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The Coming Cycle

Trion's Lars Buttler on why the company hasn't yet revealed its products, the error of a zero-sum game mentality and the server-based games future

When Activision's Bobby Kotick spoke of his company's merger with Vivendi - and the need for a company to invest USD 500 million to USD 1 billion in order to take on World of Warcraft - Trion World Network CEO Lars Buttler said he was calling Kotick's bluff. That's pretty tough talk from a company which has yet to introduce a single product.

And yet, Trion has managed to raise USD 30 million in funding with partners such as Time Warner, GE/NBC Universal and Betrelsmann AG. It has established a partnership with HP, formed studios in San Diego and the San Francisco Bay area, and hired execs with experience at companies such as SOE, Webizen, New World Computing, NCSoft, EA and Atari. That's hardly the usual pedigree of a startup company.

We spoke to CEO Dr Lars Buttler about his recent remarks, why Trion hasn't yet revealed its products, the error of a zero-sum game mentality and the server-based games future he envisions.

Gamesindustry.bizActivision's Bobby Kotick recently suggested that it would take a billion dollars to compete with World of Warcraft, and you said that you were calling his "bluff"...
Lars Butler

I hope it's a bluff. I think it would be worse if they actually believe it.

Gamesindustry.bizIf Activision is bluffing - suggesting that no one will be able to compete with Warcraft - then why hasn't anyone done it yet? WOW has been around since 2004 and, frankly, they appear to be firmly entrenched without any serious competition.
Lars Butler

That's a great question.

I think it's because no one has really launched a great product in the online gaming space yet other than WOW.

Look at all the stuff that has been launched and apply one simple bar - could you sell this at retail if you stripped out all the online components? In other words, is it a good game? I don't think that any other MMO could then stand...Or very few exceptions.

WOW is a good game. It has ramped up the last ten years of the MMO category and polished it really well and presented it as almost the closing chapter on those last ten years. But that doesn't mean that there aren't another ten years or another twenty years to come.

Saying WOW is the end of all things would be like saying Mario or The Sims or Madden or any other great franchise are the end of all things in their particular categories. There will always be new and great developments. In the games world, that's particularly true because technology evolves so much.

Gamesindustry.bizBut wouldn't you say that having been the leader for so long automatically gives them an advantage? It is their game to lose, so to speak?
Lars Butler

In many cases, the biggest obstacle to future success is current success.

If you look at Everquest, that's exactly what people thought. They thought you can't beat Everquest. If that logic applied, then EQII should be owning the market. As a matter of fact, Ultima Online should be ruling the market because they have a big advantage.

But all those games - Ultimate Online, Everquest and WOW - are essentially built in the old paradigm of a static, single device game where you take your entire development risk - or a huge development risk - up front and then you cross your fingers.

I think what the future will hold, and what we are trying to enable, are dynamic game worlds that can always improve and that really use the full capability of server-based architecture that can learn from success and failure after you launch. In other words, we try to entirely step out of the box that has restricted innovation.

I think it is really important to point out that we are not trying to compete with WOW or clone it - in my mind that would be boring and it would be creatively constraining, and I also think it would be massively limiting the amount of risk and innovation we are willing to introduce.

We don't see this as a zero-sum game where you can only have WOW and nothing else. We think that server-based games are a category that goes far beyond MMOs. It is a category that all videogames will move into - all games of today that are still basically client-based will become server-based because it gives you so many advantages.

Gamesindustry.bizCertainly, the Blizzard folks may see that coming as well. If they are paying attention to the idea of connectivity with multiple devices, server-based games, then there is nothing to stop them from going in that direction.
Lars Butler

Yes, it's not a zero-sum game at all.

Everybody who is willing to take risk and innovate dramatically can become a player in this space. I think one of the key challenges that the traditional publishers face and why they struggle so hard when it comes to the connected game space is that they are stuck in a box - basically a twenty year-old framework of approaching the world.

I think that box consists of...Number one, we own the retail channel and we own the checkbook. And you can hear it in all these comments, right? It's just a question of money or whatever. We own the retail channel and we own the checkbook. Then we buy new franchises and milk them year after year. We don't take big creative risks. We don't innovate too much internally with our own talent.

And that, I think, is the key challenge. Particularly if you move into a world where the retail channel and the checkbook are not the only determining factors. Where you have lots of new channels to reach customers, and where innovation takes over. Innovation becomes the fundamental winning driver because it is the beginning of something new and disruptive.

Gamesindustry.bizThat's a challenge that all big publishers face, however. Eventually they become so big that they need a certain amount of income to run the business so they stick with what makes money over attempting to innovate. Might Trion eventually face a similar problem?
Lars Butler

Well, maybe one day we will face that problem.

