Who wouldn’t have given up a random finger or toe to be investing in the ground level of Blizzard Entertainment? I know they were own(ed) by Vivendi Entertainment, but it was good to dream about for a few minutes. Unfortunately, all software studios are not as successful as Blizzard is; many run out of money, close their doors and shut down their servers. Let’s take a look at some ways that these companies find ways to raise money to develop the games we come to know and love.
Not all work out: The most current possible casualty could be Firesky/Cheyenne Mountain Entertainment. The studio is in danger of possibly losing the Stargate Worlds license if they don’t raise capital by August 1st. Which is less than a week away, it looks like they will need some angels to pull themselves out of this one. I’m not talking about angels as in Aion, I am using a real investment term to describe a wealthy investor that invests in small private companies.
This opens the trapdoor of a very risky style of investing, private equity funding. This is the type of money raising that vaulted many investors into millionaire or multimillionaire status in the internet bubble of the 90’s. But the MMO bubble of the 2000’s doesn’t seem that it’s getting the same type of response. These games, especially the ones with popular intellectual properties such as MGM’s Stargate, The Matrix Online and Lord of the Rings Online are more expensive to create. You are not just paying for the natural expenses of running a business and payroll, but also the weight of the name will cost you as well.
What’s in a name: This could be a reason why many studios try to develop their own brands or IP’s (intellectual properties). Some are successful such as Valve who created a very successful and respected name in the industry with the Halflife storyline. Complete with their own unwilling (and silent) hero Gordon Freeman, they quickly built the Half-life brand into as one of the best FPS’s in gaming history. I read recently that they too are looking for funding, not from the traditional methods, but from the community.
As reported on Gamasutra.com, Valve co-founder Gabe Newell tells Australian TV show “Good Game” that he is “super interested in” what he thinks “would be much better if the community could finance the games.” So what happens now? Do I go down to my local Gamestop and say, “I’ll take 100 shares of Valve please, put this money toward their next game. I hope it’s a winner!” All they would need is for little Johnny to lose money that he put towards the next installment of Half-life 3, the forums would be on fire for months.
Gabe Newell, Co-founder Valve Software.
Umm, no. That’s not how it works, thankfully. What would have to be done is certain contracts would be drawn out, there would be something called a “prospectus” handed out. A prospectus or “Red Herring” as it’s called has details about the company, where the money would be going and all the inherent risks. Basically states that you will most likely lose your money. And that is true, the trick to private equity funding is to invest in a few, one will make up for all the losses. But the most important thing is to have the money to lose. Even when a company is publicly traded on an exchange such as the Nasdaq or New York Stock Exchange doesn’t mean it’s totally safe. Just means it’s more accessible and easier to get your money in and out of.
Thar she blows!: And I wonder what Carl Icahn (above) thinks of video games since he is has such a large stake in Take-Two Interactive. Carl Icahn is a billionaire investor who sets his sights on Take-Two back in March. He raised his stake up to 2 million shares at roughly $5-6 per share. Even though the company has had some setbacks and a few of their most expected titles were delayed, he still in the money for roughly $6 million with the stock trading over $9. However, Carl Icahn has his own agenda, he is most noted for his machinations that eventually lead to a company he own part of to being bought out. This is something that Take-Two has rejected in the past, Electronic Arts wanted to buy them out back in 2008 for 2 billion or $25 a share. Does Carl think they are still worth that much?
Traditionally, smaller software companies have been more open to find funding through private channels. Sometimes larger companies help out looking for a cut in the action, while the studio works like mad at releasing fast enough and stay afloat until the ship rolls in. I hope that the ships rolls in for Firesky, they are looking into a small group of investors called MMOMOGULs for funding. They need someone like a Carl Icahn to step in and save the day. So we’ll know in about a week if there is a future for the Stargate Worlds MMO.
/crosses fingers
Come play with the big boys: As far as Valve is concerned I feel that they are in perfect position to take them public through something called an Initial Public Offering. This will put them in the market with big players like EA, Take-Two and Activision-Blizzard here in the states. This will create a way for them to raise money and even get the common investor involved, without too much legal mumbo jumbo. It is the traditional way that most companies raise money through Wall Street. Hey, I would even buy shares in Valve, especially if all this money they are raising was for a new mmorpg.
What are your thoughts on MMO Investment, is it lucrative or ludicrous to you?
Play safe,
Inktomi
You know why there probably wont be a Stargate MMO?
Because no one cares. It is not getting funded because people know it would flop. Would you want to back a loser out of the gate when Star Wars and Star Trek are coming out?
I can’t say I entirely agree Hudson. Although Stargate isn’t as huge as those properties, it does have a very large fanbase and lends itself well to the genre. And we haven’t seen much of anything from Cryptic’s Star Trek Online.
Entirely because betting on a subscription MMO is highly risky. If you have tons of money to throw at the prolonged development, and can be patient enough to wait for the proper amount of polish I think MMO investing is a good choice. The constant return is VERY enticing, but of course it comes with a huge upfront risk.
Huge Koopa, and It might be more risk in this economy than most investors would want to take.
Dan Ellgren leaving, something I left out of the post, posed to be a huge setback and would scare most interested parties away.
We will know by monday if there is going to be one, and it would be a shame for all that hard work and sacrifice to go down the toilet. However, that’s how this industry works I believe.
