MBA Finance Report

Here is the Final Report I wrote for the Finance class I recently finished. I forgot to do the recommendations section of the paper, but breaking your collar bone the day before the paper is due will do that. Other than that the paper was well received by the professor. This is copied over from a Google Doc, so there will be some formatting errors.

Financial Analysis of Activision Blizzard

 

• Executive Summary

 

For minimal costs, ATVI can start a studio in South Africa focused on mobile gaming for the Sub-Saharan Africa market. Smartphone use is steadily climbing in Sub-Saharan Africa and meets the US on a per capita basis in the larger markets (South Africa, Nigeria).

Developing Africa-centric mobile games will allow ATVI to dominate the African mobile market and establish itself as the game provider of choice for African customers.

 

• Approach

 

Due to the changes in customer preference, mobile sales will continue to increase in importance for digital game developers. ATVI has increased its mobile market share significantly with the purchase of King, and now has over 500 million active monthly users (MAUs)across all of its platforms. To remain competitive in the mobile space, ATVI needs to capitalize on the purchase of King and expand into new mobile markets, rather than squabble with competitors for a piece of China.

Upon exploring potential markets and the available resources of ATVI, Africa is the best choice for a new mobile market.

 

• Financial Performance and Health

• Organizational Context

• Key Features

 

Activision Blizzard (ATVI) is the largest video game developer in North America, and globally is second only to Chinese company TenCent. ATVI is the producer of popular and very profitable franchises such as Skylanders, Call of Duty, Candy Crush, StarCraft, and World of Warcraft. ATVI is the parent organization of three distinct and wholly separate developers, Activision, Blizzard, and King. Activision produces games primarily for the console market (PlayStation, Xbox), Blizzard develops primarily for the personal computer (PC), and King develops games solely for mobile devices. This allows the three companies to produce games for separate markets, preventing internal competition, while the parent organization ATVI reaps record profits. Within the video game market, ATVI is very diverse, allowing a great deal of adaptability. ATVI’s largest market is in North America (50%), followed by Europe (41%), and Asia (9%). With the recent purchases of King for $5.9 billion (Candy Crush), and Major League Gaming for $46 million, ATVI continues to aggressively push into the mobile and eSports markets, respectively.

 

• Organization and Management

 

ATVI is the parent holding company of Activision Publishing, Blizzard Entertainment, and King, plus other smaller subsidiaries. Activision Publishing and Blizzard Entertainment have operated independently of each other since ATVI bought Blizzard in 2008. With the addition of King, it is assumed that the wholly separate operating structure of the companies will continue. This has many benefits, as the companies are allowed to operate and function without “interference” from the corporate office. However, it has had its drawbacks, most notably with Activision’s massively multiplayer online role-playing game (MMORPG) Destiny, for the PlayStation 4. The development and release of Destiny had many roadblocks, and experts from Blizzard, the creators of the largest and most successful MMORPG in history, World of Warcraft, were only brought in to assist very late in development.

The Chief Executive Officer of ATVI is Robert Kotick, and he has been the CEO of Activision Blizzard since 1991. He has overseen many strategic mergers and acquisitions and is also a member of the Board of Directors for the Coca-Cola company. The long tenure of Mr. Kotick can be viewed as a contributing factor for the long-term success of ATVI.   

ATVI currently has approximately 9,000 employees.

 

 

• Recent Financial Performance

• Income Statement Analysis (Statement of Operations)

 

The Q4 2015 results have not been published, so the most recent annual report is the 2014 report. The majority of data has been taken from the 2014 report, but some comparisons have been made between the Q3 2105 report and the Q3 2014 report.

2014 was a down year for ATVI; net income fell from 1,149M in 2012 to 835M in 2014. Part of this decline were titles released in 2014 underperforming, but the decline can be largely attributed to the video game market shifting more towards mobile games. In 2014, ATVI had almost no presence in the mobile market; a need that has hopefully been addressed with the purchase of King.

Despite the loss of income in 2014, ATVI’s ratios have held fairly steady. The Gross Profit margin has fluctuated by a few percentage points around 65%, The Operating Margin has dipped slightly from 30% in 2012 to 27% in 2014. The Profit Margin has dropped from 24% in 2012 to 19% in 2014, but the Return on Equity has increased from 10% in 2012 to 12% in 2014.

Comparing Q3 of 2015 with Q3 of 2014, Net Income is 733M in the first nine months of 2105 versus 474M in 2014. Earnings per share are $0.99 in 2015 versus $0.65 in 2014.

 

 

• Cash Flow Statement Analysis

 

Net Cash Provided by Operating Activities has declined slightly from 2012 to 2014: 1,345M in 2012 versus 1,292M in 2014. However, Cash and Cash Equivalents has increased from 3,959M in 2012 to 4,848M in 2014, an increase of 22.5%. The largest contributors to the increase in Cash are lower payments on long-term debt, and lower licensing fees. As ATVI focuses more on ni-house activities, the licensing fees will continue to decline.

