The Rise of Naughty Dog - Part 1

The following is an exclusive excerpt from serial entrepreneur Morgan Ramsay's recent book release, Gamers at Work: Stories Behind the Games People Play. The book features personal conversations with 18 of the world's most successful founders of video-game companies about their earliest days to where they are now. GamesIndustry International is proud to bring you this exclusive chapter about Jason Rubin's early days as co-founder of Naughty Dog and how the studio became one of the most successful in the business.

Jason Rubin and Andy Gavin cofounded Naughty Dog in 1986, becoming two of the youngest contractors to develop for Electronic Arts. During its rise from a scrappy startup to an industry powerhouse with three of the top-ten games for Sony PlayStation, Naughty Dog established a reputation as one of the most innovative developers of video games on the planet.

In 1994, the company created its first major franchise, Crash Bandicoot, of which the titular character became the de facto mascot of the Sony PlayStation. Now spanning at least 16 titles, the Crash Bandicoot series has since sold more than 50 million units worldwide, and the third title in the series was the top-selling foreign-made video game in Japan. After parting ways with its publisher, Universal Interactive, Naughty Dog followed Crash Bandicoot with another bestselling series, Jak and Daxter, but not before being acquired by Sony Computer Entertainment in 2001. Rubin and Gavin left the studio in 2004.

After Rubin and Gavin had left the company, Naughty Dog released Uncharted: Drake's Fortune for the PlayStation 3 in 2007, and then the sequel, Uncharted 2: Among Thieves, in 2009. The sequel received critical acclaim and won more than 100 awards, including the coveted Game of the Year awards at both the Interactive Achievement Awards and the Game Developers Choice Awards.

Ramsay: When did you get started with Naughty Dog? How did you know your cofounder, Andy Gavin?

Rubin: Andy and I met in school at around age 13. We both owned Apple II computers, and the work we were doing with them at the time-from simple programming to pirating-was much more interesting than what the teachers were teaching. So, we would sit in the back of class and talk about computers and programming. We were very young, and there weren't books, websites, or other teaching materials for computers yet, so we learned by experimentation and communication.

I vividly remember thinking that if I kept compressing a file, it would shrink until it was one byte. Andy replied that you certainly couldn't do that, as the unlocking key would expand until it was the entire file you started with. It was thousands of simple realizations like that, and sharing ideas and tips, that led the two of us to figuring out how to make "full games" on our own. It is worth remembering that a full game in those days could be written in a long weekend. There were many false starts, such as a mostly finished golf game that I had created, which Andy destroyed by copying something onto the disk it resided on-this was before hard drives. We also had a mostly realized Punch Out clone that we eventually couldn't finish due to technical issues. And there were many other games that fell in the category now called "not safe for work."

"I think you have to have a certain amount of blind, naïve faith in yourself to be an entrepreneur. I truly believed that it was inevitable that I would be successful"

Jason Rubin

At around 15, after returning from a ski trip, I did the art and code for a game called Ski Stud. The game looked good, but the game slowed down as the skier got further down the slope. I had reached the limit of my coding ability, so I took it to Andy. He rewrote the core of the game, and it screamed! We decided this would be our first published game, so we applied for a commercial license to use the tool we had been using for sprite drawing. We were going to "publish" the game by putting it in Ziploc bags and selling them around Washington, D.C., the area where we lived. Don't laugh. That was competitive packaging at the time! The company that created the sprite tool saw the game and asked if they could publish it for us nationally. We agreed and received a check for $250. We had become game developers!

Ramsay: When you entered the business world, do you remember ever feeling that you were treated differently as a result of your age?

Rubin: I think we were probably too young to notice how young we were. I do remember going to an EA developers' symposium, a big convention of internal developers that EA held every year. Andy and I were both 17 at the time - the youngest contractors to work for EA and well below legal drinking age. The hotel bar didn't seem to mind. I vaguely remember meeting all of my heroes: Bill Budge, Will Harvey, and Brent Iverson. They were early game developers who were all significantly older than me. And I definitely remember having a lot of drinks!

I think you have to have a certain amount of blind, naïve faith in yourself to be an entrepreneur. I truly believed that it was inevitable that I would be successful. If I hadn't had such an unfounded certainty in myself, I would have taken a safer route through life. As a result, success, at any age, never seemed like success so much as part of the logical progression toward something bigger. That sounds arrogant, but I wasn't elitist. I never thought I was special, and I would have supported anyone else who told me that they, too, were destined for greatness.

The serial entrepreneur Jeff Stibel wrote in a column for Harvard Business Review that entrepreneurship is a disease. I have the disease, and part of the disease is not seeing the world for what it is. Perhaps I was treated differently because I was young, but I never noticed.

Ramsay: After Ski Stud was published, what did you do next? Did you incorporate as Naughty Dog and put together a business plan?