There is hardly any company around - particularly in the technology space - that is a leader in two big cycles. Almost all companies are constrained to leadership in one big cycle - basically one twenty-year cycle of growth.

You can look at any company out there and I think it is very hard to find examples where that is not the case.

I think you've had your twenty years of retail games, and you have your next twenty years of connected, server-based games.

We are just at the very beginning as a company and as a cycle. So, I believe and I hope and I think that we should be able to continue this amazing momentum that we have for quite some time. Maybe we will get disrupted in twenty years...Who knows? I think I will be always vigilant that these things are coming.

Just because you are successful today, and in the old paradigm, doesn't mean you are successful tomorrow.

You gave actually one of the best summaries of Trion so far in this last article you put out. It's not about one game. It's not about building one hit game. We are all about the portfolio. Building a network of great titles. And doing this with internal teams and also great independent teams across the globe.

And so we have built the technology platform. We have built the publishing network. We have great teams internally and we also have relationships with great teams across the globe. And we have all the great IP and media partners - and technology partners in HP - that are very helpful.

Gamesindustry.bizI know you haven't released a product to market yet, but is it your goal to remain independent or are you considering - once you have a portfolio - acquiring smaller companies or even to be acquired yourself?
Lars Butler

That's a great question.

Number one, I think all of these mergers and all of this consolidation is absolutely proving the point. Traditional retail games space is not growing any more. The cycle is coming to an end.

Whenever a cycle comes to an end, you see these mega-mergers. It's the clearest sign of the cycle of the last twenty years of retail games coming to an end.

Now, our cycle is beginning. If we were to sell right now to a traditional company, I think there is a big risk that we would get crushed with their processes, with their views of the world, their allocation mechanisms.

We do believe for the foreseeable future, the strategy of being a standalone entity that can develop its own processes, its own culture and its own technologies that are tailored completely to the connected games space - that is a much better approach and you can create much more exciting products that way.

That might not rule out that we would team up with other players that are single-mindedly focused on connected entertainment. Or that we would acquire at some point those companies. Or that we would look to work with great companies and great teams that have ideas for the connected game space.

It is such a young market that we don't necessarily see those as competitors, but as collaborators in creating this great sever-based games market of tomorrow.

Gamesindustry.bizThe reason I ask is that I can envision perhaps a larger company wishing to either extend the current cycle or get a headstart into the next cycle by purchasing a company such as Trion during the transition.
Lars Butler

If somebody is really serious about jumping into the next cycle that is very different from somebody who is just trying to extend the old one.

We are exclusively focused on being one of the leaders in our lifetime cycle. Your game future and mine - that's what we focus on.

I will be very hesitant to give this away or to have it put in danger, because there is so much to build, so many amazing games to be created, so many great teams to be worked with. It would just be a pity. It will be opening up possibilities we couldn't dream of in the old paradigm.

Gamesindustry.bizIs that one reason why you are privately-held right now, so you don't have to worry about public shareholders getting impatient and wanting to sell out?
Lars Butler

Number one, we're still early in the process, right? Number two, there is definitely an advantage to being private if you are in it, not for a short term win, but for the pursuit of a bigger dream - more long-term play. And that's really what we're all here for. To make amazing games that really help define gameplay for the connected era to come.

Gamesindustry.bizOutside of the games industry, the US economy hasn't been doing well. Although you have not announced any specific launch dates, are you at all concerned with the current state of the economy? That it might affect your launch plans?
Lars Butler

As far as I can tell - and I have been an investor myself in my past life - non-advertising based entertainment, and particularly games, are almost counter-cyclical. Meaning that great entertainment content that doesn't depend upon advertising for its monetisation works almost the opposite way from the traditional economy.

People need to get distracted. In some cases, they might have more time. If you don't need the advertisers which are depending on the overall economy, of course...If you have other ways of monetisation like subscriptions, microtransactions and all those other ways, past experience tells you that you are far less affected by downturns in the economy, and in many cases, a perfect hedge against downturns in the economy.

Gamesindustry.bizRight, in many ways it is similar to how the movie industry thrived during the Great Depression when people needed the "escape"...
Lars Butler

And it is a great alternative. It is a very cheap alternative to maybe going out and having expensive dinners or what have you.

Gamesindustry.bizAlthough, at USD 60 for a game these days, it is definitely no longer as cheap as it used to be.
Lars Butler

That's right. And again, you need innovation in order to stop that. You need to build dynamically so you don't go to USD 500 million or billion dollar game development budgets.

Gamesindustry.bizYou mentioned different means of monetisation apart from traditional advertising. I'm not sure that you have ever mentioned what Trion's business model is - subscription, microtransactions, free to play, retail?
Lars Butler

All of the above.

