Codemasters has occupied an interesting position in the publisher line-up in the past few years, with standout genre franchises such as DiRT and GRiD, action successes including Operation Flashpoint, niche products like Ashes Cricket and the online division running games such as Lord of the Rings. But it's been a tricky place in the market to hold down, and with tough economic conditions and increasing competition, the company has faced some tough decisions about its future.
But yesterday the publisher announced that India-based Reliance ADA had taken a 50 per cent holding in the company, a move which simultaneously secures it financially while opening up platform expertise and growth market penetration. Here, CEO Rod Cousens explains more about the new partnership, and what it will mean for the business.
Q: The deal is a 50 per cent stake in the company - what's the value linked to it?
Rod Cousens: We're not providing information to that extent at this stage. You'll appreciate that it's very early days with a new partner - I also believe it's the first stage of ongoing support - so we won't be disclosing any financial information at this stage.
Q: When does the agreement take effect?
Rod Cousens: The agreement is what I meant by ongoing support, but the arrangement in terms of the 50 per cent share-holding has been concluded.
Q: And is there a set time frame for the subsequent stages at this point?
Rod Cousens: We'll go through a process where both companies will sit down, they will evaluate their strategic directions and so forth - determine the collaborations that both can bring to bear, and ultimately agree on the plan going forward.
That will then drive, as you'd expect, subsequent investment and opportunity between the firms.
Q: Was Reliance the only suitor for Codemasters, or were other parties also interested?
Rod Cousens: Reliance was not the only suitor. People have danced with Codemasters for a while - it's attracted attention, and coming out of the second half of the last calendar year, following the success of Ashes Cricket, Operation Flashpoint and so on...
If you take the performance of the company in the UK, where we increased our market share to about 5.6 per cent I think - at a time of high competition in the market - there was a lot of visibility drawn towards us.
In saying that, you have to contemplate the future of the business, the interest in the digital side, high-growth markets such as India and Asia - Codemasters has been well-positioned, it's punched above its weight in the online side, so the strategic partner coming out of those markets is a huge boost.
It gives us, as a company, an advantage in accessing those markets with someone like Reliance and their strength against some competitors that are far bigger than us that lack the strength in those territories.
Q: Those elements could be pretty crucial in the future, as those markets expand.
Rod Cousens: If you look at our line-up too, we've developed a game like Cricket - well, the number one sport in India is cricket, so there's a great opportunity there. Formula One, as the second largest sport in the world, is intent on opening up those markets - and with a partner like Reliance, for whom F1 is a significant attraction for them, there's a lot we can do.
Plus there's Dance Factory, and with the whole Bollywood angle and dance TV that exists in the country, that means that within our catalogue are a number of franchises that lend themselves to that market, and indeed the Asian market overall.
Q: And with the Force India team doing pretty well, F1 could be a fast-growing draw in that country... So explain in a little more, for those who may not know too much about Reliance's gaming division and what they bring, how do you see the two companies working together strategically?
Rod Cousens: Well, I think we're highly complementary. With Reliance, through Zapak and Jump Games you've got essentially the portal on one side and online content through another. That therefore allows us to open up the whole social gaming network capability in those markets, and also the development of MMOs.
Aside from the development capabilities we have in the UK - three sites in Birmingham, Guildford and Southam - we'll have access to a significant development resource in India. If you look at the mobile network, for which they have 100 million subscribers and we have a back catalogue of titles as-yet untapped in that market, I think there are areas we can look at.
And then we have to consider the outsourcing that India provides, where we have worked with outsourcing providers in that region in the past, and presumably can do so again in the future. Those are just some examples, but I'm sure that when the companies sit down and really get to know each other there's a lot we can do.
We shouldn't lose sight of the fact that Reliance ADA is a big investor in Dreamworks, so there's a big Hollywood connection there. That's also something to consider, and whether there are areas of collaboration.
I think it leapfrogs us forward, and where we've been this high-quality company in England, I think this really propels us on a global stage, and no one can doubt the financial resources behind this company now.
As I said, any report you read today on high-growth areas, it'll talk about India, China, et cetera - and we're better-placed than anyone in our segment to go and take advantage of that.
Q: You mention development resource in India that the deal could unlock - could that mean new products, or new SKUs?
Rod Cousens: As I said, the companies have to sit down - but those are the logical conclusions to be drawn. We're focused on what we can do well, which is racing and action on traditional games consoles, and we host third party content in the online space, such as Lord of the Rings, Elf Online and Archlord.
Going forward I think we can accelerate our ambitions in those areas, both in terms of investment that we require to grow the company, and in terms of the human resources that we need to recruit - which is never easy, particularly for digital content.
I also think you have to look at the whole business model for online content and the way that it operates in those markets - the ability to sell virtual goods, micro-transactions, episodic content and so forth. Content like that in the mobile space, where you have 100 million subscribers, and if you do no more than send an SMS message telling them that the latest Codemasters game is coming... what a great boost that is.
Q: So scalability will be a significant advantage - the ability to grow projects, without having to necessarily take on all of the permanent investment that seems to imply these days...
Rod Cousens: Yes - it's an incredible partnership, it's a great statement to make to the world, and I know that everyone at Codemasters is truly excited about working with Reliance ADA - and what the future holds.