 

• Underlying Financial Performance

 

ATVI continues to produce quality goods year after to year, with regular increases in company value. ATVI stock is currently priced at approximately $30 per share, versus $12 in 2012. Total Assets in 2014 were valued at 14,746M, a 5.2% increase over 2013. ATVI also had significant gains in 2015, largely in part to Destiny, for the PlayStation 4, and Hearthstone: Heroes of Warcraft, ATVI’s first mobile game, that has proven to be very successful.

 

• Current Financial Health

• Capitalization

 

ATVI has a Current Ratio of 255%, a Quick Ratio of 250%, and a Cash Ratio of 259%. These are all above the average of 10 semi-randomly selected companies within the Nasdaq category of “Technology: Prepackaged Software”, and well above the ratios of Electronic Arts, one of ATVI’s direct competitors (see Table I in Appendix A). Over time, the Current, Quick, and Cash Ratios of ATVI have all increased.

In Q4 of 2015, ATVI purchased King for $5.9B, and this will likely have a huge impact on the cash reserves of ATVI. 2015 was a year of record revenues for ATVI, but also expansion and acquisition, especially in Q4. Revenues fell 14% from Q4 2014 to Q4 2015, but year to year, revenues grew 5.8%

 

• Future Growth

 

With the purchase of King (Needleman, 2015), Major League Gaming (McQueeney, 2016), and the creation of an in-house movie studio (Takahashi, 2015), ATVI is looking to expand into new markets. King has created a mobile gaming arm for ATVI, a move that is absolutely critical, as mobile gaming has overtaken console and PC gaming in revenue. Major League Gaming allows ATVI to improve upon its push into eSports. These purchases show that ATVI is focusing on promoting its “brand” and managing it in-house. ATVI is no longer simply a company that sells video games, but a multimedia company with a variety of revenue streams to fuel future growth.

 

• Financial Value of Company

 

ATVI stock is currently listed as a “buy” from nearly every source. ATVI has been aggressively expanding since Q4 of 2015, and this expansion will possibly cause an increase in costs and lower than expected returns in the short term, driving down the stock price. I feel that ATVI considerably overpaid for King, and many analysts agree. However, if ATVI can maximize the King purchase to stake its claim in the mobile gaming market, the investment will pay for itself, just not soon. Overall, I foresee ATVI continuing to grow in value over the long-term, with a dip in 2016 because of the added costs of the King purchase. CEO Robert Kotick expects net revenues of 6.1B for FY 2016.

1. Success Factors and Risks

 

• How financial and strategic priorities affect accounting procedures and business decisions

 

ATVI recently purchased King Digital, the developers of Candy Crush, for $5.9 billion. According to the 2014 Annual Report, at the end of 2014, ATVI had $14.7B in total assets, and$ 4.86B in Cash and Cash Equivalents. 2015 was a banner year for ATVI, but the purchase of King represents ATVI potentially eliminating all of their cash in one move. It is likely that ATVI used a loan to make the purchase, in which case the long-term debt of ATVI has increased from $4.3B in 2014 to $10.2B. ATVI has $3.6B in Europe that was likely used in the purchase (Sharma, 2015), splitting the price between cash on hand and a loan.

Regardless of how the cost of King is distributed, it represents a very costly move; most analysts feel ATVI overpaid significantly (Fahey, 2015). ATVI’s stock price has fallen 14.8% since its all time high of $39.58 on December 29, 2015, less than a month ago. As the purchase of King proves to have been a poor decision, the stock price will likely continue to fall. However, ATVI will continue to remain profitable; their portfolio is too strong.

ATVI is currently in a growth phase and with the purchase of King it becomes the second largest interactive media company in the world, only behind China’s TenCent. ATVI created an in-house film studio in Q4 of 2015, and continues to invest in eSports. ATVI is not risk-averse at the moment; they have the capital and are looking to spend it.

In the short term (0-3 years) ATVI needs to capitalize on the King purchase and reestablish dominance in the mobile market with a successful mobile game(s). Additionally in the short term ATVI will increase its eSports events to increase its market presence and more aggressively compete.

In the medium term (3-5) and long term (5-10), ATVI will use its film studio to develop media to drive interest in its games and improve vertical integration.

 

• Capitalization of non-financial factors

 

With the purchase of King, ATVI now has 500 million monthly active users (MAUs) and has markedly increased its market share in North America and Europe in the mobile space, where it had almost none before the purchase. ATVI can potentially leverage this exposure to bring mobile customers to its consoles, or vice versa, with mobile games that use ATVI’s existing IPs. Additionally, King brings with it personnel experienced in the mobile space who can educate others in ATVI in best practices.

The film studio allows ATVI to use its IPs in new ways, expanding its “brand”. The first project for the studio is a cartoon based on Skylanders. Skylanders revenue fell in 2015 due to increased competition from Disney Infinity. The cartoon will keep children invested in the franchise, increasing sales of Skylanders games and figure packs.

ATVI has a reputation for quality products and any game they produce will sell; Call of Duty: Black Ops III was the #1 selling game of 2015. ATVI has incredible clout in the marketplace and can use these guaranteed sales to finance smaller more experimental projects.

