Frima's Steve Couture and Jake Theis

On financing growth, acquisitions, and turning threats into opportunities

I don't know many CEO's that would joke that they do their best interviews while taking a shower (bizarrely, there was a shower in our interview room at GDC), but then I don't meet many CEO's of independent studios that have a headcount of over 250 people. Frima, based in Quebec, has been producing work-for-hire projects since 2003 for the likes of Hasbro and EA, LeapFrog, Nickelodeon, Player X and Miniclip, across virtual worlds, smartphones, social, web games and consoles - but in the past 24 months has really ramped up efforts with new original intellectual property.

Here, in this exclusive interview with, CEO Steve Couture and senior brand manager Jake Theis discuss the evolution of the studio, plans to reach across every available format that has a screen, the importance of acquisitions, and what some see as a threat is a market opportunity for everyone else.

Q: Can you begin by telling us a little about the studio, size, projects etcetera?

Steve Couture: We are a company based in Quebec and we founded the company in 2003. We are now 265 employees and we are still an independent studio. We're trying to get "midependent" to catch on, as a phrase. We're a multiplatform studio, we're doing everything that has a screen so from Xbox to PSN mobile phone, tablet, social. A big part of out business is doing work-for-hire for the big studios and for the toy industry, and the other part is developing our own IPs. So we finance our business and our growth by releasing work-for-hire titles, that's the how we play the business. We're a super-nice business, to be honest.

Q: So Jake, can you tell me more about your focus on creating new and original IP?

Jake Theis:One of the really exciting things and initiatives at Frima, the reason I moved to Quebec and am drinking the Frima Kool-Aid, is that we're set up in a way where we can take the best opportunity at any given time. Technology is getting good enough and cross-platform enough that if we see a market opportunity we can reach out, capture that and align it with the best IP that we have with the best market opportunity. There's not a barrier there. One of the nice things about Frima is we have a great legacy of seven years of partnerships with major studio developers and with different console developers. We can get our IPs out and get the notoriety that someone that is just starting new IP probably couldn't because we have this legacy.

In terms of actual things we're doing we have A Space Shooter For 2 Bucks, which is downloadable for PSP and PSN. It's a minis title, it's the most literal title in gaming that you'll find...

Q: Is it a space shooter that you buy for $2?

Jake Theis:It delivers on that! Sony worked with us on the promotion of it and it's been doing fantastically well - we have 100,000 downloads, a blend of some free giveaways through the PlayStation Plus programme and also from people shelling out the big $2 to get it. Critical reviews have been really good, my favourite are the ones that say you can't afford to not own it. Basically our methodology for that opportunity was thinking about 80s arcade machines, which were the first micro-transactions. People were shelling out thousands of quarters for the classic space explorations titles - to take that technology and amp it up so there's a narrative with multiple paths for where you want to go, different upgrades - it's been doing well.

Jake Theis: It's been ranked as the fourth best PSP title on Metacritic. So for a small title it sits beside God of War and some other high-profile games.

Q: What kind of resources did you have dedicated to that new IP compared to your work for hire projects?

Steve Couture: Space Shooter was 8-12 people depending on the timing of the project. What we're doing in service is still today bigger than what we're doing with our own IP. We've developed some really big casual MMOs for kids - the Build-A-Bear Workshop is a big project, we've worked for them for four years now. We built the initial MMO then the real work starts with the maintenance with them, which we've been doing for a long time. That's a big project and you if look at the total investment, it's huge. We worked on The Littlest Pet Shop Online with EA and Hasbro, that was a really big project too. So we have these large projects in terms of service. Build-A-Bear is 20 million customers and it's doing well so we've made less investment elsewhere.

The way we see it, instead of putting all of our eggs in one basket we try to build little IPs and see the reaction in the market and then expand on it. Something that is a good example is A Space Shooter - it's going to be ported out to between 6-8 platforms by the end of the year. Our other title, Zombie Tycoon, we launched a year ago and it's not had such rapid success but the game and the concept, they way that we present it, it's been really appreciated by the players.

Jake Theis: And then Pocket God has been our first foray into Facebook. We worked with Bolt Creative who made the iPhone version and it was a top five to top twenty game. We loved the IP and thought it was very interesting, bringing a mobile concept and a mobile brand to Facebook was a compelling opportunity, something that we certainly don't think we'll be the last company to attempt. Taking that and massaging the game mechanics so it works with Facebook, so it has virality, so it has strong retention with people checking in multiple times on it... it's been doing really well, we're about nine weeks in and we're 200,000 monthly active users or in that range. I would qualify that by saying we haven't spent a dollar of marketing against it yet, we're still in beta. We're excited to see the engines turn on shortly once we have everything in place.

Q: Why try to tackle so many different platforms - that must be a headache on multiple mobile handset, digital consoles, social networks?

Jake Theis: We had an interesting conversation two days ago about the people that dedicate themselves to one platform, when new platforms come along they are walling themselves off from fantastic options. Who would have thought a few years ago that tablets would have taken off the way in which they have? Or four or five years ago that Facebook would take off for games - those options didn't exist. We want to make sure when we're launching intellectual property we're not confining ourselves and we're able to take the best opportunity at any given time.

Steve Couture: And we have a big team so we can specialise with people. We understand different business models and work-for-hire is a good opportunity to understand the markets. When you work for big clients you see the mechanics.

