Establishing a Perimeter

Formerly the executive director of the International Game Developer Association, Jason Della Rocca is now perhaps the most familiar face on the trade show circuit, speaking and offering consultation at events from San Francisco to Malmo, Barcelona and beyond. In those engagements, a quick wit and a tendency to speak his mind has earned him a reputation as an entertaining speaker and a dangerous man to rile - but his day to day business these days is in Perimeter Partners - a consultancy firm which offers advice and insight to small game companies, larger firms from other industries and governments across the world.

At the Nordic Game Festival in Malmo earlier this month, Jason presented both the award ceremony and the frantic final session of the event, but found time alongside to speak to GamesIndustry.biz about his new business, where he sees the industry heading and why governments are starting to take notice of games and the business behind them.

Q: To begin, can you give us a quick run-down of what Perimeter Partners does?

Jason Della Rocca: Well, it's really just me! [laughs] That was just a name I came up with to make it sound somewhat legitimate, rather than me just flying around or whatever, but half my time is spent on business consulting, in the games industry. Some of that is helping smaller or start-up studios who are mainly driven by designery or artsy or coder type folks who don't really have a sense of the business side of things.

The smart ones realise when they've come to a point at which their intuitions are no longer enough. I'll mentor them, coach them a bit in terms of taking the next step or where they should go. Business strategy type stuff. I've also done work with some of the larger studios, but much more granular type stuff. Production processes or enabling higher levels of creativity.

I also do some work with companies which are on the boundaries of the games industry, so say a film studio or TV broadcaster who thinks they have an opportunity in the games industry but don't quite understand how it works, the value chain of who to talk to, etc. So they'll kind of bring me in as an expert to give them a sense of how it works.

So that's the business consultancy side. The other side is the government economic and sector development side where you have governments or different regions around the world who are trying to catalyse or incentivise or grow and support a game industry in their country or city or region. It's the same kind of thing. These government people don't really understand how the game industry works, it's unclear, if they're going to poke someone, who they've got to poke. Is it developers, is it publishers, is it indies, is it larger studios, digital... where do you poke, what kind of fertiliser do you throw onto it?

So I'll go in and help them understand how the industry works and, given the state of their country or region, where their gaps are and where they might want to focus those energies or funds or incentives.

Q: So the currently near ubiquitous nature of gamification must be of great interest to you, and a significant driver for your business?

Jason Della Rocca: Well, yes and no. For me, the area of focus is more the shift between the idea of games as products versus games as services. At a very conceptual level. Regardless of what sub-market or genre or whatever you're going into, the real disruption is "am I dealing with a product or am I dealing with a service?"

Almost everyone I consult with, whether it's the film studios, or the governments or the small studios, understanding that shift, what it means to their business and how it changes the way that they need to make and design games, it's so fundamental that the decision of "am I making an ad-game or a web browser game, or retail or downloadable" that almost comes after deciding if you're making products or delivering a service. So it's really that shift, and understanding it.

Q: What sort of trends have have you noticed in your client base? Are there any particular industries which are taking an interest in games?

Jason Della Rocca: Pretty much like anywhere you're seeing a growing interest in games as service. The mobile, casual, social, online spaces and so on. Parsing that out and understanding how that works. So you have older school studios who are geared towards producing products, they're seeing Zynga, they're seeing all the other successes occur, and they're asking "jeez, how do we make that shift?"

Or you have start-ups, who maybe got let go from one of the older school product-based companies and are saying, "we think we need to be making Facebook games, or making iOS games", and they haven't really quite wrapped their head around what that means.

Much as I describe this disruption or shift from product to service, a lot of my work has been sort of geared towards understanding what that means and the implications of it. Helping companies or governments make or support that shift.

Q: Has the core industry been quick enough off the mark to adopt that shift? Are they being left behind?

Jason Della Rocca: Well, that is definitely a problem area, it's not unique to the game industry. There's a school of thought... a great book was written called the Innovator's Dilemma. I'll sort of paraphrase or summarise it.

