Q&A: Taiwan's UneXPECted Console House

Taiwan's XPEC Entertainment has quietly existed since 2000, originally founded with the dream of creating console titles for the international market. The company has since grown to over 500 members and encompasses three businesses: outsourced art, console game development, and PC MMO development. Its partners have included Activision and Naughty Dog, creating art for games such as Quantum of Solace and Uncharted 2. The company also has its first multiplatform console game in development -- an unannounced title due to ship on the Xbox 360, PlayStation 3, and Wii in May this year. It follows in the footsteps of Activision's Kung Fu Panda, which XPEC developed for the Wii. Meanwhile, its Canaan Online MMO has launched internationally. It is also planning to launch the Bounty Hounds Online client based MMO in partnership with Bandai Namco -- a deal the company was able to sign due to the popularity of the original Bounty Hounds PSP game with Chinese pirates, strangely enough. Here, the company's chairman Aaron Hsu discusses the company's origins, philosophy, business, technology, and future. On Founding a Console Developer in Taiwan I first became familiar with XPEC back on the Xbox 1. I played BlackStone. Aaron Hsu: BlackStone. Oh, okay. Our first title. When I played it, that's when I got interested in the company. The game looked Japanese-developed, with anime-style characters, but it wasn't. How did you get into the console game production business? AH: That was a very, very hard time for XPEC. We are a studio based in the Great China area. In this area, there are no console studio people. It was very, very difficult for us to go into the industry because no one trusts us. No one believes that we can make a console game. So, we founded in 2000... We would like to have the first [console] title from Greater China area. That was very, very difficult. Even though we went to Microsoft, they didn't have a branch in Taiwan, the Greater China area. At that time, we could not get a license. We could not get a development kit. Even though we wrote a letter to Microsoft headquarters in Seattle, we got the formal license approval for getting the SDK to be a developer... [until] 2001, 9/11. 9/11, that day we got the license. That time, we'd already founded one year ago. More than one year. So, first, we have in 2000 the issue of how to get the developer's license. From the beginning, we cannot get the PS2 license. It is so difficult for a Taiwan studio to get the license. But, you know, as you played BlackStone, that title launched in the U.S. market, I think in March 2003. We struggled for maybe two and a half years, and finally we had our first title. It was very, very difficult to find a publishing deal. I just remember that... at 2001 E3 and 2002 E3, we just brought our suitcase, to bring out notebooks to show every publisher. "See?" Hold it for them and, "See, we have a product like this. We have the chance to let you publish this title." Coming from Taiwan, where the consoles didn't really exist, why did you aim at making console games? AH: That's all of our team -- we played console games while growing up. The console title company, all the games we remember... They remember being children, so, they just want to have a title going to the international market, to have a title done by an XPEC studio worldwide, saying, "That's our title.” To launch it worldwide. That was our ambition. That was our dream. There's no market in the Greater China area. There's no market in Taiwan. There's a lot of piracy [in the] market there. For a software developer, we cannot earn money from that market. The market will be in U.S., North America, Europe, and Japan. That's very far from us. How to get into that market with different culture and cultural background? And how to get the users we have here? What does the player like most? We have to do much more than the other studios in U.S., Europe, or in Japan. Otherwise, we cannot get our work in. Your first two games were original IP. But now since you've moved into movie titles... AH: That's the issue. We want to do our original title. We want to do our own IP, but the business model cannot allow us to do that. The first five years, we burned [several] million U.S. dollars. I almost go bankrupt. The issue for XPEC, we just want to survive. Sadly, you know. We're still here. We survive here. Then, we still can keep the hope to have our own IP. Because that's not our market. The console market in North America, they cannot expect to play a major role. We go to the publisher. We go to create our own IP. Although we create our own IP, it's still our dream. One day, we can have the dream come true. But so far, because of the sad business model, we have to let our team have the marketing experience and have the developing experience. One day, we want to have our own title in that market. Have you thought about doing original XBLA or PlayStation Network kind of games. or anything like that? AH: Yeah, we will go to the console online. That's why I tell you that from the beginning, we think online is the future. Console is our dream. So, from the beginning for XPEC, we didn't give out any technology for the online title. I think our Xbox 360 Live and the PS3 PSN, that will be the future. I think that will be the future. XPEC's Online Tech I also played Bounty Hounds for the PSP, believe it not. I haven’t played Kung Fu Panda, but I've played those two games, so I'm familiar with your work. Namco Bandai demoed Bounty Hounds to me, and when I saw the XPEC logo, I was like, "Oh, these guys are still around!" You're developing that IP into an MMO now. AH: Yeah. Actually, I would like to let you know that from the beginning, although we are based in Taiwan, we have two strategies to go to the market. First, we want to do the console platform. Secondly, we want