Rubin: Business plan? We were 16. Our business plan was to do whatever we thought was cool. Income? Whatever we could make. Expenses? Ask our parents; they paid for the power and rent.

We agreed to do another game for Baudville, now the long-defunct publisher that put out Ski Stud, which had been renamed Ski Crazed for political correctness. The next game was called Dream Zone, and it was a graphic adventure for the Apple II, Amiga, and Atari ST. After selling 10,000 copies of Dream Zone, we decided, as two 16-year-olds, that we were ready for the big time.

So, we cold called the help line at Electronic Arts, which was at that time the largest game publisher in the world, and managed to get a producer on the other end of the phone. A few months later, we were working for EA on Keef the Thief, another graphic adventure for the same systems. Frankly, I still don't know how we pulled that off. It would be the equivalent today of a kid who has a half-million views on YouTube cold calling Warner Brothers and getting a movie deal.

Keef sold well, compared to its development budget, so EA signed us for a second title. That game, Rings of Power for the Sega Genesis, was our first console title. Rings of Power took three years to make because it was a massive title, and because Andy and I were working from colleges in two different states. Rings was critically acclaimed and sold out of its first pressing.

"When we were almost done with Way of the Warrior, we rented a three-by-three-foot space at the Consumer Electronics Show - an early E3 - for $10,000. It was the last money we had to our names"

Jason Rubin

Unfortunately, so did a new game called John Madden Football. When Sega told EA that they could only reorder a fixed number of cartridges, EA chose to go with 100% Maddens. As a large role-playing game, Rings had more ROM than Madden and an EEPROM for saving your game, and had been developed externally. Each Rings cartridge was far more expensive to print, had a royalty attached, and was thus less profitable than a Madden cartridge. Obviously, it was a smart business move for EA. But as the developers getting the short end of the stick, it sucked! EA just decided to shut off the money flow.

Frustrated, Andy and I took some time away from game development, but it didn't last long. Eight months later, Trip Hawkins called us and told us about his new project - the 3DO. He is a persuasive man, but possibly his strongest argument for the system was that on a disc-based console with plenty of memory and discs that were readily produceable, we wouldn't get screwed by cartridge-printing decisions again! It didn't take long to discuss the opportunity. Trip gave us free development kits, and Andy and I began work. We had no publisher attached, it was a full-time endeavor, and we financed the game out of our own pockets. Way of the Warrior for the 3DO marked our exit from game making as a hobby and our entrance into game development as a profession. But we still didn't have a business plan.

Ramsay: Was that the first time you had talked to Trip?

Rubin: I don't remember when Andy and I first met Trip Hawkins. It must have been before we began Rings of Power. EA was a small, developer-centric company at that time. I'm sure he was curious to meet the 17-year-old hackers he had under contract! We certainly already knew him by the time we began Rings of Power in 1988.

Andy and I were walking through EA's offices that year after finishing Keef the Thief, and Andy spied a silver box with a cord attached to a computer. He immediately identified it as a reverse-engineered Sega Genesis platform. EA had hacked Sega's system and was developing games for the Genesis without Sega's permission. They planned, and eventually did, use that ability to negotiate a better platform rate from Sega. But at that point, the hardware was top secret. Andy pointed at the reverse-engineered system and said, "You reverse engineered a Sega Genesis?" The next thing we knew, Trip and EA's lawyers were in front of us with nondisclosure agreements. Andy and I signed the documents, and then Andy said to Trip, "Rings of Power would make a cool Sega game." We were already under a nondisclosure agreement, and Trip wanted us invested in the top-secret program's success, so he immediately agreed. That's how we became console developers.

Ramsay: In 1996, Naughty Dog released Crash Bandicoot, which became your first major franchise. How did this project come about?

Rubin: When we were almost done with Way of the Warrior, we rented a three-by-three-foot space at the Consumer Electronics Show - an early E3 - for $10,000. It was the last money we had to our names. Our "booth" really consisted of a one-TV-wide nook in the greater 3DO booth. It turned out that we had called the market just right with our game. The publishers had put their developers on titles they were grandly calling "multimedia." Basically, multimedia titles consisted of lots of badly shot, interactive video, and weird semi-gaming crap. They all realized too late that this stuff wouldn't sell and that they needed to be publishing real games. Unfortunately for them, there was only one real game that was nearing completion: our game Way of the Warrior, which was a half-decent knockoff of Mortal Kombat. So, a bidding war ensued for Way of the Warrior, and for a variety of reasons, Universal Interactive Studios won.