 

• Significant Risks to Financial Performance

 

Lack of communication is the single largest barrier to financial success for ATVI. Activision and Blizzard are located in Santa Monica and Irvine respectively in southern California, a distance of approximately 50 miles. Activision, partnered with Bungie, developed the open-world shooter Destiny for the PlayStation 4. The development of the game was riddled with obstacles, and an incomplete game was eventually released. Blizzard had previously released a similar game, Diablo III, and Blizzard was not brought in to consult to help right the ship until after Destiny had been released (Schreler, 2015). The purchase of King is supposed to allow ATVI to expand its IPs into the mobile market. ATVI can’t communicate between studios 50 miles apart, so the notion of collaborating with a studio in Ireland seems farfetched. Improved communication between its studios is largest obstacle ATVI has to overcome to leverage its recent expansion.

 

1. Projections.

 

• Likely financial projections for next three years

 

The purchase of King is projected to be finalized in Q2 of 2016. With the purchase, ATVI will see a significant increase in its Net Revenues, Operating Income, Total Assets, Long-Term Debt, and Total Liabilities. In has been hypothesized that ATVI will be using $3.6B in cash that is sequestered in Europe for the purchase, and I am assuming ATVI will use a loan of $2.3B for the remaining monies needed for the purchase. This will significantly reduce ATVI’s Cash and Cash Equivalents.

The purchase of King is not likely to generate revenue above the current level. King experienced exponential growth in 2013, and is now in decline. ATVI is in an upswing, but is expanding and accruing more debt. I project total revenue will increase at a rate of 2% per year. ATVI still has no real presence in the Asian mobile market, and isn’t likely to see significant gains in revenue.

 

• Financial projections for Best and Worst-Case scenarios.

 

In a best case scenario, Net Revenues increase at a rate of 5% per years, as opposed to 2%, Operating Income and Total Assets increase at 8% per year, and ATVI uses this extra capital to more aggressively pay down its debts. This model assumes that King is able to regain some of the momentum it lost in 2014-15, and ATVI’s new film studio and new eSports division begin to earn returns by 2017.

In a worst case scenario, ATVI stagnates and every increase in one market is offset by losses in another. ATVI has a diverse portfolio at this time, so I do not predict ATVI experiencing declines in revenue in any scenario (see table II in Appendix A). Stagnant revenues would seriously discourage investors, and potentially cripple ATVI’s stock price.

 

• Potential inaccuracies of projections

 

The projections were derived using the full year financial statements from ATVI and King from 2012 to 2014, and financial results from Q1 through Q3 of 2015. Modest growth was predicted based on King’s declining revenues and ATVI’s increasing revenues partially offsetting each other. The projected results are also contingent on ATVI increasing its presence in the mobile market, which are critical to future success. If ATVI were to either outperform or underperform in the mobile market, revenues could significantly fall outside the projected results.

1. Business Opportunities

 

• The Proposal

 

To leverage the recent acquisition of King and to expand its mobile presence, ATVI should open a studio in South Africa to develop mobile games for the burgeoning African mobile market. ATVI will be the only major studio currently focusing on the African market and can dominate the market share.

1. Cost/Benefit Analysis

The initial costs of opening a studio in South Africa will likely not be any higher than opening a new studio elsewhere. Due to the Rand’s weakness against the dollar currently, opening a small studio in Johannesburg will be cheaper than opening a comparable studio in Europe or North America.

The overwhelming user base in Africa are mobile users; as such, ATVI should leverage the newly acquired mobile expertise from King to man the new studio. Utilizing a small team (10-15 members) to develop mobile content aimed at an African audience will provide ATVI with potentially significant market share in Africa. The only large studio to operate in Africa is Ubisoft, who have had an office in Casablanca, Morocco for over a decade. Fortunately for ATVI, Ubisoft has not leveraged their presence on the continent to improve their African market share, but rather to provide project support for Ubisoft’s other studios (Ubisoft breaks up projects between multiple studios who work on separate parts of a project in parallel).

Assuming a typical three year development cycle, the new studio will not generate measurable profit for at least three years. Being the first major studio to develop games for an African audience will be seen as a major step towards legitimizing the African market and African games designers and developers. These moves could potentially lead to large increases in customer goodwill towards the company which will drive sales upon product release.

It should be noted that Africa is notorious for political instability and it is difficult to predict the future economic and political climate with any certainty.

For a summary breakdown of costs, see Table III in Appendix A.

1. Impact on Financial Reports

The monies spent on the new studio will increase the costs of product development, and these will be permanent recurring costs for the life of the studio. The added costs will decrease the Operating Income on the balance sheet, reducing potential profits, at least for the first three years until the new studio can release a viable mobile game to generate revenue.

After three years time, and assuming a successful launch, the South African studio will generate sales revenue, increasing profits. The intellectual property of the new games will also increase the amount of Total Assets of ATVI. The formation of the studio will also increase the Goodwill of ATVI, further improving their net worth.

For a summary of the impacts on Financial Reports incurred by operating in South Africa, see Table IV in Appendix A.

