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Making the Connections Part 2

Sega's Noah Musler on the current platforms and viability of being an independent developer

Noah Musler, Sega's director of artists and repertoire, has been with the company since the launch of the Dreamcast back in 1999, making the transition from hardware manufacturer to third-party developer.

During a recent interview in which he discussed the upcoming Game Connection in Lyon, Musler also shared his views on the current hardware market and the difficulties of being an independent developer.

This is the second part of our interview. Part One can be read here.

GamesIndustry.biz: You've been with Sega since just after Dreamcast launched, and have followed their transition from console manufacturer to third-party developer. What do you think of the current hardware situation? Is there room for all three consoles?

Mussler: I honestly don't think it's that different than it ever has been.

The Wii is a bit more of a unique platform, so it has certainly changed the dynamic, certainly from an external development standpoint. The games that you make on the 360 or the PS3, you can generally port from one high-end platform to the other, and you can usually get a PC SKU out of that.

But Wii is so different, unlike GameCube was. GameCube was much closer to PS2 and Xbox, so you could do a three SKU title.

I think that's probably the biggest change, from the publisher perspective. The financial component of being able to spread the development dollars against a number of SKUs so that you can recoup your investment a little easier, so that both publisher and developer actually make profit at the end of the day, is a little more challenging because the Wii SKU is much more difficult to have as a third SKU. And certainly it is difficult for it to be the lead SKU [ahead of the] 360 and PS3. The consumers are different, the platforms are different, the expectations are different.

So that's a challenge, but at the same time, there have always been three consoles. There is usually a third place console, and even if it turns out to be Nintendo, which is debatable based on how successful they have been recently...although, it does seem like they might end up in that space. It is really difficult to say. We think that they are going to be neck-and-neck with PS3 and 360 for a while.

Nintendo is always going to be able to exist because they make fantastic product on their own. People will buy a Nintendo console, whether they are a hardcore gamer or a kid, because they are going to want Zelda or they are going to want Metroid or they are going to want Mario Galaxy. That's a fantastic place to be in, when you have that level of creative quality product.

That's great for Nintendo, but what about third-party publishers? Sales of their games don't come close to Nintendo first-party sales figures.

Historically, if you look at GameCube and N64 as their most recent consoles, it's not really any different. Nintendo has always been successful that way.

Sega, fortunately, has a great relationship with Nintendo as a company and also with the Nintendo consumer. We've had great success where other third-party companies haven't, with our Sonic product in particular, but even Monkey Ball has done very well for us there. A number of games have done well for us where other companies have had more of a struggle.

We're certainly not beating out Nintendo on its own platform, but we've definitely learned how to exist with them. In particular, our Japanese studios have a great relationship with Nintendo and know how to use their hardware very well.

Along those lines, did you ever think you would see a day when you would see Mario and Sonic together in the same game?

I've got to tell you, growing up as a gamer, it is kind of a big surprise to me, but it is certainly a match made in heaven. We've got very high expectations for that title. It's looking great and we are certain it is going to be a big hit.

What are your thoughts on the recent acquisitions of some big development studios? Is this something Sega will pursue, purchasing more studios?

It has to be the right fit at the right time for the right amount of dollars.

It is tough when great studios like Bioware, Pandemic, and Bizarre go internal to one of our competitors. We like all the people at those studios. Obviously, we wish them well, but we want to be working with them.

Fortunately, we got our deal with Bioware for a Sonic RPG done before the acquisition happened, but, you know, it is tough.

The good thing is that there are always other studios to work with. It puts more focus on trying to find those guys that haven't had the three million unit seller yet, but have the potential to make it and help them achieve their goals.

That's really what the Sega artists and repertoire department has been doing for the last three years. Building those partnerships and fostering those relationships so we can, together with our development partners, make AAA products.

That's our hope and dream. We hope we are helping create the next Bioware, Pandemics, and Bizarre Creations.

With the rising costs of development on current generation hardware, do you think it is going to be a lot harder for those smaller independent developers to stay afloat without a lifeline from EA, Activision, or another big publisher?

I think you can be an independent developer if you are managing your business properly. It is just my opinion, but I think a lot of independent developers who struggle do so because... Well, there are a number of reasons. I think the biggest one is that they don't know how to run a business.

