Going for gold

by Peter Griffin / 26 December, 2013
The video game industry is thriving and with a little help could produce a global hit.
Game guru: Mario Wynands. Photo/NZH


The country’s entertainment critics have compiled their annual best-of lists, but did you spot Into the Dead or The Blockheads even as anyone’s honourable mention? Probably not.

Yet these homegrown video games and others like them were downloaded 130 million times last year, representing some of our largest cultural exports after Sir Peter Jackson’s first instalment of the Hobbit trilogy.

Unlike The Luminaries, Eleanor Catton’s Man Booker Prize-winning murder mystery set on the West Coast goldfields, these video games offer little in the way of Kiwi character.

Downloaded to computers, tablets and smartphones, they kill time for people riding public transport or waiting in doctors’ surgeries in the same way that Angry Birds does for millions of casual gamers around the world.

They’re also turning out to be very good business. In the year to last March, the New Zealand video games industry had sales of $36 million – equivalent to a couple of shiploads of Fonterra’s milk powder. But with growth of 86% in the past year, it is one of the most rapidly developing export categories of our digital economy.

Riding a surge in casual gaming driven by the spread of tablet computers and smartphones, games studios around the country are bypassing big-label publishers to reach an audience directly through Apple’s App Store and others hosted by the likes of Amazon and Google. What’s remarkable is that the bulk of these games are free. Premium extras and in-game advertising bring home the bacon instead, a “freemium” model that internet companies such as Google, Yahoo! and Dropbox have successfully exploited.

A GOOD GRIND


The free-to-play darling of the local industry is Path of Exile, a dark PC-based action role-playing game produced by New Lynn-based Grinding Gear. Path of Exile was launched in October after nine months in “beta”, or incomplete form, during which three million gamers registered to try it out. Its lush artwork, complex rewards system and players’ ability to endlessly customise characters have won widespread praise.

Path of Exile.


Forbes called Path of Exile “the best action role-playing game title on the market today”, describing it as the spiritual successor to king of the genre, Diablo II. Eurogamer said it was at its most fun with “the screen jammed with skeletons, a necromancer at their back raising the fallen ones just about as fast as you can kill them”.

Since the launch, says Grinding Gear co-founder Chris Wilson, more than a quarter of a million people have been battling monsters and collecting gems in the wastelands of Wraeclast on any given day. They can play for free, but many shell out for bonuses such as alternative animations, skin upgrades and a pet that wanders around after their avatar. “All you are buying is cosmetic upgrades. You can pay to make it look like your sword is on fire or to have sparkles around your head. The ones who are willing to pay, really pay.”

Wilson discovered that when he went out to the Path of Exile community to try to crowd-fund completion of the game, which had been in development since 2006. “We had used our life savings, then rich friends who wanted to help with the project. We had 200,000 sign-ups. Then we floated the idea of crowd-funding it. There was an immensely positive response.”

Chris Wilson. Photo/NZH


The cash drive raised US$2.5 million, much of it coming in the form of bonus packs bought by hard-core Path of Exile fans. “We’ve had eight people spend US$12,000 on the game so far. We’ve had more than 400 people spend over US$1000 in the past 18 months,” says Wilson, adding that in the freemium gaming world, less than 10% of gamers pay for extras and a tenth of those pay for a lot of extras.

“The bulk of the money is in small things. It’s some guy throwing $5 or $10 in to support us and to get a cool effect. There are tens of thousands of people who do that.”

In essence, crowd-funding has become Grinding Gear’s business model, which means the money should keep flowing as long as gamers love the Path of Exile experience. The company is profitable.

Wilson’s team of 33 developers and 10 support staff release fortnightly content updates and more substantial expansion packs every four months. “People are still playing Diablo II 13 years after it came out. We hope to be updating Path of Exile 10 years from now.”

Grinding Gear controls all the game’s intellectual property, an advantage shared by other developers that have foregone lucrative overseas contract work in favour of self-publishing. Wellington-based PikPok, a 100-strong game studio with a 16-year legacy of producing top-selling games, follows the same riskier but rewarding path.