Appendix A

 

Table I: Ratio Comparison between ATVI and similar companies

	Intuit	Microsoft	2U	DDD	ACI	Adobe	American Software	Electronic Arts	Imperva	Activision Blizzard	Average	ATVI % difference from average
	INTU	MSFT	TWOU	DDD	ACIW	ADBE	AMSWA	EA	IMPV	ATVI
Current Ratio	147%	250%	379%	391%	110%	185%	218%	135%	194%	255%	226%	13%
Quick	147%	244%	379%	326%	110%	185%	218%	134%	193%	250%	219%	14%
Cash	97%	194%	366%	192%	20%	150%	159%	110%	131%	179%	160%	12%
Gross margin	83%	65%	76%	49%	55%	85%	51%	68%	78%	65%	68%	-4%
Operating	18%	19%	25%	4%	14%	10%	9%	21%	35%	27%	18%	48%
Pre-tax	17%	20%	26%	3%	10%	9%	10%	20%	35%	22%	17%	28%
Profit	9%	13%	26%	2%	7%	6%	8%	19%	36%	19%	15%	31%
Pre-tax ROE	31%	23%	33%	1%	17%	5%	11%	30%	60%	14%	23%	-38%
After Tax ROE	16%	15%	33%	1%	12%	4%	9%	29%	61%	12%	19%	-38%

 

Table II: Expected, Best-Case, and Worst-Case Scenario Financial Results

Expected Results	2013	2014	20151	2016	2017	2018
Net Revenues	4583	4408	4530	6790	6926	7064
Operating Income	1372	1183	1699	1784	1873	1967
Total Assets	14012	14746	15483	16257	17070	17923
Long-Term Debt	4668	4324	4120	64202	6099	5611
Total Liabilities	7390	7513	7663	8136	8298	8465
Cash & Equivalents	4443	4858	5268	30533	3327	3594

 

1. 2015 data based on ATVI projections from Q3 2015 report.
2. Assume that ATVI used a $2.4B loan as part of King purchase.
3. Assume that ATVI used $3.6B cash sequestered in Europe for King purchase, reducing Cash, but $964M from King’s Cash is then added to total.

 

Best-Case Scenario	2013	2014	20151	2016	2017	2018
Net Revenues (+5%)	4583	4408	4530	6790	7130	7486
Operating Income (+8%)	1372	1183	1699	1784	1927	2081
Total Assets (+8%)	14012	14746	15483	16257	17558	18962
Long-Term Debt (-10%)	4668	4324	4120	64202	5778	5200
Total Liabilities (-3%)	7390	7513	7663	8136	7892	7655
Cash & Equivalents (+15%)	4443	4858	5268	30533	3511	4036

 

 

Worst-Case Scenario	2013	2014	20151	2016	2017	2018
Net Revenues (+0%)	4583	4408	4530	6790	6790	6790
Operating Income (+0%)	1372	1183	1699	1784	1784	1784
Total Assets (+0%)	14012	14746	15483	16257	16257	16257
Long-Term Debt	4668	4324	4120	64202	6099	5611
Total Liabilities	7390	7513	7663	8136	8298	8465
Cash & Equivalents (+0%)	4443	4858	5268	30533	3053	3053

 

Table III: Breakdown of costs for South Africa office for 3 years

 

	2016	2017	2018	Total
Purchase Office	61,000	0	0	61,000
Project Manager	82,000	82,000	82,000	246,000
Senior Developer	74,000	74,000	74,000	222,000
Programmer x 3	279,000	279,000	279,000	837,000
Artist	74,000	74,000	74,000	222,000
Audio Engineer	0	96,000	96,000	192,000
Quality Assurance Tester	55,000	55,000	55,000	165,000
Office Assistant	50,000	50,000	50,000	150,000
Operating Costs	50,000	50,000	50,000	150,000
Net Financial Cost	725,000	760,000	760,000	$2,245,000

*Payroll costs are industry average values per the Gamasutra Industry Salary Survey 2014

 

Table IV: Summary of Impacts on Financial Reports

 

	2016	2017	2018
Assets
Cash and Cash Equivalents	(61,000)	0	0
Property and Equipment	61,000	0	0
Costs and Expenses
Product Development	50,000	50,000	50,000
Operating Income	(50,000)	(50,000)	(50,000)

Changes to Financial Reports assumes no new hiring of personnel, only transfer of existing personnel to South Africa

 

