“ What to do when it all goes to hell” Escape Factory Post-Mortem James Gwertzman Former CEO, Escape Factory Ltd Managing Director, Sprout Games, LLC

Goals for Talk Share lessons we learned the hard way Prevent your deal from being cancelled If cancelled, prevent your studio from closing If closing, prevent financial ruin & heartbreak

Share lessons we learned the hard way

Prevent your deal from being cancelled

If cancelled, prevent your studio from closing

If closing, prevent financial ruin & heartbreak

Company Milestones

Project Mistakes

People Issues Startups can’t afford hand holding In some cases we chose potential over experience Strategy was hit or miss… and misses are expensive Startups can’t afford personality conflicts Startups can’t afford to change people Changing people takes a very long time Instead you can either: Change job to match person Replace person Focus of performance reviews was on self-improvement Should have been focused on finding right job Too slow to fire people when it didn’t work Impact of a negative person on team was tremendous

Startups can’t afford hand holding

In some cases we chose potential over experience

Strategy was hit or miss… and misses are expensive

Startups can’t afford personality conflicts

Startups can’t afford to change people

Changing people takes a very long time

Instead you can either:

Change job to match person

Replace person

Focus of performance reviews was on self-improvement

Should have been focused on finding right job

Too slow to fire people when it didn’t work

Impact of a negative person on team was tremendous

Hiring Track Record Hired 30 people 2 “weak performers” Easy to identify & fire or shift responsibilities Minimal impact on company & schedule 2 “bad cultural fits” Harder to identify Harder to fire because often strong performer Big impact on company & schedule 4 “left voluntarily” All left because they were in the wrong job Potentially huge missed opportunity

Hired 30 people

2 “weak performers”

Easy to identify & fire or shift responsibilities

Minimal impact on company & schedule

2 “bad cultural fits”

Harder to identify

Harder to fire because often strong performer

Big impact on company & schedule

4 “left voluntarily”

All left because they were in the wrong job

Potentially huge missed opportunity

No Full-Time Producer Producer is absolutely a full-time job Finding great producer took 18+ months Great producers are very hard to find Joined team 2 months before project cancelled During search, president was also producer But president and producer are both full-time jobs President (optimist) not good fit for producer (pessimist) Lack of full-time producer caused: Production pipeline inefficiencies Communication gaps Overly optimistic schedules

Producer is absolutely a full-time job

Finding great producer took 18+ months

Great producers are very hard to find

Joined team 2 months before project cancelled

During search, president was also producer

But president and producer are both full-time jobs

President (optimist) not good fit for producer (pessimist)

Lack of full-time producer caused:

Production pipeline inefficiencies

Communication gaps

Overly optimistic schedules

Wrong Organization Structure Wrong org structure is very expensive Symptom: too many meetings Org structure must match core values & personalities Core values stressed collaboration & independence Reward great ideas ahead of ego or rank Zero tolerance for mediocrity Close collaboration Disciplined approach to development Ridiculous amount of fun Hire & retain best people in industry Hired to match core values

Wrong org structure is very expensive

Symptom: too many meetings

Org structure must match core values & personalities

Core values stressed collaboration & independence

Reward great ideas ahead of ego or rank

Zero tolerance for mediocrity

Close collaboration

Disciplined approach to development

Ridiculous amount of fun

Hire & retain best people in industry

Hired to match core values

Actual Org Structure

Idealized Org Structure

Never Hired Admin Assistant Founders’ time is simply too valuable Good assistants are relatively cheap Ideally you will find someone who can: Keep your financial books & pay your bills Manage your office Play “mom” (or “dad”) to your employees Sort through incoming resumes Free you to focus on building a great game

Founders’ time is simply too valuable

Good assistants are relatively cheap

Ideally you will find someone who can:

Keep your financial books & pay your bills

Manage your office

Play “mom” (or “dad”) to your employees

Sort through incoming resumes

Free you to focus on building a great game

Didn’t Feed the Dragon Publisher investment driven by P&L forecast P&L forecast based on sales-force forecast Sales-force forecast based on… what? Developer’s reputation Great playable demo Sexy art & videos Target platform & genre Enthusiastic marketing team Passionate & committed producer Didn’t produce enough “demo” materials Seemed like a waste of time…

Publisher investment driven by P&L forecast

P&L forecast based on sales-force forecast

Sales-force forecast based on… what?

