Short Fuse

Jon Walsh of Fuse Powered on a journey from indie retailer to mobile publisher, via Facebook and gambling

Jonathan Walsh has a history in the video game business. Initially as an independent retailer, then launching PS2 and Xbox publisher Groove Games, transitioning into early Facebook and skill gaming, and then settling on a independent development studio… which has since changed to a publishing business.

But all the best online companies have been those that have adapted to their customer's needs, so perhaps the time is right for Fuse Powered, a company that is putting all its previous experience - from retail stocking solutions to social analytics - to good use. Here, the CEO discusses the harsh realities of business in the online space, how Fuse Powered has worked its own business model around bigger rivals, and how a network of developers can be a success by serving a loyal base of dedicated players.

Q: It sounds like you background in independent retail, in publishing on the PlayStation 2 and in skill-based gaming has all informed the mobile business you currently run. Can you take us through some of that background?

Jon Walsh: We had some good early success with Groove, we grew the company to about $20m in revenues, until 2005 when one of our distributors, Hip Interactive, went out of business owing a couple of million. So we ended up raising a bunch of money as the traditional console cycle wound down.

One of the partners we bought on board had founded a company in the gambling sector that had done very well so recognising the wind-down in first-gen consoles and knowing it would be a long transition for a couple of years we decided to transition our business into online skill gaming.

We built Skill Ground with a bunch of private equity and in Fall of '06 the gambling legislation changed in the US which made it illegal to advertise any gambling service. We weren't a gambling service but we certainly looked and smelt like one, so we were treated like one. We could never really get that service to a critical mass.

Q: But at this point you were also looking at Facebook as a viable gaming platform as well?

We launched Dawn of the Dead… I had a brand, I had real money, I spent marketing money. We thought we had it figured out but we had our asses handed to us.

Jon Walsh: Near the final days of Groove we had taken our big golf game that we did with Gusto Games and put it on Facebook. We got some great initial traction there in 2007. We learned a lot on the way through those experiences. And in 2009 I started up Fuse, there was just the two of us and the company was called Bitemark Games. One of the last things we did on Bitemark was we launched Marine Sharpshooter on iPhone as an experiment. We loved the device and we could feel it was the future, that was in early 2009. It went on to hit number one and had a million downloads in 10 days. We started Bitemark to be a developer and I got a couple of licenses from Universal for Dawn of the Dead and Jaws. We thought we knew everything because we had one of the first number one games in the world on iPhone with Marine Sharpshooter. We launched Dawn of the Dead on January of 2010 thinking we knew everything and basically got our asses kicked. I had a brand, I had real money, I spent marketing money - all of things I didn't do with Marine Sharpshooter. We thought we had it figured out but we had our asses handed to us.

Q: Why was that - was that a problem with discovery 18 months ago?

Jon Walsh: We couldn't get any visibility in the store. That experience combined with our history with skill gaming, and with Groove as a retail publisher, the real skill we developed was the ability to get products on shelves. So we got a lot of games on the Wal-Mart shelves and licensed them to get them around the world. We recognised in the skill gaming industry it looked a lot more like the gambling market, because it was an online business it was much more about getting players in the door as cost-effectively as you could but once they were in it was critical to know what they were doing, so you could ensure they were having the experience you intended. For the skill gaming business we built a lot of analytics technology, we were looking at how players were playing, and this was in 2005-06. We built an in-app purchase infrastructure that we'd modelled off Kart Rider. We had ambitious goals back then but one of the things that stuck with us was the mentality understanding what is happening in the digital market and looking at analytics.

We did a lot of that same stuff in Facebook where it became more critical with in-app purchases. So that sort of learning, combined with an ass-kicking on mobile, made us realise we had to do a lot of things we'd done over the past few years in the mobile market. With a small team of external contractors we got development partners to help us on the game side and we build our analytics platform. We had a couple of pillars of that established by the time we launched Jaws in 2010 and that went much better, we got that game to number three in the US as a paid app, so we recognised pretty quickly that the technology we developed would be a key competitive technology for us. We could see how effective our marketing was, how people were playing our games.

Since then we've been building out our technology platforms and building our relationships with developers because one of our key lessons was that we could see people playing Jaws, there's this increase but they slowly leak out over time. And when we launched our next game months later we didn't really have any players that we could cross-promote to the new game. We need a larger portfolio of content and that's why we changed our name to Fuse Powered and pushed the publishing side. We showed off the tools and tech to a wide variety of partners at GDC in February and since then it just feels like we've been running a million miles an hour bringing partners on board.