One of the reasons that we chose Universal was their enthusiasm for funding our next title and letting us choose what that title would be. We set out by car from Boston to our new home at Universal Studios in Hollywood, determined to decide what to develop along the way. We had "successfully" knocked off a fighting game, we reasoned, so why not try for a character action game? This time, with a real budget and a real team, why not go beyond "borrowing" ideas from past games and try to do something that had never been done before? Fighting games and racing games had gone 3D, but character action games had not been done in 3D. But how would a 3D character action game look and play? We titled the concept "Sonic's Ass" because we realized that in 3D, you would be looking at the back of the character most of the time. What did Sonic's ass look like? Who knew, but in our new game, the character's ass would have to look amazing because you'd be staring at it for hours!

"Andy and I made the audacious decision that because Nintendo and Sega already had mascots, we would make our game for the Sony PlayStation"

Jason Rubin

At the same time, somewhere in Japan, Miyamoto-san and Naka-san were thinking the same thoughts. Both were responsible for creating the most popular and emblematic characters for their systems: Mario for Nintendo and Sonic for Sega. The new systems their companies were bringing out - Nintendo 64 and Saturn - would enable them to bring these characters into 3D for the first time. Miyamoto-san went for it with a fully open playground for Mario 64, creating a form of gameplay that is copied to this day. Naka-san balked and created a game with 3D characters and art, but with gameplay fixed firmly in a 2D space. Because of this, or perhaps because he thought the risk of 3D was too much to risk on a Sonic game, Naka-san also chose to launch a new character called Nights.

Unaware of any of the incredibly important decisions that two of the greatest minds in video games were making, Andy and I solved the same question in another way. Most levels would be into z space, or into the screen. We let the character move in full 3D, but significantly restricted one dimension of freedom: the x axis, or left and right movement. This created "paths" that were only a few characters wide. It was truly 3D gameplay, but also allowed us to keep the challenges firmly in the classic 2D sweet spot of platforming, timing, and simple interactions. It also made it impossible to run around enemies, get lost, or get attacked from off screen or behind the camera - these were weaknesses of Miyamoto's 3D efforts. We also solved the "ass" problem by keeping some paths mostly in what is called "x and y space." In these levels, you got to see the character from the side. For good measure, we even had levels that came "out of" the screen's z axis. Gamers will remember these as the boulder levels. Controlling a character that ran at the camera allowed a full frontal view - with shorts on, of course.

Most importantly, Andy and I made the audacious decision that because Nintendo and Sega already had mascots, we would make our game for the Sony PlayStation. Sony was new to video games, and therefore, they had no legacy characters. We were in Utah after two days of solid discussion when we made the decision. Two 24-year-olds, who had never made a successful game, with all of their worldly possessions in the back of their car, were going to drive to Los Angeles, hire their first employees, figure out what made a great action game, work on their first 3D title ever, and create a compelling character and franchise. Then all that would remain to do would be to put in a call to Sony and tell them we had created the PlayStation mascot. It was simple, really.

Ramsay: Were you aware at the time that all of this would be quite difficult? Or were you two still just winging it?

Rubin: We were both aware of the difficulty, and yet completely sure that we would manage to overcome the barriers and create the Sony mascot. This, despite the fact that we had no way of knowing whether Sony itself was working on a mascot internally, which would have guaranteed failure. Remember, at the time we were working with Universal, not Sony. Sony had no way of knowing about what we were doing, and we had no way of knowing how they would react. Of course, who were we to attempt a game of this complexity and against such great competition? Again, to succeed as an entrepreneur takes a certain amount of blind faith, bordering on raw audacity and possibly entering the realm of stupidity. Andy and I had that kind of faith. By this time, we were certainly doing business planning. We had a budget, we had employees, and we had deadlines. Naughty Dog had become a business.

Although we were both computer hackers, Andy and I were comfortable with business and management. I was treasurer of my senior class and an economics major. I had run multiple small businesses of my own on the side over the years, including a t-shirt printing business while I was at college that sold 50,000 t-shirts in a year. I knew how to use Quicken and budget time on spreadsheets. We never had problems running a business.

Ramsay: When you arrived in Los Angeles, where did you set up shop?

Rubin: As part of our deal with Universal, they paid to put us in a space on the back lot of Universal Studios. We received free phone lines, fax machines, secretarial staff, etc. Originally, we didn't even owe them a product for all of this free help. They just wanted "talented people" working on their lot, and hoped that would lead to good things for Universal. It sounds strange, but this strategy had worked for Universal. We had roughly the same deal that Steven Spielberg had at the time, although our entire space was the size of his office!

This methodology is totally different from what the game publishers would have offered. EA had given us a budget and expected to get a game in return. If we needed power or desks or a roof over our heads, then we had to figure out how to get that for ourselves. You are either internal or external to publishers. Internal teams get everything done for them, but don't own or control anything. External teams have to fend for themselves.

We had something in between at Universal. We liked the Hollywood "housekeeping deal" arrangement, and in the end, we signed a three-project deal with Universal that eventually produced hundreds of millions of dollars in revenue for them. So, it worked out for everyone.