Developer’s reputation

Great playable demo

Sexy art & videos

Target platform & genre

Enthusiastic marketing team

Passionate & committed producer

Didn’t produce enough “demo” materials

Seemed like a waste of time…

Company vs. Game Invested too much in the company? Ladder levels Endless process discussions Performance reviews Profit-sharing plan 401K plan Highly automated build tools Made a big bet on success of first game. Much of that can come later…

Invested too much in the company?

Ladder levels

Endless process discussions

Performance reviews

Profit-sharing plan

401K plan

Highly automated build tools

Made a big bet on success of first game.

Much of that can come later…

Why was our project cancelled? Weak P&L (low sales forecast) Platform choice: Xbox (not PS2 – engine issue) Target Demographic: 10-12 (vs. GTA3) Genre: “platformer” (vs. GTA3) Publisher slipped other projects, losing 2003 revenue We cut a key “unique selling point” during budgeting We were looking at a 3-6 month schedule slip Forced to redesign main character half-way through Operating in “Zero tolerance” environment

Weak P&L (low sales forecast)

Platform choice: Xbox (not PS2 – engine issue)

Target Demographic: 10-12 (vs. GTA3)

Genre: “platformer” (vs. GTA3)

Publisher slipped other projects, losing 2003 revenue

We cut a key “unique selling point” during budgeting

We were looking at a 3-6 month schedule slip

Forced to redesign main character half-way through

Operating in “Zero tolerance” environment

Dealing with Cancellation

Have Disaster Plan Ready Figure out accurate financial picture How much money do you owe? How much do you have? You may already be out of business… What is best way to spend remaining $$$? Start a new project? Marketing/Sales blitz? Do you have the right team to restart? What projects are realistic? Do you have the energy to restart?

Figure out accurate financial picture

How much money do you owe?

How much do you have?

You may already be out of business…

What is best way to spend remaining $$$?

Start a new project?

Marketing/Sales blitz?

Do you have the right team to restart?

What projects are realistic?

Do you have the energy to restart?

Pay Yourself First Founders took minimal salary and repeatedly went without pay Allowed us to hire one extra person But burned through founder savings When crisis hit, no safety net for founders Limited options in dealing with cancelled project Once deal is signed, pay yourself first Just don’t be greedy… If money tight, better to lay-off weakest employees than starve your strongest Saves money, demonstrates high-standards Often increases productivity

Founders took minimal salary and repeatedly went without pay

Allowed us to hire one extra person

But burned through founder savings

When crisis hit, no safety net for founders

Limited options in dealing with cancelled project

Once deal is signed, pay yourself first

Just don’t be greedy…

If money tight, better to lay-off weakest employees than starve your strongest

Saves money, demonstrates high-standards

Often increases productivity

Minimize Long-term Debt Starting a company requires enormous optimism, faith, and self-belief Money is place where that’s inappropriate Must be total pessimist when managing finances No debt unless you KNOW you can pay it off Line-of-credit to bridge milestone payments: OK Long leases for expensive h/w, s/w: not OK Line-of-credit to build demo for possible deal: not OK Debt reduces your options

Starting a company requires enormous optimism, faith, and self-belief

Money is place where that’s inappropriate

Must be total pessimist when managing finances

No debt unless you KNOW you can pay it off

Line-of-credit to bridge milestone payments: OK

Long leases for expensive h/w, s/w: not OK

Line-of-credit to build demo for possible deal: not OK

Debt reduces your options

Always have deals on table CEO’s primary job is bringing in business Time to sign projects is when you don’t need them I should have been far more actively networking while SQ was under development Instead I was too head’s down with game Acting as producer for over a year Trying to solve too many problems, write code, etc Let the team solve more of their own issues Ideal CEO: “No aptitudes, high vocabulary”

