Flagship Studios' Founder Discusses Its Demise

1Up is running a lengthy interview with Bill Roper, founder of Flagship Studios. The game company, known primarily for its Hellgate: London and Mythos titles, announced massive layoffs last month, and is now simply winding down and taking care of a few final issues. Roper gives quite a bit of detail regarding the financial machinations of a game developer and the current status of the games' code. Co-founders Max Schaefer and Travis Baldree gave a related interview recently as well. "The subscription money we did get, we all poured directly into keeping the game online, keeping it up and running. But the development demands far outstripped the revenues. There just wasn't a good contemplation early on of how that would work. It wasn't like: This is the budget that comes in every month; we'll do whatever we can do with that. We just said [that] development will get done out of the revenues, and whoever pays for development, they get paid back out of the revenues. And there wasn't really enough revenues coming in to cover the expected and required development."

release a crappy product

and you get a crappy return. From what I understand, there were a lot of bugs and problems with the game, to the point where it wasn't worth picking up. If those bugs had persisted, those already playing the game would have left (to varying degrees of course). In the end, they released a product that wasn't where it needed to be, and they lost out on their big opportunity to make a splash.

Re:release a crappy product

Even with the bugs it was quite playable I found. The missing content was the annoying part to it, but you couldn't really find out about that until you bought it.

Initial release quality is important if you want to have an impact with game review magazines. Not everyone bases their buy decision off these magazines, but I think enough do for it to really hurt a game if they get a couple bad reviews. Especially in the PC game market where there are so many new games released every year, and where gamers are generally more literate (sorry xbox gamers, but it's true).

Re:release a crappy product

You're xbox gamr thing is just a sterotype, idio.t

Re:release a crappy product

The missing content was the annoying part to it, but you couldn't really find out about that until you bought it.

Unless you're the kind who preorders or camp the store on release day, just because the hype sounds good, yes, you _could_ find out. The fact that there's no actual content for your subscription money, for example, was common knowledge within days.

Honestly, I wish that the meme that buyers are a bunch of isolated, gullible dolts, would just die already. Even the MPAA and RIAA discovered recently that, what do you know? People call or text each other to tell their friends stuff like, "man, this movie sucked, stay away from it" or "dude, it was great, you should really see it too."

I don't know exactly why would it be less true for games. And there's plenty of empyrical evidence that points at the fact that, say, more polished games sell more copies. Plenty of times contrary to what those review magazines were telling people. I still have a game on the shelf there which got good reviews and sold 800 copies IIRC. (That's a homeopathic quantity in that industry, btw.) Nobody knows why.

I mean, seriously, humans had a society and were telling each other things like "ugh, heap plenty antelopes that way" 100,000 years ago. We had whole spreads of technologies and civilization based on the fact that people were even taking the time to write a letter on a papyrus to cousin Bubba-ho-tep in Thebes to tell him about this new thing they tried. We're like the bees in that aspect.

Did anyone really expect that a few millions of years of evolution would just go away just because Mr Marketer snapped his fingers?

Now I'm not saying that marketing doesn't work at all. It does. But it's a lot less alpha and omega than those people sell themselves as.

Re:release a crappy product

Six months after release, the technical quality of the game was fine (it was still lacking in content). Flagship was forced to ship 6 months before they were ready, because they had so mismanaged the business side that they lost control. This game didn't fail because of poor developers, but poor business management (including not hiring enough content developers to go with the software developers).

Even if you don't like Hellgate, it's a shame

It's a shame when a studio that is at least trying something different goes under. It was a shame that Hellgate was basically a beta product until only recently. If you release a finished product at the start then you don't have to pay for developers from your monthly revenue.

Re:Even if you don't like Hellgate, it's a shame

Except that developers need to get paid in order to develop. Without a release, there's no revenue (other than start-up capital) to pay developers.

It's a difficult situation. And if you're trying to start a new development house, it must be very difficult to accurately estimate how much money you'll need to get you all the way to a finished product. I wonder if they just ran out of money and had to publish something in order to keep going at all...

Re:

All they had to do was go to some investors and go "This is the guy who was a driving force for Diablo, Diablo 2, Starcraft, and Warcraft." and you'll have money thrown at you.

Re:

"It's a shame when a studio that is at least trying something different goes under."'

I'd like to deal with this statement, because it implies "If only games were different (i.e. creative), then somehow this implies difference is awesome".

