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Streamline's Hector Fernandez

Mon 23 Nov 2009 2:00pm GMT / 9:00am EST / 6:00am PST
Business

The production company's VP explains the reasons for the closure of the Amsterdam facility

Streamline Studios

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Streamline Studios was established in 2001, but following a tough year this year has taken the decision to shut down its production facility in Amsterdam.

Here the company's VP, Hector Fernandez, explains exclusively to GamesIndustry.biz the reasons for the closure, and why Europe is such a tough place to do business at the moment.

Q: Can you just explain the action you've taken regarding the business?

Hector Fernandez: We're closing down our production studio in Amsterdam, however the group behind Streamline Studios - and all of its workings will continue to live on. We’re basically taking a step back, reassessing the situation, and then essentially beginning our re-invention.

Q: We spoke to the company's CEO, Alexander Fernandez, at the beginning of this year and the future then seemed bright, with 2008 revenues up 45 per cent. What's happened since then?

Hector Fernandez: What happened was the economic crisis - when we looked at the start of the year we were bullish and optimistic, simply because we had contracts that took us into 2011. But as the economic crisis worsened, especially during the summer period - our contracts started falling by the wayside.

Then one of our bigger clients went out of business with an accounts receivable that was quite high - compounded by an increase in the Euro and the death of the Dollar - so it was a triple hit that created a 'perfect storm' where we had to make this tough decision.

Q: How will this impact the staff - will you be able to provide them with redundancy packages?

Hector Fernandez: We were very straightforward with our staff from the beginning of this year in terms of what the economic crisis could mean for the industry, and for our company itself.

We've downsized to a core team of people over the summer, and have decided to close the company largely in part to provide our former staff the best opportunity to receive the monies that are owed - making sure that we can find the best possible way to pay out salaries to the people who stuck by us, as much as possible.

Q: And what of the future - where will the rest of the company go from here?

Hector Fernandez: The first point that I want to make is that the creative industries in The Netherlands is really incredible - there's no shortage of talented people who live here and people wanting to come here, but the problem is cost.

Although we have highly creative people in place where I'd say art, engineering and design skills are unparalleled, the cost is just way too high. That, combined with the new economic reality for the industry, means that we have to find a way to get highly creative people working, while remaining affordable.

I think probably the easiest way to say this is that the entire industry wants European quality, but they don't want to pay European prices. As a business we're going to have to look at how to leverage co-productions and the production management model in the industry now - but taking into account the economic realities that we're in.

Q: Do you expect to see similar situations for other European-based outsourcing companies?

Hector Fernandez: I honestly hope not. I think that the day is going to belong to the people that can be as nimble and flexible as possible, in order to get through this interim period right now. I definitely hope that no European developer has to go through this situation.

I read a lot on GamesIndustry.biz about the discussion in the UK over tax credits - it's very popular, with people looking at options both in France and Europe.

But I honestly don't think this is as much about giving a handout, as much as it is a hand-up - and not that I think that a tax credit is a handout, but there needs to be a way for government to be able to recognise the significance and importance that this creative industry is playing, that goes beyond just lip service.

It needs to be looked at as more than just the cultural staple it is, but as a vibrant industry that is producing the most significant entertainment experiences of this century. People don't want to just play games; they want to be able to participate in the creation of them.

One way that Government can assist is by developing mechanisms outside of tax credits that increase the flexibility of production and actually respect the business model that the industry finds itself in - it's less ICT software-development and more production-oriented, and that's something that has to be recognised not only here in The Netherlands, but across Europe.

There are ways to stay competitive without thinking that handing out money is the way to do it. It could be in employment laws, in social benefits, in the ability to provide more incentives and discounts on hardware and software - just something that can reduce the overall cost of burn here. At our height, our payroll per month was more than most payrolls per year in Asia. We need to be vigilant on reducing the cost of development for European developers.

Q: It's a challenging environment for Europe, but with the economy and exchange rates, it's really bitten this year.

Hector Fernandez: We started this company out of our apartment - eight years ago we were four guys, I came along and was number five. We were very much a start-up company out of bedroom development, and we were able to grow a company simply because the effects of the Euro - as well as the quality we were able to deliver - meant that we were still on par with what was coming out of the US... and Asia hadn't really taken off fully.

But as Asia came on board, the Euro rose and a large number of productions continued to still be paid out in Dollars. It's a simple economic reality, when a publisher has a choice between looking at Europe and Asia as to where they go for their content solutions - especially in an economic crisis they go where the money will go the furthest, regardless of the quality level.

So it's a weird trade-off that the industry finds itself in.

Q: There are some companies in places like China with hundreds of staff... it's impossible to compete with that, isn't it?

Hector Fernandez: It's definitely a challenging situation, and one that our Production Management service has been learning how to utilise. We have talented core teams here - we've got talented management and knowledge workers. We've got the brains and the designers that can sit here and wield the strength of all of these vendors that are across the world.

But, by no means do I want to undermine what the Asian companies can do, because there are some very talented people over there - but it's about understanding that globalisation is really happening: It's about the developers who understand that there are both strategic and tactical ways of being able to combine all these different resources out there, and managing them to produce product.

I think here in Europe, seeing what I've seen in the past eight years, Europeans tend to have a way of congregating together to work in teams that's an advantage compared to the US. If there's a place in the world that's going to be able to leverage that it will be here in Europe - especially with the way the economy is right now, there's really no choice.

Hector Fernandez is VP of Streamline Studios. Interview by Phil Elliott.

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