Q: The market's been tougher in the past 12 months, and while Codies did do well in the second half of last year, it sits in the middle ground - between the leviathans that have huge resources to tackle the big changes, and the new companies that have sprung up specifically to address newer markets...
Rod Cousens: I'd argue that it's a tough time for the larger companies, perhaps with the exception of Activision, and that's obviously weighted by the success of Call of Duty. But videogames companies have had a challenging environment in which to operate, regardless of scale, and you could argue that the infrastructure that's been assembled over many years - particularly in terms of physical distribution - is actually a handicap rather than an advantage now.
For companies like Codemasters, that are agile and have focused on content creation - because that's what we are, and we've successfully demonstrated that with our track record - we don't have the baggage of the large-scale infrastructure scattered around the world that a lot of companies are now contemplating disassembling.
We're focused on development, on digital content - and we've now got a partner in an area of the world which lends itself to that. If you look at Western markets, which are bogged down in traditional gaming on consoles - which are yet to achieve on a single format the heights of the PlayStation 2, and is also facing a lot of competition on time-based entertainment on social games, from the iPod and mobile phones, et cetera - looking at the partner we've got we can now participate in all those areas.
So actually I think we're better-placed than most for the future - I think we're on our way.
Q: How important was the timing of this deal in terms of the security of the company - was it vital that it happened now?
Rod Cousens: It depends - in order to do what the company needs to do to compete and participate in the market, it required investment. The one factor that is true in today's market is that you can't stand still, and it could be argued the company had come a long way, but in order to go on to the next stage it required investment to do so.
As you well know, if you ignore the investment on development, the issue is time - games take time to create, so if you're starting to look at 2012-13 and where it's all going, then clearly investment is always critical.
For it to come right now, for the staff at Codemasters it's like Christmas has come early, rather than Easter.
Q: No bones about it then, this is a deal that's secured the future of the company?
Rod Cousens: I believe it's wonderful - if you had to go around the world and choose a partner, Reliance ADA is in the Premier League.
Q: The changes in European distribution and the deal with Koch Media was announced last month - are there any other planned restructuring to take place in light of this deal? Sometimes when companies work together closely there's some repetition of tasks and so on.
Rod Cousens: They shouldn't necessarily be connected, because we would have carried on down that path regardless of the investment partner. My view is that the distribution structure, for us to build - it's a dinosaur, and is no longer part of the future. We'd rather go in the short term with a proven partner, as we've elected, where they have (along with other partners) some mass to go out there - so we secure our traditional business, which is still a significant part of our revenues, and in regions where broadband penetration or speed isn't where it needs to be yet. So it's almost a hybrid situation.
We've gotten on with that, and we continue to build - both for traditional games and dedicated games - the online aspect of our business. This is absolutely cemented now, it couldn't be a stronger statement.
Q: In terms of the decision-making process at Codemasters, will Reliance have a place on the board?
Rod Cousens: Yes - they will have seats on the board, and we welcome them as board members, along with Balderton, who's obviously a share-holder. We look forward to working with the various companies that they have around the world, be it their existing gaming operations, or any other area that allows collaboration.
Q: Does the deal impact the development of currently-announced titles at all?
Rod Cousens: No, I don't think so. In fact, I think they'd want to build on it.
Q: Other publishers have announced their intention to drill down into a greater focus on fewer, core franchises as a response to tricky conditions - how do you evaluate the changing nature of the markets, and the way that you're making decisions today, as opposed to 12-18 months ago?
Rod Cousens: If you reflect on the catalogue, you could argue that some of the franchises may have been marginal - such as Cricket, where today you can really only sell that in England, Australia and to an extent South Africa. Obviously the console penetration in other countries, such as India, is very small.
But we now have the ability to take that from a marginal product to a key franchise by exploiting it in a market where the sport is tantamount to a religion, and on formats such as mobile; or online PC variations of the game; you can talk about the monetisation opportunities with the game that it provides for.
Formula One is obviously a huge opportunity in those markets - but not only Formula One, but when we start to look at DiRT 3, and GRiD, we essentially have a racing universe that we can put out to a global audience.
And then of course, what we've got to do - apart from Flashpoint and Bodycount, which is coming down the line - we've got to look at the action category and see where we can take that to these markets.
But sitting beneath all of that, ironically - and believe me, this was never the lead on the agenda - but titles like Dance Factory, as you look at Bollywood and the TV dance shows... if you then start to look at what we can do through Zapak - plus the Sensible titles we have, such as Cannon Fodder and Megalomania, for us it's just great.
Q: Finally - the F1 season is underway, and the game itself looks stunning. There's a big fanbase for the old Geoff Crammond games back in the nineties, so will your game bring a return to form for that sport in the interactive space?
Rod Cousens: I think we'll re-energise, in terms of an interactive experience, that entire sport. I think it had become dull, I think we offer much more. We offer the race experience, the driver experience and at the end of the day what can't be disputed - as the Americans say - we do good racing.
I think F1 will once again make sure we stay at the head of that pack.
Rod Cousens is CEO of Codemasters. Interview by Phil Elliott.