References

1. Tassi, Paul. (January 1, 2016). What it means if Activision Blizzard is really buying MLG for 46m. Forbes. http://www.forbes.com/sites/insertcoin/2016/01/01/what-it-means-if-activision-blizzard-is-really-buying-mlg-for-46m/
2. McQueeney, Ryan. (January 5, 2016). Activision buys Major League Gaming, a closer look. Nasdaq. http://www.nasdaq.com/article/activision-buys-major-league-gaming-a-closer-look-cm561636
3. Needleman, Sarah E. (November 3, 2015). Activision moves deeper into mobile games with King digital deal. Wall Street Journal. http://www.wsj.com/articles/activision-moves-deeper-into-mobile-games-with-king-digital-deal-1446574971
4. BBC News. (November 3, 2015). Candy Crush maker King bought by Activision Blizzard. BBC News. http://www.bbc.com/news/business-34707701
5. Takahashi, Dean. (November 3, 2015). Activision’s $5.9B King deal will rewrite the gaming landscape. Venture Beat. http://venturebeat.com/2015/11/03/how-the-5-9b-activision-king-deal-rewrites-the-landscape-of-gaming/
6. Nasdaq. (January 7, 2016). Technology Industry Stock Information by Company. Nasdaq. http://www.nasdaq.com/symbol/atvi/financials?query=ratios
7. Investor Relations, Activision Blizzard. (December 31, 2014). 2014 Annual Report. Activision Blizzard. http://investor.activision.com/
8. Takahashi, Dean (November 16, 2015). Activision Blizzard opens movie studio to create films and TV shows based on its games. Venture Beat. http://venturebeat.com/2015/11/06/activision-blizzard-opens-movie-studio-to-create-films-and-tv-shows-based-on-its-games/
9. Morris, Chris. (November 3, 2015). Why Activision spent $5.9 billion on ‘Candy Crush’ creator King Digital. Fortune. http://fortune.com/2015/11/03/activision-blizzard-king-digital
10. Fahey, Rob. (November 3, 2015). Activision and King: Wrong price, poor fit. GamesIndustry.biz http://www.gamesindustry.biz/articles/2015-11-03-activision-and-king-wrong-price-poor-fit
11. Serafino, Phil. (January 16, 2016). Vivendi sells its Activision stake, netting $1.1 billion. Bloomberg Business. http://www.bloomberg.com/news/articles/2016-01-15/vivendi-sells-activision-blizzard-shares-netting-1-1-billion
12. Sharma, Rakesh. (November 3, 2015). 3 Reasons Activision’s King deal Wins. Investopedia. http://www.investopedia.com/articles/investing/110315/3-reasons-activisions-king-digital-deal-wins.asp
13. Kerr, Chris (January 20, 2016). Supercell and Clash of Clans were last year’s top global earners on mobile. Gamasutra. http://gamasutra.com/view/news/263934/Supercell_and_Clash_of_Clans_were_last_years_top_global_earners_on_mobile.php Candy crush #2 downloaded, Soda Saga #4. King #2 global revenue, EA #10.
14. King Digital Investor Relations. (December 2014). King Digital 2014 Annual Report. King Digital. http://investor.king.com/investors/financial-information/quarterly-reports/default.aspx
15. Activision Blizzard Investor Relations. (December 2014). Activision Blizzard 2014 Annual Report. Activision Blizzard. http://investor.activision.com/
16. Schreler, Jason. (October 20, 2015). The Messy, True Story Behind The Making Of Destiny. Kotaku. http://kotaku.com/the-messy-true-story-behind-the-making-of-destiny-1737556731
17. Sliwinski, Alexander. (July 26, 2013). Activision Buys Itself Back From Vivendi for $8 Billion. Engadget. http://www.engadget.com/2013/07/26/activision-vivendi-split-for-8-billion/
18. Young, Doug. (November 9, 2015). TenCent Raises More Cash, Activision in Sight? Forbes. http://www.forbes.com/sites/dougyoung/2015/11/09/tencent-raises-more-cash-activision-in-sight/#a61c3ac316ca

 

1. Usmani, Basim. (February 3, 2016). The Game Industry of South Africa. Polygon. http://www.polygon.com/features/2016/2/3/10781618/the-game-industry-of-south-africa
2. ZA, Holden. (2015, September 22). Mobile gaming dwarfs PC and console gaming in South Africa. GameZone. http://www.mweb.co.za/games/view/tabid/4210/Article/21949/Mobile-gaming-dwarfs-PC-and-console-gaming-in-South-Africa.aspx
3. Sharma, Rakesh. (November 3, 2015). 3 Reasons Activision’s King deal Wins. Investopedia. http://www.investopedia.com/articles/investing/110315/3-reasons-activisions-king-digital-deal-wins.asp
4. Moss, Richard. (February 2, 2016). The state of game development in Africa. Gamasutra. http://gamasutra.com/view/news/264888/The_state_of_game_development_in_Africa.php
5. Holodny, Elena. (February 4, 2016). South Africa has a lot of problems. Business Insider. http://www.businessinsider.com/south-africa-has-a-lot-of-problems-2016-2
6. Veloria, Lorenzo. (May 15, 2014). Does ‘more developers’ really mean ‘better games’? GamesRadar. http://www.gamesradar.com/ubisoft-takes-co-op-next-level-10-studio-game-development/

California Agriculture Game

A friend of mine and I are developing a resource management game that educates players about how water is used in California agriculture. California is viewed from outsiders solely as the location of Silicon Valley and Hollywood, and not much else. In reality, agriculture is what makes California such an economic powerhouse, and how we use the limited water available to feed that economy is tantamount.

I started the game by researching what crops are grown in California in significant number, and how much water each of those crops uses, and how much revenue is generated by those crops. I used a 2013 California Crop Report by the USDA, and inserted needed values into a Google Sheet. I then compared my results with  a report from the Pacific Institute that related water use of a crop to revenue generated. My results were consistent with those of the Pacific Institute.

