Game over: Has the collapse of Realtime Worlds delivered a fatal blow to Scotland's video game industry?

Published on Wednesday 18 August 2010 17:00

DAVE Jones, founder of Realtime Worlds, was devastated. After five years of hard graft and constant pressure from investors and publishers, his game had finally been launched - but it was all going horribly wrong.

Reviews of the game APB - All Points Bulletin - were grim and, as a result, sales were poor.

Nine days ago, on Friday the 13th, Realtime Worlds made 60 of its 250-odd staff redundant. By last Tuesday the whole company had been put into receivership.

The news sent shockwaves through the gaming industry. Nobody had seen it coming, not least because APB had only been on the market for weeks.

A complex subscriber-based shoot 'em up action game, it should have had at least months if not years to build up the sort of global fanbase it was designed for. But the worldwide gaming community is notoriously brutal in its honesty - if they don't like it, they don't hesitate to post their views online. Could it be that after five years and $100 million (64m), APB was a dud?

Rewind two years and Jones was convinced that APB was going to take on the world. Although the company, which developed games in Dundee but was headquartered in Colorado, was loss-making, Jones estimated the game could ultimately generate "hundreds of millions of pounds".

As one of the main creators behind world blockbuster game Grand Theft Auto, Jones had a vision for a new product that would transform how games were commercialised - sidestepping the suits of the major console makers and selling direct to players.

Thanks to the latest in graphics technology, players would be able to hone their "avatars" in a way that had never been done before, and their characters would inhabit streets that looked so real a player could almost imagine he was walking down them himself.

APB is what is known in gaming lingo as an MMO, a "massively multiplayer online" game. Having chosen to be a good guy or a bad guy, players form alliances or try to kill other players who have logged on. The business model is similar to that of the hugely successful World Of Warcraft, owned by California-based Activision Blizzard.

Although most major games are played on the three main consoles - the Sony PlayStation, Microsoft's Xbox and the Nintendo Wii - increasingly games firms are sidestepping these formats. Instead they are taking advantage of devices such as the iPhone and, as in the case of Realtime World's APB, the internet.

In June, Bobby Kotick, chief executive of Activision Blizzard, dismissed the fact that only 30 per cent of his company's sales were now for console-based games. He could easily shrug off the criticism, as World Of Warcraft has 11.5 million active subscribers who pay monthly to play online.Realtime Worlds had experience of the often unequal relationship between developer and console publisher. Its previous game, Crackdown, was published by Microsoft for the Xbox 360 in early 2007. The debut game broke records for demo downloads, sold approximately 1.4 million copies, and won multiple awards including prestigious Bafta and Develop Industry Excellence awards.

But by the end of 2008 Realtime Worlds was still losing money hand over fist. It decided not to make Crackdown 2. Instead, another Dundee firm, Ruffian, took on the Microsoft-supported development of the sequel while another business, Proper Games, was last month awarded the job of creating the game's "premium downloadable content" (DLC).

Instead Realtime Worlds plumped to go ahead with APB and another, perhaps even more ambitious concept, Project: My World, which would make use of the millions of man hours spent creating APB's gritty urban environment but adapting it for players who didn't necessarily want to smash cars and shoot criminals. Both games are now up for sale.

On Friday, the receivers Begbies Traynor announced part of the My World team had been rehired, ostensibly to make the game saleable.

Launched in 2002, Realtime Worlds traded on the blockbuster games experience of Jones as well as his partners, gaming industry veterans Ian Hetherington and Tony Harman. The firm attracted investment from Maverick Capital, one of the world's biggest hedge funds.

"They make other venture capitalists who work in the game industry look like small fry," said one industry commentator of Maverick.

The Dallas and New York-based hedge fund founded by Lee Ainslie in 1993 now controls $11.4 billion in assets. For Maverick Capital, the initial investments in Realtime Worlds were small change - overall Maverick and other investors pumped an estimated $100m into APB. But the company is currently facing problems of its own. US financial regulators have charged its billionaire co-founder Samuel Wyly with fraud, although the fund, which is managed by Wyly's protg Ainslie, is not part of the Securities and Exchange Commission investigation.

