The Rise of Naughty Dog - Part 2

The following Q&A is Part 2 of our exclusive excerpt from 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. In Part 1 (which you should read now if you haven't yet) Naughty Dog co-founder Jason Rubin talks about his early days in game development and building Crash Bandicoot.

In Part 2 below, Rubin discuss moving on from Crash to Jak and Daxter, the eventual sale of Naughty Dog, and much more.

Ramsay: Why did you leave Crash for Jak and Daxter?

Rubin: Naughty Dog would have liked continuing with Crash beyond Crash Team Racing, but the relationship with Universal was untenable. Originally, we had signed a three-project deal; however, when Sony became enamored with the game and eventually negotiated to publish Crash, Universal cut a deal for a sizable yet much smaller cut of the game than they would have received as the publisher. Our contract with Universal never contemplated this occurrence. We were effectively crammed down into a cut of their cut. This made no sense. Our costs and recoup were the same. Our effort was the same, but we were getting a much smaller amount per copy sold. On the other hand, the arrangement meant that Universal had no more marketing costs, very little internal management costs, and eventually they even managed to push the financing costs back to Sony.

It is perfectly fair to say that they did next to nothing on the project and yet reaped a larger amount on the early games' profit than we did. The only reason I cannot say that Universal contributed nothing is that Mark Cerny, a Universal employee, was our producer. He was a massive force in the success of our games. His salary and work could be called Universal's contribution to the first few Crash titles. But Mark eventually left Universal, and we started contracting him directly. Sony effectively paid for his work. While Mark continued to be incredibly important to our titles, his contribution could no longer be attributable to Universal. From that point forward, they did literally nothing but collect royalties that should have been, at least in large part, ours.

"Jak and Daxter was not an attempt to repeat the success of Crash so much as move forward on the Naughty Dog 'dream' ...basically, a fully playable movie. "

Jason Rubin

Obviously, this situation couldn't last forever. We had to strike out on our own and start fresh. Jak and Daxter was the result. It is sad that Naughty Dog had to leave Crash and that Crash went on to be in so many average titles - I'm being kind - after Naughty Dog stopped developing the games. He is still a very endearing character with a huge fan base. In 2010, I looked at Crash's Q Scores - rankings done by a third party for every major intellectual property. Crash does incredibly well for a character that has had such a long hiatus from the spotlight. This is especially true with adults 18 to 49. Those that remember playing Crash remember him fondly. When Activision merged with Vivendi Universal - itself a merger of Vivendi and Universal Interactive - the Crash rights passed to Activision's hands. I have high hopes that they will someday dust off Crash and bring him back to his original glory.

Ramsay: Were you looking to repeat the success of Crash?

Rubin: Jak and Daxter was not an attempt to repeat the success of Crash so much as move forward on the Naughty Dog "dream." That game, or at least the outline of that game, existed when we started Crash, but would not be realized for over a decade and a half. It involved weaving plot and adventure together seamlessly and continuously with tight gameplay - basically, a fully playable movie.

Originally, Crash was supposed to be laced with plot points and action sequences. But both our code and the PlayStation utterly failed on that promise. Instead, we fell back on almost 100% platform gameplay. As the Crash games progressed, more and more plot came in-basic plot, but plot nonetheless, driving the game forward. Jak was an attempt to take that to the next level with even more showpieces-large physical destruction and change-and story.

Ramsay: After leaving what was effectively an abusive relationship, did you think that Naughty Dog could survive as an independent, external studio?

Rubin: Andy and I had no fear that Naughty Dog could go it alone. We were generating significant income from Crash Bandicoot royalties, and the band was still together. Everyone was excited to move forward and try something new. Mark Cerny, who had been the only major contributor to the success of Crash from Universal, was now freelance and continued to add his abundant talent to our endeavors. Sony Computer Entertainment was still giving us advice from over 70 countries around the world. It was just such local knowledge that had made Crash so popular in Japan and elsewhere. It was the fact that we were all so comfortable working together that led Andy and I to make the investment in Jak and Daxter.

We knew that we'd eventually work out terms with our friends at Sony. Our relationship could not have been better. Why bother negotiating a contract upfront when there was a game to be made? We had also learned, from self-financing Way of the Warrior, that there is no such thing as a great game that can't find a place on store shelves. If you build it, there will be a way to get it to market. And the longer the developer takes the risk, the greater proportion of the reward they reap. We were ready for that risk. The PlayStation 2 was just hardware. As much as everyone worries and complains, new hardware is just new hardware. At the end of the day, hardware never holds up a good team. In fact, new hardware makes good teams shine. Not only were we ready, but we also had everything we needed to succeed.