I used the Google Sheet to conduct more in-depth analysis (revenue per acre, yield per acre, and others). I then chose the crops that were most representative of California agriculture for use in our game.

For balance we assigned different water costs to the crops; the water costs aren’t precisely accurate, but they provide strategic value to the game while still retaining the approximate water cost of the actual crop.

We have been beta testing our game for some time, and now it’s time to fine-tune our User Interface and Rules Document and submit a finalized version for the May 15th IndieCade deadline.

MBA Enterpreneurship Report

I am currently working on an MBA, and for the program you choose a company to use as a case study. I have been using Activision Blizzard, the makers of such games as World of Warcraft and Call of Duty to give my MBA classes an emphasis in Game Design, at least from the business side of things.

Here is the final paper from my Entrepreneurship course. It’s copied from a Google doc, so there are some formatting errors.

 

• Market Domain

 

eSports, or electronic sports, is the moniker given to competitive events that are held in the digital space. eSports have existed in their current iteration since the 1990’s and really came into their own with the release of Blizzard’s game StarCraft II in 1998 and the emergence of the Korean eSports market. Blizzard’s historical success in eSports has mostly been limited to South Korea; competing companies such as Valve and Riot Games have had measurable success in North America over the past decade. Blizzard released a competitive digital card game, Hearthstone, last year, released its 5 vs 5 MOBA (Multiplayer Online Battle Arena) Heroes of the Storm (HotS) last June, and is releasing its multiplayer FPS (First-Person Shooter) Overwatch next year. Blizzard is making a large push into eSports, and while a very lucrative opportunity, it doesn’t come without risk.

 

 

• Historical Significance

 

Historically eSports have been a niche market. There have been video game events since the 1980’s, but it wasn’t until reliable high-speed internet became the norm that eSports became a viable business strategy. Traditionally eSports events were held at a venue over a Local Area network (LAN), and the events were only seen by those in attendance. Now that high-speed internet is common, events can be held remotely, where each competitor plays from their home computer, and the event is live-streamed over the internet on sites such as Twitch.tv. This revolution in connectivity has exponentially increased the number of viewers for eSports events, and opened the door for reliable advertising revenue and marketing campaigns.

 

• Factors

 

The rise of eSports can be directly attributed to three factors: reliable internet connectivity; increased acceptance of video games and video game culture; and broadcasting of eSports events on mainstream television channels.

1. Impact of Factors

In the days of dial-up modems, eSports events were held over LANs because the internet infrastructure in place couldn’t reliably run the events. Current internet lines (cable, DSL, fiber optic, etc) are now able to allow players to compete in events from any location, and more importantly, allow viewers to see the event in real-time from anywhere.

Video games are commonplace and children are exposed to video games via dedicated consoles, or more likely mobile phones, at a young age. Adults aged 18-30 grew up with video games, and are more receptive to video game related purchases than the prior generation. The acceptance of video games as part of daily life, and the passive viewing of video games via streaming has opened up the marketing opportunities for publishers.

As eSports have proven themselves to be reliable revenue streams and have attracted advertisers, major networks have aired events (Taylor, 2015). This allows additional exposure to potential customers that may not have seen the events online.

 

• Competitive Readiness

• Internal Factors:

• SWOT

 

Blizzard has brought quality eSports products to a crowded market, and success is tenuous at the moment (Joost, 2015). There is currently a vacuum in the leadership positions for the eSports venture, which is not a positive indicator. If Blizzard focuses their marketing on the customers of their competitors, I predict failure. If instead Blizzard targets wholly new customers to the genre, I predict they will see much more success. HotS will probably never be as popular as Riot Games’ League of Legends (LoL), but it doesn’t have to be. HotS can still command a sizable market presence, and has the potential to generate revenue at a regular rate. In my opinion, the success of expanding into eSports for Blizzard depends largely on who they decide they want their customer base to be.

 

 

• Prioritized List

 

To reliably compete, Blizzard needs to focus on who their customer base is going to be. Blizzard needs to establish inroads to those customers if they don’t already exist, develop marketing strategies to target those customers, and highlight what makes their product unique from their competitor’s.

 

• Readiness

 

Activision Blizzard has the monetary resources to make a big push into whichever market it chooses; much of this monetary success is from Blizzard’s titles. Blizzard has the capital to invest heavily in the eSports venture, and the steady income to see it through to the end. Blizzard has already established a partnership with TeSPA, a collegiate esports organizer, to promote brand awareness on college campuses and to create eSports teams on college campuses, bringing legitimacy to eSports. Blizzard has a diverse range of games, each with their own loyal customer base. HotS capitalizes on this by using characters from those franchises as playable characters; this makes it easier to bring customers from those franchises into the new one. In addition to TeSPA, Blizzard has already had a HotS event aired on ESPN2, and commercials for its games air regularly on television. Twitch.tv is the web-channel that is the leader in eSports viewing, and videos of Blizzard’s titles regularly appear in the top 10 viewed games on a per month basis.

An additional asset that Blizzard has over its main competitors Riot Games and Valve, is Hearthstone. Hearthstone is available on PC or mobile devices; the same can’t be said for the competition’s games. having a game in the mobile market provides Blizzard with a significant advantage in the continually expanding mobile marketplace.

