Due South

Southpeak's chairman Terry Phillips and CEO Melanie Mroz on a difficult 2010

Publisher Southpeak Interactive has drawn more than a few troubling headlines over the last years, with a number of erstwhile partners CDV, Paradox, Nobilis and Timegate bringing about legal action against the US firm. While rarely responding publicly to these claims, Southpeak has maintained throughout that much of the reporting has been inaccurate. It also claimed late last year that its legal woes were at last behind it, leaving it primed for a better 2011.

Many of the publisher's former partners have had their say, including staff from 2009 acquisition Gamecock, whose former CEO alleged that Southpeak was trying to avoid paying off its debts. Southpeak itself has traditionally been tight-lipped on such accusations, but chairman Terry Phillips and CEO Melanie Mroz agreed to an interview with just before Christmas.

Q: It looks like 2010 might have been a bit of a tough year for Southpeak how are you feeling about things now?

Terry Phillips: Yeah, obviously we're in a challenging business and lots of things can present challenges to us. This year was relatively challenging, but we're pretty optimistic going forwards, with where we're headed.

Q: You've suggested that there's been misinformation in the reportage of your various legal issues over the year. Can you clarify what it was that you believe was inaccurate?

Terry Phillips: I think probably all of it has some truth; a lot of it has some parts that we haven't been given due correctly. From our standpoint, we're disappointed that some people have used the press for some... we'll call it misinformation, if not perhaps outright something else. But we'll call it misinformation - you read a lot of it and you just think we've had a terrible year on the legal side, but we've not had one single substantive judgement against us whatsoever this year. It hasn't been our style to respond to all of these, or to use the press in that sort of vein.

So we've tried to steer clear of all that, but I think what happens is some people tend to use it and it works well for them, so the next person tries the same thing. But if you go through the various litigations and read about them I guess it would sound pretty bad, but whether it was CDV or Nobilis or any of those things, in each of those cases we've pretty much won our position. We've had to defend our right on more occasions than we've liked, but we're required to do that as public company, we have to defend our rights and our investments.

Q: You talk about winning in these judgements - it's been a bit unclear how these cases have actually been resolved. Was it settlements or legal decisions in your favour?

Terry Phillips: Specifically, the big issue for us has been the My Baby franchise and the challenges that have been going on with that whole thing. We think that's a great franchise and we worked hard to build that franchise, and we got a clear judgement from the French court that the contract was fraudulently terminated and our rights fully exist under those contracts. So those games are our games, and we'll continue to fight and continue to protect our rights under each one of those games.

Q: What is the status there? Will you have to start the fight over for each new My Baby game?

Terry Phillips: There was a list of titles that were on the contract that we had with Nobilis - the ruling just came down on December 7. It was completely turned over, it was a bit of a historic ruling I'm told by the lawyer, in France to be able to get a ruling like that on a nice speedy trial. All of our rights under that agreement have been put back in place, and because of that contract not being terminated all rights on the future games fall back into our agreement and we'll do what we need to do to protect those.

Q: You've also dealt with legal action from the likes of CDV, Paradox and Timegate. Why would you say there've been quite so many cases against you this year?

Terry Phillips: Yeah, from our standpoint we think most of it stems back from our purchase of Gamecock back in October 2008. We took over Gamecock and when we did they already had a fair amount of issues on the table - contract disputes and whatnot with a variety of people. We took over the company in October, we quickly worked with the various developers or distributors, whoever the third parties were, and in most cases we were able to get things back on track and get things solved, get the games back on track and moving forwards.

Probably in, I guess, 20 per cent of the cases, we either weren't able to reach an agreement or it was already too far gone, if you will. In those sorts of situations, we were sort of forced to protect our investment. We tried in every case to work out something else, and in most cases we did - but in a few cases we didn't. Most of the litigation challenges, things you read about, all stem from Gamecock contracts versus things that we had prior to that. I think Nobilis is the only substantial issue that we've had that didn't have something to do with Gamecock.

Q: Do the guys you've worked with generally seem pretty clear about that - that outstanding payments are to do with Gamecock rather than blaming Southpeak directly?

Terry Phillips: Yeah, I think that goes back to the misinformation. Gamecock had its challenges when we took it over, we kept it as a separate company, we never took any assets out of that company, we tried to resolve the liability. We thought it had some good games, some good opportunities, we thought we could get most of the things back on track. I would say that, as a public company, some of that's more challenging than we had anticipated because so much of it gets aired in your public filings. When you're a public company, you have to report any potential bad news, you don't get to report any potential good news. It can make your numbers look pretty bad...

Because we have to consolidate their numbers with ours we have to put in these potential liabilities and contingencies, even if we're not sure that they'll ever amount to anything. Like with CDV, we had millions reserved, but once that was resolved we were able to unravel that. It would have been ideal if we could have resolved 100 per cent of these cases, but we think that after we bought Gamecock some people might have taken a little bit of advantage and there may have been some hard feelings about some of the people that were there. It was disappointing.

Q: How confident are you that's all behind you now? Or is there potentially more trouble to emerge from Gamecock's legacy?

Terry Phillips: I hope not! [Laughs] More came out of it than we ever expected. There were people we'd never heard of when we bought the company that came up later on which made plain that we'd never been informed about some things. So we've worked really hard to work directly with people, to resolve those issues, to help people who were disappointed. We think that it's behind us now, and the reality is we only have a couple of things left that are hanging out there, and Nobilis is one, now we just need to make sure we protect the rights on the other versions. There's nothing else really substantive that's still outstanding.