The things that you do to succeed today are the things that prevent you from succeeding tomorrow. Because the environment, the context, the rules of the game today, become so optimised - in everything you do, the policies you have, the people you hire and train, the tools that you have - are so optimised for today that when there's a disruption in the marketplace, or some technology innovation occurs and things start to shift, you're so optimised to today's rules that you don't even see or fathom how you can make the jump to the new rules.

So this is exactly what's happened to many of the companies which are optimised to delivering games as products. Re-orienting their entire business, abandoning, in some cases, billions of dollars of revenue, to switch to a different source, way of advertising or reaching consumers... It's such a massive shift that it's going to be hard to make.

Surprisingly, I would say that it's been EA that's been the most aggressive in terms of exploring online casual, social, mobile. The purchase of Playfish, some of the experiments that they have done with free-to-play models in Korea. Are they going to make the shift intact and successfully? It's hard to say. If I was going to look at the handful of the big dinosaurs, let's call them, EA really seems to be the one that's experimenting, and dabbling, that realises that this shift is occurring.

Otherwise, when you talk to Activision, or the others, it's more like "we knew all along it was coming, we've made a companion Facebook game to help promote our big release, but we're still in the business of putting a AAA blockbuster game in a box and selling it for hundreds of millions of dollars."

I think Bobby Kotick has gone on record as saying "hey man, you can't tell me that Call of Duty is a dying business model." So that's the innovator's dilemma - they're so optimised and attuned to collecting these billions of dollars on that set of rules that for them to make the jump is very difficult. Even if, within the company, certain people, who are all very smart and talented, identify these issues - steering the big ship and changing the direction is a very difficult thing to do when you have so much time and resource behind doing things a certain way.

Actually, what happens in most industries when this sort of disruption occurs is that the new big companies end up being start-ups, that aren't encumbered by the rules and resources and paradigms from previous models. That's why you see ngmoco succeeding, that's why you see Zynga succeeding. They weren't product companies that shifted to service, these are companies that started off seeing the new way. Again, that's not unique to the game industry. You can go through business history and that's generally the way that business industries operate.

Q: That seems to resonate with the idea of a pendulum swing between innovation and big business success - companies picking up on ground-roots trends and turning them into big business.

Jason Della Rocca: Well, part of the challenge is often that there is so much noise in terms of the new things that are coming up, that a successful business on the current paradigm only gets that noise. Are we going to gamble this billion dollar business on social or mobile, or accessible interfaces, guitars, styluses, Wiimotes, cameras? What's the thing we're going to shift to?

So what they do is say, "well, let's continue collecting the billion dollars, we'll see what shakes out." Because they don't make that jump, because of all that uncertainty, the start-ups say, screw that, let's take this opportunity.

Some of them fail, some of them go nowhere, but some of them do well. There's always competition, evolution, trial and error. At some point, one of the things that sticks is up at that billion dollar mark.

Q: So do you think that the industry's big players could be accused of deliberately stagnating innovation to preserve a stranglehold on existing business models?

Jason Della Rocca: It's hard to say. I think that a lot of the major players are trying to keep their business intact by controlling the retail channel. How many billions of dollars have been generated by mastering the pipeline from product going out to the Walmarts of the world and reaching the consumer. Managing that channel. That's really where the packaged goods, games as products model comes from.

Again it speaks to the question of being so optimised to succeeding under those rules. It's less about, "hey man, don't innovate", it's more about, "how do I keep that business going?" It's more the natural consequence of the economics of that model that limits your ability to innovate. To succeed in that model you have to generate blockbusters. To generate blockbusters you have to have $50-$100 million in development, one to four times that in marketing...

These are massive bets that these companies are taking. So rather than giving the money to you, with your crazy idea, it's about saying, "Call of Duty did good, let's make the next one". That's why you get risk aversion, not because they're sitting there saying, "we need to lock down innovation, or else". It's more that there's just no room to innovate within the economic factors in play. It's more of a natural consequence.

Q: You talked about government involvement and consultancy - does government have a lot to learn from games about how to engage people?

Jason Della Rocca: Well, to be clear, that's not really my area, but that being said, there is a lot of opportunity. We have a lot of examples of governments leveraging games and game technology. Most of the examples I have are American. In the US, the Whitehouse not so long ago had apps for health contest, where they were looking for health related apps and games, that was a big success.

