Death, Hedgehogs, and Major Motion Pictures: Foundation 9 CEO Jon Goldman on Super Development

Jon Goldman is CEO of Foundation 9 Entertainment, the 'super-developer' formed just over a year ago by the merger of Backbone Entertainment and The Collective. The company, which is a notable example of an independent development firm, like Bioware/Pandemic, which is trying to buck the trend of publisher consolidation, has shipped more than 300 titles since its inception, including the original title Death, Jr, which debuted on the PSP is in the process of spawning sequels, potential movies, comics and more.

In addition, the company, which includes development studios Backbone, Digital Eclipse, The Collective, and Pipeworks, recently announced that it has received "a significant capital infusion" from technology-focused investment firm Francisco Partners. According to the company, Francisco Partners will fund Foundation 9 with up to $150 million over the next few years, with "access to further resources as necessary for Foundation 9’s organic growth, IP development, and future acquisitions." Recently, Gamasutra talked with Goldman about the anniversary of Foundation 9's forming, focusing on issues such as original IP, the new funding commitment, and ways to provide original, quality games in an increasingly competitive market.

Gamasutra: With Backbone’s Death Jr., it seemed like you had a real solid IP, and a good marketing push, but the game perhaps didn't perform as well as some people might have thought. Have you any comment on that?

Jon Goldman: I don't want to sound too much like a PR guy, but it did reasonably well in the marketplace; certainly if our royalty checks are any indication. Do I feel it could have done better? Absolutely. And we recognized that, and I do know there are some sequels along the way. As we were pitching Death Jr. we decided to pull back from it and think of it as more than just the game, but as an IP that we were going to try to commercialize in other areas and build a multi-area campaign around, and that by and large has continued to be the strategy. We had very successful comic books, we’ve got manga coming out, Halloween costumes and action figures, apparel licenses and so on. The game did reasonably well commercially, and I think that there's enough awareness of it for us to improve on the game experience and build up a franchise on it over the next several years. Like with any sort of media business, that may or may not come to pass, but the strategy in and of itself is playing out as we planned.

Death Jr., developed by Backbone Entertainment.

GS: As the CEO of Foundation 9, trying to keep all these different developers under your umbrella, is it hard to stay up-to-date on what everyone is doing down to the last detail? Or is it something that was made easier by conglomerating?

JG: As the CEO, my mandate is really to run and grow the business. At the production level, we have studio heads who are running the studios and we’re putting into place more of a studio structure to help look at all our projects. And that's an evolving system, because Foundation 9 only came together a little over a year ago. But we did over forty SKUs last year, and it's a huge challenge to look after that many SKUs, and each studio has to produce summary reports on what's going on in the studios. We do have a different load of monitoring and looking after projects than a one project company might have.

GS: Last year when Foundation 9 was forming, the message was that a “super developer,” made up of many different houses, could survive in the market. So looking back one year later, how did it go?

JG: I think it definitely helps that the market is shifting. So yes, on a basic business level, it's been a huge success for us. By pulling together these companies, we got better platform coverage, better genre coverage, coverage of different age groups; I mean, we really are working on every platform in every age group now and a lot of the platforms or all of them right now are viable. So that means that companies that are specializing in any particular platform are really at risk for the success of that platform, and we're doing everything from…we’ve got multiple next-gen titles as well as lots of handheld titles. We still have kid’s edutainment stuff going on. So it's a pretty broad-based platform of video game development, and for us, we think it's a really successful strategy that allows us to mitigate our risk across all these platforms and still have the resources to take a bet on original things like Death Jr.. More importantly, we’re able to back up those bets with the resources to continue working at it.

GS: On the subject of resources, Foundation 9 recently acquired some private equity firm funding from Francisco partners in the last month or so. Having this financial backing, do you feel that your autonomy may be reduced at all? Do you think you may end up doing what your investors are asking?

