Writing a new chapter

Well, we are currently restructuring the business, which is no small thing. We are looking at how we create games and how we can bring them to market in a different way. That is a challenge, but as an industry we are used to challenges!

We have been very upfront about where we were as a business and where we are going. We are moving to a decentralised, studio and product-centric operation and everybody is now happily on board with that.

So, are things settling down? Well, despite some initial pain, yes, they are settling down thanks.

Phil has earned everybody's respect in a short time. He brings with him a fresh approach and a clear vision for the company. He has all the attributes you need in a good CEO. He is energetic and leads by example. He is an excellent motivator and communicator, understands the business and the numbers, is not afraid of change and has a clear idea of the direction of where the industry is heading.

What I particularly like is that whilst he challenges people he also empowers them. He has had the courage of his convictions to make some difficult decisions. Cutting 25% of the workforce and 14 projects is not a decision you can take lightly, but he is committed to the "less is more" principle by producing fully-invested "quality" titles based in the main on original IP. We like that. But for all I know he might, of course, be a train spotter or play the trombone, but as a CEO, it's thumbs up from me!

Progress is all about simplification, not complication. We are moving from a top down publishing-led model to a ground up, studio-led model. This is the start of a new chapter in the history of Eidos.

Yes, I know we have had our fair share of adventures already as a company, but I genuinely believe this is an extremely exciting time. Notwithstanding our recent trading updates and consequent board changes, don't forget that Eidos still has ownership of some of the world's leading development studios, franchises and original IP.

In the next six months we will have fine tuned the company's re-structuring, we will be launching Age of Conan, the most anticipated mature MMO of all time and of course we will be gearing up for the launch of Tomb Raider Underworld - our best Tomb Raider game ever - and all of the PR drama that it will bring with it.

Ironically, this is where things are getting more complicated.

Not that many years ago the games market was a lot easier to predict and to develop product for. The bulk of the market was made up of hardcore male gamers who played console games offline and predictably wanted a certain type of game, usually sports, action/adventure or first person shooters.

Today we have the overall impact of the internet plus the specific impact of MMOs, online casual games, the Nintendo factor with Wii and DS, micro transactions, in-game advertising, social networking, user-generated content, and multiple devices that has attracted a much more diverse audience - young and old, male and female, all with their own tastes and all enjoying a wide variety of games.

So, whilst the market has expanded and sales are up quite significantly year-on-year creating new opportunities for the industry, there have been new challenges as companies have had to adapt their product mix, their development processes such as outsourcing, ways of distribution, and ways to communicate and market their products. It is a competitive and changing world out there which requires innovation or you will end up with stagnation.

I think there is still a lot of confusion as to how people define casual games. Some people see them as just being NDS titles, others see them as online games downloaded from portals, others see them as budget titles, and others see them as all of the above.

For me, a casual game is defined by the experience. They are simple to play with instant, addictive game play, a form of light entertainment to enjoy but not necessarily to win. They can be full price, budget, subscription or even free to play. They are platform agnostic and appeal to both males and females - although to date 35-45 year old "soccer moms" have made up the bulk of the market for games downloaded from casual game portals.

Casual games have diverse genres - match three games like Bejeweled, time management games like Diner Dash, hidden object games like Mystery Case Files and classic puzzle games like Tetris. People play for fun, to relax and to escape for 10 - 20 minutes.

Casual games are certainly mass market and the market is growing at 20 per cent a year with sales now topping USD 2 billion a year. The cost of entry to making casual games is obviously a lot less prohibitive than making console games. Not surprisingly there are a LOT of casual games in the world and the revenue models are changing almost daily. Over 200 Million people play casual games each month over the internet.

Having achieved great success with Pony Friends, Eidos is committed to expanding its range of titles under its new Eidos Play label with the release of Dr Reiner Knizia's Brainbenders and Soul Bubbles, both on NDS. Eidos Play is also responsible for our casual, PC and console online games and we expect great success in this market.

Whilst it is rare for a blockbuster console game to stay at the top of the charts for a long period of time, it is certainly possible for NDS titles such as Brain Training, or PC offline titles such as The Sims or PC online titles such as World of Warcraft.

It is usually the case where a console game sells a LOT of units initially over a short period of time whereas the other formats are dominated by titles with 'long tail' sales patterns. Console games only appear to be able to be sustainable over time by way of sequels. Games consoles are the homes of the most famous digital icons like Lara Croft, Mario and Sonic and consumers always want to play the new adventures of their favourite characters.

I think franchises are great. Consumers obviously like them or they wouldn't buy the sequels and publishers like them because they help with portfolio management and predictability of earnings.