"Uncharted 2 was the game Naughty Dog set out to make when we started Crash. It took well more than a decade to get there"

Jason Rubin

Ramsay: Where did you eventually set up shop? Did you want to stay near Los Angeles, or did you look at other locations?

Rubin: We moved to Santa Monica. It seemed like the most comfortable place for the team. Hollywood was of small importance to Naughty Dog by the time we left Universal. Initially, we had thought it was important to be established where the entertainment action was. That was one of the reasons we moved to Los Angeles instead of signing with a San Francisco-based publisher. At that time, in 1994, it seemed that games were going more "multimedia" and that Hollywood would provide better talent. But it didn't pan out that way. While it was certainly nice to be in the Los Angeles area- where great voice actors, cartoon designers, writers, and other Hollywood talent reside-other teams have been able to harness that talent from other cities with little trouble. Los Angeles is certainly a great place to live and work, but other major cities have their advantages as well.

Location is not that important for developers, but there are tradeoffs to make. If you are in a big, game-centric city like San Francisco, Los Angeles-Orange County, Seattle, Vancouver, Montreal, or Austin, then there is a lot of talent. But there's also a lot of competition for your staff. On the other hand, if you are the only player, or one of the only players, in town-like say, Epic Games in Cary, North Carolina-then it is harder to attract talent but easier to keep it. I think anywhere works, so long as it works!

Ramsay: When Naughty Dog relocated to Santa Monica, were you aware that Sony was establishing a studio of its own there?

Rubin: We had been aware of the other Sony studio all along. Alan Becker, who ran the studio, was involved in the Crash, and Jak and Daxter, projects. But even after the acquisition, Sony left Naughty Dog to do its thing. Before Andy and I left, Naughty Dog was a wholly owned subsidiary of Sony Computer Entertainment America, a company that was completely owned by its parent but had its own board and management. Our relationship with the other Sony studios, including Santa Monica, was very close. And we remained close with Insomniac, who was not under the Sony corporate umbrella.

Ramsay: Did that proximity inspire Naughty Dog's sale to Sony?

Rubin: There is a good story about how the sale of Naughty Dog came about, but it had nothing to do with the Sony studio. Andy and I were in Tokyo at the Lexington Queen, a Roppongi nightclub that had been a debaucherous hangout for the touring heavy metal bands of the 1980s before it became our favorite 4:00 AM spot in the late 1990s. We were with Kelly Flock, who was then head of Sony's game division in the United States, and Andy McNamara and Andy Reiner of Game Informer magazine. Suffice it to say, we were not in any shape to drive home, were we to have had cars. We were arguing about what Naughty Dog should do after Crash, and even Kelly wasn't privy to what we were already doing at that point. Naughty Dog had started Jak and Daxter, but Shu Yoshida and Connie Booth, our longterm producers, were probably the only non-Naughty Dogs who had seen it at that point. Kelly threw out the idea that Naughty Dog was at the top of the business. We had the number 2, 4, and 7 best-selling games on the PlayStation, and Crash Team Racing was fast catching up, so there was nowhere for us to go as developers but down.

That piece of sick logic hit Andy Gavin and me like a brick. The Andys from Game Informer fought back, literally. They both jumped across the table to wrestle Kelly and defend Naughty Dog's honor. But Andy and I looked at each other, and we both realized that he just might be right. That is when we first contemplated selling the company.

Ramsay: How was Jak and Daxter different from your success with Crash? Was Uncharted an evolution of your earlier vision?

Rubin: By Jak 2, the Naughty Dog vision started to show through. Through the Jak games, we still had to separate gameplay from story with pretty harsh cuts. We tried to do both at the same time here and there, but there was only mild success in this endeavor. Jak was more serious, more adult, and more interesting in its weaving of plot and game, but it was far from our dream title. Uncharted finally realized the dream. I'm elated and proud that Naughty Dog finally saw the dream to fruition, and sad that I wasn't there for the final steps. When Uncharted 2 came out, I finally saw the pieces come together and click. Uncharted 2 was the game Naughty Dog set out to make when we started Crash. It took well more than a decade to get there.