Q: So you're saying Fuse has got the ability to get developer's games in front of paying consumers. It's all about visibility when you're releasing titles onto the App Store…

Jon Walsh: A lot of people in the industry were complaining about the App Store and how it was designed and you couldn't get visibility, and my reaction to that was, "it's the same as traditional retail". If you get a game into Best Buy but you don't get an end cap and you haven't paid to market it, it goes on the bottom shelf in the corner of the action genre and no one ever sees it. If you don't have all the vehicles at your disposal, and you've not done all your packaging right, and made a good game with good reviews then people won't buy it.

That same mentality or approach still exists in the App Store, the only difference is there's two end caps. One is Apple Features, which is totally curated by Apple. We've got some great contacts there but at the end of the day they make it really clear that their content editorial team is a walled garden, they look at every game on its own merits. Our representatives at Apple with advocate on our behalf but at the end of the day its up to the editorial team. Apple will tell you that if you're just counting on being featured by them, that's a bad strategy to be successful over a long time.

The second area to get exposure is in the Top Rankings. Every store operates differently but they all use a rolling, weighted algorithm to determine the most popular games by download volume or by top grossing revenue. And that's the other area where if you market efficiently you can create a perfect storm of awareness that helps to get you high up in the charts so you have a degree of organic visibility where most people are discovering content on a device for themselves. If you're in the top 25 you'll get seen. If you're number 255, believe me, you've got no chance. And that was our mandate from the get go - come up with the right business models, the right marketing partners, and the right technology platform ourselves to makes sure that when we launch a game we get visibility to our audience - effective positioning in the store.

Apple will tell you that if you're just counting on being featured by them, that's a bad strategy to be successful over a long time.

The interesting thing about this business is there is literally a snowball effect. The more customers you have and the more you have playing in your own games is crucial. The other powerful piece of technology we bought is this cross-promotional engine that includes a bunch of different features and functionality, but essentially allows us to get a person playing on one game exposed to another game. It's nothing revolutionary but they way we put it together it really helps us to optimise our marketing in real time and that's something we couldn't see anybody else doing. We need visibility in the App Store but we also need a big eco-system of players ourselves. That had fed our publishing strategy. Instead of just us launching a game every 6-8 months, if we have 8-10 partners who we can work with really collaboratively, who are looking to launch 3-4 games per year, then we end up with a really stable release slate of high quality content. It gives us a really big player base to deliver more content to. As a player the big challenge I have is a lot of the stuff in the top rankings isn't necessarily my cup of tea. Curation is an issue for players. I can peruse the top 50 apps but all of those are there for a whole bunch of different reasons. If I buy a great game I want to know that the company behind it, and their network of developers, is making other good stuff.

Q: What would be the optimum in terms of releases over 12 months and number of partners?

Jon Walsh: Right now we've got seven developers that we're working actively with, and that's having met over 100 developers since February. Everybody from a guy in his basement to the biggest development studios in the world. Right now we're working with five of them in an extensive capacity. But our goal for next year is to release 24 games and we're on slate to do that, so that's about two games per month. It sounds kind of ironic but we would prefer to have fewer partners that are bringing high-quality games because we'd rather be doubling down on those learnings really quickly rather than bringing new partners up to speed on an ongoing basis. Maybe 10 or 12 at the most, but it's quality over quantity.

Q: And free-to-play is about getting the numbers through the door and then monetising them…

Jon Walsh: This is an unprecedented opportunity in our industry to make a game for free, get it out to 100s of thousands of players within a week and you don't have to pay Apple or Android any money to do that. In 2001 when I started Groove we were giving away demo discs and every one of those cost us 50 cents and we had to get them into retail.

We talk about this, and it's not necessarily a positive analogy, but you get as many people into the casino as you can and then you've got to do a great job of keeping them there. Casino's don't charge to get in, and if you don't get a positive experience out of the casino you won't stick around. If we have good enough games and we're giving them out for free then we should be able to get people in the door. With our last three games we had more than four million downloads. That's the way to go, bring in a big audience, use our analytics to make sure we're giving the audience the experience they want, and then they will pay appropriately.

This is an unprecedented opportunity to make a game free, get it out to 100s of thousands of players within a week, and you don't have to pay Apple or Android any money to do that.

Q: The risk of comparing the mobile business to the gambling business is you make it sound ruthless, and there's already a concern that mobile and social games can end up being designed by analytics, which people assume is a spreadsheet. Adding a casino mentality doesn't make it sound like the most creative entertainment medium to those precious about the user experience…

Jon Walsh: You're totally right, but we use the casino analogy just because it's easy to understand. You're right it does have a negative connotation. But that's one of the things that really differentiates us from our competitors, the social gaming guys that admit they are an analytics company first and a gaming company second. I really dislike that explanation. If you don't have great games that go beyond an addictive core game loop, and deliver something that is more compelling and entertaining to players, you might have a good run and it's difficult to criticise some of those companies... But from Fuse's perspective we're rather be working with partners that produce extremely high quality and entertaining games. The foundation of our business is that you have to make great games. But then you have to use data to make sure you're giving players what they want. Maybe naively it's a little bit more idealistic than other companies.