“We were a bit like Weta Digital in a work-for-hire model, where contracts came in from overseas and we were working on intellectual property owned by these foreign companies,” says PikPok founder Mario Wynands, considered the godfather of the local games industry. A mentoring programme, Coffee with Mario, pairs him up with emerging developers.

“Now we fund our own games. And the advent of digital distribution – the ability for us to get games into the hands of consumers over the internet – has created this new business model for us.”

That doesn’t rule out PikPok working with multinational media companies. Its most successful title, Turbo Racing League, was a movie tie-in game developed with DreamWorks. Available for iPhones and Android smartphones, it has been downloaded 32 million times.

“We are the developer and also the publisher so we participate much more in the revenue flow from that title,” says Wynands. Advertising and in-game extras earn revenue for PikPok, with a few bonus extras on the side, such as music soundtracks.

“With some of our games, we’ve sold more copies of the soundtrack than would get us a platinum album here in New Zealand,” says Wynands.

Into the Dead, which PikPok spent $500,000 developing, has had 20 million downloads. “We’ve had millions of dollars of revenue back. This is the difference between being a work-for-hire studio making a margin on a budget and the return on investment when you create it yourself.”

SKY'S THE LIMIT


In the digital world there is no upper limit. PikPok’s legacy – by Christmas it passed 100 million downloads – is an audience that new games can be marketed to. “It means large ongoing passive revenues. I don’t want to put our numbers out there but if we wound down the company to have no employees, it would still be a multimillion- dollar business for years to come.”

Not all New Zealand-developed games are free to download. Bloons Tower Defence, a franchise from Kumeu-based Ninja Kiwi, sells for $2.99 and is estimated to have been downloaded a few million times. Ninja Kiwi, which bought Scottish developer Digital Goldfish in 2012, doesn’t disclose its sales. However much it makes through the Apple App Store, Apple takes a 30% margin.

Fortunes are being made. Within three days of its release last September, the Xbox and PlayStation 3 console video game Grand Theft Auto V had sales of US$1 billion. Created by Rock Star, another Scottish developer, for Nasdaq-listed parent company Take-Two Interactive, it became not only the best-selling game in history, but the fastest entertainment property to gross $1 billion, outstripping James Cameron’s Avatar.

A smash hit like that would earn the New Zealand video game industry cachet of the sort enjoyed by Sir Peter Jackson. But unlike Weta Digital, which can handle simultaneous production of a movie trilogy, the games industry isn’t equipped to deal with blockbusters.

Stephen Knightly: New Zealand’s games industry isn’t up to blockbuster scale. Photo/David White


“We’ve certainly had enquiries,” says Stephen Knightly, an Auckland-based game developer who chairs the New Zealand Game Developers’ Association. “But we are not in that market. We think doing a portfolio of smaller downloadable games is more sustainable.” Grand Theft Auto V cost US$265 million to develop and market, so anything of a similar scale undertaken here would require overseas backers.

But foreign cash is coming to the industry. Parnell-based games studio Gameloft employs 110 people and is part of a French multinational that has 5000 employees around the world. The New Zealand division has produced such hits as My Little Pony: Friendship is Magic, a game version of the animated children’s TV series of the same name produced by toymaker Hasbro. It has notched up 17.5 million downloads.

Gameloft set up shop here after New Zealand Trade & Enterprise put a case to the French that New Zealand represented the best mix of creative and technical game development capability at a reasonable price. In an industry with only 450 full-time-equivalent jobs, Gameloft is a major player.

TALENT SHORTAGE


Knightly says if anything puts the brakes on the rapid growth video games development is experiencing here, it will be a skills shortage. Tertiary institutions offer bachelor-level degrees in game development, but there remains a dearth of programmers and, crucially, game designers.

He describes a game designer as “part director and developer, part psychologist and product manager … A talented game designer is the difference between an okay game and a hit.”