From a business standpoint, Jak would release us from our shackles at Universal. Finally, the pie was to be split between only the parties who were making and publishing the game: Naughty Dog, and Sony. But Sony also wanted to be freed from its shackles. They didn't want to create another de facto mascot just to see the character go multiplatform like Crash. Naughty Dog asked for the same deal that had been struck with Universal, but Sony wanted more.

Ramsay: What did Sony want?

Rubin: Sony wanted insurance that Naughty Dog wouldn't do with Jak what Universal was doing with Crash: publishing it on competitive hardware. In the end, it only made sense for Sony to own the intellectual property outright. However, Naughty Dog wasn't willing to spend another six years working on a property that it didn't own. The only solution was an acquisition of Naughty Dog by Sony. So, Sony solved the problem by making Andy and me an offer that we couldn't refuse.

It was a smart financial move on Sony's part. That was true by the time Andy and I left, but when you add the Uncharted series, it becomes obvious. It was also a good move for the Naughty Dog team. From that day forward, we had a comfortable place to focus on making the best games we could with all the support that only a company like Sony could provide. That focus and support continues to this day. But was it a smart move for Andy and me personally? In retrospect, I think so. But who knows what would have happened were Andy and I still leading an independent Naughty Dog!

Ramsay: When did you and Andy leave Naughty Dog?

Rubin: Andy and I left Naughty Dog in October 2004 at the end of our contracts. There were many reasons. The two major factors were our lack of vacation and the needs of those directly below us in the company hierarchy. I guess it's fair to say that we desired the first and were enabled to pursue it because of the second.

Triple-A video-game development has progressed from one man and a computer in a weekend to teams of hundreds working in multiple specialties for years. But that progression was not smooth and organized. Andy and I had started making games in 1985 at the end of the "one man and a computer" period. By that time, teams were specializing, with an artist or two, a programmer or two, and sometimes a specialist for sound. There was very little hierarchy on the teams. The developers worked together, but there usually wasn't much in the way of leadership.

By the time Crash rolled around a decade later, teams had become eight to twelve people on average, and one or two of the members needed to be decision makers. The structure at the time of Crash was flat. In other words, as director, I spoke to everyone on the team directly and I knew what everyone was doing. That meant that Andy and I were usually the first ones in and the last ones out of the offices. Budgets were rising quickly, although they were still what seems today to be a pathetic $2 million. That meant limitations on hiring.

Bottom line: in 1997, I was in the office for 364 days and averaged 16 hours a day on the computer, according to the computer's logs. The single day that I was out was during the worst part of a bad cold. Lunch that year came out of a vending machine more days than it didn't. I don't think Andy missed a single day that year. After finishing a game, we were already late for the sequel. It took 21 months to make Crash with 8 Naughty Dogs, 13 months to make Crash 2 with 13 Dogs, and 11 months to make Crash 3 with 16 Dogs. And the bulk of Crash Team Racing-aside from the new engine-was done in 8 months and 6 days with 21 Dogs, which must be some kind of record. We hit four Christmas releases in a row-30 million units. Big money, but we had no breaks, and it showed on us physically.

Unfortunately, the PlayStation 2 brought even bigger challenges. The team size ballooned, and we didn't have the time, experience, or foresight to radically change the team structure. This was not unique to Naughty Dog. And as the age of the average Naughty Dog, and developers industry-wide, was increasing, families and children came into the picture. This created time issues. Some Naughty Dogs were happy working from 6 AM to 6 PM, while others were working from 4 PM to 4 AM. This is not an exaggeration. This couldn't work. A single game character was no longer the task of a single person. There were modelers, riggers, texture artists, and animators all working together. If one was an early bird, and the other was a night owl, they might not be in the office for more than an hour or two together. So, I created the then-novel idea of "core hours." Everyone had to be in the office from 10:30 AM to 12:30 PM and 2:00 PM to 5:30 PM. Those weren't complete hours. Those were just the hours that an individual Naughty Dog absolutely had to be in the office, so they could work together. I vividly remember the meeting that Naughty Dog had about this new rule. Employees were yelling in ways that had never been seen before. I lost two employees- one that day and one a few weeks later-over the core-hour rule.

