Securing investment and achieving successful commercialisation are two of the major challenges that are often hotly debated in the games sector. Although securing funding is always a challenge for any entrepreneur, the problem is particularly acute in games where the development process can often be long and costly, causing traditional tech investors (ie VCs) to prioritise investments in tech sectors they perceive to be ‘lower risk’. If the game developer does manage to develop a solid, releasable version of his or her game, they are, of course, immediately confronted with the formidable tasks of effectively promoting and monetising their game(s) in an increasingly crowded space.
European Games Group, a Munich based start-up founded in 2010 by games industry veterans Johannes Sevket Gözalan and Justin Stolzenberg, is looking to partner with game developers to address some of these challenges through providing funding and business support (ie monetisation, mechanics, marketing, and international expansion support). Their vision is to become “Europe‘s leading enabler & partner for independently published Free2Play online games.” Although their investments have focused on the German market thus far, they’ve recently successfully launched of one of their hit games Hero Zero here in France (and Poland) and are now actively looking to partner with French game developers. I recently caught up with Justin to discuss how things are evolving thus far and their plans for the future.
What is European Games Group’s focus?
What we really are about is empowering the developers by entering into an equal partnerhship with them. When selecting partners, we strive to work with those that have a similar work ethic (to ours), which focuses on fast decision making, transparency and fairness,and enough ‘technical muscle’ and know-how to develop and launch a successful game. We believe that ensuring that developers keep full control over all product related issues is of utmost importance in creating a long-term successful game with an active community, and that these teams and games deserve a focused commercial partner who has similar ‘muscle’ in global scaling.
What types of game developers are you looking to partner with?
The game developers we’re looking to partner with should, firstly, have some kind of previous experience in the industry. So, they should have worked in a online and/or mobile games company, worked as a freelance developer, and/or already launched a project. This game industry experience and technical know-how is particularly important in terms of scaling up after launch. Typically, what we want to achieve within 12 months after launch is to have expanded into 10-12 markets. In order to achieve this we need to make sure developers have the necessary technical experience to achieve this. We also, prefer, but don’t necessarily require, that teams that are founder led/owned because we believe that founders/owners on the development side behave differently than pure managers. Our way of working tends to work best with this type of structure. Of course, having a great team, with a strong, innovative vision is also imperative.
What do you offer game developers.
For the game developer, it should feel like a joint-venture where you outsource all commercial matters for the game, but you maintain 100% of the IP, the graphical and technical assets, and control of the features of the game. The commercial aspects we handle include securing payment providers (in the different markets in which the game is launched), administration tasks to launch quickly in new markets, ad sales if the game is fit for ads, and all marketing aspects, including creating banners and the pre-financing of external marketing in both the pre-marketing phase and the scale-up phase. We pre-finance these services, which in a browser or mobile game amounts to approximately 300-500€k in the first 6 months. As it’s important to be in an equal relationship with game developers, we enter into a 50/50 revenue share relationship for the specific game, so we don’t take equity of the developer’s company, and there is no way we could ever earn more than the developer.
How do you find new partner developers, especially in new markets?
At this point we’re establishing developer relationships in new markets mainly through word of mouth and cold-calling. As we’re becoming more known as we’re operating successful titles in more markets, we’re starting to have more developers contact us now. We’re operating a few games now and our first group of developers are starting to pitch new games (which we may fund). However, we want to continue to look for innovative new developers to work with, so are looking for new partners with quality ideas and teams. We still expect though to maintain our target of supporting about 3-4 games a year.
How are the games you support distributed?
We decided to not launch our own game distribution platform because we need to be open to market and distribute each game in the the best way for each individual title. For us, the game should come first and be distributed through all means that are healthy…so, the game needs to fit the platform and not the other way around. Our main focus is the standalone version of the games and distribution through a great variety of performance ad networks, media portal partnerships as well as portal integrations, including but not limited to Facebook – a proper Open Graph integration is great to drive viral traffic, but there’s no need to actually run in the FB canvas. We view all these means of distribution as all complimentary to our stand-alone, destination sites.
How do you support expansion to new markets and negotiation with service providers at the local level?
We employ experts in local markets that can assist with identifying suppliers and building relationships locally. What we look to do, which we have done in France and Poland, is launch a game in a new market with a few local or global service partners and once the game proves itself in that market, we then look to identify other local partners to work with. So, we have been quite successful this far with doing initial launches without being present in-country. For example, in France we had 120k players in the first 4 weeks and healthy 4-digit daily revenues without having a physical presence there. The hardest things we deal with when launching in a new market are actually being aware of cultural differences (and how they impact how things operate in country), understanding tax and administration differences, managing money streams which can be very difficult in certain markets, and optimising after launching. As mentioned, working local experts is an important part of addressing these challenges.
What are your long-term objectives?
We don’t want to grow to a point were we have an extremely large number of products as we feel this would be detrimental to the games. So we want to avoid a situation like you have in the music industry, where you have so many releases that you don’t ‘feel’ the product any more. We prefer, instead, to scale-up each game to its maximum potential. Our goal is to have a smaller, high quality number of games and developers which allows our team to stay small, agile and fast in terms of marketing execution. Our strategy to grow is mostly through duplicating the organisation we have currently in new markets. These local structures will work with local developers and operate in a similar way to how we do currently. We’re actually preparing to establish our presence in Latin America. The Middle East is also a really interesting market for us in terms of expansion on the developer side.
What are your thoughts about opportunities in the games sector?
It’s a very interesting and constantly disrupting sector. There are so many things that companies can do better to make room for themselves in this crowded market. Cross-platform approaches to browser / mobile look promising, and there’s an increasing growth in acceptance for the free2play business model, which in turn supports more service oriented operations than under the retail or pay per download business models. We feel there are a lot of things that can still be done in the games sector. We’ve managed to do well thus far (in a very crowded space). But this success isn’t because of luck. It really starts with the developer having a great, innovative vision and team.
As mentioned earlier, European Games Group are actively looking for game entrepreneurs to partner with. So if what they do might be of interest, feel free to get in touch with Justin and Johannes here.
This article has been modified after its original publishing to include facts omitted initially.
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