Ian Baverstock - Part One

From the business point of view, it would be nicer if it was somewhere that was easier to get to [than Leipzig], there were a few more nice hotels around the conference centre - that would be good. It might encourage a few more people to come, which is obviously always good.

From my point of view I'm here to see other people in the industry, not so much the consumers, and I'm not sure how many of those people are put off by coming to Leipzig.

I think the consumers being here brings the publishers here in force, and then because the publishers are here in force it makes it much easier for everyone else who's part of the ecosystem to come along as well. So that's great, from that point of view if we need the consumers, we need the consumers.

I don't know really - I don't know how strong the consumer event is. It's obviously huge numbers of people and brings lots of publishers here, but I don't know how robust it is in terms of moving location. I don't have a view on that.

I'm pretty happy with the range of studios. There are still gaps, so there are still other studios that I can imagine fitting into a portfolio of development studios, and if you look at our site scale, there are other people who have got just that many people almost in one focus.

And then you've got Foundation 9, which is maybe three times as big - so there's plenty of scope as well to grow the business in that sense. I think the industry's been doing very well in the last couple of years, and I'm not sure whether at some point that might ease of.

In the last cycle there was definitely a point mid-cycle, because development has that 1-2 year lead time on products, development started to ease off long before the consumer price really came down, the product mix changed, and so on.

I don't know when that's going to happen in this cycle, but I'm pretty certain that at some point it won't be quite as buoyant as it is now.

I think what matters to the development community, especially in somewhere like the UK, where we're producing generally high quality games - relatively expensive compared to outsourcing stuff in China or somewhere like that - publishers' demand for quality and innovation is what drives success in the UK.

In previous cycles we saw new platforms come out, they were very driven by the technology that was needed to produce games on those platforms, they were generally bigger in terms of game size, and so on.

Some of that's been true this time, but I think because the budgets have been so high, there's still plenty of opportunity for quality on the two high-end platforms to grow - and that I think will continue to drive demand in the high value, high quality development territories.

And then on the Wii, which has obviously been this outrageous success story, you've actually also got, I think, this strange inversion. The initial range of products away from Nintendo's first party products weren't that high quality. But now that the market is there, now that people are realising they can get a high return on investment - and actually in that mass market, to differentiate yourself you need quality products, you can't just rely on a catchy name or a nice box.

Nintendo is driving quality and so are other publishers, so instead of it being a market which is tailing off in the value of development and the size of development projects, it's actually the opposite I think - a lot of publishers are realising that they've got to invest perhaps more than they were before on their Wii titles to make sure they've got the quality there.

So that again is good for the UK.

No, I think they're just reflecting that the market is there. They can sustain those bigger investments, and in fact they almost need to in order to compete.

The biggest issue with development cost is obviously that it's harder to make royalties back on something that's just that much more money in the first place. But I think we're starting to see evolution of business models for independent developers.

Publishers are starting to recognise that if you're spending huge amounts of money, the developer's not going to be sitting there expecting to make royalties back unless it's a mega hit. So there's got to be some way of sharing that upside with the developer.

We're just seeing a wider range of models - there are more projects which are non-royalty bearing and are just work-for-hire, people are doing more deals where the recoupment point and where the developer starts to see royalties is defined in terms of the number of units shipped rather than just the old model of earned out development advance.

I'm not saying everything's like that, but there is more imagination being displayed by publishers, because if you want a developer that's in there for the upside and the long term, you have to think carefully about the size of the development budget, and what that means in terms of recoupment point.

I definitely don't think it's a bad thing, I mean it would be much worse for the industry if nobody was interested in acquiring development studios. That would be a pretty bad sign, right?

So the fact that there are people out there who are willing to buy companies for significant sums of money implies that we're doing something right, and creating value somewhere.

I was certainly scared that a few years ago the ecosystem of new start-ups coming into play would die out. In some ways, frankly, from an existing developer's point of view, it's quite nice to not have start-ups come along and compete with you, but equally it would reflect a certain lack of dynamism and interest in the sector.

Again - it would also reflect an inability for the models to evolve - but actually over the last few years we've seen some good start-ups being very, very successful. So I don't think there's any fear that people aren't still able to create studios, start them up, get decent deals, move on. There's perhaps a bit more maturity about how long it will take and what the previous steps are - it's not as random as it was, which is probably a good thing - but I don't have any doubts that seeing people buy studios and seeing new ones start has got to be good overall.

I sat on a panel at the Develop conference talking about why you would or wouldn't sell your studio, and really I can see both sides of the coin. I would never make the case that there shouldn't be publisher-owned studios, and all the rest of it.

Why do we value it? I don't think we do. I don't think we're sitting there saying that we must be independent in a quasi-religious way. This is the business we're in - you have to play to your strengths. There are strengths and advantages to being independent, but there are clearly disadvantages in that you've got to go out and constantly find new work and new revenues streams - you aren't sat there being paid for on a monthly basis by some sugar daddy publisher... not that a lot of internal studios feel like that either, mind you, I'm sure they have to work for it to!

It might be that it's the in-thing to do for some of those companies - there have been repeated attempts by some of the big media companies to get into the industry. Generally they've failed in previous iterations - but what you're seeing now is an understanding that firstly it's not the Wild West, you can go in and acquire something, there's solidity, there's history, there's process, there's engineering, there's strength in depth - which is obviously important if you're spending lots of money, you don't want to see it just walk out the door and evaporate.

And I think that the other thing that's true is that people are realising because of this sense of reliability - you know that if you buy something you're going to get something out of it - that they're buying it because they want what's there. They don't want to remould it in their own image. They're actually actively trying to acquire something because it is different from their existing business.

So in the past I think some of those acquisitions were made with a view to turning them into a wing of an existing company with their own working practices and so on, whereas now people are realising that if you want to do this you've got to go in and get the people who know what they're doing and actually take advantage of that history - stick with it and evolve it, not just try and meld it into something else.