Most are scratching their heads as to why Realtime World's backers would pull the plug now. Only last week, Colin Macdonald, Realtime World's head of studio, said: "We have a long-term game plan for APB. Because it is an online game we viewed the launch as half the battle. The other battle is attracting and retaining enough players, adding content all the time and also developing the long-term plan for the project."

Last weekend, Macdonald and several colleagues from Realtime Worlds were in the Edinburgh International Conference Centre, showcasing APB and lending their support to Dare To Be Digital - the University of Abertay Dundee's annual student skills development competition.

Days beforehand, Macdonald had talked about scoping the Dare event at the EICC for new recruits. But rumours and tweets over the course of the three-day session hinted the company was in trouble.

"They were putting a brave face on it," says Brian Baglow, head of interactive entertainment at Revolver PR and a former colleague of Jones at DMA Design, which spawned the famous GTA franchise before it was sold to international games firm Rockstar North.

By Tuesday, Macdonald himself, a hugely influential figure in the Dundee games scene, was made redundant as well.

In the days following the company's collapse, there were calls to "level the playing field" between the UK and other countries - notably Canada and France - where governments have been priming their games industries with tax breaks. In Quebec, the government pays 37.5 per cent of developers' salaries. Before the election, Labour had proposed plans for incentives aimed at the industry, but these were scrapped by the coalition government as it cracked down on spending.

There is a debate as to whether Realtime Worlds was aiming for the right market. Richard Wilson, chief executive of the games industry body TIGA, believes they were doing everything right.

"Realtime Worlds had a very impressive management team, a very skilled workforce. They were trying to sell their game online - an exciting and new business model. It is just the way the industry is supposed to be going," he says.

"It is not as if they are stuck in a fading business model, it is a new business model. For it to then run into trouble and go into administration will be a real blow to the Scottish games industry's morale and indeed the whole UK games industry's morale."

Others suggest APB was always a high-risk play in an industry where only one or two big MMOs exist in a graveyard of hundreds that have fallen by the wayside.

Bob Last, managing director of animation firm Digital Ink and chairman of the body that promotes games development, the Cultural Enterprise Office, says: "For a small nation, Scotland excels in content creation for multiple media but, no matter what the platform or distribution channel, content creation is a high-risk business.

"Realtime Worlds played for the highest stakes, looking for a hit in a marketplace that changed hugely during the development cycle, compounding its risk."

Baglow argues that the industry has, to a certain extent, moved on from the big blockbuster game, popular with a hard core of worldwide players, many of whom will spend hours a day in front of their computers. Instead, emphasis will be put on the more casual gamer. He points to game "apps" such as Angry Birds, which generated 2m in sales in the first six months that it launched.

He suggests smaller Dundee firms such as Tag Games and Denki, which are working in this area, are on the right track, not least because they won't be reliant on the big investments RTW needed. Indeed, Baglow argues there will be little appetite among investors to support blockbusters in future.

"I don't think the day of the big game has gone. There will always be a requirement for the big blockbusters that pull in millions around the world, but the market is growing - with iPhones, people are buying games who would never have picked up a joypad. But it is a hard market to crack. That is why for every World Of Warcraft there are 200 MMOs that never succeed. I do, however, think it will now be a whole lot tougher in Scotland to do anything interesting in terms of funding."

TIGA estimates there are about 220 independent games developers in the UK, averaging about 50 employees. Realtime Worlds was a major player.

Some of the industry's largest players - Activision Blizzard, Blitz Games and Creative Assembly - have banded together to launch a recruitment fair aimed at the 160 people that were made redundant from Realtime Worlds.

"Gaming in Scotland is going to move on," says Baglow. "The one bright spot is every time one of the big studios go, you have two or three starting up and doing great things. I have fingers crossed people will stay here and put that innovation to work."