I think a comparison to the music industry is appropriate here. You've got artists and engineers and designers all working together to make a product. That's great. If you give them enough leeway, they are going to be able to do that and be successful. The issue is that it doesn't necessarily mean those guys know how to run a business. They might not know how to manage 40 people. That's a tough task for anyone.

Managing 5 people is a challenge to do it appropriately, so to manage 40 or 50, 60 or 100 people, all working for one goal, is definitely a challenge and I think that some studios, not all, suffer from lack of managerial skills and business smarts to get them through that aspect of running a business...a business that is taking in millions and millions of dollars in investment money from other people.

But that said, if you make good product, and if you manage your business well, being an independent studio is certainly a viable option. Being internal definitely offers a lot of security and is not a bad way to go.

I don't know if it is absolutely necessary to own studios. There are advantages--you don't have to pay royalties, although you usually end up paying some kind of bonus structure, and of course there is goodwill money, or however the acquisition takes place.

I can see it both ways. Sega definitely looks at acquiring studios, and we've acquired a few. Sports Interactive and Creative Assembly in Europe. We built a racing studio in Europe as well. We acquired Secret Level and have been growing that studio considerably since the purchase, and they're working on two big games for us--Iron Man and Golden Axe.

But at the same time we have great relationships with external partners, and as long as those external partners pipe is filled, and they've got work they have to do, and people are paying their bills on time, they are fine being independent. Some times that's a better way to go.

A lot of analysts are saying that hardware will be in short supply this holiday. Wii can't meet demand, the Xbox 360 and PS3 just had price cuts... How is Sega positioned to not be hurt by shortages, especially focusing on the Wii?

I think you always wish that every platform had the installed base of the PS2--I mean, that would be publisher nirvana. But it is still early in the lifecycle for all these consoles. This is only the second Christmas for Wii, so you wouldn't expect it to have 15 million units installed base in North America.

However, they've been doing great. They've been consistently pushing product into the channel. It remains in high demand, which means interest in the platform is high, so you always have consumers going to look for Wii product, which will help us.

I do think that Mario and Sonic at the Beijing Olympic Games is going to be a platform mover for Nintendo, and it is going to be at the front of minds for consumers who are looking for a good Wii title for the holidays.

But that said, there are a lot of 360's out there. I feel like we have good product, whether it is The Golden Compass, our licensed product with New Line, for the holiday season, or our catalog product, or Condemned 2, which is shipping in the first quarter of the next year.

People who received 360's for Christmas are going to want new product. They are most likely to get Halo or Bioshock or one of the other phenomenal games at the holiday season, but there is also a great buying season that happens in January and February and March, and we've got fantastic product for both 360 and PS3 coming out in the first quarter of 2008.

So do you think the PS3 price cuts are going to help?

Well, they can't hurt, right? It's better than $600. To have the variety of prices out there for consumers is certainly not going to hurt the platform.

I think it has still got a little bit of time to grow. But all of our projections... I think that most analysts would agree that PS3 is going to catch up to the 360, if not surpass it, as more and more big titles come out.

Microsoft has done a good job of closing the gap between the platforms. I don't think they are in the situation they were in with the PS2 and Xbox 1, but it is still too soon to say.

Fortunately, there are a lot of videogame consumers out there, and the market continues to grow. People want to play games, and the games keep getting better. The development community is really driving that by making great product.

As far as the PS2 is concerned, are you shifting away from it towards current generation platforms, or are you still actively developing for it?

Well, I can't speak to what hasn't been announced, but we still have product that is coming out on PS2. We are certainly more selective with what we put out there.

It is a combination of factors. It is too expensive to develop a PS2-only SKU at this point, so you have to do it in conjunction with something else. The closest correlation to PS2 right now is probably Wii, but to make really good quality Wii product you have to make it for the Wii platform, and that doesn't necessarily translate to PS2.

So, we are being more selective about what we put on the platform, but... We refer to the same analysts that you, I'm sure, talk to, and [they] think the PS2 could be vital through 2009.

We will continue to support it with selective product that makes sense, given that it is such a mass-market, huge installed base platform. Probably our biggest title on PS2 this year, aside from our catalog of previous PS2 titles, will be The Golden Compass. But we do have other products in production for it. Iron Man will be on PS2, The Incredible Hulk game will be on PS2... So, they're out there.

Noah Musler is Sega's director of artists and repertoire. Interview by Mark Androvich.