Jake Theis: It's kind of like working in a seesaw fashion, where sometimes the client project is first and our first foray into a platform - they're excited and we're excited. And sometimes we'll go in with the IP first and open it up, and our business development guys will see their phones start to ring, "we saw your iPad game, we didn't know you did that, let's do something." It's intriguing.

Q: Is there an optimum balance that you're working towards with work-for-hire and new IP?

Steve Couture: Over the next couple of years we want the IP to become our main revenues generator so we'll have to expand a lot more. It's still 90 per cent of our revenue, from servicing and work-for-hire. We want to build the IP portion slowly and quietly.

Q: What's the maximum number of employees you'd like at the studio?

Steve Couture: It's not a question of the total amount of employees, it's the amount of people we want in one single set-up. To get to 300, it's a huge team to have in one single location, so for sure we're looking for acquisition to expand our company in different territories.

Q: Is there any particular location that would be the most beneficial for Frima?

Steve Couture:We're already present in the United States and we want to grow our IP side of the business. The kind of acquisition, it's not totally based on the geographical thing but more on IP and expanding our catalogue, that would be interesting. Producing videogames in Quebec it's super-nice. We have good incentives with tax credits, R&D tax credits, there's some programmes to create new IPs and things like that, and there's talent.

In the province of Quebec we have this strange culture that's between American culture and European culture. So we're watching HBO and listening to French singers. We're in the middle of that and it gives us a culture of creation for an international market, or at least a European and American market.

Q: If you were going to acquire you'd want talent in a location that already has incentives such as Quebec?

Steve Couture:The kind of acquisition we can make, if they are based on IP, that would be more to continue the operation of that IP itself instead of trying to produce as work-for-hire.

Q: How would the company be different if the local incentives weren't there to support Frima?

Steve Couture: Honestly, as an entrepreneur it would have been totally different. Some people think these kind of incentives are their just to put pressure on the market. We use these incentives to grow the business, we employ 260 people in Quebec city where a few years ago there were about 50 people working in the industry. It brings companies like Ubisoft to the city, Activision, us and some other independent studios. And also the ancillary support businesses for the games industry - animators, sound and music, bug tracking, localisation.

It creates an ecosystem that is positive and powerful. It's now possible in the province to find really senior people, because for 10 or 12 years the industry is at an international level. So it generates a super-nice industry. Without these incentives the industry would be different. As an entrepreneur I would have managed things differently. These incentives are connected to full-time jobs, not for sub-contractors. When you start any business it's a good thing to hire people and sub-contract and take less risk.

With these incentives I was more willing to take the risks to have someone paid for the year, but if we have someone over in production we're able to keep them on. It creates real value in the region and we reinvest. We are still 100 per cent private company. There's no VC at Frima, we're still the same three co-owners and we earn more than 90 per cent of the business. That would have been totally different without the incentives. But then on the other side of that, Quebec is not a venture capitalist place. There's not many investors. Probably without the incentives I would have gone to American VCs. It sounds like the best place in the world to start a business but there are some things missing in the ecosystem. We shine brightly if we compare to others. For two years we were the fastest growing company in Quebec and the tenth in Canada so we've grown rapidly.

Q: If you're working across multiple formats what hardware of formats do you see the most amount of growth coming from?

Jake Theis:I think the tablet technology is amazing. Looking at the iPad 2 announcement and the $500 price point... there are 15 million units of the original iPad out there and with that nice attractive price point I think there's going to be a lot of tablet gaming out there. Social is really big and robust. It's interesting that I've heard a lot of people say that it's so hard to compete because you have the dominant companies at the top end. But to be the 500th most popular game on Facebook - in terms of monthly active users - you can still have a really dedicated community and have a nice little business, and launch brands on Facebook pretty simply and straight forward.

Kinect is also something that's really exciting to us, that's something we're also trying to figure out.

Q: That's interesting, Kinect seems part of the old console business compared to everything else we've discussed so far...

Jake Theis:One of the things I think that is the most exciting opportunity on Kinect is to create a new brand in that space. One of the issues that the Wii had initially before Nintendo started to launch cornerstone titles, was that the brand was the platform - Wii Sports, Wii Play. The brand was the platform. With Kinect and our growing relationship with Microsoft, hopefully we'll be able to launch brands in there - people's first reaction to a property in Kinect is something I'm curious to see. Kinect and downloadable has got a lot of potential.

Beside the platform and the technology, a lot of people are talking about metrics and game design. We're born of that industry six years ago when we built our first kids MMO and we know about managing maintenance, we have a proprietary dashboard so we know about managing stats. To get granular on stats, on behaviour, on purchase, habits around people and how they interact within the game - you try not to get caught in paralysis by analysis, because there's an overwhelming amount of data, it can be intoxicating.

Q: What did you think to Satoru Iwata's comments that there's too much digital content, prices are too low and that's devaluing the market for bigger games?

Jake Theis: As a company that launched A Space Shooter For 2 Bucks and I don't think we've ever shipped a physical copy of a game, it's a huge, huge market opportunity. If you want everyone that has the capacity to play a game to touch it, if you aren't able to offer it for a compelling price point, then your competitor will. Unless you can get everyone to collude on prices, well, no one's going to do that - someone's always going to see the opportunity in delivering what the customer wants.

You need to have intellectual property that can stand out from the pack. If 13 farm games come out in a row in the social space then I would agree with him, but if you come out with something that is strikingly different that you can navigate through, I think there's tremendous opportunity.

Steve Couture is CEO of Frima Studio, Jake Theis is senior project manager. Interview by Matt Martin.

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