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Whenever I’m in a crowd and I see Jeff Hilbert, the co-chief executive of game-related talent agency Digital Development Management, he’s always on his phone. If he stops to talk with someone, he’s immediately interrupted by someone else he knows. That’s the life of a busy agent who puts people and deals together in the game business. And lately, his business connections have been taking him overseas to Asia.
Hilbert and his team of video game experts represent game developers, helping them put together game deals with publishers. DDM also takes successful games and finds a home for them in other markets. Plenty of that is happening in mobile gaming, a $30 billion market. Hilbert’s job is to create the relationships among the right people in the industry. That may sound vague, but it’s not an easy to do in China, a country of 1.4 billion people and a bewildering array of games, app stores, and publishers.
Hilbert is headed out soon to the ChinaJoy 2015 game trade show, which is expected to draw 250,000 people to Shanghai from July 30 to August 2. Hilbert is also going to be a speaker about “Gaming Behind the Great Wall” at the DICE Europe event coming up on September 13-15 in Barcelona, Spain.
Here’s an edited version of our conversation.
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GamesBeat: What’s the topic of your talk for DICE Europe?
Jeff Hilbert: I just made it up yesterday. “Gaming Behind the Great Wall.”
GamesBeat: How far back does your interest in Chinese games go?
Hilbert: Six years. I was reading data on the gaming market and stumbling across this little game called CrossFire. I started looking at the numbers. One of our development studios, Zombie, had gone over to Korea to meet with publishers. I was talking with their CEO and he was saying, “This free-to-play stuff is going to be huge.” So we hopped on a plane and went to this show called ChinaJoy. Didn’t know anything. Had no idea what was going on. We just showed up.
Remember, six years ago, the game industry was in the doldrums over here. Smartphones were only just starting to show promise. Everyone was wondering if there would even be another console cycle. I went to trade shows here and everyone was moping around saying, “Oh, we’re so scared.” I went to China and it was like, “Holy cow! They see nothing but green fields in front of them.” That’s what got us started.
GamesBeat: What was ChinaJoy like six years ago?
Hilbert: I was really easy to find. People would ask, “Where are you?” and I’d say, “Look for the white guy.” It was huge. In China, the show is weird, though. You know how at Gamescom they have the retail side and the business side? They do the same thing in China, but on the retail side they don’t really show the games. When you go into the booth, they show just thousands of booth girls. I could never figure out whether they were displaying booth people or games. What are they trying to win here? They’d ring a bell or an alarm would go off and all the booth people would line up and march through the conference center.
GamesBeat: Have you ever figured out why that’s the main attraction?
Hilbert: I don’t know. I don’t know where it came from. There are so many different theories. It’s like wondering why the English drive on the other side of the road. That said, that’s the consumer side. On the business side, it’s games, period. You could walk into any booth and say, “Hi, I’m from America. I’d like to talk to you about games.” They would put their global business development person in front of you. If that person couldn’t see you right then, they’d find someone who could, or pull out a schedule and schedule you to come back on the spot. When you came back they’d be there and ready. They were there to do business. It was night and day.
GamesBeat: How do you look at China now, with all the perspective you’ve gained? How do you look at the different booms they’ve had? They seem to have gone through a mobile-gaming boom. I’m not sure where it is right now, but do you see a pattern or a cycle going on?
Hilbert: When we went there, the first thing we noticed was that PC was huge. It was all about PC. Mobile was interesting. The revenues in PC then started to flatten out, and the revenues for mobile started shooting through the roof. What I’ve seen is that games from the West—At first they were primarily interested in casual games from the West to bring to China, because of the play patterns. But now they seem a lot more interested in mid-core and hardcore games from the West. That’s been the biggest evolution. Mid-core and hardcore games from the U.S. didn’t translate so well before, although similar games from Korea did. I don’t know if it’s because Western games are becoming more Chinese, or Chinese tastes are becoming more global, or we’re all coming together as Chinese games come over here and Westerners convert to Chinese play patterns and vice versa. But we’re starting to see a lot of activity in mid-core and hardcore that we didn’t see two or three years ago.
GamesBeat: You have this unique situation there with the 300 or so Android app stores. How much more complicated does that make it as far as doing business?
Hilbert: It’s super complicated. You need somebody on the ground, because every single app store has its own SDK. You need to know which app stores are right for your game. Different app stores focus on different markets. They update with different features and different price points. If you’re from the West and going into China, you either need to make a commitment and build a Chinese organization with Chinese nationals, or find a big partner. Straddling the middle – finding a Chinese publisher but not committing to a full organization in China – isn’t something we’ve seen lead people to success. You look at the number of companies that went into China and pulled out, or ended up with a partner, the list is pretty long.
GamesBeat: You’re well known in the industry, but maybe you could explain what it is you do. You’re an agent. What are some examples of how you do business, especially in the Chinese market?
Hilbert: The biggest thing we do in China right now as an agent is help publishers and developers navigate the waters. Certain publishers in China are much stronger in casual games. Others are stronger in mid-core games. That’s the first thing we look at. What’s your genre, your type of game? Very few publishers will provide a development advance, but some will. If you need a development advance, you can go to a select group of publishers. If you don’t, if you just need distribution, we know the status of games people want to see before they’ll seriously consider them. Then it’s helping the Western companies the way the channels work in China, what a royalty really means.