CEO’s primary job is bringing in business

Time to sign projects is when you don’t need them

I should have been far more actively networking while SQ was under development

Instead I was too head’s down with game

Acting as producer for over a year

Trying to solve too many problems, write code, etc

Let the team solve more of their own issues

Ideal CEO: “No aptitudes, high vocabulary”

Be Realistic Natural impulse is to find another deal “ We’re bigger & better now… We should have no problem finding another deal!” But the market may be very different Publisher more willing to bet on hungry startup than unsuccessful studio Startup is blank slate for publisher to fill with hopes & dreams “ Project cancellation” smacks of failure despite: team, technology, lessons learned Team probably more expensive now Different point in console life-cycle

Natural impulse is to find another deal

“ We’re bigger & better now… We should have no problem finding another deal!”

But the market may be very different

Publisher more willing to bet on hungry startup than unsuccessful studio

Startup is blank slate for publisher to fill with hopes & dreams

“ Project cancellation” smacks of failure despite: team, technology, lessons learned

Team probably more expensive now

Different point in console life-cycle

Console Life Cycle Affects Deals Unit Sales Deal Signing Ease 2 nd Wave: Publishers approve many new projects. No teams have prior experience. 3 rd Wave: Bar goes up; Publishers prefer teams who published in wave 1. Launch Titles 2 nd Wave Titles 3 rd Wave Titles

Self Confidence Issues?

Be Open with Employees Be honest about what’s going on Smartest thing we did at Escape Factory after project was cancelled Anxiety is bad enough without rumors People will want to know how they can help We promised to tell people when to start sending out resumes We also helped employees get jobs

Be honest about what’s going on

Smartest thing we did at Escape Factory after project was cancelled

Anxiety is bad enough without rumors

People will want to know how they can help

We promised to tell people when to start sending out resumes

We also helped employees get jobs

Why did we shut down? Assumed we would find another project… Market much more competitive 2 nd time around Assumed team was most valuable asset “ 20 person team ready-to-go” Didn’t really check market value; should have gotten bids We were too expensive for available projects (ports, etc) Started shopping new concepts Morale boost, but LONG, expensive process we couldn’t afford Didn’t really slash costs Deferred salaries: illegal; ended up paying it anyway Rent: still owe $30K+; should have bargained up-front Took on new debts Ran up line-of-credit to pay for team

Assumed we would find another project…

Market much more competitive 2 nd time around

Assumed team was most valuable asset

“ 20 person team ready-to-go”

Didn’t really check market value; should have gotten bids

We were too expensive for available projects (ports, etc)

Started shopping new concepts

Morale boost, but LONG, expensive process we couldn’t afford

Didn’t really slash costs

Deferred salaries: illegal; ended up paying it anyway

Rent: still owe $30K+; should have bargained up-front

Took on new debts

Ran up line-of-credit to pay for team

Escape Factory Headcount

Escape Factory Net Worth

Looking forward Sprout Games Casual game studio True “mass market” games www.sproutgames.com New philosophy: Spend no money… Unless truly critical Revenue = Profit Very small partnership Personally satisfying Actually making games vs. building company

Sprout Games

Casual game studio

True “mass market” games

www.sproutgames.com

New philosophy:

Spend no money… Unless truly critical

Revenue = Profit

Very small partnership

Personally satisfying

Actually making games vs. building company

Reading Recommendations http://www.gamasutra.com/ Read every article; invaluable background & “best practices” Organizing Genius , Warren Bennis Insights into creating “Great Groups” (such as Disney, Apple) Software Development, A Legal Guide, NOLO Critical to reducing your legal bills Employer’s Legal Handbook, NOLO Eventually you’ll need to fire someone… Are you covered? Managing the Professional Service Firm, David Maister Written for the traditional service firms, but highly relevant Built to Last, James Collins Great survey of great companies to imitate

http://www.gamasutra.com/

Read every article; invaluable background & “best practices”

Organizing Genius , Warren Bennis

Insights into creating “Great Groups” (such as Disney, Apple)

Software Development, A Legal Guide, NOLO

Critical to reducing your legal bills

Employer’s Legal Handbook, NOLO

Eventually you’ll need to fire someone… Are you covered?

