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Putting shareholders before customers will kill your company

Putting shareholders before customers will kill your company

Thu 17 Apr 2014 7:18am GMT / 3:18am EDT / 12:18am PDT
DevelopmentGDC 2014

Lorne Lanning on the evils of big business

Oddworld creator Lorne Lanning has never played well with big corporations. In 2005, following a particularly vicious quarrel with Electronic Arts, his studio Oddworld Inhabitants seemed all but dead, taking the beloved franchise with it. Now it's back, and barrelling towards a bright new future. At GDC earlier this year, Lanning was keen to explain to GamesIndustry International his new approach to the business - and why he trusts major publishers less than ever.

"I don't want to be a slave to the big ships, and that's what was happening with AAA, with publishing and with game devs," he explained. "Every game dev that I know that's still doing AAA retail products is trying to figure out a way to get out of it.

"Those deals are just getting worse and worse, even though your expectation of the money is getting higher and higher. Labour's getting more expensive and the rewards are getting smaller. So that's why we decided to stop playing for a while until we could start getting our games up digitally, see if we could build our own business. It's working, it's funding new content."

The success of HD re-releases of Stranger's Wrath and Munch's Oddysee has provided the resources to create a full remake of the original Abe's Oddysee, titled Abe's Oddysee: New 'N' Tasty. Lanning hopes that the sales of this latest offering will, in turn, open up further new opportunities. Ultimately the goal is to get Oddworld Inhabitants to a place where it can create a new AAA IP totally independently.

"We're spending cold cash on this, a couple of million. Not a public company partner. Ourselves. If we lose, we lose big. But if we can get it to that next level where we're spending five or six million on content, we can do a new IP," he said.

"It's not money we're sticking in our pockets, it's money we're leaving in the bank to fund new stuff"

It's the sort of money he doesn't think could be raised through crowd-funding - he's dismissed suggestions that he should run an Oddworld Kickstarter. He's determined to live up to the "AAA expectations" of Oddworld, and he's confident that with a cycle of game releases followed by re-investment in the business, they'll get the funds they need.

"I do think success in the product can raise that money. It's not money we're sticking in our pockets, it's money we're leaving in the bank to fund new stuff," he explained. "It'd be nice to be getting paid again! [laughs] That hasn't been happening for me. It's all going into the product."

For Lanning, going independent doesn't mean going it alone. None of Oddworld Inhabitants' progress so far would have been possible without their partnership with Just Add Water. The small, Yorkshire-based company has been responsible for the development of all three remakes, with Oddworld Inhabitants taking on a supervisory role and handling publishing. Now Lanning is working with a second studio, mobile developer Square One, who will be producing a port of Stranger's Wrath to iOS and Android devices.

1

"What's nice, working with other indie guys, is that they believe that quality is going to be their lifeline," he said of his partner studios. "These guys are like, 'if we're going to succeed it's because we build really superb quality products'."

The indie community as a whole is something he's keen to embrace. He spoke enthusiastically about cross-promotion plans with developers 17-BIT (Skulls Of The Shogun, Galak-Z: The Dimensional) and Switchblade Monkeys (Secret Ponchos), pointing to an almost union-like spirit of mutual co-operation and support among independent studios. The sort of interactions, he pointed out, that are impossible for studios hitched to major publishers. Among indies, he says, it's not about competition.

"It's funny, because people ask me, for New 'N' Tasty, 'who do you see as your competition out there, what titles?'," he said. "It's interesting, because if you'd have asked me that for an Xbox release it would be a very specific answer and I'd be trying to convince you why we're a better offer for your money. But we're not looking at it that way anymore. We're looking at it like if you like this type of game, and there's another type of game like this, we want to be recommending it to you!"

Of course, Lanning's glowing positivity about the indie community is always framed as a contrast with his misgivings about the past and current actions of major publishers. He pointed to Battlefield 4 as an example of how wrong he feels the developer-publisher relationship can go.