I’m a gamer as well as a Stargate fan, and I was looking forward to Stargate Worlds. However, they blew their customer relations by sending out tens of thousands of beta invites to people who would never be invited to participate in the beta testing – all for a cheesy news article to use the invite responses to prove how anticipated they were.
As a customer, I dislike being deceived. Even if Stargate Worlds ever goes into Open beta, I won’t try it. Customers need to start saying No to unethical business practices at the outset – before they’ve invested any time or effort into the game, and the social and psychological ties make it harder to get out.
Wow all,
First of all, you have to consider Eastern Vs Western Markets, MMO shelf life, box sales, pre-orders and sub fees. Then balance that against salary for coders, programmers, quest / lore folks, character class balance people, customer service, tech supports and upper echelon people.
Would look something like, aion, knows they have a 22-24 percent MMO market share (wow has a 66) but 4.5 million subs at 15.95 a month with 2.5m pre orders and a western / EU Launch.
But it takes 1.5-2.5 years to get into profitability.
Wow shocked us and increased subs thru almost 6 years now, passing its shelflife .. and why?
They had a good product, they made an MMO for the people (masses) not a niche product with a big name (like LOTRO ect) marketed it aggressively, rest spready by WOM (word of mouth)
Ideally, to succeed you need to time your release, Aion will do well western markets initially because wow players are restless …. however aion is a pvp centric game, people are axing pre-orders and its western shelf life might not make the 2.5 year cut for an mmo …. Western gamers hate “korean grind fest and pvp centric games”
We want PVE, lore, a game that offers a smooth experience, customized characters, detailed quests, lots of gear options and graphics, pvp options that are meaningful, but not a center part of the mmo. We want balanced stats, and not nerfs or abilities or gear that give x while taking away y … we want to see our characters progressively get stronger given out time and money investment.
We want crafting options and lots of it (and meaningful) we want main jobs and sub jobs (not like GWs something like FF11) and a new gimmick …. like tank / healer / dps archtypes are fine … but have it so a healer is a B almost A class DPS’er as well, and tanks throw out impressive damage ….. and the pure DPSers or hybrid specs wreck havoc each with their own niche …. none of this overlap BS blizzard threw at us!
If you want to bust open the market, you need a game that offers sustainability, beta tested, nearly bug free with lot sof options … great story and I mean something like 12-14 classes at launch, 1000 point customized character feautuers, high server populations, the ability to solo and group .. and choose the mo focus …. PVE particularly, and base your game on that, don’t switch to apease the lower pvp population and nerf your classes ….
This is what is eroding wow … along with the casual overhaul from the vanilla wow days .. raid groups of 12 seem to be the magic number .. 25 might be a little much, I would launch one 12 man, 8 mid and 6 on the low end with parties making up of 4 max … that way guilds can run multiple events, not get upset with gear because ff you read this, there will be a ton of it and another thing .. dont flood your game with purples … an established loot system!
Make the just rare gear hard to get and most comon end game, a tier up very hard to get and 1-2 upgrades past that, with the final having a drop plus solo effort plus x. Immerse us, make us feel like we have a world to explore and cant wait to get home and log on ….
Also RMT … for little bonuses .. maybe guilld houses and player houses … expanded features, name changes … server xfers ect .. its a huge cash influx.
Lastly factions, most games do good vs evil (or similiar) wow alliance . horde – aion elyos vs asmodes ect … make 3-5 factions, make various worlds even for 1-2 each and a couple end game places where they all meet. Have a good archtype, and nuetral, an evil, and hell make a genre of class that is on par with the enemy NPCs …
Mounts – flying world – I mean it has to have it all, but in a new fresh and dynamic way … Its hard for me to explain here … I am actully a market research analyst and avid gamer here in Manhattan …. I have tracked this and picked winners and losers for a very long time. (and very accurately)
There is room to develope a new MMO, and new brand but you cant get greedy and mistime it, launch it with not enough content or beta testing, not market and hype it, not go thru the pre-order process ect … it needs to be polished and feel like a luxury mmo .. (not like bargain budget LOTRO for example with their band aid nerfs and bridges the size of tooth picks lol) or cartoon graphics wow with casual feel .. or pvp centric aion that will piss a lot of western gamers off when they relaize pve is an after tought haha!
Learn lessens from games like Ragula and Warhammer that launched too early with too many bugs that didnt catch on main stream … or stubborn genres like FF11 online that never adapted …
You could even take another whole direction and make a FF tactics type MMO too that would do well and not cost a whole lot to develope either … but thats another thought.
Startgate … I am sorry niche market at best, and people will lose interest to Studio 38s new MMO, Aion, the hardcore wow population, KOTRO MMO, Diablo 3, star trek, starcraft, Champs and ff14, lest we forget blizz plans a next gen MMO too announced at blizzcon and other sin the pipeline.
So yes there is an opportunity … but most people have no idea what the bulk of players want, what makes us leave an MMO and what really matters …. it’s sad really but thats the present MMO climate.
Keep tax rates in mind when purchasing stocks. When you purchase a share and you keep it for more than a period of one year,
you are going to be taxed at the rate of a
long term capital gain. However, if you sell the stock before the one year is finished,
you are going to be taxed at the normal tax rate.
Also visit my site; charts stock island to fort jefferson