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Varchild2008 (84.02)

(GOD) Or...How Video Game Publishers Fail



September 04, 2009 – Comments (2) | RELATED TICKERS: TTWO , EA , ATVI

I got a sure fire great idea!  Let's have a team of 3 or 4 talented game developers create a video game publishing company.  There are lots of great talented game developers with currently no publisher for their games.  Sure they are new, but hey talented game designers head up these break away gameing development houses. 

So..we'll get together, put on contract about 3 or 4 game development companys, publish their kick butt video games and rake in the profits.  Before long every game developer will want to be part of our video game publishing company!!  

Wow!    Great Business model!!!!

5 years later..(GOD) goes bankrupt....

What is..err....WAS....(GOD)?   A video game publishing company designed exactly as I wrote above called "Gathering of Developers."  Remember them?  Well..They went bust as fast as they took off..... And inspite of having super talented development company's under their belt.

What went wrong?  Nothing.  Nothing at all.

It was the business model that was simply lacking in any PLAN B much less PLAN C.

Most authors will start talking about releasing a game...selling it.....turning it into a franchise....etc....etc.... I  say STOP!!!!   That's not exactly how to run a Publishing company!!

The best way to explain how to run a successful publishing company is to hand you an autobiography of Bobby Kotick.   His way?  Simple....It's the same way as Alan Mullaly...The same approach as Goldman Sachs...

A)  Design your business model to reward developers for exceeding your goals/schedule and sales expectations.

B)  Go after INNOVATION and not strictly judge a developer based on WHO is running the design studio but on WHAT they are developing.  You can pass up a SID MEIJER for a JOHNNY *UNKNOWN* if Johnny's got the better idea.

(GOD) spent waaaay too much CASH recruiting top notch developers with products that were years away from release.  There were big time game delays and money ran out.

Instead go after the *unknown* development house that has a *bright idea*   Costs less.....And rewards you more!

That's how Guitar Hero came into being.  Unknown entity makes awesome innovative game...gee? No brainer.

Oh and you do not randomly, stupidly, make video games into franchises.  You make games that are *HAILED* by video gamers and critics as brilliant masterpieces.....into franchises...

You turn sales leaders for the year.....into franchises.  Not just any ole game cause you published it.

C)  Don't be afraid to punish poor performing developers.   Just as stock investors shouldn't fall in love with an abyssmally performing stock, neither should you do the same to one of your game developers.

D) Quality over Quantity.    It's never about how many developers you have....It's about the GAMES!!
1 Publisher can survive off just 2 or maybe even 1 developer....starting off...

       Quality is both created on how expensive it will be to get your developer's game to Market  (TIME = MONEY) and how that game looks compared to similar game titles.... What is innovative about it that would convince a "STARCRAFT" fan to fork over cash for your title as well?

Just as investors don't scoop up 5 companys just cause they are in a hot sector.....but invest in 1 or 2 that have a great catalyst you can rally behind....  You must do the same...

That brings me to (TTWO).  This publisher is a mixed bag of great hits and poor ones.  They sometimes follow this model and other times like in 2005 they don't.

Right now TTWO is a stock I would skip on as an investor until January 2010.....but only to get behind Bioshock 2's release.

Ultimately, I think a *peak* into the list of developers TTWO has is what investors should do and judge for yourself which ones deserve to be rewarded....which one's punished by being dumped? 

2 Comments – Post Your Own

#1) On September 04, 2009 at 2:23 PM, Broken196 (33.55) wrote:

I personally would never be long on game stocks. If I had to pick one it would be ATVI and I would be 10+ years long on it. The truth is you could make more money just riding it's wave as great titles get released.

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#2) On September 04, 2009 at 2:33 PM, Varchild2008 (84.02) wrote:

I'm doing fine with ATVI.

Investors can make a lot of money even with stocks trading in a tight range sideways for months... It's buy when share price dips down...and hold otherwise through the months knowing you can sell when share price pops up.

Of course... With ATVI's buyback program the trend for ATVI share price will always be higher. 

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