"you know they were devastated when someone made the decision to release that project before it was ready. Because they're smart enough not to do that"

"Why did a title that was so incredible ship prematurely?" he asked. "Now I know, without talking to anyone, if you look at the quality of that title, and if you know how games are built, you know how much hard work went into that, you know how much love and pain and sleepless nights the developers put into it. And you know they were devastated when someone made the decision to release that project before it was ready. Because they're smart enough not to do that."

He speaks from personal experience too; the original release of Abe's Oddysee was criticised for its buggy state, and Lanning places the blame firmly on now-defunct publisher GT Interactive.

"A gold master with all the bugs fixed was in Fed-Ex while someone else made the decision to release a buggy game, because they're in the sales department and they thought 'Hey that's enough time, I don't need to wait til tomorrow, it's good enough'," he recalled. "And then you get stung by the hardcore gamers asking 'why did you f**k this game up?'. I know what a heartbreak that is."

In his eyes, it's the need to impress shareholders taking priority over the need to satisfy customers. "When shareholders are more important than the customers, how long is your business really going to last?" he asks.

"Trust is the most endangered commodity, it's the rarest commodity today"

Lanning points to the level of trust and transparency indie developers have with their audience, and the more direct relationship that creates. It's already affecting the way Oddworld Inhabitants do business in a significant way - following the re-release of Munch's Oddysee, the company polled their audience as to what title they'd like to see developed next. Abe's Oddysee: New 'N' Tasty was the winner. "When creators can go directly to the audience it's a much better existence," said Lanning.

"Trust is the most endangered commodity, it's the rarest commodity today," he pointed out, referring to the lack of trust consumers have in large businesses. Indie developers, he believes, are in a unique position to gain that customer trust, but it takes a leap of faith. It means being honest even when you don't know that things are going to go your way.

2

"You've got to answer their questions in a sincere way, even if it's not what they want to hear. You have to say 'you know what? You're right, we f****d up like this or we f****d up like that, but this is where we're at, this is why we're doing it, this is what we're trying to achieve," he explains.

For Lanning, however, the benefits are absolutely worth the risk. It's that direct relationship with the fans that has allowed Oddworld Inhabitants to revive itself in the way it has, and will allow it to continue moving forward. Without the resources behind them to do large-scale marketing, they're relying on word-of-mouth to sell units.

As ever, Lanning is supremely confident, convinced that the fans will come through for him. So far, they have, with the two remakes to date generating impressive figures. Strikingly, Stranger's Wrath HD has actually out-sold the original, perhaps finally vindicating Lanning's claims that he was failed by publisher EA's marketing department when it was first released. He's enthusiastic about the future, talking excitedly about potential future projects, even mentioning in passing developing something for VR devices.

"High-end AAA isn't going away, but within 5 years, I think what we're going to see is high-end AAAs competing against indies"

He's also convinced he knows where the industry is headed.

"High-end AAA isn't going away, but within 5 years, I think what we're going to see is high-end AAAs competing against indies. The indies will be rising up," he predicted. "More and more sales will be digital and the retailers are going to have a harder and harder time. Some more retail businesses will go out.

"I think games are just going to continue to get better. You're just going to continue to have a wider variety. It's great that small teams can actually find a viable outlet now and sell the product. And we're right there."

This interview was conducted by Dan Pearson and written up by Robin Valentine.

19 Comments

Thomas Dolby
Project Manager / Lead Programmer

328 277 0.8
I really want to believe in karma striking back at those who put customers second, but so far I can't really point to any example other than Zynga. Zynga seems to have failed because of failing to move with market trends rather than consumer backlash though. It just seems that companies that put shareholders first are the ones with the most money, and therefore they ensure they get the most customers because they can use a big marketing budget. Put simply I'm not sure most people care how their games are made, they just go with what they can see, and what their friends are playing. Depressing...

Posted:3 months ago

#1

Gil Salvado
3D/2D Artist

32 36 1.1
It actually doesn't matter how large a company gets. It's all about competition and lately there hasn't been much for AAA. How many AAA-publishers or studios are left from the 90's? Ain't much. It's almost a monopoly. That's the point when companies can do whatever they like. Preferably lower quality and production time in order to increase their profit for whatever cause.

Digital distribution is the cure small companies needed to compete with big players. Indies win by developing quality-products for small pockets. AAA can't compete with this kind of production value. Ironically.

