SAN FRANCISCO — Game publishers are cutting back on their staffs as console sales drop and digital sales gradually grow. But the larger entertainment industry sees gaming as a big piece of “transmedia,” or entertainment that crosses various media. That’s one reason why Warner Bros. is moving into digital games with the announcement last Friday that it’s opening a new game studio in San Francisco.
The studio will hire as many as 100 people in the next year or so to make games based on Warner’s entertainment properties. And it comes after the entertainment company built a successful console video game business on properties such as Batman and Lego. The studio will specialize in developing and publishing high-quality, free-to-play, mobile, social, and browser-based games.
The man calling the shots in this business is an industry veteran, Greg Ballard, the senior vice president of digital games at Warner Bros. Interactive Entertainment. Ballard will now have to manage Warner’s brands across game platforms and work with allies such as Kabam, the San Francisco-based maker of Warner Bros.’ Hobbit games. Warner will have to manage the projects that it undertakes in-house with those that it farms out to specialists such as Kabam. The tension on that front is similar to Warner’s relationship in past years with Electronic Arts, which made the Harry Potter games for Warner. But if Ballard bets correctly, Warner could begin to enjoy megahits that extend across entertainment platforms.
We caught up with Ballard at the Game Developers Conference. Here’s our transcript of our interview with him.
GamesBeat: What are digital games for you guys now? What counts as a digital game?
Ballard: Literally, the way we have constructed it, it’s anything that doesn’t have a physical wrapper, including downloadable content (DLC) that might be associated with a physical product. It includes all of our Steam-based PC games. It includes online massively multiplayer online games (MMOs) or some of the lighter stuff that we’re doing in the online world, and of course mobile. What’s happening is that we now believe that this is a big enough opportunity, and we’ve convinced the rest of the Warner infrastructure that it is, that I’m going to be focusing on what we call the “light freemium” market. Not just mobile, but browser-based games that might be on Facebook or other ways of reaching consumers. In general, the lower-budget, faster-moving, iterative digital games that we’ve seen grow in size and stature.
GamesBeat: So this includes some of the things Kabam is doing, right? Is there more browser stuff as well?
Ballard: Yes. Our initial titles are probably going to be mobile, just because we want to be getting up and operating. Browser games take a bit longer. But we will be doing some browser games.
GamesBeat: You guys don’t have a stable of things there now?
Ballard: Not for browser, no. In fact, the only browser game that we have is the one that Kabam has announced, which we’re co-publishing. Well, that’s not true. We have a couple of browser games coming out of Montreal — Lego Chima and Cartoon Universe, eventually.The Kabam games are Kingdoms of Middle-earth and Armies of the Third Age.
GamesBeat: So far, then, you’re getting into the market through Kabam. Was that part of the experiment? How did you view the entry into these kinds of games?
Ballard: That was an entry point for us. We knew that we had not yet established a capability in-house to do it. Certainly not to be able to do it as successfully as Kabam does. We reached the partnership with Kabam, and it proved to the remaining skeptics — I was never one of them, but there were some — that this is a huge market with nearly unlimited potential as a growing part of the games business. It galvanized our own internal interest in doing something.
The Kabam relationship will continue to be important to us, for the same reason. They can’t do all of our brands, or they’re not inclined to do all of our brands. The effort that we’re launching in San Francisco can’t possibly do all of our brands, either. We’re going to be a relatively small, focused operation for the first year or two. We don’t view this as inconsistent with doing further games with Kabam or other partners like Kabam. Nor do they see it as competitive. They know we’re not unleashing a huge effort to compete against them.
GamesBeat: So the precedent here is kind of like Warner and EA.
Ballard: Yeah. That’s not a bad analogy.
GamesBeat: How large do you think you’re going to grow the studio?
Ballard: The one thing I’ve learned at Warner is that growth is dependent on success. Assuming we are successful — and I believe that we will be — I expect us to have 80 to 100 people in 2014. We’ll grow from there. One of the pillars of Warner’s strength is its capability to quickly follow growth. If we find something that’s working, resources are almost miraculously made available, compared to the difficulty in the Valley. With Warner, success breeds all the resources you need.
GamesBeat: Even the choice of the studio location now is getting interesting. Why does San Francisco make sense? It seems like it’s getting awfully crowded with game companies here.
Ballard: It is. If you throw a dart out the window here, you’d probably hit a game company employee. That’s a big part of it, though. We wanted to be in a place where gamers have lunch with other gamers. When people go out at the end of the day, they’re having cocktails with their friends and they’re talking about the best way of acquiring customers at lower costs. There’s such a fervent ferment of discussion and culture around games right now. It’s hard to not be here and then claim that you’re plugged in to the gaming world.
The argument that I made to the folks at Warner was that by being here, it would be easier to recruit, but more important, the people we would be able to attract would be more plugged into the very fast-moving, ever-changing dynamic of this marketplace. We’re also closer to all of the key partners — the Googles and the Apples and the publishing partners like Kabam. There are lots of reasons to be up north. Here, right now, has a very special mix of things that make it attractive.
GamesBeat: I’m wondering whether we’re seeing a bigger talent war in this region, because of the many layoffs at the traditional studios. A lot of people are actually available. Two different big trends are going on, and I’m not sure whether it’s making it a good place to set up a studio or a just a very competitive one.
Ballard: I think it’s going to be good, because you’re right. A lot of people are realizing that the company they may have started this adventure with is losing momentum. We’re now seeing the sorting-out of the winners and the losers. The losers, many times, have lost not because of anything other than bad luck, or maybe one or two bad decisions along the way. The talent that they have can easily compare to the talent at the companies that have won.
For us, we think that this is a good opportunity to come in and attract people who may be looking more for stability in their next job and not so much for chasing after stock options. It’s good timing for us, to come in and tell the story of stability, of growth, of the chance to work on great brands for gamers. We think we offer the prospect of having a lot of success and a great career at Warner. So far, by the way, in my two days of discussions with people who have become aware of this, we have a lot of interest in working for the company.
GamesBeat: Do you guys have some particular titles in mind, or platforms? Is mobile going to be your first target?
Ballard: We’ll do mobile out of the box. It’s something I know well. It’s something we aren’t doing with the free-to-play model anywhere else in our Warner system, with some small exceptions. There’s a big opportunity for us to prove ourselves by doing a good, strong first offering. We’ve not decided which games are going to be first, however. A lot of that is going to depend on the people we attract. Are they more casual? Are they core? Are they 3D or 2D? We have a lot of choices to make along the way.