Interview with Seamus Blackley, Capital Entertainment Group

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by Kyle Ackerman

Formerly a high-energy physicist, Seamus Blackley turned his innovative spirit and fascination with technology toward gaming, becoming one of the industry's prime movers. He has worked with Looking Glass Technologies on titles such as Ultima Underworld and System Shock, and brought Microsoft's console, the Xbox, from conception to market. After leaving Microsoft, Blackley was one of four founders of Capital Entertainment Group (CEG), a production company for games. According to CEG's mission statement, "By marrying direct financing with a highly predictable, professionally creative production model, CEG is able to invest in the innovative games that many publishers cannot, while still managing financial risk."

I was fortunate to sit down with Blackley for a few minutes at the D.I.C.E. Summit (Design, Innovate, Communicate, Entertain) held by the Academy of Interactive Arts & Sciences on February 27 and 28, 2003 in Las Vegas. There, he gave a talk tactfully called "No, You're Wrong," in which he argued that the gaming industry has "evolved into a broken state that's holding us all down." The problem as he sees it is that communications have broken down between developers and publishers. Publishers are mostly publicly traded companies, beholden to investors. Publishing games entails a lot of money and risk, but investors demand that publishers produce predictable revenue with low risk. Revenue targets, retailers' expectations, risk management and investor expectations all complicate publishers' relationship with developers. At the same time, developers often game the process of making games, designing products geared at their publishers rather than their audiences. Developers may even resort to manipulating milestones and delivery dates to ensure that funds for a game project continue to flow. Such institutional dishonesty can only hurt the games.

As a production company, CEG hopes to make better games by taking on the financial risk of creating games, working with the developer, and ultimately delivering products for publishers to take to market. This sort of production company is more common in other industries. (DreamWorks SKG, where Mr. Blackley worked as an executive producer, is an example of such a company.) People are so curious about CEG that an audience at the 2003 Game Developers Conference hijacked a session called "A Review of Funding Models for the Independent Developer and Their Implications" to interrogate the panel with myriad questions about CEG. During that session, it was noted that Sega is interested enough in the company to acquire the right to first look at two of CEG's next five projects (but don't expect to see anything until late 2004).

At D.I.C.E., Mr. Blackley talked with us about CEG, the process of making games, and his own beginnings as a gamer... but we should let him speak for himself.

Seamus BlackleyLet me take some time to explicitly kiss your ass – I want you to note that, because you have a great site. I find myself continuing to come back because the sort of cynical, knowledgeable and yet skeptical view that you guys bring to it is awesome.

So what do you want to know?

What was the genesis of Capital Entertainment Group?

The genesis was three different things happening at the same time. One was our partner Gene Mauro, who was one of the first developer agents in the industry getting really frustrated at E3 in 2001 because he was starting to see this trend of Publishers being very reluctant to look at anything that was really new. He knew, because he had a lot of friends at publishers, that it wasn't that they didn't want new stuff, it was just getting harder for them to actually take it. So, he started thinking, "Gosh, maybe we should start some sort of finance company that could do this."

At the same time, it was getting near the launch of the Xbox and I was just getting really sick of seeing all my friends making games, while I wasn't making games anymore. Instead, I was shipping their games out. It's one thing to be working on Halo – it's another thing to be the guy who shows Halo. And so I really wanted to find a way to get back into games. But at the same time – God, the perspective! – I couldn't give it up. I didn't want to work on just one game. And so I went over to Kevin [Bachus] and said "Kevin, let's start a publisher."

He had left [Microsoft] a few months before. I said, "I want to launch Xbox so I can feel really good about that, and then I want to get back into making games, so let's start a publisher." And Kevin said "Seamus, we need like FIFTY MILLION DOLLARS to do that!", so he's like "I haven't checked your butt, but are you gonna plan on pulling it out of there?"

I didn't really have any idea, but I knew that with the sort of reputation that we had at the time that we could raise some money. But we knew nothing about finance – we knew nothing about running a business like that. We knew an awful lot about producing games and had learned a lot about what the production process could be. At that point, Gene had met up with our other partner, Mark, who had worked with the Sierra studios for a number of years and had started off being a programmer. He was actually one of the first guys writing object-oriented languages, and had ended being a big manager, sort of against his will. He wanted to leave that giant company because he was just like, "look, I want to build games, I don't want to be a manager – quit promoting me." We all came together and realized that we could achieve everything that we wanted to do at the same time by building this production company.

In the video game business it's this radical idea and hard to describe. People are so steeped in the way the business currently works that it's hard to understand, but in every other industry it's commonplace – everybody does it that way. So it's kind of an ironic situation.

We independently finance game development, and then we take those games and partner with a publisher for distribution. Then we split the profits. The publisher never pays for development. All those [publishers'] pressures are off the development process. We have this giant fund of money which we spend entirely on development. We do all the iteration. We do all the creative protection. We do all the focus tests. We do all those kinds of studies to be sure that a game has the potential to do really well and really resonate with the audience – outside all that pressure.

