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Video game development is a painstaking and risky business but the rewards can be high. Consumers are eager to buy, pushing local sales of video games in 2007 to $1.3 billion. Yearly revenue is rising and 2000 people are directly employed in the industry.
However, in December 2007 one of Australia’s oldest independent game development companies went into voluntary administration. Auran Studio’s much-hyped Fury, a multiplayer online game akin to mammoth hit World of Warcraft, had officially flopped, and 60 staff lost their jobs.
Add to this news the near-simultaneous release of three new gaming consoles last year, and this long-hailed boom industry looked beset by stormy weather.
In the midst of packing up Auran’s old workspace (now too big for the studio’s leaner, meaner team of 16), CEO Tony Hilliam explained where it all went wrong.
“We knew that we couldn’t compete with World of Warcraft on an overall scale. I mean, it’s just an enormous project, they were already three years ahead of us. So we chose the PVP, you know, player versus player aspect and said let’s be number one at PVP.
“Ultimately, sales of Fury were worse than our low case projections. We did OK in Australia, we were top 10 in Australia, but Europe was a complete write-off. In the US – again the Australian sales have nearly outstripped the US market altogether. When Australia is almost your biggest market, you have a problem.”
Hilliam believes the lack-lustre response to Fury internationally can be attributed to the state of the game development industry as a whole.
“You’ve got big multinational companies with huge budgets,” he said. “If you look at Warhammer Online, they started in 2000. It was due out in 2007, they delayed it until Q1 2008. That delay alone is probably about a $20 million overrun. And here we were trying to compete.”
Tom Crago, president of the Game Developers Association of Australia and CEO at development studio Tantalus, disagrees that the Australian industry is failing to compete. In fact, he maintains that 2007 has been one of its best years yet.
“I think the game development industry in Australia is in a great place in terms of the growth we’ve enjoyed,” said Crago. “Revenue-wise we’re in excess of $130 million.”
He does acknowledge the inherent volatility of the industry, with new generation console releases a continuing challenge for developers.
“We’re just coming off of one of those transitions at present, into this new generation of consoles which are the Playstation 3, Xbox 360 and Wii. And we have to wait until install base, the number of people who own these platforms increase, before they become genuinely viable in a business sense.”
Crago’s prediction for the near future is a cheerful one, providing Australia’s new Federal Government delivers on tax offsets for game development investors. He estimates that the industry could triple in size over the next three years.
Hilliam, on the other hand, is understandably less optimistic.
“Australia is really a work for hire outpost,” he said. “And if you look at the biggest companies, Krome is the biggest and they’re independent, but they do work for hire for other publishers. And then you’ve got people like THQ, internationally owned. So, it’s the independent developer doing self-funded IP. It’s a really tough, tough road.”
Founded in 1999, Krome Studios is now the largest independent game developer in Australia, and among the top five studios in the world. Krome has achieved enormous success with its original IP Ty the Tasmanian Tiger, which sold multiple millions of units world-wide.
Krome Studios CEO Robert Walsh is philosophical about the restructure of Auran in an obviously risk-taking industry.
“If you go back two years, the UK industry was in a huge amount of turmoil. Big studios that had been around a long time had all shut down. It’s not just any one thing that happens here, that happens on a global basis. Getting original IP off the ground is probably the Holy Grail and it doesn’t matter where you are, you face all the same challenges.
“I mean, there are games out there that have huge marketing budgets and still don’t necessarily get successful. It’s the luck of the game some days, and sometimes you win, sometimes you lose.”
Hilliam is inclined to the view that any perceived boom in Australia’s gaming industry is tailing off.
“I’ve spent a lot of time in China and once they … they’re very good at copying things at the moment and I think once they get a bit more creative, they’re really going to be a force to reckon with.
“Asia and Eastern Europe are going to replace Australia as an outsourcing post. I don’t see a lot of confidence in seeing the thing grow and grow as it has done in the last 10 years.”
Despite the gloomy prediction, the Auran chief is positive about rebuilding.