However, Blizzard still lacks leadership in key eSports personnel positions, particularly at the global level. This fact downgrades Blizzard’s readiness: they have the capital, but not necessarily the leadership and expertise.

 

 

• External Factors:

• PEST

 

The economy is still weak, and will likely continue to be. Smart-phones have exponentially increased the video game customer base. Hundreds of new titles are released on the Apple App-Store everyday, making it tough for a developer to succeed in a crowded market. In this video game market, name recognition and brand loyalty is key. With the likely passage of the Trans-Pacific Partnership (TPP), the cost of exports to Asia will drop, increasing profits (Chifelle, 2015). Smart-phones have opened up third world markets that didn’t exist a decade ago. For a new developer, generating profit will be difficult, if not impossible due to the flooded market; an incredible amount of luck is required. For established brands with the capital, expertise, and willingness to innovate, the overall outlook is positive, and will continue to improve as the global economy continues to recover.

 

 

• Prioritized List

 

Being an established brand, Blizzard has the upperhand in the current economic climate. To best capitalize, Blizzard needs to expand its market presence into the emerging markets of Africa and Central/South America.

 

• Readiness

 

Blizzard has historically focused on the established markets of North America, Asia, and Europe. Purposeful expansion into emerging markets will require Blizzard to hand over operations to a partnering agency, at least temporarily. Blizzard has experience in this regard, as a separate company manages their IPs in China. TeSPA also manages Blizzard’s eSports on college campuses, and a similar deal could be reached with a partner in South Africa. Unfortunately Blizzard is missing key Global eSports personnel that could improve the viability of this venture, but I feel Blizzard has enough other experience to make up for this, at least in the short term.

 

 

III. Opportunities and Trends

 

• Intrapreneurial Opportunity

 

Blizzard has successfully organized large gaming events a multitude of times, and I suggest that Blizzard hold an event in South Africa as soon as feasible. The increasing middle class in Africa is creating independent game developers all over the continent, and Blizzard should work with these individuals to foster additional goodwill. By combining a traditional Blizzard-centric gaming event with an exposition of up-and-coming developers native to the continent, Blizzard can show it wants to be a positive contributor to Africa’s gaming success.

The mobile gaming market doesn’t exist in many countries in Africa, but it will very soon and Blizzard will want to be on the ground when it comes to fruition. Additionally, English is spoken in Nigeria, Kenya, and South Africa (three of the largest markets), so Blizzard doesn’t need to convert any games to new languages; they can be played as-is, unlike markets in Asia.

 

 

• Intrapreneurial Assessment

 

Blizzard has experience partnering with local organizations to promote its brands (TeSPA), and could do the same in South Africa. Blizzard also has years of experience hosting major events, and can bring that expertise to South Africa for both eSports events and traditional expos. The African gaming market will continue to increase, and establishing a presence before the market matures will give Blizzard a competitive advantage.

Blizzard has been trying to establish its games as legitimate eSports contenders, with some success. StarCraft is almost a national sport in South Korea, but has seen limited eSports success elsewhere. Blizzard’s newest title Heroes of the Storm is competing with League of Legends and DOTA2 in the saturated Multiplayer Online Battle Arena (MOBA) market, and will remain in third place for the foreseeable future. Additionally, Hearthstone is the only eSports title in Blizzard’s portfolio that can be played on a tablet or smartphone, making it ideal for the African market. Rather than battle competitors in the North American, European, and Asian markets, Blizzard can create its own market in Africa. Specifically, by establishing a foothold in South Africa, fostering positive brand awareness, and then expanding Northward.

 

 

• Entrepreneurial Opportunities

 

Mobile gaming is the leading revenue generator in video games, surpassing both consoles (XboxOne, PlayStation4, WiiU) and PCs (personal computers) (Gaudiosi, 2015). The prevalence of the smartphone has allowed developers to release games to millions of users simultaneously, and those users tend to be working-aged women, not the adolescent males that have defined “gamers” for the past two decades. Many developers that traditionally developed titles for consoles and PC have had mixed results. Blizzard Entertainment, the video game studio that is the subject of this paper, had avoided the mobile game space entirely until last year (2014). That venture into the mobile space possibly occurred by accident, as the game in question, Blizzard’s Collectible Card Game (CCG) Hearthstone: Heroes of Warcraft, was developed using the Unity game engine instead of creating an internal engine per normal because the project was so small scale; being created with Unity allowed the game to be transferred to mobile fairly easily.

To take advantage of the rising revenue associated with mobile games, I propose  the development of a new mobile game based on Blizzard’s PC Real-Time Strategy (RTS) game StarCraft II.

Blizzard games are known for their high quality, and Hearthstone is no exception and is currently generating $20 million in revenue per month for Blizzard. Hearthstone has proven that Blizzard can be successful in mobile gaming, and their next mobile title should utilize StarCraft II. RTS games are very popular with mobile customers; SuperCell’s Clash of Clans and Boom Beach can attest to this fact. The just mentioned titles are derivative of StarCraft, a defining series in the RTS genre. Blizzard could easily leverage their knowledge of RTS, coupled with the fact that Blizzard’s parent company Activision-Blizzard recently purchased King, the creators of Candy Crush Saga, to create an excellent mobile RTS to rival the success of SuperCell’s titles.

