Christian Svensson - Part One

Capcom's VP of business development talks about the company's Westward-facing development strategy

In the past few years Capcom has been strong in its determination to appeal to global markets by working with Western developers on a range of projects, from Bionic Commando with GRiN to Flock with Proper Games.

At the recent Animfx NZ event in New Zealand Lucy O'Brien caught up with Christian Svensson, the company's VP of strategic planning and business development, to get an update on the publisher's ambitions.

Q: First of all, how important is the Animfx conference to Capcom - particularly considering its broader scope of multi-media creative technologies?

Christian Svensson: As a company we're trying to do increasingly what our COO calls "multi-use applications" of our properties and projects. So if you look at our efforts in the motion picture space, we’ve made several pictures - both good and bad!

Resident Evil is Sony Pictures' second most profitable franchise behind Spiderman. We've had two Street Fighter outings. Lost Planet is a major motion picture coming from Avi Arad - responsible for the Spiderman, X-Men and Iron Man series. Big, big budget films, and we have several other projects in the works, some of which will be announced before the end of this year.

So Animfx, as far as playing a role in sharing and exposing what we're doing with a different audience than we normally talk to, is important. In terms of getting some understanding as to what’s happening with digital efforts and digital film, it's very important, because this is not an audience we usually get to engage in.

Our guys in Japan would very rarely get to sit down with the guys at Weta, but what's funny is that we have a lot in common in terms of how we work. We have very similar tools, they get to do things over 15 pass renders in two days on a render farm, we're doing things at 60 frames a second. But at the end of the day we're creating digital content.

Q: What are your impressions of the digital media industry - and the gaming industry in particular - in New Zealand?

Christian Svensson: Sidhe is the largest game developer in New Zealand, and those guys have been really active in evangelising the Kiwi development scene, not just here, but in showing the rest of the world in what's happening in New Zealand and how it's relevant to our business globally.

While Weta is the big very obvious monster in terms of visual effects down here, I think there are a lot of other interesting smaller things that - if they aren't forces now - will be in the future.

Q: New Zealand's game industry is still young. What do you see as some of the pitfalls that smaller developers have to face?

Christian Svensson: I can't think of a riskier business today than being a one-team game developer shop, especially in today's climate with funding becoming increasingly difficult, and publishers becoming increasingly risk-adverse, given the pummelling some of them have taken over the last 18-24 months.

The biggest pitfall is getting signed, and once you get signed, how do you get that project through to completion? There are lots of projects that get killed along the way; production doesn't go smoothly, it's unfortunate. If you're a one-team shop and you're going from milestone to milestone, and all of a sudden that project is gone, there's a really high likelihood that your shop is gone too.

It's a really difficult business, it takes incredible persistence and great execution so you can build up your reputation and get your next gig. Not just a reputation either, but a relationship with someone you're working with.

In an ideal world, both for a publisher and a developer, if a project goes well, you do another one together. You know how they work, they know how you work, you've come out the other end and hopefully there's been some profit, some royalties for those developers to build up a bit of a war chest.

But it's really hard to get to that point, and there's not an easy transition between milestones. Having sat in hundreds of pitch meetings, there are a million very easily avoidable traps developers walk into constantly. They don't know what the publishers' 'hot buttons' are, why they're sensitive about certain things and not others.

It's a funny thing, because the developers are focused solely on the game, and the deal is only partially about the game. The other part of the deal is who the developers are and what they bring to the table. Oftentimes it's much - if not more - about them than their game.

The really good game developers treat the game business as a business, they have to figure out what their burn rates are going to be, they have to make sure that they're not over-extending themselves or putting too much of their own money in the game in the event that it falls through.

Capitalisation for publishers and developers is a very key thing, and like I said, publishers in the last 18-24 months have not been generating the returns they'd hoped for. Well, most haven't. They see a lot of red ink at EA and SEGA, and there have been disappointing returns elsewhere. You could probably count on one hand the number of publishers - thankfully Capcom is one of them - who are actually fairly profitable and stable and doing rather well.

That's not healthy for the ecosystem as a whole, if there are only five publishers doing well and the rest are underwater. These guys have to fund products that are profitable. At the end of the day, the game that gets brought to them needs to have an opportunity to make a return for the publisher, so the developer can benefit on the royalty side.

Q: Looking at some statements you made regarding working with Western developers, Capcom has been one of the few Japanese companies who have embraced the multinational development market. Is this still a driving force for Capcom?

Christian Svensson: I would say it is. Our global head of product development is adamant about expanding the number of Western developers that we're working with. I think you'll see the methods in which we're working with them change a little bit. We're actually going to be doing a tighter integration between our western operations and Japan's operations, so we'll have producers on both sides of the pacific assigned to pretty much every project, including things coming out of Japan.

So a bit more integration than we've had in the past - over the past three years or so we've had a Western product development organisation that was fairly standalone, a bit autonomous. I think we're heading towards more of a global team now.

Q: Considering the unfortunate demise of GRiN, which developed Bionic Commando for Capcom, do you see the current economic climate as a hindrance to realising these multinational ambitions?

Christian Svensson: Financial considerations for every developer is a legitimate concern. Developers need to expect a publisher to want to see what your books look like. If a developer can't carry a couple of milestones on their own, and a publisher doesn't approve a certain milestone, and the developer then says: "Well then we have to lay off these 15 guys and your USD 10 million investment that's already been made is at risk"... the publisher effectively can't say no.

The publisher has to continue to fund a project that hasn't been meeting its milestones, with the aim of saving the investment. So financial solvency of any development partner you work with is absolutely critical.

At the end of the day, when developers deliver what's in the statement report in the contracts that we sign with them, they get paid. If for some reason or another a discussion is opened as to whether a milestone should be approved or not, we need to know that the developers have the wherewithal to weather that, and get that milestone to the point where it can be approved.

We're pretty rigorous in how we evaluate our milestones, and we can only do that with partners who have the financial solvency to carry themselves a little bit. As far as GRiN themselves are concerned, [founders] Bo and Ulf [Andersson] were stellar to work with, and I'd daresay we'd not be averse to working with them again.

Q: Looking at Capcom's recently released financial report for fiscal 2010, it plans to have overseas titles account for 75 per cent of all sales. Does this mean Capcom's target consumer audience is now increasingly focused outside of Japan?

Christian Svensson: Without question. When my boss and I were brought in four years ago our remit was to grow Capcom in the West. It was pretty well understood that Japan, at best, was a flat market in terms of growth. Even if Capcom was successful and growing its market share in Japan, because the market isn't expanding quickly there, that's not going to be a huge growth area for us.

We were a much smaller percentage of the business in the West than we are today. Now, we are significantly higher. We have grown revenues in North America over the last four years by approximately 270 per cent. And it wasn't just that we had a good year last year and that's the 270... It was a consistent planned growth all along the way.

There are similar growth patterns for Europe as well - so, across the West, we are much larger as a percentage of the company than we were when we came in. That was the goal.

But we're still not quite where we need to be. If you look at the relative market sizes of Japan versus North America and Europe combined, globally they're about twenty-ish per cent of the global market but we're still not 80 per cent of Capcom's revenue base. The goal would be to get us more in-line with relative market size.

Part of that desire to work with Western developers was driven by creating Western focused content aimed at Western gamers. And that may mean leveraging the Capcom brand, as we did with Bionic Commando, as re-envisioned, re-imagined, by Western developers.

Christian Svensson is Capcom's VP of strategic planning and business development. Interview by Lucy O'Brien.

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