Capital Entertainment Group shuts its doors

An innovative development "incubation" company which was founded by some of the pioneers of the Xbox project with a view to acting as a middleman between publishers and developers has been forced to close due to lack of funding.

Capital Entertainment Group was founded in 2002 by two of the key people behind the Xbox project at Microsoft, namely Seamus Blackley and Kevin Bachus. CEG aimed to sit between developers and publishers, providing funding and guidance for development projects and then selling complete or near-complete projects to publishers - thus freeing up developers to focus on working on the game, and cutting down the amount of input a publisher needed to the development process itself.

The company attracted significant amounts of funding early on, and signed a fairly high profile publishing deal with Sega USA. However, since the company has been fairly quiet - until now, when it has transpired that the group needed an additional $20 to $30 million of funding to continue its work, and has been unable to secure this capital from investors.

It's not known which development studios CEG was working with, or what the status of the projects it was funding are. However, the collapse of the group is not dissimilar to the collapse of a publisher in many respects, and the fallout in the development sector may well be significant if the affected studios cannot secure alternative sources of funding or new projects. CEG still has some cash reserves, which it plans to use to wind down its operations - this may help to cushion the blow to the developers involved.

The model for publisher-developer relations proposed by CEG is based on a popular business model in the movie industry, and CEG co-founder Kevin Bachus still believes that this model will become popular in the games industry in the near future. "There is no question in my mind that this business model will appear in the games industry in the next three years," he told Mercury News. "The demand is there. The challenge is finding investors who share the appetite for risk."

Seamus Blackley, meanwhile, plans to continue working in broadly the same sector - taking up a job with Creative Artists Agency in Los Angeles, in a role which will see him expanding the agency's work into the games industry. "At CEG, we got a lot of people thinking about the right things in the game industry," he commented. "CAA is the place to carry on the fight."

Further Reading: [Gaming middleman throws in the towel - Mercury News]
Further Reading: [The rise and fall of CEG - Gamespot]