JG: I should point out that it's a private equity firm and not venture capital, and the differences are size and amount of resources. Another reason I point out the difference between private equity and VC has to do with doing what they ask. I think these guys are going to be active partners in the business, but they're not VCs who are hands-on guys who are running the business. They spend all their time trying to place hundreds of millions of dollars, and it's a full-time job for them. And the reason we came to an agreement is because we had a shared vision of what could happen on the video game developer’s side - or at least the independent developer side - of the business. I think the expectation is that we're going to keep doing what we're doing. They're going to be involved, obviously, because they've got a lot of money at stake, but I'd be very surprised if all of a sudden they decided that instead of spending their day figuring out investments they want to figure out how to run an independent videogame developer.

GS: There has been a precedent for companies acquiring funding, usually of the venture-capital variety, and then immediately shifting from their core concept to what their financial backers wanted them to do a because it was a “hot property.”

JG: I don't think that's our approach at all. Our approach is not to take a lot of money and then do something we've never done before successfully. We are exploratory and we'll look at other areas if it makes sense, in the same way that we've little by little expanded into all the areas were active in right now. We’re not ostriches with our heads in the sand. This is not a giant course correction. They invested in us because they liked what we were doing and they want to see more of it.

GS: Do you see more mergers like this taking place, things like you guys, or Bioware/Pandemic? Is this a trend that you think a lot of other people will pick up on, having one house in control of a bunch of different developers?

JG: I think it certainly creates enough of a trend that people who weren't thinking about it will be thinking about it now. I think that goes for the developer side as well as the private equity side. I think it's made a lot of sense for us, certainly as we transition to new platforms, and I think the same logic makes sense for other independent game developers.

GS: Do you feel that this conglomeration produces better games than autonomous developer?

JG: I think that the jury still out on that, but I think one of the huge problems of being an independent developer is resources. So it solves that part of the equation. Does it solve everything? Well, we'll find out. Particularly on the next-gen side of things, you need to have both a lot of people and a lot of financial resources to tackle that market effectively, and the other thing that a large developer brings to the table is that you can share some of the R&D costs across all the work you do.

So the way to look at this sort of consolidation or merger is probably more so from the business structure side of things and what it enables. It doesn't guarantee anything on the development side. It just puts us in a better position to get things right, or at least that’s the hypothesis.

GS: So something like a new technology, would this be developed in-house? Does Foundation 9 have its own development team or is it more something like, if Backbone develops a new technology that the Collective would find useful, you would share resources across the board?

JG: It's kind of someplace in between. We’re trying to identify key initiatives, but people can share initiatives. One example that comes up is something like a sound engine, something that is unglamorous. But if we’re all separate companies, everybody might get 80% of the way there, but if we’re coordinating and talking with each other we can get 100% of everything we want on those types of things. At the same time, we're not looking to force anybody to change anything dramatically. Our philosophy is that we take a bunch of smart developers, get them together where they can talk about issues or common challenges and more often than not, they'll solve things in similar ways or split up the task together, because everybody wants more tools and more resources. So I think with our developers (who've been at this for a long time,) there's a level of maturity and pragmatism that makes collaboration easier rather than harder.

GS: So it's not going to attempt to homogenize the different developers? You’re not going to say, OK, PipeWorks, Collective, Backbone: you all need to be using Foundation 9’s sound engine (to use your example.) We’re not going to be seeing the same thing spread across the board because they do have autonomy within the conglomerate?

JG: I think that with doing this type of thing people will naturally... we've got studio heads, who’ve got objectives to meet at the business level. So I kind of doubt that, just using that sound engine as an example again, that that's going to be an issue that everybody wants to have their own. I think they'll naturally share it because there are things that are different, in each studio there different types of games that are made at each place. So we couldn't, for example, mandate that hey, everyone’s got to use Renderware or this that and the other thing. We've got different types of games on different platforms, so there's going to continue to be an individual flavor and culture at the studios.

GS: It seems like the studios have fallen into their own roles. I don't know if this was something that existed before, or perhaps was why they were brought in, but for example Backbone seems to focus on developing a lot of new IP, whereas the Collective seems to have produced a lot of games based around existing IP from movies, books, and things like that. Was that sort of thing part of the reason these specific companies were brought in?