As a counter example, there was a group called A Force More Powerful. This was an activist group which is trying to thwart oppressive regimes around the world. They released a game called A Force More Powerful to help "train" the civilians of countries in, essentially, how to have a coup - to overtake the government in a peaceful way.

The game almost looks like Syndicate, an isometric city with groups of people walking the streets and you have different ways to connect with civilians, having rallies and sit ins, putting posters up, identifying regimes and their centres of power and so on. They released the game online and for free. So that's sort of an anti-government game. There are more and more examples of games being used in these propaganda senses, be it good or bad propaganda.

I've seen other governments using games for their own purposes, I guess the biggest example is America's Army.

Q: We've been hearing about the reduction in government funding for the Nordic Game program - from the five year program so far we've seen 75 games created, about a third of which have reached the publishing stage. Do you think, from a purely business perspective, that the money they've invested into the scheme has seen a justifiable return on investment?

Jason Della Rocca: It'd be great to have actual numbers to validate that. Where they can track job creation and retention, they can track which games have come out, how many deals have been made over the years at the conference - it'd be great if they had those kind of metrics. They might have some of them, enough to say "the Nordic region invested X number of Euro over that timespan, and here's the effect it had, here's the impact we can calculate." Maybe in some cases very direct, maybe in some cases indirect. I don't have those numbers, so I can't say what the percentage is on ROI.

The assumption is that these kind of support programs generally have a positive impact. I wouldn't be doing what I'm doing if I didn't assume that by default it was a good thing for governments to do. But it's hard to measure. Oftentimes it's hard to put a dollar amount on things. In terms of doing a program that then creates an environment for entrepreneurialism.

You're investing in the people, maybe you're creating an environment where that person can have a failure too. So maybe on paper the first one or two goes don't go so great. But then that individual who you've supported via that program, that's someone who's really learned a lot, the hard way, but now on their third chance for example, they're able to succeed. These things are intangible. Maybe I invest in you, but you inspire some students to stay in the country and not fly off to Australia or Canada or whatever, that has a trickle on effect.

But yeah, this sort of governmental development work, the government assumes by default that poking and incentivising and catalysing has value. I think what's particularly interesting about the game industry is the sense that it's part of this creative industry, digital and knowledge economy - all those buzz words that everybody, particularly government, is interested in. In most cases it's net exports. That's not true for the US or Japan, but in most cases it's new dollars from the outside coming in, that's always nice from an economic point of view.

Generally speaking it's also a low ecological footprint. It's not like we're an oil refinery or a mining operation coming to town, razing your forests or putting stuff out in the ocean. From an eco point of view, it's a couple of guys with laptops in a warehouse.

Also, vis-à-vis the film industry, which many governments do a lot more to support, is something that is often much more transient. So you may have a tax-break or a funding support scheme, but the team will show up for a month to do their shooting, then they pack up and go. Some regions got burned with that. There was no left over. The crew would come, be totally self contained, film in a box. They'd spend money, people had to eat and stay in hotels and whatnot, but there was no spillover, no knock-on. When those teams left there was nothing to start building an endemic industry from.

The game industry, for the most part, means you're all sitting in a room and living in one place. You're not saying, let's do a casual game in Poland, then an iOS game in Australia. You don't have that sort of nomadic, transient nature. That's another reason governments are interested.

Q: Is there a risk with these programs that when the funding dries up, you're left with an artificially inflated industry which can't support itself and collapses?

Jason Della Rocca: Theoretically and conceptually, yeah that's something we should be concerned about. I've not seen any data to support it. There's never necessarily been examples where the scheme has been completely pulled out. In the case of Nordic, they're getting reduced funding and they have to operate on a slightly different mandate and so on, but there's been no-one, that I'm aware of, where it's been hard-cut cold turkey down to zero.

