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Rod Cousens - Part Two

The Codemasters boss talks retail relationships, business models and the future of Ashes Cricket

Last week in part one of this interview, Codemasters CEO Rod Cousens talked about the company's stance on quality and why that's led to success in 2009, as well as the importance to the industry of investing in new IP.

Here in part two he looks in depth at the business model for games and offers some possible views of the future relationship between developers, publishers and retail. With the development of a direct-to-consumer world, some would argue there's a receding need for retailers - how do you view that argument?
Rod Cousens

I don't buy off on that. As I've gone on, what I've realised is that we all need the constituent parts. If you go back to the early days, from developers to publishers there was a 'them and us' - publishers to retailers, there was a 'them and us'...

The reality is that we all have to understand what the business model is and that we need each other - as a combined entity we're actually stronger. So to turn the retailer off on a global basis is not going to happen.

Various countries are at different stages of technological development - if 35 per cent of my business in boxes is outside of the UK where broadband take-up is very low at the moment, I'd still have to be able to access that market and create boxed content.

If in progressive markets where the pipes are such that we will be able to download product quickly and regularly, then I think there's an element where you can work with retail. What do I mean by that? Well, let me give you a scenario that could happen in the next three-to-five years.

That's that games aren't at GBP 50 - they're at GBP 20-30, but they're unfinished. You then have to download future levels or packs to progress through the game, and within those downloadable packs you also have micro-transactions. You can do that directly, or you can do it in conjunction with retail, where they have a code to unlock future packs and they participate in the margin.

That is a far more constructive and value added approach than if they're simply churning pre-owned software out, which I believe in terms of content creation disadvantages us - and actually, further, stagnates the industry. That's the view of Cousens, for what it's worth. It's certainly a valid view from a publisher's perspective, but the other side of the business argument is that with the economy the way it is, and consumer spending down, the margins on pre-owned is probably what's kept specialist retailers going to an extent...
Rod Cousens

My point to you was that I don't believe retail goes away - but I believe the business model has to change, where you embrace retail. Because you still have to get the box out there - even if I give you an absolute whacky scenario that the box is given away for free, you have to have a business model that incentivises retail to help create the subsequent packs. You have to come up with a business model which enables them to do that.

They have their business dynamics, just as everyone else, not the least of which is called real estate. My position is that I do regard them as partners, but I do think that as partners the business model evolves and you have to sit round as an industry and figure out what that is.

Let me give you another scenario - if you look at it today and you buy off on the fact that the whole business model goes back to razors and razor blades - where there's no money in the hardware, it's in the software - what if we reversed that and argued that if the platform holders want to get their installed base to the levels we all need around the world, they actually have to improve the margins to retail on hardware, but you now look at the software package over a 12-month period.

Probably the first point isn't what they're getting on day one, where we're selling predicated on a retail price of GBP 49.99 and everyone's discounting the hell out of it. Instead the price probably needs to be GBP 29.99 on a lower margin base, with DLC following that, with more margin built into the hardware - which is what we all need. That's where I'm going with it, and that's what we as an industry should be doing.

But the cynicism in me says that in more than 25 years I've never seen our industry figure this stuff out...

If I was the retailer I'd get with the programme and engage with the publishers. [GAME CEO] Lisa Morgan is a great friend of mine of many years' standing and I've got nothing but admiration for the job that she's done, which is a public company - and that's never an easy task. Navigating through an economic minefield is a further aggravation.

So I want to be quite clear that I'm not critical of what they do - but I do believe it's time that the industry takes a look at it, and all the constituent parts of the industry, the development community, the publishing element, the retail element, figures out something and evolves... because it will take evolution to get there.

But I'm not negative - I think it's great, it's very exciting and provides greater opportunity (and actually greater benefits) to our industry which will continue to grow.

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