Managing the Professional Service Firm, David Maister

Written for the traditional service firms, but highly relevant

Built to Last, James Collins

Great survey of great companies to imitate

Thanks To: Gabe Newell, Valve Rick Goodman, Stainless Steel Studios Tony Goodman, Ensemble Studios Chris Taylor, GPG Ron Moravek, Relic Brian Fleming, Sucker Punch Mike Ryder, Buena Vista Games Josh Davidson

Gabe Newell, Valve

Rick Goodman, Stainless Steel Studios

Tony Goodman, Ensemble Studios

Chris Taylor, GPG

Ron Moravek, Relic

Brian Fleming, Sucker Punch

Mike Ryder, Buena Vista Games

Josh Davidson

Call To Action! Don’t be afraid to take risks Don’t be afraid of failing Pay someone to be paranoid And listen to them! An articulate vision is your best asset Will help hire team, attract $$$, attract deals Know your competition If you can’t beat them, get out

Don’t be afraid to take risks

Don’t be afraid of failing

Pay someone to be paranoid

And listen to them!

An articulate vision is your best asset

Will help hire team, attract $$$, attract deals

Know your competition

If you can’t beat them, get out

Q&A

Why were we late? Pre-production was largely wasted Team not yet fully staffed up Engineering team especially understaffed Game-design focused on writing massive design doc vs. prototyping & iteration Licensed engine – no free lunch Unless you’re making identical genre game Biggest advantage – faster prototype

Pre-production was largely wasted

Team not yet fully staffed up

Engineering team especially understaffed

Game-design focused on writing massive design doc vs. prototyping & iteration

Licensed engine – no free lunch

Unless you’re making identical genre game

Biggest advantage – faster prototype

People Issues Mistakes: Hired a few “bad cultural fits & kept them too long Had some people in wrong jobs Results & Symptoms: Created rift between teams Wasted lots of time dealing with fallout Lower productivity from people involved Solution: Be super hardcore about hiring/firing Listen to your gut & your team Act quickly to move people around if in wrong jobs

Mistakes:

Hired a few “bad cultural fits & kept them too long

Had some people in wrong jobs

Results & Symptoms:

Created rift between teams

Wasted lots of time dealing with fallout

Lower productivity from people involved

Solution:

Be super hardcore about hiring/firing

Listen to your gut & your team

Act quickly to move people around if in wrong jobs

Great hiring process not enough Candidates had 1:1 interviews with 6+ people Everyone else met candidate over snack Consistent & simple criteria: Passion Effectiveness Horsepower Cultural Fit Company-wide wrap-up: “hire / no-hire”

Candidates had 1:1 interviews with 6+ people

Everyone else met candidate over snack

Consistent & simple criteria:

Passion

Effectiveness

Horsepower

Cultural Fit

Company-wide wrap-up: “hire / no-hire”

Must listen to the results “ We can change this person” Nearly impossible to change a person Startups can’t afford personality conflicts Performance reviews focused on changing person to match their job Should have focused on finding right job “ Low experience but high potential” You can’t afford to grow/train new people

“ We can change this person”

Nearly impossible to change a person

Startups can’t afford personality conflicts

Performance reviews focused on changing person to match their job

Should have focused on finding right job

“ Low experience but high potential”

You can’t afford to grow/train new people

Office Space Mistakes: Leased more space than we needed (initially) Results & Symptoms: Lowered energy & passion than before Private offices meant less looking over shoulders (“hey, that looks cool. What is that?”) Longer walks between offices = less random visits Solution: Keep office slightly too crowded; cram together

Mistakes:

Leased more space than we needed (initially)

Results & Symptoms:

Lowered energy & passion than before

Private offices meant less looking over shoulders (“hey, that looks cool. What is that?”)