JG: They do have existing roles, but they weren't pigeonholed and I think a lot of the identities will develop over time as well. The Collective will be coming out with different type of deals, the Backbone studio in Vancouver will have some different sort of opportunities emerging over the next year, which we will hopefully be able to announce sometime in the fall. So I think the basic strategy of continuing what we’re doing and trying to evolve from there takes place at the studio level as well.

Each of our studio heads and the teams there have aspirations and we want to make sure and allow them to continue taking care of business, but test the waters with some of the things they like to do as well. And I think, getting to what seems to be the heart of your questions, which is “does it somehow turn into the Borg and we’re going to homogenize everyone”: that's not the goal. It's a business structure, and it's going to be a business discipline. People actually have to make money and independent video game development. It’s not about turning everyone into worker bees in the hive.

GS: Did you feel that houses like Backbone and the Collective may have been pigeonholed before they came under Foundation 9’s umbrella, and that conglomerating in the way they did may open up new opportunities that may not have existed before?

JG: That's always the case with something like independent video game development. It's a very fragmented and undercapitalized part of the industry. It's hard to expand beyond what you're doing today and one of the goals here is to have a business structure that allows people to expand in their studios and in their careers. You've got the core competency, and we want to continue that. But we're about expanding from there and I think that's what happened at Backbone.

If you remember Backbone did mostly handheld ports and things like that before Death Jr., and now they've got some great original IP and visibility for coming up with those kinds of ideas and doing new types of projects like Brooktown. Yet they still do lots of handheld games and we’re not abandoning what made them successful before. So that's really key to the strategy, that when we see a problem we want to try and grow as opposed to abandon something and take a whole new path.

Death Jr., developed by Backbone Entertainment.

GS: Gamers are very dyed-in-the-wool fans, and if you find a fan of a development house (to say nothing of a game series that it may have produced,) they may be concerned when something changes. So do you feel what you have going is a solid business model that will also not alienate anyone by doing things drastically different?

JG: It goes hand-in-hand, and that’s certainly the goal. If you're not selling games, if you're only making games that people in your company want to play, and your fans and the wider mass audience don't take any interest in, then you’ve failed on both accounts. You got a game that doesn't satisfy your fans, and it doesn't make any money. The business takes care of itself if we're developing games well and developing games that people want a play. And I think that the tendency is to think that if an independent game developer wants to get resources or to get capital that somehow it just doesn't sit right that our side of the industry should do that. But I think that you have more resources and more capabilities to make better games. And like I said earlier, that doesn't guarantee that you can make better games, but it sure sets yourself up in a position to do things right.

GS: Some developers suggest that the best way to encourage independent games would be to set up a system almost like Hollywood, where maybe a larger studio would fragment itself and set money aside for smaller projects. Does something like this fit in anywhere with what Foundation 9 is doing?

JG: Well, this is not an industry that's really driven by cost-cutting or corner cutting. It’s an industry that's driven by making entertainment experiences that people want to play. So there isn't an independent film model for this industry, and the independent film model is difficult even in the film business where you’ve got multiple viewing opportunities. From theatrical release, cable, to DVD to in-flight entertainment, pay-per-view…I mean, there's a lot of different ways you can monetize that and that makes the financing scheme in the movie industry makes sense.

But it's not emerging on our side of the business, and it's been talked about for a long time because people draw a lot of analogies to the film business. But right now, sure it doesn't cost $30 million to make a good game, but it costs millions and millions of dollars and I think a lot of us are losing sight of the fact that that's still a tremendous risk for the publishers, given that you've only got right now, one way to release a game, which is one main avenue, which is retail packaged software. We’re still not there in terms of maturity for direct or digital distribution for the billions and billions of dollars of sales that go on in the industry. Maybe over the next decade, sure, but we think the model we are pursuing is one that makes a lot of sense or ought to, but we're in no way saying that that's the only way or that everybody should get on the bandwagon or be worried. People who are out making great games are going to be successful; at least we hope that that's the case.