I don't buy a word of it, the problem with hellgate was that it was a diablo rip off in 3D, and a poor one at that. It copied many aspects of diablo but lost the experience of diablo.

The whole point of hellgate was "spiritual diablo clone", it was all over the gaming news

Re:

It's a Diablo clone set in a post apocalyptic future. It's hardly innovative.

It's first person. It completely changes the feel of the game compared to a Diablo clone, so that was pretty innovative. And it had some pretty unique weapons for a Diablo clone, my favorite being a napalm launcher.

And this is why...

And this is why, ladies and gents, if you want to make a go of a business, you'd better understand the business end of things as well as the sales and product ends. And if you don't fully understand the business end, you hire someone who does.

And people wonder why VC firms are so obsessed about the cash flow of startups (after learning their lessons of the 90s).

Re:And this is why...

This is exactly right. Bill Roper and company knew how to write a game - Diablo is evidence enough of that - but in a story that seems to endlessly repeat, a bunch of engineers who knew little about the business side decided to go into business for themselves, and failed horribly through no lack of engineering skill. You *have* to understand the money side to make the business work.

And Flagship made every stupid newb mistake they could. They gave away too much contol, and were forced to ship early by other corporations. They tried to do too many things at once, because there was no business manager to put his foot down and force them to focus on the core game, and made sure that resources got allocated to content, not just technology. They didn't have an "after we launch" plan to ensure things would be profitable either, which ensured their demise.

It's a damn shame, too - it was a decent enough game idea, that might have turned out well if they had spent enough time on it, and focused more on world design and content than technological infrastructure.

Re:And this is why...

The theory is rather easy, in practise it's rather hard. Ship too early and you're bugzilla, ship too late and you're "outdated" or worse. Why do you give away control? Well, because those you give up control to are usually the ones funding you. If the VCs pull out, usually the whole thing fizzles. The core game usually means things that have been done before, so you need something creative and different and it better be good. A lot of it just does not work out, so it feels like you've spent far too much money on things you shouldn't but otherwise you probably wouldn't have found the killer features either. A working engine with little content is a poor game, good content with poor engine is no game at all. The answer is of course that you need money for both, which leads to more VC money, which leads to less control... "After we launch" is something you can have in MMORPGs and whatnot to prevent churn, in most other ganres and even in MMORPGs you're toast if the game isn't flying high already from launch. If you just got off the runway and the plane is on fire, no follow-up plan will save you.

Re:And this is why...

They gave away too much contol, and were forced to ship early by other corporations. They tried to do too many things at once...

It's a damn shame, too - it was a decent enough game idea, that might have turned out well if they had spent enough time on it, and focused more on world design and content than technological infrastructure.

I can attest to that. My roommate got hired at EA to work on Hellgate last August, and nearly everyday he'd come home saying something like "This game is going to suck. It could be awesome, but EA wants it out by Halloween and it won't be good if we do that." One of his big sticking points was that in all of their marketing they were touting the multiplayer stuff, but the dev side hadn't even started working on the multiplayer aspect as of Mid-September, and the game was supposed to release a month later? Their solution was "We'll patch it in later."

Classic Story

This happens in a lot of businesses where development plus operations costs are greater than the revenues generated. Without enough incoming cash to go around, the development effort fails. Without a good development effort, the revenue increases fail. It becomes a really nasty Catch-22.

It's actually similar to building a consulting business to the point that office and sales staff is necessary. It's very difficult to grow fast enough to pay the overhead.

In a lot of businesses, it's necessary to either be very small and lean, or huge enough that the overhead is minimal in proportion to "productive" and "billable" efforts.

Being in the middle is the most dangerous place of all.

Re:Classic Story

This happens in a lot of businesses where development plus operations costs are greater than the revenues generated. Without enough incoming cash to go around, the development effort fails. Without a good development effort, the revenue increases fail. It becomes a really nasty Catch-22.

The problem is that revenues should not cover development plus operations. Revenues should cover amortisation on the development costs, plus your overhead and cost of goods sold.

The problem is that most software business are heavy on the development costs early on, so *cash flow* is the issue, not profitability. This can be overcome by owner investment, outside investment (VC)... to overcome the cash flow problem by reducing development is just shooting yourself in the foot.

Of course, if you're going to sink money into a venture, you want to make sure that the future has a good likelihood of paying off well... and you can be damn sure that VCs want to be assured of that as well. Like he said in TFA, they didn't have a post-release plan or budget, and they never bothered to figure out if they'd be cash-positive, or even if they'd be profitable.

