Life After Conan

Funcom CEO Trond Arne Aas on how the company is spreading its bets in 2010

When Age of Conan was first released in 2008 the game's initial sales numbers showed great promise. But as time wore on developer Funcom found it increasingly hard to maintain high subscriber numbers in the face of strong competition - particularly from perennial giant World of Warcraft.

At the end of 2009 the company announced exclusively to that it was launching a new strand of casual MMO games aimed at a younger demographic to sit alongside the existing adult MMO strategy, and here CEO Trond Arne Aas explains a little more about the company's present position and future plans.

Q: Funcom's undergone various cost-cutting measures in the past year or so - have they produced the results that the company needs in terms of savings?

Trond Arne Aas: Going through cost reductions is never a fun thing, and unfortunately it's become almost a default thing for businesses in the last year it seems.

I think we've adjusted well to that - we've done several things to reduce our cost base. We've had several cost reductions, we've got an office in Beijing that's doing some fantastic work, and we've set up an office in Montreal.

All of that is with a keen eye on the cost position of the company - we're also specifically exposed to the Norwegian Kroner versus the US Dollar exchange rate, which has been a specific challenge to us. We're taking steps to make sure we're not as exposed to that as we used to be.

Q: You've recently been promoting some free trials and other measures aimed at boosting the subscriber base for Age of Conan - have you seen numbers increase as a result?

Trond Arne Aas: Yes, we did, I think we had a very good run in the summer with the re-evaluation and marketing initiatives that actually grew the subscriber base. I think that was a positive experience. But then there are times when competitors launch, and they reduce our customer base - it's the way it works with this kind of long-term subscription business.

So when we've used those marketing initiatives they've worked quite well for us, but then you are exposed to that risk of competitors in the market.

Q: It reminds me in some ways of the mobile phone industry, where the initial push is for news subscribers - but later that changes to a focus on cannibalising the customer base of competitors. It's very different from traditional publishing, isn't it?

Trond Arne Aas: Oh absolutely - mobile phones, or newspaper or magazine subscriptions... it's very much a subscription-based business, and you have the ebb and flow of those kind of businesses. You know that summer is usually quiet because lots of people go on vacation, and you know that January is actually a great time because people are finished with Christmas... they don't have too much money to spend on other stuff, so they return to their subscription games.

So yes - it absolutely has the characteristics of a subscription business.

Q: You mentioned Beijing and Montreal - in one location the general cost is low, while in the other the government helps to keep the cost base low. How many staff do you have in Montreal now, and how are you growing that office?

Trond Arne Aas: We have at present about 25 people in Montreal, and we've communicated that we expect it to grow to maybe 100 in about a year's time.

Q: There doesn't seem to be too much help on offer in Norway - is that something you'd like to see change, or expect to see change?

Trond Arne Aas: I think it will happen - it's in the process. There are several smaller initiatives in other Nordic countries and I think those will, over time, be expanded. The kind of projects that are, I'd say, relatively well supported in Norway right now are very small, focused projects with a relatively limited number of employees on them.

The Norwegian Film Fund actually gives some support, and there is some small government support as well.

But there isn't yet general support for the videogames industry in the same way that all the Nordic countries, I believe, have for their film industries. I think in ten years there definitely will be, it's just a question of how fast things will move in that direction.

Q: For now you've got strong cash reserves - how do you expect to be able to respond as other parts of the business come online? You've got The Secret World MMO as well as the casual MMO strand to come (starting with Pets vs Monsters), so how do you see the revenue splitting between the more casual and hardcore sides?

Trond Arne Aas: I don't think I can give you any projections on that, but what I can say is that we do have a clear eye on building a portfolio of products, and that we will have several smaller projects starting up and running to diversify the risk of the company.

I think you'll also see a larger portion of our investments going into those smaller projects than we have done currently and in the past - but we still think we have a unique competitive advantage in the high-end space... we just have to make sure we take the current market conditions into consideration when we develop our products in that space.

Q: You're coming up to the launch of Conan in Korea - how's that coming along?

Trond Arne Aas: Well, we're very happy to work with Neowiz - they've been a great partner, very professional and insightful, and I think it's been a fruitful partnership both ways. It's very hard for us as a Western company to assess the likelihood of success or the potential in Korea - Neowiz does have faith that it can be a success there, and is investing a significant amount of effort and resources into making that happen.

I think that they're probably better off than I am to answer the specifics of how likely we are to see success.

Trond Arne Aas is CEO of Funcom. Interview by Phil Elliott.

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