The Euro Vision: Publishers Love Spending Cash

This edition of Gamasutra's regular 'The Euro Vision' column sees Jon Jordan delving into the recent financial doings of publishers JoWood and 10tacle, while also noting the continuing travails of Infogrames and the $50 million cost of EA moving its executives from the UK to Switzerland. "Perhaps it's not been spectacular compared to the deluge of first reviews of Gears of War, but this week European news has been dominated by the activities of some of the smaller publishing groups. One company which has been throwing up surprises since it burst onto the scene in 2005 - raising €20 million in private investment before floating on the Frankfurt Stock Exchange in May 2006 - is German publisher 10tacle Studios. It recently announced German investment firm Avenue Capital Group has taken an eight percent stake in the company, something which builds on the $20 million deal its Singapore subsidiary struck with the Asia Games Development Private Equity Fund in the summer. Shaking Hands With The Prancing Stallion But when you've been given cash, you're expected to spend it, which is one reason 10tacle was pleased to announce it's signed a licensing agreement with Ferrari. A number of games, both for PC and console, are planned, which makes a certain amount of sense considering 10tacle's part ownership of UK racing simulation studio Blimey! Games, as well as its relationship with Swedish racing studio Simbin. But readers with even half decent recall will remember that the Ferrari license has some pretty significant form when it comes to games. Sega's Ferrari F355 Challenge pleased the hardcore, but didn't sell well. More surprising however were Acclaim's dealings with the Ferrari license, which saw a large amount of cash heading down Maranello way, but no games coming out of Acclaim. Partly, of course, this was due to Acclaim's general woes at the time, but equally there's always the feeling that racing games based on single manufacturer licenses can be relatively expensive compared to the size of their potential audiences - Lotus Challenge didn't do much, and not even EA continued with Need For Speed Porsche Challenge. Instead, for such success in this area, it seems you're better off looking to budget games with mass-market appeal such as the Ford Racing series or including as many manufacturers as you can, a la Gran Turismo. Catch A Dream Another interesting financial move came from Austrian publisher JoWood Productions, which has entered into an agreement to acquire privately-owned Canadian publisher DreamCatcher. On first impressions, the deal seems like a solid one, with plenty of potential synergies between the two. For example, DreamCatcher, like JoWood, is reliant on PC games. DreamCatcher's distribution network should enable JoWood to expand its sales in the North American market, while, conversely, JoWood will boost DreamCatcher's sales in the PC stronghold of central Europe. The deal also gains JoWood's DreamCatcher's subsidiaries such as niche adventure game publisher The Adventure Company. The price seems quite steep though. JoWood will issue new shares to pay for the deal, leaving DreamCatcher's owners, mainly venture capital firms, holding 23 percent in JoWood shares, almost as much as the company's largest shareholder, games distribution business Koch Media, which stepped in with a cash injection to stop JoWood from becoming insolvent in 2005. A back-of-the-envelope calculation prices the DreamCatcher deal at around €16 million ($20 million), although no monetary total has officially been announced. This figure is larger than JoWood's annual sales, which were around €6 million ($7.7 million) in 2005, although €17 million ($22 million) in 2004. It’s broadly equivalent to DreamCatcher's annual sales of around C$ 25 million (€17.5 million). Infogrames Tries Again In general though, the moral of such financial stories is that the days of plenty will always eventually becomes days of lean unless companies are extremely well run, very careful about what they spend their money on, and lucky. And if any example were needed of what can happen in the absence of the above, the latest chapter in the Infogrames/Atari tale demonstrates it well. On this side of the Atlantic, Infogrames is still trying to organise its controversial meeting so shareholders can vote on its plan to refinance its huge debt by issuing yet more shares. Two previous attempts in September and October were postponed due to the failure to get the minimum number of members required to attend. It's going to attempt the meeting again next week, incidentally on the same day it announces its second quarter figures. While all this is going on, US arm Atari has gained a three-year credit line worth $15 million from Guggenheim Corporate Funding. Strangely, some people seem to view this as a lot of money, but these days, even Infogrames/Atari would be hard pressed to get a couple of decent next-gen games released with that. The pain for both companies seems likely to continue, credit line or no. In The Land Of Numbered Bank Accounts Our final stop on the track on European publishers takes us into an entirely different tier: EA, which slipped out some interesting figures of its own in its second quarter financials. With the reorganisation of its European publishing executives from the UK to Geneva, Switzerland well underway, $9 million has been spent closing UK facilities, $9 million on employee-related expenses, and $6 million in other costs, adding up to a total of $24 million. Overall, however, EA expects the complete cost of the move over the next couple of years to be between $40 million and $50 million, of which $25 million will be due to employee-related relocation assistance, $10 million due to closing building and $10 for miscellaneous costs. This really does seem like a large amount of cash to spend to avoid UK corporate tax, but presumably the figures of profit and loss work out in the long term. Let's hope the Swiss don't decide to raise their rates anytime soon." [Jon Jordan is a freelance games journalist and photographer, based in Manchester, UK. He's with Harry Lime when it comes to judging five hundred years of Swiss democracy.]