Q: One of the trends we're hearing about is that social gaming experiences will gravitate to mobile and tablets rather than stay in an enclosed network accessed via PC. Is that something you're expecting?

Jon Walsh: That was one of the reasons we decided to focus purely on mobile and get away from social. We had some early success on Facebook and we understood that market but we felt like it was getting saturated really quickly. As players we were using iPhones and iPod Touch a lot more. We thought that was the way the industry is going to move in 2009 and now it's only accelerating. Devices are more powerful, we definitely see mobile as the leading opportunity in the industry right now. For anyone on Facebook now it's a lot more of a saturated market, player acquisition costs are very high and it's very difficult to generate revenue off Facebook if you don't have the very high level lock-down math. It you're not Zynga. It's really tough. But on mobile it's a lot more of a frictionless system, people can come into it easily and purchase easily.

For anyone on Facebook now it's a lot more of a saturated market, player acquisition costs are very high and it's very difficult to generate revenue.

Q: Do you think there's still space for the dedicated handhelds like the 3DS or the PS Vita or has their time been and gone?

Jon Walsh: I do think there's space for them. My whole view on consoles and the traditional handheld market is that there's still things you can do with those games, like on the 3DS or Vita, that you can't do as effectively as on mobile. It's possible to do something like Advance Wars on mobile but you're not seeing a lot of that. There's always going to be room for those devices but I believe that market will get smaller and smaller and it become even more of a core market. There will always be a hardcore audience just like there will always be a market for Call of Duty. When you see something like Infinity Blade, that level of production quality, that quality on mobile is going up substantially and what that does is eat in to that marginal player. When I could only play on console I could only play eight games a year. I'm 38 now and I have a lot less disposable time. I'll play Call of Duty, I'll play Arkham City, but otherwise I get my fix off something in my pocket when I'm riding the subway home.

Q: What about the speed and evolution of technology in the mobile space, it's on a 18 month tech cycle. That's obviously an attraction but is it also a problem trying to keep up with rapidly evolving technology?

Jon Walsh: We're starting to see the beginning of the challenges now. We can see what players are playing and their devices. We can see on 3G for example, which is a few generations old iPhone, that we have a very small audience playing on that device. On the one hand you have to support all of these devices, on the other hand you realise the market, the audience is moving just as fast as the devices are and they are transitioning up really quickly. The other huge advantage is that we have games that are on three to six month development cycles so if you're working on a game that takes two to three years to make, you get caught in that transition a year or a year and a half into a game where Microsoft goes and announces a new console. That's what happened for the first Xbox hardware. That's not good news. In this case with great engine technology like Unity or working with a team like Hothead who have their own technology that's capable of doing high-end next-gen console rendering, they love the fact that there's more and more power coming into these mobile devices because they can take some of that engine technology and repurpose it into making high production value and visually compelling games on mobile. The short dev cycle and the consumer adoption rate mitigate that risk for us.

Q: What have you got planned for the next three months at Fuse?

Jon Walsh: We've just submitted and are releasing a game with Rebellion in the next few weeks, we're very excited about working with those guys. Then we've got a couple of big brands coming in the new year, we've got six games coming in the next three and a half months and all of them have that freemium model associated with them. We're trying to take that flexible business model, where players can get in and play for free, and then decide do they want to play their way through, do they want to accelerate by paying some money, are they happy to have ads? Regardless of genre, all of our games will have that player flexibility in mind. When you get into the big action games, some of the big publishers are still launching $6-$7 games on mobile and that's proven to be a big roadblock for a lot of players.

If you're working on a game that takes 2-3 years to make, you get caught in that transition a year or a year and a half into a game where Microsoft goes and announces a new console. That's not good news.

Q: Last holiday season EA dropped the prices of all their games to 99 cents and completely owned the charts over the Christmas period. Are you guys prepared for that kind of bulk discount, that bulk price slashing, and the effect it has on the smaller players?

Jon Walsh: That's one of the things that motivated us to transition our business model. That idea that a big publisher can drop prices, take a hit and fill up all those top slots. That said two things: paid games are always going to have that risk. The big publisher is basically selling at an extremely low cost to gain market share and if it works for them they are going to continue to do it. So we can either complain about it or make sure our business model works around it. That's where the freemium model works for us. But it also said to us that we need to go towards a publishing model where we have a base of really avid players that are enjoying our games so that when we bring out more stuff we don't need to get into those top 25 positions in the App Store, we can deliver directly to the existing player base. That will be a continued risk for people selling 99 cent games.

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