Xbox Co-Creators' CEG 'Middleman' Venture Fails

Thanks to the San Jose Mercury News for their story revealing that the 'gaming middleman' venture Capital Entertainment Group has closed its doors. The article explains that CEG's founders "...included Seamus Blackley [now heading to CAA as a games agent] and Kevin Bachus, who were part of the team that created the Xbox at Microsoft and persuaded Bill Gates to spend billions in a bid to unseat Sony as the dominant player in video games." The founders started CEG "...to solve growing rifts between game developers and publishers. CEG planned to develop high-quality games with established developers. It would then take those games and pitch them to game publishers and share in the cut if the games were successful." But funding wasn't forthcoming, since "...in the end the VCs didn't want to try their luck in risky hit-or-miss games." Will there ever be room in the market for an "independent production company" like CEG?

Comments

Will there ever be room in the market?

[PainKilleR-CE]

Will there ever be room in the market for an "independent production company" like CEG?

I think the problem is that CEG wasn't a production company at all. They were simply trying to fill the same role for developers that agents play for actors or managers play for musicians, and the industry isn't quite setup that way, yet. If it starts to move in this direction, it'll be more likely that the publishers will establish the role of agents, putting people out there to look for game developers, rather than having game developers pitch directly to publishers as they do now, and since the agents will be an arm of the publishing company, the cut the agent takes will be extra padding in the publisher's bottom line.

Only once this system (which is more or less a scam) is in place would an independent company have it's place, and only then if that company had made significant in-roads with the publishers. It only becomes a production company (of sorts) when they've got enough developers under their wing and when they can maintain developers by making single-title deals with publishers (rather than multiple-title deals which are fairly common with successful developers).

Even at that point, you have to find ways around the economic problems with the games industry, realizing that most titles fail and that games are getting more expensive to produce every year, and, as an independant production house, publishers aren't likely to sign off on your projects until they're fairly close to completion unless you have a very solid team in-house that has released some very strong titles and has been very consistent about doing so. The music industry's getting hammered by bad economics, and the movie industry turns out a lot of crap to try to deal with it's economics, so moving to a model with more 3rd parties involved in games, where the economic problems are really just starting, doesn't seem like a sound idea.

That being said, having one of CEG's founders move on to CAA seems like just about the perfect move for both him and CAA, since they need people with a better idea of how the games industry works, and it essentially gets him a little closer to the job he was setting up at CEG in the first place.

In the middle of what?

[imperator_mundi]

It looks like the businnes idea of the former CEG was to be the link between game publishers and developpers...

By outsourcing game production to professionals at CEG, game publishers could relieve themselves of the production process and focus on sales, distribution and marketing.

well if publishers give up the control of the content and the quality of the game they turn themselves into merely box distribution companies, and eventually they'll disappear the very first day after the game distribution channels will really go on line... so why the hell should the publishers be willing to give away the part of their businness with the highest added value?

Re:*scratches head*

[PainKilleR-CE]

I don't know from marketing, but I really don't see how companies like that will ever be crucial to the industry. Is marketing such a problem that it would be worth sharing profits with another company to solve?

It's not really about marketing unless you're questioning the existing model (developer goes to publisher, who takes care of marketing, distribution, and usually financing the project). They were trying to play the part of a go-between for the developers and publishers, isolating the developers a bit more from the management of the publishers and isolating the publishers from overseeing the projects so much. In theory, it should work in such a way that a production house has a stable of good developers and a knowledge of how they work and what it would take to get a project off the ground and to a final state. This production house could then go to the publisher either with a completed game asking for the amount that it cost to produce plus some additional fees and negotiate the contract for any profit on the title (which is pretty much what a developer does now if they have a finished product they're shopping around). Alternatively, they can shop around ideas with a solid plan in place to produce a new project and try to get a publisher to fund it, which is actually how most games are produced today (except that with the producer the developer again wouldn't have to do this).

Ideally, the producer has a good group of developers working for them and a good understanding of how those developers work, and can turn out higher quality titles on a better budget than independent developers (or developers beholden directly to their publishers), because the producer would be the interface between the two, meaning that developer resources aren't wasted on dealing with the publisher and the publisher may have better assurance that the details are being overseen by the producer.

The real problem is that in order for something like this to be successful, a production house actually has to be trusted by well-known high-quality developers, or the developers have to form the production house themselves with solid managers (and lawyers) to make sure they don't have problems like G.o.D. Games or Ion Storm. Those managers also have to be wary about signing multi-title deals just for the sake of gaining funds or security for the company, as this would make them further beholden to the publishers, leaving the developers in the same position as always (feature creep and rushed releases are commonly attributed to publishers and marketing). In other words, it would have to come out of a group of development houses that can afford to fund their own projects or already have fair leeway with their publishers in terms of development times and features. Needless to say, the companies with the most money and say over their own development are also the least likely to actually need a production house, which is where the problem comes in with the whole idea. The only real benefit the whole thing would have would be to allow new developers to come into a rather large production house and get their feet wet, and eventually add to the development team after they've gained experience. Unfortunately, it also means that new developers would end up spending a long time doing small-time work on big projects before they could work on any ideas of their own, and the bigger a production house gets, the longer that time period can stretch.