“Getting that right partner on board, we can then grow, build the team back up again and add a lot more content in the future,” said Hilliam. “These games have a life span of five to 10 years if you get it right. So we’re not giving up hope yet.”
However, in December 2007 one of Australia’s oldest independent game development companies went into voluntary administration. Auran Studio’s much-hyped Fury, a multiplayer online game akin to mammoth hit World of Warcraft, had officially flopped, and 60 staff lost their jobs.
Add to this news the near-simultaneous release of three new gaming consoles last year, and this long-hailed boom industry looked beset by stormy weather.
In the midst of packing up Auran’s old workspace (now too big for the studio’s leaner, meaner team of 16), CEO Tony Hilliam explained where it all went wrong.
“We knew that we couldn’t compete with World of Warcraft on an overall scale. I mean, it’s just an enormous project, they were already three years ahead of us. So we chose the PVP, you know, player versus player aspect and said let’s be number one at PVP.
“Ultimately, sales of Fury were worse than our low case projections. We did OK in Australia, we were top 10 in Australia, but Europe was a complete write-off. In the US – again the Australian sales have nearly outstripped the US market altogether. When Australia is almost your biggest market, you have a problem.”
Hilliam believes the lack-lustre response to Fury internationally can be attributed to the state of the game development industry as a whole.
“You’ve got big multinational companies with huge budgets,” he said. “If you look at Warhammer Online, they started in 2000. It was due out in 2007, they delayed it until Q1 2008. That delay alone is probably about a $20 million overrun. And here we were trying to compete.”
Tom Crago, president of the Game Developers Association of Australia and CEO at development studio Tantalus, disagrees that the Australian industry is failing to compete. In fact, he maintains that 2007 has been one of its best years yet.
“I think the game development industry in Australia is in a great place in terms of the growth we’ve enjoyed,” said Crago. “Revenue-wise we’re in excess of $130 million.”
He does acknowledge the inherent volatility of the industry, with new generation console releases a continuing challenge for developers.
“We’re just coming off of one of those transitions at present, into this new generation of consoles which are the Playstation 3, Xbox 360 and Wii. And we have to wait until install base, the number of people who own these platforms increase, before they become genuinely viable in a business sense.”
Crago’s prediction for the near future is a cheerful one, providing Australia’s new Federal Government delivers on tax offsets for game development investors. He estimates that the industry could triple in size over the next three years.
Hilliam, on the other hand, is understandably less optimistic.
“Australia is really a work for hire outpost,” he said. “And if you look at the biggest companies, Krome is the biggest and they’re independent, but they do work for hire for other publishers. And then you’ve got people like THQ, internationally owned. So, it’s the independent developer doing self-funded IP. It’s a really tough, tough road.”
Founded in 1999, Krome Studios is now the largest independent game developer in Australia, and among the top five studios in the world. Krome has achieved enormous success with its original IP Ty the Tasmanian Tiger, which sold multiple millions of units world-wide.
Krome Studios CEO Robert Walsh is philosophical about the restructure of Auran in an obviously risk-taking industry.
“If you go back two years, the UK industry was in a huge amount of turmoil. Big studios that had been around a long time had all shut down. It’s not just any one thing that happens here, that happens on a global basis. Getting original IP off the ground is probably the Holy Grail and it doesn’t matter where you are, you face all the same challenges.
“I mean, there are games out there that have huge marketing budgets and still don’t necessarily get successful. It’s the luck of the game some days, and sometimes you win, sometimes you lose.”
Hilliam is inclined to the view that any perceived boom in Australia’s gaming industry is tailing off.
“I’ve spent a lot of time in China and once they … they’re very good at copying things at the moment and I think once they get a bit more creative, they’re really going to be a force to reckon with.
“Asia and Eastern Europe are going to replace Australia as an outsourcing post. I don’t see a lot of confidence in seeing the thing grow and grow as it has done in the last 10 years.”
Despite the gloomy prediction, the Auran chief is positive about rebuilding.
“Getting that right partner on board, we can then grow, build the team back up again and add a lot more content in the future,” said Hilliam. “These games have a life span of five to 10 years if you get it right. So we’re not giving up hope yet.”