GamesBeat: That’s the primary mission, then, to make deals happen?
Hilbert: Part of it, too, is that it takes years to develop relationships before the people in China start taking you seriously. They need to know you first. They need to understand your motivation, how you think, what you feel about the game industry before they’ll start working with you closely.
GamesBeat: What are some good things you’ve seen in this interaction, or bad things as well?
Hilbert: The good things are the relationships. Once you start to develop strong relationships, decisions happen very quickly. Whether it’s a yes or a no, they make the decision quickly. That’s a positive. Some of the negative things we ran into were when we underappreciated the importance of personal relationships in doing deals. The other side is this very complicated distribution system and the multiple layers of payment that need to go out before our clients get paid.
GamesBeat: One thing I heard last year when I visited China was that a game developer wanted to bring a game there, and the answer from the Chinese publisher was, “We’ll take your game, reskin it, use your basic engine and mechanics, and add a Chinese celebrity brand.” To me, that seemed like making a completely different game than what the Western developer was bringing to them. I wondered how common that might be as far as requests coming from Chinese publishers – “you need to completely change this game for our market.”
Hilbert: Two and a half years to a year ago, we were getting lots of requests for that. I haven’t seen a lot of that in the last year.
GamesBeat: This was about a year and a half ago, yeah.
Hilbert: I never really thought about that change, but you’re right. It was a big thing. They would see engines and gameplay over here, but they wouldn’t want the Western developer to reskin it. They wanted a code dump from the Western developer and then they’d do the reskin. They take care of it in China now. A lot of the stuff in China, though, was a sprint for market share. They would see an engine in the West and say, “Wow, they really built that thing out well.” Their internal teams would say, “We could build that too, but it’ll take this amount of time to build that engine and reskin it.” So they thought that if they could just take the technology, that would be a quicker route to the market. Some of this stuff is pretty hard to build.
GamesBeat: I wonder, as Chinese gaming tastes change, whether they’ll embrace more global content as it is or if we’ll still have to see content tailored to Chinese tastes.
Hilbert: That’s a multifaceted question. What’s starting to happen, because Hollywood—Western brands are starting to take hold. Dreamworks has Kung Fu Panda, which is a huge IP in China. If you have a Western-branded game, they’re more often taking the game as-is, but there are still fundamentally different play patterns in free-to-play.
Free-to-play is way more aggressive in China. If you bring Chinese games to the West as-is, with the way the payment walls work, people will hit a wall right away and just drop the game. If you bring Western games to China, by the time they get to a point where the game asks for money, they think, “I’ve already played this game enough. I don’t need to pay.” Even if we address the art issue, that’s not the only issue. It’s the way we pay. In China they consume content way faster than we do in the West.
GamesBeat: Your 100 levels need to be 200 or something like that.
Hilbert: We’ve had games where we’ve brought them over and they say, “What’s your content rollout plan?” We say, “Well, this is our content rollout plan in the West. This is when we released the game and this is all the content we released over the next year.” The published said, “That’s great. That should be enough content for our first month. What about after that? You need way more content and way more stuff to buy.”
GamesBeat: As far as comparing last year to this year, there’s been a stock market drop in China. We’ve also seen a lot of game companies wanting to go private because of that. How does that affect what’s going to happen with deals? Is game investment expected to go down?
Hilbert: Even though the stock market dropped, it hasn’t filtered through the channel to us yet. I don’t know what’s happening with mergers and acquisitions or studio investments. But as far as game publishing and licensing, we haven’t seen a big hit. Remember, most of the licensing that goes into China is for games that are finished or almost finished. When they pick up a game from the West for China, they’re expecting to recognize revenue in the next three months. Whenever revenues have been down with Western publishers in the past, be they console or PC or mobile, traditionally Western publishers get more aggressive at trying to do pickups and fill revenue gaps. We’re seeing that for high quality games. The biggest thing we’re starting to see, though, is that before the stock market dropped, Chinese companies stopped focusing on everything and started narrowing in on higher and higher quality games. The advances and guarantees have been increasing.
Before, you could show up with a casual game and they’d just put it up on their network and promote it – work on it, culturalize it, put in all the SDKs. Now they look at it and say, “It’s not worth our time. We don’t want to burn off users.” Rather than release three games that are okay, they’ll save their resources for one game that’s really good.
I haven’t had one publisher mention, “Well, our stock is down. We’re getting a little nervous.” It hasn’t even come up. Maybe in a little bit?
GamesBeat: Do you think Westerners are going to grab a bigger share of the Chinese market?
Hilbert: I don’t know if Westerners exactly will have a greater share, but Western games might. A lot of times the Western games that are succeeding have Chinese partners. But it appears that way. The resources the Chinese publishers are starting to allocate to Western games, to really integrate them and work with them, are definitely increasing.
A lot of it is part of the learning curve, where Westerners are getting used to working with the Chinese and the Chinese are getting used to working with Westerners. We know what each other needs. The Chinese companies are getting better and better. It’s just like when American companies got better at working with third parties versus developing their own games. It’s a learning curve. We seem to be coming out of that learning curve in China. They’re taking Western games in through a pretty efficient process. They’re getting better at integrating and culturalizing these games. They’re asking more of the right questions.
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