New Zealand isn’t producing enough of them. A dedicated government fund for video game projects would assist in fostering talent, says Knightly. This year Screen Australia introduced a games fund offering business development grants and talent development.

The Film Commission and Creative New Zealand offer schemes to help film-makers, novelists and artists, but video game makers can only compete for a slice of NZ On Air’s annual Digital Media Fund, which can put up to $300,000 into two or three interactive or “transmedia” projects each year and $45,000 into each of half a dozen smaller projects. Even then, games need to target special-interest audiences that are not well-served by mainstream media.

“Our job is to maintain a space for local in a sea of global,” says NZ On Air digital strategist Brenda Leeuwenberg. “We don’t provide business seed funding, nor do we get involved in industry training or upskilling per se. It’s about the idea, the proposal and the value of the concept to a target audience.”

With video games competing alongside website, app and video streaming projects, it’s little wonder they struggle to get a look in. NZ On Air has, in fact, funded just one game so far, developed by Knightly’s company InGame. Indie Music Manager, an iPhone game that lets the player assume the role of band manager, received $287,000 in 2011. It met with mixed reviews on its debut in May and has been downloaded 30,000 times.

“The game took longer than expected to be completed, and in this relatively fast-moving world of app-based gaming this resulted in some issues for developers in keeping up with operating system updates and user expectations,” says Leeuwenberg. Promotion is key to a game’s success, she adds. “There has to be a lot more than a funky launch and a day’s worth of publicity to reach people.”

Knightly agrees. When Path of Exile was launched, it was featured on Steam, the largest PC gaming portal in the world. “That’s the equivalent of Lorde being on the front cover of Variety,” he says.

My Little Pony Friendship is Magic.


David Frampton, a one-man operator in rural Hawke’s Bay, has seen his games Chopper and The Blockheads take off after they were featured in coveted promotional spots in Apple’s App Store. The Blockheads drew inspiration from the hugely popular “sandbox” game Minecraft, which lets players build a world of textured cubes, acquire resources and wage war and has had eight million downloads from the App Store and Google’s Play store.

Frampton also gives his games away, with in-game advertising generating about 70% of revenue. The Blockheads and previous hits Chopper and Chopper 2 have made him a millionaire. The 32-year-old recently hired a part-timer to moderate The Blockheads online forum. Other than that, he runs every aspect of his company, Majic Jungle, from game design to marketing.

“I’d been extremely poor, trying to sell enough paintings to survive. I started looking into computer programming and found I loved it. I stopped painting there and then and started making games. I feel incredibly lucky to have stumbled into this industry as it was growing. It has really paid off.”

MORE ANGRY BIRDS?


If a Grand Theft Auto is beyond the scope of New Zealand’s ambitious video games industry, could we produce an Angry Birds?

The cartoonish game from Finnish developer Rovio is ingeniously simple and addictive. It involves the player hurling wingless birds from a slingshot at pigs positioned on structures. It has had over 2 billion downloads, can be played on numerous devices and is considered one of the most accessible games produced.

That degree of cut-through with a downloadable game is rare – a sign that it has transcended geographical, cultural and language boundaries. “The myth that you can make a smartphone game, publish it and have a hit is long gone,” says Knightly. “All the large media companies have piled in and saturated the market, spending millions on marketing.”

Wynands says quality is important to a successful game. “Everything you see at the top of the charts is a polished experience, great characters, great sound. With Angry Birds, it is really satisfying when you’re pulling back that catapult.”

WELL-TIMED


“Timing is very important,” says Frampton. He got in early on the iPhone with Chopper and launched its successor, Chopper 2, the day the iPad was released.

Ultimately, developers that have already tasted success have an edge in creating the elusive mega-hit that could propel the New Zealand games industry to the heights of our film sector.

“The thing that lifted the lid on explosive growth in the industry was digital distribution,” says Knightly. “We no longer had to fly to America and negotiate a publishing deal with Sony, Microsoft or Nintendo. For once, I reckon, New Zealand’s tyranny of distance is to our advantage.”

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