Posted:3 months ago

#2

Andrew Jakobs
Lead Programmer

223 83 0.4
Yes, it all might be true, but back when he started, there wasn't really a better way to get your game out there than through big publishers. Now he has a name and a franchise it's easier to just say 'oh big bad bad publishers'.. And in the end, what's he going to do? a remake of his old game........... talk about non-creative.....

Only now it's easier for small teams to get their games know to the public through services like steam, google's play store and Apple's iStore..

Posted:3 months ago

#3

Senar Koraltan
QA Engineer

6 0 0.0
Big respect for Lorne Lanning, I'm glad things are finally starting to look positive for the oddworld games, I will definitely be supporting them. It's also great to see dev's standing up to publishers, Its quite outrageous how dev's are always getting the short end of the stick!

Posted:3 months ago

#4
I also have respect for Lorne Lanning and his outlook on gaming. I will be sure to look for, and support his upcoming creations.

Posted:3 months ago

#5

Tim Carter
Designer - Writer - Producer

550 266 0.5
Funding games with IPOs is insane.

These are works of art, not mining ventures.

Posted:3 months ago

#6
I like this approach. The word Lorne uses which means so much is TRUST. That is a cherished word and one which is only earned, never bought.

Posted:3 months ago

#7

David Serrano
Freelancer

297 269 0.9
Popular Comment
When shareholders are more important than the customers, how long is your business really going to last?
To truly comprehend how detached from reality the priorities of publicly held companies have become, you simply need to read Johnson & Johnson's company credo i.e. mission statement, written by President and Chairman Robert W. Johnson Jr. in 1943:
We believe that our first responsibility is to the doctors, nurses, hospitals, mothers, and all others who use our products. Our products must always be of the highest quality. We must constantly strive to reduce the cost of these products. Our orders must be promptly and accurately filled. Our dealers must make a fair profit.
Our second responsibility is to those who work with us - the men and women in our plants and offices. They must have a sense of security in their jobs. Wages must be fair and adequate, management just, hours reasonable, and working conditions clean and orderly. Employees should have an organized system for suggestions and complaints. Supervisors and department heads must be qualified and fair-minded. There must be opportunity for advancement for those qualified and each person must be considered an individual standing on his own dignity and merit.
Our third responsibility is to our management. Our executives must be persons of talent, education, experience, and ability. They must be persons of common sense and full understanding.
Our fourth responsibility is to the communities in which we live. We must be a good citizen––support good works and charity, and bear our fair share of taxes. We must maintain in good order the property we are privileged to use. We must participate in promotion of civic improvement, health, education, and good government, and acquaint the community with our activities.
Our fifth and last responsibility is to our stockholders. Business must make a sound profit. Reserves must be created, research must be carried on, adventurous programs developed, and mistakes paid for. Adverse times must be provided for, adequate taxes paid, new machines purchased, new plants built, new products launched, and new sales plans developed. We must experiment with new ideas. When these things have been done the stockholder should receive a fair return. We are determined with the help of God’s grace to fulfill these obligations to the best of our ability.
http://theachiever2011.wordpress.com/2011/04/25/shareholder-value-is-the-dumbest-idea-in-the-world/

Posted:3 months ago

#8
Isn't it against the law not to put shareholder profit/value first?

It would be nice if the companies where still run like that mission statement from Johnson and Johnson.

Edited 1 times. Last edit by John Owens on 17th April 2014 7:32pm

Posted:3 months ago

#9
what law would that be? the good old boy network of .1%ers law? There is no law , just some ridiculous notion born from some misguided ideas from Friedman in 1970. Sometimes referred to as the " world's dumbest idea".

http://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/

Posted:3 months ago

#10
I've no idea which is why I asked the question. I've just heard people say that before. Although it probably stems from the fact that the directors run the company on behalf of the shareholders and they have a legal duty to those shareholders.

Posted:3 months ago

#11
more of a Fiduciary Duty than strictly legal one. Although Fiduciary duties are made up of legal concepts that form the basis of the fiduciary duties. All said though, there still is nothing stopping a company today from following J&J mission statement of 1943.