Naughty Dog was one of the first, if not the first, developer with core hours. Three years later, almost everyone in the industry had them. And the team sizes just kept expanding! Budgets doubled from $2 million to $4 million on the PlayStation 1 and from $10 million to $20 million on the PlayStation 2. Although we tried to create hierarchy and middle-level management, the team lead was still on top of everything. We had over 60 employees, and I still needed to know what almost every one of them was doing. Assuming a ten-hour day, that was only ten minutes per person, if I wanted to check in with everyone.

The work was stressful, so we started giving the entire team a month of vacation after every project. The cost of this, from a budget standpoint, was over a million dollars per project. To minimize this cost, the team had to be ready on the day they got back. Andy and I had to work during the month off, preparing everything with Evan Wells, Stephen White, and a few other key people.

"I'm incredibly proud of Evan, Christophe, and the entire Naughty Dog team for what they achieved after we left"

Jason Rubin

In addition, bigger games with bigger profits led to bigger marketing campaigns. This created press tours around the world to speak with local media about the titles. The longest one was 20 days in 14 countries. I truly loved the press tours, but it wouldn't be fair to call them vacations. So, we lost the only month we might have taken time off.

When I decided to leave Naughty Dog, I was looking at two seemingly intractable issues. The first was that I couldn't see myself continuing at the pace I was going. The second was that, in creating hierarchy and promoting Evan and Stephen, we had created two incredibly talented individuals who had then gained the experience and talent to run teams on their own.

Teams were bigger and budgets were higher, but the console business was still in its heyday. There were publishers itching to expand and create new teams. I feared that Evan and Stephen would leave to jump on that opportunity, and I didn't want Naughty Dog to go through that division. This was not our imagination. I had managed to pull Stephen back from the brink just before he left Naughty Dog for another opportunity.

We might have split into two teams, with Evan and Stephen running the new team, but I felt at that time that Naughty Dog was at the top of its game and shouldn't take risks like that. Two mediocre, or even two very good products, wouldn't be as lucrative as one great one. Historically, this has been true in hit-driven industries. If you look at the sales curves of titles, you will see that this is certainly the case in video games.

So, in 2002, Andy and I decided to leave Naughty Dog. We told Sony of our decision, and promised that we would spend the next two years making sure that Evan and Stephen were ready to lead the team when we left. We did exactly that. By the end of Jak 3, I was not in the biggest office; Evan was. I did less and less direct management, and more looking over his shoulder. By the time Jak 3 finished, Evan was ready. Andy did the same with Stephen. Stephen eventually decided that he didn't like running a team, probably for many of the reasons that I've mentioned. Christophe Balestra was right there, ready to go. That created the seamless transition that allowed the team to continue to perform at such a high level of success and which led to Uncharted 2, a game of the year.

A few years later, hierarchy had come to the business, and that meant teams self-healed and were more efficient to run at scale. Hierarchy also brought more sanity to development schedules. This is not to say that development has become easy, or that developers don't put in extremely long hours, but the industry is now more sustainable and less brutal to team leads. There was a certain aspect of the Wild West that disappeared from triple-A development. It was fun at times, but I think we were all happy to see the industry mature and grow out of it.

Other things have changed as well. Smaller teams have returned with social, mobile, and casual games. Deadlines outside of the console space are looser. Christmas is not much of a factor for them. Games are patchable and continue to have add-ons, so development is not so focused on a single-disc release. In the console business, the opportunity to strike out on your own and create a new team is now basically nonexistent. Triple-A teams are being cut in huge numbers. Certainly, a second-in-command can leave to start a smaller developer making smaller games, but the fear of losing your number two to a similar triple-A project isn't hanging over anybody's head. Since triple-A managers only want to make triple-A titles, you don't worry about losing your talent like you did.

Had Andy and I continued through the early PlayStation 3 development transition with our sanity, I think we probably wouldn't have left thereafter. Had we split into two teams and managed to keep up the quality, maybe we'd be even more successful. It is hard to say for sure, but at the time I made the decision to leave Naughty Dog, I felt like I had no other choice. Some people live for a single purpose-to do the one thing that they love doing. I loved working at Naughty Dog. I loved the team, the process, and the success, but I also love diversity of life experience. I have done things that I never would have been able to do had I stayed at Naughty Dog.

The road had two paths, and I chose what seemed like the more interesting one at the time. You can never see too far past the branch, and you always wonder what you might have given up had you followed the other. I would not give up what I've done since October 2004 to be able to go back and change my decision. I'm incredibly proud of Evan, Christophe, and the entire Naughty Dog team for what they achieved after we left.