Longer walks between offices = less random visits

Solution:

Keep office slightly too crowded; cram together

Not violating values is hard Reward great ideas ahead of ego or rank Close collaboration Requires great professionalism & maturity, especially in a creative organization Zero tolerance for mediocrity How to balance with “disciplined development” and schedules? Okay to rush to hit milestone? Disciplined approach to development How to reconcile with above points? Ridiculous amount of fun If work isn’t fun is something wrong? Hire & retain best people in industry Hard to do as a startup Room for junior team members?

Reward great ideas ahead of ego or rank

Close collaboration

Requires great professionalism & maturity, especially in a creative organization

Zero tolerance for mediocrity

How to balance with “disciplined development” and schedules? Okay to rush to hit milestone?

Disciplined approach to development

How to reconcile with above points?

Ridiculous amount of fun

If work isn’t fun is something wrong?

Hire & retain best people in industry

Hard to do as a startup

Room for junior team members?

Core values must be reinforced Mistakes: Some core values occasionally ignored (e.g., sub-par work to meet milestone) Potential contractions not openly discussed (e.g., “discipline” vs. everything else) Results & Symptoms: Values seen as empty promises Can’t assume team on same page if not reinforced Employees could pick & choose their values Solution:

Mistakes:

Some core values occasionally ignored (e.g., sub-par work to meet milestone)

Potential contractions not openly discussed (e.g., “discipline” vs. everything else)

Results & Symptoms:

Values seen as empty promises

Can’t assume team on same page if not reinforced

Employees could pick & choose their values

Solution:

Lots of Passion Passion & energy are sexy People want to be inspired Employees, partners, bankers, etc An alternative to the “mundane” Create “Skywalker Ranch of Gaming” Controversial Call to Action Downside: hard to maintain…

Passion & energy are sexy

People want to be inspired

Employees, partners, bankers, etc

An alternative to the “mundane”

Create “Skywalker Ranch of Gaming”

Controversial Call to Action

Downside: hard to maintain…

Call To Action … So what's our dream? That we'll be the studio that finally elevates the video game into an art form where it rightfully belongs alongside film and theatre. An art form that unites epic stories, beautiful cinematography, and rich drama with the forgotten magic of childhood play. We can't wait for the rest of the industry to do it because most developers are too deeply sunk into the culture of "by hardcore gamers, for hardcore gamers" and most publishers are too busy chasing whatever sold the most last year…

Exciting Clear Vision Unique time to enter game industry Internet: disrupts channel, allows multiplayer games Mass-market potential High powered hardware = greater creative freedom Company goals: Break new ground , inspire copy-cat imitators Look back as most fun, creative, productive times in our lives Entertain millions of people of all ages & interests Cultural impact on par with Star Wars Build games that: Suck the player in through great stories, compelling characters, addictive game-play, intuitive UI, and breathtaking worlds. Encourage and reward players to think and be creative. Provide a social game experience with competition and collaboration. Offer players an escape from the mundane with the opportunity to be the hero.

Unique time to enter game industry

Internet: disrupts channel, allows multiplayer games

Mass-market potential

High powered hardware = greater creative freedom

Company goals:

Break new ground , inspire copy-cat imitators

Look back as most fun, creative, productive times in our lives

Entertain millions of people of all ages & interests

Cultural impact on par with Star Wars

Build games that:

Suck the player in through great stories, compelling characters, addictive game-play, intuitive UI, and breathtaking worlds.

Encourage and reward players to think and be creative.

Provide a social game experience with competition and collaboration.

Offer players an escape from the mundane with the opportunity to be the hero.

Company Culture Reward great ideas ahead of ego or rank Zero tolerance for mediocrity Close collaboration Disciplined approach to development Ridiculous amount of fun Hire & retain best people in industry

Reward great ideas ahead of ego or rank

Zero tolerance for mediocrity

Close collaboration

Disciplined approach to development

Ridiculous amount of fun

Hire & retain best people in industry

Regular Post-Mortems