BTW, the same is true for your consulting business example -- this is especially true for hiring a sales force. Admin overhead is scalable (part-time help, etc), but good sales staff are *expensive* and less scalable -- and the results aren't immediately shown in the cash stream. This is why most successful small consulting businesses are dependent on the owner making most of the sales, and are owned by good salespeople (along with other talents).

Re:

Like he said in TFA, they didn't have a post-release plan or budget, and they never bothered to figure out if they'd be cash-positive, or even if they'd be profitable.

Which is really stupid, because if they had spent just a few weeks or months putting together a solid business plan, they could have come up with the financial statements necessary to either a.) show considerable growth potential and attract VC funding or b.) convince themselves the idea was unworkable and quit while they were ahead.

With the combination of their previous resumes at Blizzard and a solid business plan, they would have been fighting off VCs with a stick. Unfortunately, they did none of that,

Missing the obvious

http://www.metacritic.com/games/platforms/pc/hellgatelondon [metacritic.com]

Pretty much all the reviews point out that while it's a nice enough game, it's competitors are similar if not better, are cheaper, and were already out there. Hellgate was well polished but dull is what it sounds like, and there were better products out there.

There was no money coming in because your product wasn't competitive.

While I hate to see people lose their jobs, and sincerely hope all the people who created the game get hired again quickly at studios with better guidance, it's somewhat of a relief to me that creative financial management couldn't be used to make a bad game into a success. There are a glut of games on the wii especially but consoles in general that aren't worth a dime because they're bankrupt in the innovation and creativity department. It would be nice if those games weren't made.

I personally prefer games that aren't as polished graphically but have great concepts. They're more fun to play as well as being cheaper. It's nice when they're both, but the old adage about a horse built by comittee is a camel rings true. A small group of individuals can often come up with a better, riskier idea for a game than you'll get coming out of a big studio, at the small price of not having overdone graphics.

Here's to hoping that EA will suffer the same fate.

Re:Missing the obvious

Here's to hoping that EA will suffer the same fate.

As long as there are people out there that are willing to paint their beer bellies in bright colours and grunt "Mad-den" loudly as means of communication, there's no chance that EA will ever fail.

Having worked for the gaming industry, I will say that it is going the way of the music industry. That is, they don't want to risk anything on something really new, so they repeat the old formula, with more bling.
The problem is that a game costs so much more than an album, so a game failing just a little has as big impact as if a hundred albums all flopped. You have to gamble. And you'd think that games producers would be interested in a gamble too -- after all, that's what games are. But no, they won't. They'd rather play it safe, which in all cases (except EA and their license to print money) is dooming yourself. You might survive your first "OK but boring" flop, and the second one too, but you won't make money either, and will eventually have to fold.

Where are the new innovative games? Have there been any innovative games since Populous and Elite? Perhaps, but very few. Hellgate: London most certainly wasn't one.

Re:

Almost everything that manages to make it over here from Japan is golden. I'm aware that there's a filter keeping a lot of the crap games from making the jump, but there's still great games from over there.

I'll eat some negative moderations to laugh publicly at your "nearly all Japanese games sold in America (presumably where you live) are fantastically innovative" theory.

Ha.

Who will find me first, the unreasonably anti-Japanese mods or the Nintendog-fan mods? Go!

Re:Missing the obvious

It wasn't even all that well polished. I think the real problem was, and this is mentioned in the interview, is that Blizzard had several superhits under its belt and that creates a very different environment. Blizzard could basically take as long as they needed on their games, because their track record gave investors confidence that it would pay off for them. Flagship had no such luxury and they had to release the game far sooner than they would have liked because there was no more money for more time.

Mythos

My understanding is that Mythos was free to play... Maybe developing a free game at the same time as you're trying to develop a for-profit game was an issue. It seems like you'd want to spend your money making the profitable game and then make freebies once you've got a revenue stream going that covers your costs...

Daikatana

So is this the Ion Storm of the 2000s?

Re:Daikatana

Not exactly. At least, they did not sink any other company with them. I still feel bad about Looking Glass...

I hope

I so hope they release a patch so people can play multi-player with out them. Or even a stand alone server.

Not that I expect to play that much as I lost interest around level 20. Personally, they made the game require to much hardware for most my friends to buy it, and not being able to play LAN makes it less fun.