"I know that in their hearts, the guys at Naughty Dog and Insomniac still measure themselves against their brother development house"

Jason Rubin

Ramsay: Were there other internal teams on the Universal lot?

Rubin: Naughty Dog was the first team that Universal brought on the lot under a "housekeeping deal." Mark Cerny, vice president of Universal Interactive, felt confident enough about only one other team to bring them on the lot - Insomniac Games. All other teams were off-lot and operated under the standard terms of a development deal.

It is fair to call Naughty Dog and Insomniac's relationship competitive, but only in the best of terms. We critiqued each other's work, we shared code occasionally, and we even had each other's characters do cameos in our games. We also spent time with each other outside the office, and I'm still quite close with the Insomniacs today. During the day, we were all business, but at the end of the day, there was nobody else that understood what you were going through more than someone who did what you did. So, we were also friends.

The competition continues today. In my opinion, Naughty Dog had the edge in sales and quality in the Crash days versus Insomniac's Spyro. But I think it is only fair, in retrospect, to say that Ratchet & Clank was a more successful franchise - sometimes in sales, but also in impact - than Jak and Daxter. I'll leave it to the fans to judge Resistance versus Uncharted. The games are less comparable than past titles because they don't share a genre, but I know that in their hearts, the guys at Naughty Dog and Insomniac still measure themselves against their brother development house.

Ramsay: By 1998, Crash Bandicoot was an iconic trilogy that defined the PlayStation, but the three-project deal had ended. I assume that Naughty Dog had to vacate the premises soon after?

Rubin: Naughty Dog made the decision to not renew its deal with Universal Interactive. By the time that Crash 3 rolled around, Universal's role had shrunk to nothing. Sony was financing and publishing the games, and additionally providing valuable worldwide production advice. Mark Cerny, who started at Universal and was a large contributor to Crash's success, had become an independent contractor and continued to work with us. And, of course, Naughty Dog was doing the heavy lifting of developing the titles. Universal was simply being paid for the intellectual property rights.

Andy and I decided that we were not willing to split the developers' share of revenue with an entity which was contributing nothing to the mix, which was extremely difficult to work with, and which was actively trying to take credit for Crash's success. So, we announced that we were not renewing our contract and we were leaving the lot after Crash 3. At that point, Universal Interactive's management lost their minds.

We were forced to develop Crash 3 in the hallways of their offices. Although they still had a contract to give us office space, they decided to make our lives as miserable as possible. We were under extreme deadlines for a Christmas release, so we couldn't move the team in the middle of the project. We had to stay in those hallways until the game was done. Naughty Dog was working 16- to 20-hour days that year with no weekends. To make matters worse, Universal refused to pay for the air conditioning in their offices, and thus their hallways, after hours. Los Angeles summers, especially in the San Fernando Valley, are extremely hot. At night, and especially during the weekend, the heat on the thirty-fourth floor passed 100 degrees. This is not an exaggeration. We had to buy thermometers and measure the temperature constantly because the heat was affecting more than our comfort. Our servers were going down because the internal temperatures of the hard drives were going over 130 degrees. And the building wouldn't let us bring in portable airconditioning units, so we were forced to cool the servers by blowing air over a bucket of ice with a fan. That solved the problem until we managed to disguise an air-conditioning unit as a mini-refrigerator and sneak it in.

I could tell endless tales of Universal Interactive's spite and contractual misbehavior that year, but that's all history. They tried to break us. They couldn't. Although we all worked shirtless at desks in hallways that year, we got Crash 3 done. To put all of this in perspective, Crash 3 was guaranteed to make Universal hundreds of millions of dollars in profit. Yet, as a company, they didn't have the decency to accept our decision as independents to chart our own destiny. And they were vindictive enough to risk their financial windfall had their nonsense caused us to fail. If Universal had been more humane and reasonable, it is possible that Naughty Dog would still be making Crash products today.

The day Crash 3 was finished, Naughty Dog moved off the Universal lot and started work on a kart game. We didn't have characters attached then. The first versions had nondescript block-headed kart riders. Our relationship with Sony was always incredibly close. We offered to make the game based on Crash characters, if they dealt with Universal and obtained the rights. At that point, Naughty Dog couldn't even speak to Universal's management they were so... apoplectic. Sony managed to do so, and thus our first title after leaving Universal was a final Crash product: Crash Team Racing.

At the same time, Naughty Dog decided to start fresh. While most of Naughty Dog worked on Crash Team Racing, Andy, Stephen White, and Mark Cerny started working on a next-generation engine for what eventually became the PlayStation 2. Andy and I risked $4 million of Naughty Dog's cash into starting development of Jak and Daxter. This was well before thoughts of selling Naughty Dog entered our minds.

Stay tuned for Part 2 of this exclusive excerpt with Rubin.