Once we have the game playable, we take it to publishers, so they can test it. They can decide if it fits with their portfolio and if their sales guys are excited about it. We find the right publisher for a game. Remember, a lot of publishers actually start a project when they're all hot on one category, and by the time they're done they're not hot on the category anymore. So picking the publisher is just as important as picking the title, from a business standpoint.

So you're bringing the title all the way to completion?

We've set up our business so that we have capital. Our investors understand what we're doing, they've signed up for it, and what we're going to do is make a bunch of games. We're going to cancel a lot, too. When they don't work, if they don't resonate, we kill 'em. That's another thing that's very hard to do at a publisher, because you already have this investment. You already have it in the channel, and there's an expectation for a certain amount of revenue in a certain quarter. You can't pull it out – you have to justify it to forty people, and that's nearly impossible to do. Cancellation is key. We've already cancelled one game, and we've only been up and running since September.

How many do you have in process now?

We have three in production now and we're going to cap it at around five at any given time. We're going to try to do around twelve a year. That's when we're actually up and running – in a couple of years.

When the company was really just getting started, talking about the fundraising process...

We had to get out there so that developers would know we were there. The financial community had to know we were there. And then we were just gonna shut up. I mean, I'm happy to tell you how our business works, but you're going to see games from us when the games are ready to show. Doing any other sort of press until then is just ridiculous.

How are you doing in your fundraising process?

We're doing fabulously well, and that's all I can tell you right now. You're going to hear announcements about that in a little bit, but we have the cash and we're going.

With respect to cancelled games and the like, and thinking about your talk at D.I.C.E., does that mean that for the sake of maintaining your process, Capital Entertainment Group can't ever be a publicly traded company?

I think that if you look at production companies [in other industries], none of them are public, and when they go public, you see that those sorts of market pressures start to make the content change. We don't want to have those pressures on us. I think that the exit strategy that we look at is one of being sold to a big media company, or something like that. Not going public. That's not the exit we're looking for. That doesn't mean that I ever want to leave if it's fun.

Who's taking care of the actual promotion of the games? Is that going to be you, or the publisher?

The publisher of the games. [Although,] just like in the film business, there's a little bit of buzz building you do in the games industry before you really start any sort of promotion, and the timing is such that if it's in production for a long time before the publisher actually joins, then we'll handle some of that buzz-generation on our own.

In film, you might spend a huge fraction of the film's budget on promotion. Do you think that's where games are now, or do you think that's where games should be?

It really depends on the kind of game, right? Different genres have different fans. On the PC, the customer tends to be a lot more aware of what's out there. It's more of a hobbyist market. I don't want to piss off PC gamers, as a PC gamer myself, but the promotion is very different. They're much less pop products than console stuff, so the spending on a console game is going to be a lot more. And then depending on the type of console game, do you want to do TV [ads] or not? For example, a game like GTA3 was perfect for TV ads, because you had The Sopranos, you had a fascination with that sort of Mafioso crime thing going on, and the ads just slipped right in.

For other games, like Jak and Daxter, or even one of my favorite games of all time, Ratchet and Clank, you put it on TV, and you really have to work hard to make that a fresh ad. Because, when you play Ratchet and Clank, you think, "This is one of the most beautiful menus I've ever seen, I can barely believe this!" But, to the mainstream kiddy audience, it just looks like a game. That's a cultural challenge, right? So that determines your spend, also.

Are games that you can advertise on TV more likely to appeal to a mainstream audience? If you can't explain it in a commercial...

Well, here's the thing – with consoles, the games play on your TV. If what your game does uses a lot of the same visual language and style, and makes sense to people who watch the other stuff that happens on TV, then you probably have something that has a lot more hit potential. Obviously, the advertising comes a lot more naturally. And it's what I was talking about before. [In his talk at D.I.C.E., S.B. mentioned that the mainstream population views gamers as "irresponsible, immature, losers." The industry tunes games to hardcore preferences, making it embarrassing for many people to play.] You know, if you look at Ratchet and Clank, Jak and Daxter, Sly Cooper and all that stuff, you have a real kind of cultural backlash against gaming right now. Those games look so gamey. If you look at it, the guy sitting with his girlfriend, eating his TV dinner or whatever – if he thinks, "Wow, that's looks cool," he doesn't want to say that! There's a dynamic there that we have got to understand.

So, how do you manage risk? Those systems emerge, as you say, partially from habit, and partially from managing risk.

We manage risk by always steering toward quality. We believe that the easiest way to ensure profitability is to do everything possible to make your game better. I think that is borne out by our opinion that all of the games that have hit big have been high-quality games that really resonated. It's not like another medium where you can say "this was total crap, but it still did well." In the game industry – part of the reason I still believe in it so strongly – everything you see that hits has a high level of quality. You can see that it's an act of love. And that is the way that we manage our risk. At the same time, if stuff is not showing quality, we get rid of it right away. The developer's game we cancelled – we use them as a reference to investors. We are totally up front – that's how serious we are.