There is a market for free to play with ad support, there is a market for items and there is a market for subscriptions - it is never in black and white, there is always overlap. It depends upon the individual title and channel what the dominant model would be.

But the great thing about server-based games in the connected space is that you have so many different models which are all strong. You have all of those options, and you can also react to trends in the marketplace.

You aren't just dependent upon this one retail box that you sell and where you share so much of your revenue with the retailer.

Gamesindustry.bizWhen you responded to Kotick's comments, you indicated that a lot of publishers reveal information too early. Why do they do that, and do you really think it is better to remain silent rather than releasing some information in order to generate interest?
Lars Butler

That's another great question.

I think many companies, particularly new companies, talk about their products far too early. And they do it because they have nothing else to talk about. That's what they raised their money for. That's what they hired their people for. That's the only thing they have. So they start talking about it years before they become relevant in the marketplace, before they have product to show.

Compare this with other industries. Compare this with Apple for example. Apple never shows anything before it is ready or it is really close. And they get a lot of traction when they come out finally.

We never had to do it. We succeeded in bringing amazing talent to Trion, and we're still doing that. We succeeded in attracting amazing external developers, amazing investors. Capital. We built technology without ever having to be trigger-happy and talk about things before they are ready. I think it is not respectful, even, to your audience and to the marketplace to talk about things that are not done, that are not ready.

Gamesindustry.bizDo you think that is another consequence of being publically held? That you need to prove to investors that you are doing something?
Lars Butler

You might be right. Publically held on the one hand, and then startups on the other hand - I think they both need to make a lot of noise.

Because we are not dependent upon one particular product but are building a publisher, we have been able to follow our own rule and so far have never broken it - that we won't talk about product until it is ready. Having said that, there will be a few interesting announcements to come in the next few months.

My tone...I don't want to sound arrogant, right? I also didn't want to sound offensive to Activision or Blizzard or any of them. I just wanted to make it clear that this is not a zero sum game. And I wanted to make it clear that this is the beginning of a big, big, big cycle.

And to say that the first product that is moving into this space and has been a success is the "end of all things" is just discouraging all these creative people across the globe - and we want to encourage them. We want to work with them. We want to give them technologies that are unique and groundbreaking. We want to give them publishing capabilities - funding, even - and make sure that it is really happening.

Gamesindustry.bizIn Activision's defense, they haven't been the only ones to note the dominance of World of Warcraft. Peter Molyneux, for example, commented that Warcraft and The Sims are pretty much all there is to the PC gaming market at the moment.
Lars Butler

If you look at the way the market is today, then that is the case...but only in the West. If you look at China or Asia, it is a very different story.

I don't think that The Sims and WOW are the end of all things. And then, even defining the market as the "PC market" is wrong. In the future, it is not going to be a PC or a console market any longer. It is just going to be a broadband market - a server-based market. Those devices - PCs and consoles - are just access terminals. The platform is the server and is broadband.

Again, I think that is a zero-sum view of the world. It is not the view that embraces possibilities and really embraces where the world is going.

Gamesindustry.bizIf you look at the demographics, there is a difference between PC users, handheld users, console users and so on. Does it matter that you offer content via servers if that content only appeals to only a specific segment of the market? In other words, it will be primarily going to only one of the "access terminals" anyway.
Lars Butler

I'm a big fan of giving different people different product.

I would not say that every one is going to be an MMO player on all devices. I'm basically saying that I think everyone will be a server-based games player. There will be server-based games that will have the console as their lead platform - and at first glance they might not even look that different from today's console games. But when you start playing them you will see the differences - that they can change, that they can evolve, that they are more social.

I think those are generic benefits of server-based games.

So, I'm not saying that everybody plays the same type of games and that there aren't going to be MMOs. Absolutely not.

Everybody will be playing server-based games. Some people will do that as a single-player experience but they will still get better content over time. Some people will do it as a social experience. Some people will take the same game and play it on different devices. Some people will just play it on their favourite device.

The good thing is that we can give people a choice.

Gamesindustry.bizIs there a problem, though, with the differences in the capabilities of each device? There is a huge disparity between the experience you can have on a PC, let's say, compared to a cell phone.
Lars Butler

Think of it in the way you get your electricity. Your electricity powers the dumbest lamp in your apartment and also your computers, right? The question is what you do with it and how you use the particular devices.

If it is a big game world, you wouldn't play it on your cell phone but you could still stay connected. Just as you use your cell phone to stay connected to your friends or your workplace. It is about using every device with distinct capabilities for what they are best at.

Gamesindustry.bizSo, it isn't that the content will be similar across devices, but that the content will have something to offer each device?
Lars Butler

That's absolutely right.

Lars Buttler is president of Trion World Network. Interview by Mark Androvich.

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