But it's definitely one of the criticisms. Oftentimes the timed example is that, you're trying to catalyse things - where you're trying to get things going, on the assumption that, if you push the rock down the hill and let it go, the momentum will be self-sustaining. Canada is actually often criticised for not having a sustainable model with all the tax-breaks. You know, would Canada be doing so well if someone suddenly pulled the funding out from underneath. We can only speculate, but there's such a momentum in Canada it's hard to imagine.

There's also so many other factors in Canada, it's not just the tax-breaks, it may hurt a few companies here and there, but I don't get the impression that the industry would suddenly collapse on itself. But again, using Canada as an example, I think the rock has built up enough momentum to keep going. The Nordic region definitely has a long history of game development, but for many years it was small and young - the Nordic Game Program has really helped to drive and support and foster the community over the whole Nordic region. The question is, has it built up enough momentum where it can stand the reduction in funding.

My sense is that it will do fine. It's going to be a headache for the Nordic Game folks to figure out how to do more with less, but on the whole I think the region will survive. If you think about the indie projects - these indie guys are so cunning and resourceful that they'll still find a way to survive and do what they want to do. I don't know to what extent Mojang got support to develop Minecraft, but I think they just do their own thing. You'll still get that kind of stuff emerging, even if one or two companies feel more pain.

This question of sustainability always comes up, but we haven't really seen a good example of that.

Q: So mentioning Canada, as we inevitably have - the programs there featured very strongly in arguments from TIGA and UKIE about tax-breaks in the UK, that we have to level the playing field to prevent talent drain and cannibalisation. Do you think that talent is a limited resource in that way? Is that concentration of the industry in one area a bad thing?

Jason Della Rocca: Well you know, look at California. They have forty per cent of the US industry's workforce. There are no incentives there. Do we say that that pooling is cannibalising the rest of the country? I mean, it absolutely is - people are coming from all over the world to work at the awesome companies there. So Canada can also be "blamed" for maybe recreating a bit of that through the incentives and the job creation demand, but my sense is that it's more rhetoric. "Look at Canada and all they've done!" Can we actually look at the people and see how many people actually left and went to Canada? I don't get the sense that it's planes full of UK developers.

So are they stealing those people? I don't know. Maybe, but I don't really know. It'd be interesting to look at those numbers and see what sort of effect it has. I'm much more thinking in a global perspective. Although I may help specific governments grow their industry in their country, I want to see the industry be healthy on a global basis. So personally I don't care if you go from one country to another or not - let's do the things to make your region attractive.

The tax-break issue... It's not about the tax-breaks alone. When I talk about the industry I talk about an eco-system kind of metaphor. It's very dynamic, it's a complex system, there's lots going on, it's not clear that introducing a tax-break is going to be the thing that all of a sudden makes your ecosystem thrive. In fact there are regions where there's nothing - it's a desert. So you say, we have this desert and we'd really like there to be a game industry there because we think it's sexy and good jobs etc. So they look at Canada and say, well, they're doing so well because they have these tax-breaks, let's put a tax-break in our desert.

So they put a tax-break in the desert, and guess what? Nothing happens. Because a tax-break alone isn't enough. Now of course the UK is not a desert and there's a long-standing industry and all kinds of companies and schools and stuff, so a tax-break would have some kind of effect, but the point is that it's not the only thing.

If you look at Canada, there's all kinds of stuff going on. Even if you just look at Montreal - everyone assumes that Montreal succeeded just because of the tax breaks. But, it wasn't just Ubisoft. Montreal had a long history of visual simulation with Soft Image and Discrete and several other companies that innovated, really pioneered, 3D content creation.

Not game specific, because it was before that. There was creativity in the arts with Cirque Du Soleil, science and engineering stuff with CAE, the whole aerospace industry there. There are four major universities there, computer science students, fine art - all the talent base you need. All that stuff is there. Using the eco-system metaphor, it's fertile ground for this stuff to happen.

There were several game companies there already, obviously not on the scale of Ubisoft, then they did the Ubisoft deal and the boulder started to roll, but even in that sense there's still a lot of other stuff going on in terms of funding training and government dollars going into academic research on game related topics. Industry bodies working together to do trade missions. There's all these things going on - tax incentives are just one of them.

Q: Do you think the UK is anywhere near emulating that?