Edited 1 times. Last edit by Todd Weidner on 17th April 2014 9:39pm

Posted:3 months ago

#12

Benjamin Solheim
3D Artist

3 4 1.3
Those last couple of comments are the scariest thing I have ever read. Short term profits at the expensive of long term profits are only of use to people flipping stock. Stock was designed to be held over a long period of time. Anyone telling you that destroying assets like such as Disney's policy of training employees and then firing them once they are trained is an insane policy. This is why even after middle level mangers would outsource IT departments to show short term profit then move to another company before the support costs went through the roof, only benefited those willing to destroy the companies they worked for their own gain then left before anyone realized the impact of what they did. We are still dealing with that issue today where companies where companies do not not hire enough people to fix issues but just grease the squeaky wheel.

Investing in assets, both people and material, always makes sense in the long run if you can afford the setup costs. If you try cutting costs it is always best to look at what is causing the income to drop not what is easiest to remove from the list. But hey these are all things you could learn with a class or two in econ or finance, but the people making these decisions generally have never taken any classes in econ or finance yet feel more qualified to make the calls as to what needs to be cut because they are the boss, yet very few are willing to do what old time companies would do. That is the guy making the tough calls he is not getting a salary 100 time what his/her workers are making he/she is the owner and their clothing anything to do with public image is over head but spending money, not really most of the money is re-invested back into the company until the company has cash reserves so it can ride through bad times.

Posted:3 months ago

#13

Paul Jace
Merchandiser

864 1,262 1.5
Putting shareholders before customers will kill your company
If that were true there would be no big companies left in the world, especially in the US. This is just wishful thinking on Lanning's part and has less of a chance of coming true than 3D gaming becoming bigger than smartphones.

Posted:3 months ago

#14

Sasha Yelesin
Student

53 33 0.6
I like this guy. He genuinely respects the people who care about his games, and isn't afraid to take risks on something he's passionate about. I've never played an Oddworld game, might as well start with the first as soon as it comes out. You'd think EA would elicit the same type of enthusiasm.

Posted:3 months ago

#15

Bonnie Patterson
Freelance Narrative Designer

155 422 2.7
@Thomas Dolby

I wouldn't be too sure about people not caring about how their games are made. Maybe it hasn't happened yet, but look at what's been happening out in the world to companies with anti-gay CEOs, and the wallet-votes that turn away from them. Likewise, since the early days of torrenting, anti-RIAA sentiment has been slowly rising while musicians that sell direct have been gaining more success little by little over the last few years.

You're exactly right about marketing, though - getting people to hear of your product is the last big hurdle to overcome before they come to your site and buy direct, and I have no idea how that barrier is going to get broken.

Posted:3 months ago

#16

Chris Younger
Principal

2 0 0.0
I was the guy in the shipping department playing the only non-buggy copy of Abe's Odyssee - Solid interview Robin. I have a new quote of the day - "Trust is the most endangered commodity, it's the rarest commodity today"

Posted:3 months ago

#17

Aleksi Ranta
Product Manager - Hardware

267 121 0.5
Its not about putting shareholders before customers, its about treating everyone as equal. At this day and age you cant really have one without the other.

Is it more important to have a shower in the morning or a cup of coffee? Both are important.
Is it more important which comes first? no.
Is it important if you leave one out? Yes.

Posted:3 months ago

#18

Sandy Lobban
Founder and Creative Director

310 195 0.6
100 percent agree with him on this. Once I got over the kudos factor of making AAA games, and started investing in myself it was a no brainer to leave the corporate world and its shareholder policies behind. Everyone should consider the idea of self employment and collaboration in this industry. It makes more sense for everyone to collaborate, create and share in the wealth that follows.

My advice to anyone who remains frustrated in the corporate world is to build your relationships and find your future collaborators. Your network of friends and fellow developers will become hugely important when that big game is no longer selling or it has serious competition from the indy sector doing it smaller, cheaper and with a team fully invested in creating something amazing for its customers.

Edited 1 times. Last edit by Sandy Lobban on 22nd April 2014 12:17pm

Posted:3 months ago

#19

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