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Should you grow your games company? Four questions to help you decide

Pipeworks CEO Lindsay Gupton explores the considerations you must take into account before expanding your business

After 33 years in the game industry, I have seen the good, the bad, and the ugly when it comes to gaming studios expanding, whether it be growing a current team, opening up new offices, or launching an entirely newly-branded studio as a subsidiary.

We at Pipeworks just launched our first new studio -- Timbre Games in Vancouver led by Joe Nickolls, Zoë Curnoe, and Geoff Coates. This was the first big step in our North American growth strategy, and was a result of backing an amazing team we knew could stand on its own but also be part of the Pipeworks family.

The first question you should ask yourself when considering growth is: Why? And my bias tends to be: Why not?

Growing your gaming company can:

  • Diversify and de-risk your business if your growth includes new capabilities, like expanding into new game genres or technology. This means you don't have all your eggs in one basket or a single point of failure for your business.
  • Generate income -- for the ongoing survival of the business and the ability to invest internally in anything from new IP to self-publishing.
  • Create opportunities -- for our people and the business itself to do new and exciting things. No one wants to be static or stagnant and doing something new usually requires growth.
  • Create value -- for our people, investors, and the studio itself, which can lead to more investment or a path to an exit.

But you want to grow sustainably, sensibly, thoughtfully, and for the right reasons. To help make that decision, I would propose asking yourself these four questions, to start.

1. Is the timing right?

You could argue that business strategy is just visualizing the future and making sure that your company is in the right place at the right time. Piece of cake, right? In the gaming industry, that means that you have the capabilities (more on that later) to expand exactly when the opportunity arises, there is a demand for your game, and market conditions support your business model.

Lindsay

Lindsay Gupton, Pipeworks

That timing, of course, comes with a bit of luck.

To use an example close to home, Pipeworks hired nearly 50 people during the pandemic to build Rival Peak alongside our partners Genvid and DJ2 Entertainment. It was a whole new type of game and perhaps the most radical thing we had ever done. Part of our forward-looking business strategy was to eventually leverage our experience in the interactive streaming space. So when the opportunity came to create Rival Peak, we jumped at it and doubled down. The timing was right -- the opportunity aligned with our business strategy -- and we are now working on even more games in this space.

Of course it's not only what market conditions currently exist, but what they will be. Forecasts, after all, are just (hopefully educated) guesses. The pandemic has seen a boom in gaming, and often people believe booms precede downturns. We believe the opposite -- that the world discovered the true power of gaming during the pandemic and that trend is not going anywhere -- but that's a different article.

2. How will you structure your expansion?

Whether your expansion involves buying another studio, launching a new studio or simply increasing headcount, how your company will be structured post-expansion will be key to its success.

If you are buying or launching a new studio: • Will it have its own name? • Will it be part of a centralized organization including using the same shared services like finance, HR and communications? • Will it have its own P&L?

The right answers depend on the details, including whether the satellite studio has a recognizable name, whether that outweighs any benefit of the parent company name, what kind of games it will make, and how closely its culture and values align with the parent studio.

Having its own P&L can foster autonomy and a more entrepreneurial spirit for a new or acquired studio, but that comes with the pressure of owning its own top and bottom lines -- which are both a measure of freedom and also accountability. However it still makes sense to allow a subsidiary to benefit from things only big companies have, like access to capital, secured loans or shared services such as recruiting, HR, IT and marketing.

After working out how you should structure an expansion, the next question is whether you can.

3. Do you have the capability to expand?

This one is relatively straightforward but requires a healthy level of self-awareness. Where are your strengths and weaknesses and do you (or will you) have the skills and resources to execute a successful expansion?

You should avoid holding a company back because you're questioning a team's ability to take on more responsibilities

In the simplest example, if you are expanding from one to two teams, do you have leadership capability to staff those teams: Two game directors capable of running projects, two producers, and so on down the line. Do you have the infrastructure to support two teams, so an expansion won't break your internal systems? If you decide to have a separate P&L, do you have leadership at a subsidiary who has the business skills to manage that?

Especially with smaller teams or studios, too many of these stressors at the same time can be overwhelming. You can't afford to mess up the game you're working on by kicking off another one at the wrong time.

But you should avoid holding a company back because you're questioning a team's ability to take on more responsibilities. I've always been amazed about how people have risen to the occasion. Great people will thrive when they have the desire and are given the opportunity to step up.

4. What about location?

Diverging culture or projects might mean you will want to keep your teams or subsidiaries at different offices or in different cities. I like to think that 200 to 250 is about the right peak number of people to have at any one gaming studio location -- it creates opportunity for people to grow within it but you can still get to know people and all fit in a reasonably-sized building.

When choosing a city for expansion, access to talent is the number one priority -- and that often means having a great university nearby with graduates that have the right set of skills you need. You should also be considering up-and-coming hotbeds of the gaming industry -- so where is the talent going or will go in the near future?

Having a good business climate in the city you are considering is important, as are qualities like access to a good airport and a government that believes in your industry and is willing to support it. Business incentives and cheap startup costs, however, should not be your primary decision maker. It's difficult to get past deficiencies in talent or the other qualities I've listed, even if the tax breaks are tempting.

The pandemic obviously has shown everyone that productive remote work is possible and as it becomes more commonplace, it may allow studios to break free of some of what they see as constraints of their location. Be conscious that any new location you have to collaborate with is within a manageable time zone difference. Eugene, Oregon and Vancouver, Canada are very different cities when it comes to the business environment and the talent pool, but they are in the same time zone, which can make all the difference when it's time to collaborate.

The world needs more games. And more great studios to create them. Be a part of that growth in a sustainable, people-centric way to create opportunity, value, and a lasting positive impression on our industry.

Lindsay Gupton is CEO of Pipeworks Studio, an Oregon-based developer and part of Sumo Group.

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