Of course, there is a requirement for the next iteration to be a superior product and experience to the previous one, but that is a good thing as it necessitates innovation for the benefit of the consumer. Some people criticise franchises for supposedly stifling creativity. I don't accept that. It just means that new titles have to demonstrate originality and innovation - and big marketing budgets - if they want to compete with existing franchises. This has to be good for the consumer.

And if people enjoy a franchise why not let them have more of what they want if they want it? Whether it's the next Tomb Raider, FIFA or Call of Duty, people should have the opportunity to buy the next installment and let them vote with their feet. Everybody was perfectly happy to have had 40 years of James Bond in the cinema or 59 titles in the Fighting Fantasy gamebook series!

Original IP helps to define the industry as to what it is as an art form and underpins the real value of the industry itself. Owning original IP is like owning a gold mine. As long as there is gold in it, you can keep mining it indefinitely.

Licensing IP is like leasing the gold mine. No matter how much gold is in the mine, it is only yours for a fixed term. Then you have to renew the lease, usually at a higher cost or lose the rights. Content is king - whilst it is a cliché, it is certainly true. If a company owns its own IP it can determine its own future more easily. It can leverage its IP through licensing and merchandising, creating valuable incremental revenue.

Eidos has a history of creating original IP including Tomb Raider, Championship Manager, Hitman, Deus Ex and more recently Kane & Lynch and Pony Friends. Lara Croft has appeared in two blockbuster movies and is one of the most famous digital icons in the world. Whilst she does not appear on the company balance sheet, her asset value is enormous. The important thing about original IP is after creating it is to make sure you retain ownership of it.

I do not believe it is simply a matter of the industry being hit-driven that is causing studio closure at this time. Most entertainment industry products are hit-driven and what's wrong in that?

In the UK it is also a case of the high cost of labour and the UK government's unwillingness to offer subsidies and tax credits. The government sees that retail sales of games are increasing and assumes everything is OK - yet if it bothered to look at the charts, it would discover that none of the games in today's top 20 were developed in the UK.

Given the heritage of game development in the UK, this is a terrible state of affairs. Meanwhile, Canada has taken third place in world development of games whilst the UK has slipped to fourth. Rather than looking at how the government can help our development industry, it would rather complain to the World Trade Organisation about "unfair competition" from Canada.

Overseas governments and companies have long seen the value in the UK games talent that has resulted in a brain drain and studio sales. However, the UK government has been very slow to support our industry and to realise there are serious threats facing it. If it does not act soon it will count the economic cost of the loss of UK studios, the brain drain and the loss of ownership of IP. Rome burns, and all that.

Whilst Eidos has announced a proposed 25 per cent reduction of staff across the company, the reduction will not apply to our cornerstone company owned studios. Eidos Montreal is in fact currently hiring more staff to work on Deus Ex 3 and the total head count there has just risen above 100.

There is a tremendous energy and enthusiasm at Eidos Montreal with many industry veterans and experienced talent coming together to work on one of the most renowned and respected franchises of all time. The great thing about Deus Ex is that it had such amazing critical acclaim and huge fan base that some of the best industry people in several areas of expertise applied to work on this iteration. The buzz at Eidos Montreal is amazing and I am very excited about what is happening there.

The UK is perhaps the most creative nation in the world. Look at the success of our music, fashion, design, literature, television and more recently games. It is no surprise that mega titles like Tomb Raider and Grand Theft Auto were created in the UK.

But the market has matured and the competition is hot. Industry needs highly skilled talent. Unfortunately, I think many universities took the easy option in order to get bums on seats by simply renaming their media studies courses as computer games studies. This has resulted in a skills shortage and the production of poor quality graduates. This was a disservice to those graduates who would have expected to jump into employment only to find that their generalist degree was not a lot of good to industry.

What industry needs are graduates with specific programming, art and animation or project management skills. As Chair of the Computer Games Forum on behalf of Skillset, I have been working with industry and the universities on an accreditation scheme for computer game courses to produce the graduates that industry needs. It is important that universities partner with local development studios to keep up to date on content and technology trends as well as inviting guest lecturers and mentors to teach and inspire their students.

Four universities have been accredited to date and more will follow. Again, it is up to the government to put more resource into games education if it wants to continue to reap the rewards of the industry which currently contributes 0.75 per cent of GDP and employs over 22,000 people in the UK and is a net contributor to the UK's balance of payments. It is vital that UK industry comes together to articulate what it needs in terms of support and skills and to work closely with government and the education and skills system to protect and build the future. For God's sake, let's not become a work-for-hire nation.