to do online titles because we think the future of the market will be all online. In the view of XPEC, we think the MMORPG will go to the web. Since that time, since 2000, we do the online game... We do the browser-based without any download. We're probably the only studio focused on the web browser MMORPG for over nine years long. So, we caught the key technology of the browser MMORPG. So, so far we have six MMORPG browser game titles. Our MMORPG browser games, you don't have to do any download. How does that work? Is it Flash-based? AH: It's Flash-based. From the beginning, since 2000, we used Java as an interface. But at the end of 2006, we started to research on Flash-based. So, so far, that's a Flash-based MMORPG browser game. So, that's two strategies. We think online was the future, so we caught the online technology from the beginning. We think the browser-based [games], that will be the vision. This year, we not only have a booth at Tokyo Game Show. Actually, we have a forum in Tokyo Game Show. We share our technology on the web MMO browser game title. How to achieve the technology of the browser MMORPG, and what's the technology we already have. Why we think our technology on the MMO browser is in a leading position. So, we shared the performance and experience with the whole developers at the Tokyo Game Show. Are you hoping to do licensing, or are you hoping to just do presentations about your technology? AH: Just presentation. We don't want to do the licenses. We want to do the co-develop business model. Actually, our technology performance is 10 times better than Club Penguin. You use our technology, and you can easily compare to beat the Club Penguin business model because we are more interactive. We have so smoothly download, our streaming technology. Your browser technology is basically 2D. AH: 2D. So far. This title will be 2.5D. Actually, almost like 3D. We're now going to the 3D technology. 3D browser MMO technology. 3D is not the issue. The issue is how to let the 3D web MMORPG, when they go to download, go smoothly. That's the key. Even the people say we have a very, very good graphic engine for 3D web technology, but you still have to try how to go to download. So, the main issue, is it bandwidth? It's not performance. AH: Bandwidth performance. How to downsize the download volume. That will be the issue. Company Structure It seems like the three main pillars of the company are MMOs, console games, and then outsourced art. AH: That's right. We have the MMORPG with Bandai Namco. So, you played Bounty Hounds? Now we go to the Bounty Hounds Online. That's a downloadable MMORPG. The first market will be going to Mainland China. Eventually, you know, Bounty Hounds, the PSP title, never went to the China market because the China market. Their policy, they don't allow the PSP title to launch into the market. So, at that time, it can be downloaded, right? So after Bounty Hounds published, the China illegal download website, Bounty Hounds is ranking, that year, number two. Almost two million times to have the illegal download. Did that help you get the deal to make an MMO version? AH: Yeah. That's why we want to go to the MMO market, because that means at least we have two million clients based in Mainland China, this area. So, we would like to go to the Bounty Hounds Online. We're with Bandai Namco to go to the Mainland China market. So, our Beijing studio is browser MMORPG studio. And our Shanghai studio is only focused on next-generation outsourcing. And our Taipei headquarters, we have three business units there. We have three business units. Business Unit 1 is focused on full platform console titles. Now we are working on movie titles. We go to the market in May. That will be our first title... PS3, Xbox 360, and Wii. That will be our first full-platform title done by our studio in Greater China area. How many people do you have working on the title? AH: Around 100. Averaging 70 to 100... The Business Unit 2, we focus on Bounty Hounds. BU2, they only maintain the Bounty Hounds IP. The BU3, we go to with the other console platform company to work on some titles with them. We have almost like three small studios in our headquarters. So, totally, so far, we have [over 500] people. XPEC at Tokyo Game Show I did notice you guys had a booth at the 2009 Tokyo Game Show. In fact, not only did you have a booth at TGS, but it was the first thing I saw when I got down to the show floor, because it was right by the escalator. AH: Actually, [2009] is the seventh year we went to Tokyo Game Show. We think Tokyo Game Show is a good time for us because [in 2008], we go to market [our] title Cannan, an MMO browser RPG, in Japanese market. After that show, we sold out the worldwide licensing rights. The title goes to NHN. We got a huge achievement from the Japanese market. So far, the performance is... They are so satisfied. We all know that the Japanese market, the console platform [sales performance is getting] slow. But the online market just keeps on rising. The change is so clear. So, I think, we still can bring some MMO titles to that market. The booth was very big, bright, and exciting. Was that more aimed at the fans of your games, or was it more aimed at introducing your company from a business perspective to Japanese companies? AH: I think both. We really think both. From the beginning, when we go to the Tokyo Game Show, we do expect 100 percent on the first two business days. For the consumer days, we don't keep the big expectations from that consumer show. But for these two years, the two days for the consumer show, we think that the feedback from the market is very, very good. You can go to the website to check the Japanese websites. A little bit of fans of our title Bounty Hounds, of our title Cannan, the players really show their passion on this title and really show their interest on this title.