Jason Della Rocca: Just a few years ago I got into a shouting match at Develop in Brighton - there was a panel by the UKIE and TIGA guys, and the whole thing was an anti-Canada statement, how they had to have tax-breaks. I forget who it was, but someone was saying - "we kind of know we're never going to win this fight, but on principle we have to fight the fight. We have to keep ramming against the wall. It may never fall, and we think it may never fall, but we're going to carry on anyway."

I kind of got mad at that. I mean, why? That's just one thing that you can do. There's a hundred other things you can do to support, catalyse, foster, grow, evolve - go do those other things! Then if the government shows up tomorrow and hands you bags of money, then you take the money!

So they said what kind of things, and I explained, well this and that, and they sort of almost said - "well, that sounds like really hard work!" [laughs] No kidding!

This is going back about three years. I was saying, well there's all these digital distribution channels that are emerging. Online, mobile, the iPhone was just emerging - explore that, work with development studios to exploit this new paradigm. They were like, well it's hard work to convince people.

You have a better chance of engaging and educating your membership about the changing dynamics of the game economy than you do running against a wall of politicians. I got nothing against those guys, but I offered to help them out and I think they were just too proud to engage me.

Recently, I think in the last few months, TIGA announced some digital distribution training seminar. Great - but they should have done that three years ago. Had they done that three years ago, again, pure speculation, imagine they'd been talking to the UK studios and entrepreneurs and start-ups then. If they'd got started on these platforms three years ago? To me, that would have had much more impact than if they had won tax breaks.

It's a complex system, and it's hard to predict what one change would have on that system, but it's really not about tax breaks, it's about so much other stuff.

Q: A lot of the hope in the UK industry at the moment is being put on small start-ups and indie studios, in what is perhaps a slightly rose-tinted view that it can return to the days of the bedroom coder, the Britsoft era. Is that what's happening, or is it just a natural consequence of the vacuum left by the folding of some of the larger studios?

Jason Della Rocca: Well, it's the form of studio which suits well the kind of games that are succeeding in these new areas, right? I mean, you don't need 100 people to make an iPhone game or a Facebook game. Naturally, you, me and another buddy of ours could get together and say, hey - we just got fired from Black Rock, we all like working together, what should we do? You have some runway so you get together and you make an iPhone game. You don't say, let's get fifty guys and make the next Halo, you don't have the resources.

I think it's fairly organic and natural in that sense. What's different today to the Britsoft days is that you really have to incorporate the business side. You're the designer, I'm the coder, she's the artist and the fourth person is someone on the business side. Because we can't just put our game in a ziploc bag and take it down to the corner store and put it on the shelf like some of the Brabens of the world did back in the day. You really have to master the sort of business, the marketing, the monetisation, all that stuff. That's the new paradigm of the digital world's games as a service model.

If you're just three blokes who are talented and you code up some stuff and throw it out there, you might get lucky, but your chances are really rough. Barriers to entry are so low that the market is flooded - how do you get noticed and how do you succeed in that sort of flooded market? It's rich with opportunity, but it's also rich with hazard. If you don't have the business skills, you're going to suffer.

My sense is that the UK is super-talented from a development point of view, perhaps less so from a business point of view. If we're just using cultural stereotypes, then the capitalistic Americans, even the nerdiest of programmers still have that business sense to them. There's just more of those businessy people to go around. [laughs] I'm exaggerating and generalising!

To some extent that techy prowess of the UK is counter-productive, the average developer being so talented from a design and production perspective, there's a natural distrust or disconnect for the business side. The feeling that they're so talented that they don't need that. "We're just going to create this awesome thing and it's going to be great and we won't need that." It just doesn't work that way anymore.

If I was TIGA or UKIE, or the government, anyone trying to support the industry, I would focus on those sort of things. I would focus on educating the programmers or the dev folks on the business. Doing events where they can connect with businessy oriented people. That kind of connection would probably have much more impact than all the time wasted on trying to get a tax break. But that's fuzzy, that's hard. You need feet on the ground, you have to shake hands, pull people together. It's much harder than writing statements to lobby government.