Rob Burman (European PR and marketing manager): From the UK side, the CDV issue was a major press point and it got a lot of attention. We purposely chose not to add fuel to the fire; we just went about our business and dealt with those legal issues through the courts rather than through the press. That's all been solved now, we're back to business as usual here and a lot of people supported us in terms of distribution partners and whatnot is testament to how we tried to continue our business going forward.

Q: Are the former Gamecock bosses still involved in any way?

Terry Phillips: Yeah, the prior management pretty much left a couple of months later.

Melanie Mroz: Soon after we acquired the company, they moved on to pursue other interests, if you will.

Q: Do you perceive the various stories about these cases as having harmed your business?

Terry Phillips: Oh, absolutely. Like I said, that's the most disappointing part for us - some people, attorneys or whoever, used the press to try to put pressure on us, to try to squeeze a better deal out of us, to try to paint a negative picture of us. That's definitely a challenge for us, because we spend a lot of time with our partners reassuring them that everything is fine. That's not how we want to spend our time we want to sell games.

Q: Have you been at the point where you've considered not being Southpeak anymore - taking on a new name and having a clean start?

Terry Phillips: I think the press - not that you guys are doing it yourself, but people using the press have done what they can to harm the name and harm the brand, make people nervous about that, but I think that the partners we work with still support us. I think we've got various strategies going forwards in regards to different labels and how we operate with the digital strategy and some of those things. But, y'know, we're still Southpeak.

Q: What is the primary driver for revenue over the year, outside of My Baby?

Terry Phillips: For us, we've got some games we're really excited about. A couple of them we've been waiting for a while. Two Worlds II is probably our next big release - we're really excited about that game, it looks fantastic, it launched in Europe already and is doing very well. Stronghold 3 is another big property for us - it kind of leads into our digital initiative, it has a great development team and is a great looking game.

Melanie Mroz: We have another game that we've partnered with NVIDIA with. We haven't announced the title yet, but we will do so at CES. That will be using the UE3 engine, and will be part of a lot of OEM deals that NVIDIA is making. There's a lot of opportunity with NVIDIA, we've been working with them on several titles. We've announced a partnership, but we've not announced any specific titles yet.

Q: How much will you continue to look to Wii and DS next year?

Melanie Mroz: We're looking at 3DS. I think that has lots of potential, and most publishers who have been on board with Nintendo's initial platform releases have done very well. I think there's some opportunity there, and we have some opportunity with particular titles at a certain price point. We specifically had a Wii title that we could have released in 2009, but we held it for 2010. I think it's doing better than it would have done in the market in 2009, when there were so many Wii titles. We've seen a good price point and there's just not as much competition as there was. There's a huge install base, so...

Q: For 3DS, how concerned about the trend of third party titles perhaps not doing quite as well as first party on Nintendo platforms?

Terry Phillips: Yeah, that's always been a challenge - Nintendo does great games so it's hard to compete with those. But we sold over a million pieces of the My Baby franchise, so even with that we've been able to be pretty successful on DS, and we've got some Wii games that are doing great. It's always about the game, right? If the game's right and gets the right audience, the right timing and the right price, then it can sell. You can't count Nintendo out, that's for sure.

Q: You mentioned your digital strategy earlier - what proportion of your business is likely to be dedicated to that compared to retail?

Melanie Mroz: Digital is certainly something that we're working hard on. Retail, I think there's a lot of opportunity to sell there but extend the lifecycle also through digital initiatives. There's also a lot of product that's available to us right now that we could bring to PSN and XBLA. It's great product, but these developers need a publisher to bring it to market through PSN and XBLA. There seems to be a lot of those opportunities, so I think you'll see a lot more from us in terms of retail and also going digital. Terry mentioned Stronghold 3 earlier - I think that's a perfect example of a title for us that will straddle both sides. It'll be a PC boxed title that'll also have very strong digital sales. That's going to ramp up our digital business, if you will.

Q: How much will you look to Android and iPhone? If you can work things out with Nobilis, My Baby seems like it would very much suit mobile platforms...

Melanie Mroz: Yeah, we're definitely looking to those platforms. As I mentioned, we will be announcing a product this month that will be available for Android. There's a lot of opportunity there. From a development standpoint, it's a much shorter timeframe than it is putting out a retail box, so there's a lot of product and titles that we're working on right now that you could see in three months. We'll see quite a few of those releases next month.

Terry Phillips: We have a UE3 studio license, so with Infinity Blade and what's happened there, we think that's an ideal development tool and platform for us to focus on tablets and phones and 'droid, and to use that engine to bring some great-looking product to the market.

Q: Do you agree with the argument that Infinity Blade has set a precedent for higher pricing on mobile devices, or will you be sticking to the 99c model?

Terry Phillips: Yeah, it did a great job with the pricing, and those guys are pretty smart. I guess people will follow their lead in some cases. I guess you've got to do a great game for people to pay that price, but from what we can tell it looks like people are prepared to pay it if the quality's there. So I think the opportunity's definitely there to do it, but our overall model isn't changing. We've always worked with independent developers, bringing games to console. We'll keep doing that but maybe digitally and any other applications, because it gives us a lot of opportunity to create unique kinds of products.

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