Video Game Development: The Third Generation

Kevin BachusChief Executive Officer

Nival Interactive

Video Game Development: The Third Generation

Kevin BachusChief Executive Officer

Nival Interactive

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The Third Generation of Game Development

Three Generations

1. United States and Western Europe

2. Japan

3. Eastern Europe and Asia

Why? – Quality vs. Cost

Costs vs. Revenue: Hit Game

1980 1985 1990 1995 2000 2005

Perceptions of Russian Developers

• Pros:– Very bright, very well educated– Inexpensive, compared to US and Western Europe– Extremely good at certain types of games

• Cons:– Difficult to communicate with: distance/language– Concerns about political/legal environment– Limited console experience, limited quality– Extremely good at certain types of games.

United StatesUnited States

United KingdomUnited Kingdom

JapanJapan

Nival Interactive

The Way Forward: Creating Global Content

Why Care?

Japan39%

Europe21%

USA40%

Source: NPD/ChartTrack/Famitsu

1 Madden NFL 06 PlayStation2 Electronic Arts August, 2005 2,900,000 $462 Pokemon Emerald Game Boy Advance Nintendo of America April, 2005 1,700,000 $343 Gran Turismo 4 PlayStation2 Sony Computer Entertainment February, 2005 1,500,000 $494 Madden NFL 06 Xbox Electronic Arts August, 2005 1,200,000 $475 NCAA Football 06 PlayStation2 Electronic Arts July, 2005 1,100,000 $486 Star Wars: Battlefront II PlayStation2 LucasArts November, 2005 1,000,000 $477 MVP Baseball 2005 PlayStation2 Electronic Arts February, 2005 970,000 $298 World of Warcraft PC Vivendi Universal November, 2004 957,000 $47

9Star Wars Episode III: Revenge of the Sith PlayStation2 LucasArts May, 2005 930,000 $47

10 NBA Live 06 PlayStation2 Electronic Arts September, 2005 820,000 $44

Best-Selling Games for 2005: USA

Source: NPD

Best-Selling Games for 2005: UK

Source: ChartTrack

1 FIFA 062 Pro Evolution Soccer 53 Need for Speed: Most Wanted4 Gran Turismo 4

5Star Wars Episode III: Revenge of the Sith

6 FIFA Street7 Star Wars: Battlefront II8 Grand Theft Auto: San Andreas9 King Kong10 The Sims 2

Best-Selling Games for 2005: Japan

Source: Famitsu

1 Animal Crossing: Wild World Nintendo DS 1,169,7572 Gran Turismo 4 PlayStation2 1,066,7493 Brain Training Nintendo DS 1,011,3414 Nintendogs Nintendo DS 965,6655 Winning Eleven 9 PlayStation2 923,2886 Dynasty Warriors 5 PlayStation2 917,9857 Gentle Brain Exercises Nintendo DS 875,3718 Tamagotchi Connection: Corner Shop! Nintendo DS 770,3919 Kingdom Hearts II PlayStation2 737,65210 Mario Kart Nintendo DS Nintendo DS 669,575

Genres

0

5

10

15

20

25

30

35

40

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rts

Act

ion

Rac

ing

Str

ateg

y/R

PG

Sh

oo

ters

Fig

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ng

Fam

ily

Sim

s

Oth

er

USA

UK

France

Germany

Japan

Source: NPD/Screen Digest/Famitsu

The “80/20 Rule”Percentage of Total US Game Sales

Represented by the Top 30 Titles

29%

19%

26% 27% 26%29%

12%

12%

12% 10%

4%

9%

6%

8%

8%6%

13%

7%

0%

10%

20%

30%

40%

50%

2000 2001 2002 2003 2004 2005

Top 10 11 to 20 21 to 30Source: NPD

Four Basic Drives

• To Acquire

• To Bond

• To Learn

• To Defend

Relevance!

Innovative games tap into an audience’s aspirations to deliver experiences they want to have!

Listen to the audience!

The Paradox of Innovation

1. Innovation is not art … and art is not necessarily innovative.

2. Different is not the same as innovative.

in·no·va·tion (n.)1. The act of introducing something new.2. Something newly introduced.

Five Keys to Successful Title

• Quality is evident throughout

• Truly differentiated, not just different: consumers see that it’s fresh and unique

• Built with a specific audience in mind– Accessible and relevant to that audience:

not afraid to take the “right” risks

• Delivered “on-time” and “on-budget”

• Word of mouth makes it a “must have”

Global Content Checklist

• Has a very powerful, very specific vision• Can be described very simply and very clearly• Starts with story, character and action,

not with setting• Evokes strong emotions• Steals the tools and grammar of other

media to enhance impact• Can be described without reference

to other products

Take Destiny Into Your Own Hands

Introducing “Nival 2.0”

• USA-based company– US management team– US creative talent– US point of contact for publishers– Access to US capital for expansion/acquisition

• Russian development talent– High quality, low cost– Extremely talented and experienced– Demonstrated track record and history of production– Scalable to meet production requirements

Nival Management Structure

Team Members(USA and Russia)

Department Heads(USA and Russia)

Vice Presidents(USA)

President(Russia)

CEO(USA)

Nival Studio Structure

IndependentContractors

Internal Studio

ExternalStudio

IndependentContractors

Internal Studio

External Studio

External Studio

Internal Studio

In-House Producers

Studio Support

Management

What Does This Mean?

• More responsive to publisher requirements• Studios have more autonomy• Experienced western creative talent helps

ensure worldwide commercial appeal• Creative and technical talent integrated

with teams to help train and develop production capabilities

• Able to raise money outside of CIS

Key Lessons Learned

• Experienced management team with industry credibility is critical to get deal flow

• Development studio with established track record is essential to satisfy publishers

• U.S. game development community has consolidated in California – particularly in L.A.

• Company must be able to support higher costs of production and “white” transactions

• Must have a unified structure: One happy family!

Questions?