Is it tough for you, coming from a developer background, to axe something, to let it go?

No, it's like when you first manage people, when you fire somebody, and you know it's the right thing but it's still painful. Or breaking up with a girlfriend – it sucks short term, but it's the best thing, really, for everyone. That's why we use these guys as a reference. They built a tremendous prototype, but their company wasn't set up to be able to do that innovative feedback process. They'd been set up to build a different sort of game. And it was just too much for them to change it as it existed there, so we just said, you know, you should just take this idea somewhere else – and it's great.

What do you look for in developers? What lets you think that you can really start this risky process with a new team?

Well, it totally depends on the game design, and the mindset of the developer. What we look for is mainly someone who has a certain amount of passion to do something awesome. And somebody who has a good, functioning family of guys there, because it is a family thing – you live with these people. You can't decide that you're gonna run this like another business. It's three A.M. in the morning, you're eating stale pizza because you have to ship this thing, and the character's face is having some sort of Z-buffer issue. At that time, there's no such thing as professionalism – it just doesn't work that way. And that's why we love the industry! We look for guys we can work well with, because we have a very tight relationship with the developers, and we all have to have fun. If you're really making something that's doing well, that's testing well, and you're getting very excited about it, then you're gonna win. If it's a strain, if it's stressful in any way, eventually that will affect the quality. Like I said, the way we manage risk is by always pushing for quality.

How are you approaching the relationship with the developers differently?

We're right in there with them. We help them write the schedule. We talk to them. We're very intimate about it, because you never want to have that common publisher/developer conflict start, and that's so easy – in any business relationship. That conflict can start with anyone, if you're not totally frank and honest all the time. It can start, because life is hard, and things go wrong. The quality of what you do in life is based on how well you deal with things that go wrong. It's part of the reason that I'm with my wife, because when things go to hell, she just laughs, and it makes things better. That's the sort of relationship I want to build.

Interestingly enough, this is really similar to the way people think about the business in Japan. Americans get really frustrated and freaked out when Japanese business guys want to go out for drinks right off. [Americans might say,] "We'll go out for drinks after we close the contract." No, no, no! A lot of Japanese games ship with no contract. It's all about, "Do I trust this guy? Have I been out doing stuff I shouldn't have been doing with this guy? Do we have a relationship? Can I really trust him when things go wrong? Can I trust him when I'm getting a lot of heat about the game from my publisher? Will he cover me? Can he trust me [enough,] when they're behind on a milestone, to tell me?"

How do you maintain such a close personal relationship? Are you building up to a bigger staff, or is that why you're keeping the number of games so small?

You can't really replicate that sort of relationship - it's not scalable, so we've decided to keep it small.

How big is your group?

Right now, it's five guys. It's four partners and somebody else, and we're staffing it according to need. We have few titles in production right now, and frankly, we're doing all this according to a new production methodology, and Mark and I felt like we ought to live it for a while before we ask somebody else to do it, you know?

So that's how it's going. But that's gonna change really soon. We're about to hire some guys, so that'll be interesting. You know, Mark went from managing hundreds and hundreds of people to none. We all had hundreds of employees before this, and now we're doing all this stuff ourselves – it's pretty cool!

About you personally, how did you start gaming? What was the first time you remember playing something and being really engaged?

It was at a hotel in San Francisco. I was on vacation there with my parents, and there was a Computer Space machine (Nolan Bushnell's first game) in the lobby. I got a quarter from my dad and played it, and I thought the whole universe had changed. Interestingly enough, we actually own (my wife owned when I met her) a Computer Space machine signed by Nolan, because everybody knows and loves her (which is fortunate for me!). We have it in our house. There's a chance it's the one I played when I was a kid, 'cause there were only a few of those machines around.

I got an Atari PCS and a computer, and started running games. The strange thing was that my excitement about it was always centered on making them. I was way more excited about taking something that I was playing, and then going and working on something that was cooler than that, or was like that in some way. So I got to the point where I wouldn't even finish most of the games, or even play them that much. I'd just get really excited to go try to work it on the Apple and make that thing go.

What was the first point when you knew that you wanted to make games, that you weren't going to be a dentist or a lawyer?

It was when they cancelled the Superconducting Super Collider [The U.S. House of Representatives halted the project in 1993]. Because I was a high-energy physicist, and I was like...

You were going to be part of that project?

Oh, yeah, man! I was working at Fermi lab. I was working on the top quark team. I was doing simulations of top quark production and all that kind of stuff, and I was a full-on physicist. They cancelled the SSC, and that was just... it. The whole thing went down the toilet.

Before you have to go, did having your son change your perspective on games or on making games?

Not at all! Maximillian laughs all the time. I get to a point where I'm so stressed out, somebody will use the wrong intonation in an email, and I'll start freaking out. He's really made it clear to me that it's about fun, you know? It's really about fun.

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This page contains a single entry by Editor published on May 11, 2003 6:57 PM.

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