 

 

• Entrepreneurial Assessment

 

Developing a new mobile game that lives up to Blizzard’s standards of quality, a company notorious for not releasing content until it is ready, will take several years and thousands of man-hours. While this is a good investment that will yield predictable returns, and should be carried out, I feel it is too in-line with Blizzard’s existing portfolio and doesn’t represent a true entrepreneurial opportunity.

 

 

• Trends

 

Africa has been politically unstable for decades, preventing investment capital from flowing into the continent. Recent history has seen some progress, but infrastructure is still severely lacking and is a major barrier to economic progress. South Africa is the lone outlier, with stable government and infrastructure that makes it the best location for a foothold in Africa. Mobile phones are as commonplace in South Africa as they are in the United States, and 34% of users in South Africa have a smartphone. eSports do currently exist in South Africa, but not with the same fervor as the triad of Asia, Europe, and North America. All African and Middle Eastern countries are currently part of the European server network for Blizzard (Blizzard, 2015), clearing showing the small number of users in Africa don’t even warrant their own servers.

The market potential of Africa, coupled with its need for infrastructure, has led private companies to create the infrastructure themselves to further their economic goals. Chinese companies in particular have been upgrading local infrastructure in the central continent to expedite the mining of raw materials (Pitlo, 2015). South Africa does not need additional infrastructure, so a regional base of operations could operate without creating a location from scratch. Expanding northward into new emerging markets will likely mandate investment in infrastructure.

 

 

• Impact on Opportunities

 

The increase in mobile users worldwide has greatly increased the potential customer base for Blizzard. Blizzard already has Hearthstone available to play for mobile devices, and this functions as marketing for Blizzard products on PCs and consoles. As the world shifts away from dedicated gaming consoles towards mobile game devices, Blizzard would do well to continue to develop games for the mobile audience.

 

 

• Impact on Sustainability

 

The digital game space continues to shift towards mobile, and Blizzard will need to develop additional mobile games to remain viable in the long-run. Blizzard has established IPs on PC that will continue to generate revenue, but those streams will shrink over time as mobile gaming continues to constitute more of the market. All major developers have recognized the importance of mobile, and Blizzard is no different. Developers will need to devote more resources to mobile applications, specifically applications catered to the emerging markets overseas. Mobile phones have become a necessity and will remain a viable platform for the foreseeable future.

 

 

Resources

1. Taylor, Rich. (March 4, 2015) Rise of eSports is a Game Changer. The Huffington Post. http://www.huffingtonpost.com/rich-taylor/rise-of-esports-is-a-game_b_6784174.html
2. Activision Blizzard. (October 21, 2015). Investor Relations. Activision Blizzard. http://investor.activision.com/
3. van Dreunen, Joost. (June 1, 2015). Can Blizzard’s Storm Tackle a Saturating MOBA Market? gamesindustry.biz. http://www.gamesindustry.biz/articles/2015-06-01-a-storm-is-coming
4. van Dreunen, Joost (October 13, 2015). Heroes’ Fate Could Determine Activision’s. gamesindustry.biz. http://www.gamesindustry.biz/articles/2015-10-13-heroes-fate-is-tied-closely-to-the-success-of-activision
5. Chifelle, Cristian. (October 6, 2015) 4 things to know about the TPP trade deal. World Economic Forum. https://agenda.weforum.org/2015/10/4-things-to-know-about-the-tpp-trade-deal/
6. Blizzard (July 8, 2013) Blizzard Entertainment and Netease, Inc. to bring Hearthstone: Heroes of Warcraft to mainland China. Blizzard Press Release. http://us.blizzard.com/en-us/company/press/pressreleases.html?id=10392614
7. Xu, Beina. (April 7, 2015) Media Censorship in China.Council on Foreign Relations. http://www.cfr.org/china/media-censorship-china/p11515
8. Economist (October 31, 2015) Take It Easy: Economies are too weak for normal monetary policy to resume. The Economist. http://www.economist.com/news/finance-and-economics/21677234-economies-are-too-weak-normal-monetary-policy-resume-take-it-easy
9. Gaudiosi, John. (January 15, 2015) Mobile game revenues set to overtake console games in 2015. Fortune. http://fortune.com/2015/01/15/mobile-console-game-revenues-2015/
10. Ghemawat, Pankaj. (December 2005). Regional Strategies for Global Leadership. Harvard Business Review. https://hbr.org/2005/12/regional-strategies-for-global-leadership
11. ZA, Holden. (2015, September 22). Mobile gaming dwarfs PC and console gaming in South Africa. GameZone. http://www.mweb.co.za/games/view/tabid/4210/Article/21949/Mobile-gaming-dwarfs-PC-and-console-gaming-in-South-Africa.aspx
12. Pitlo, Lucio Blanco. (August 6, 2015). Chinese Infrastructure Investment Goes Abroad. The Diplomat. http://thediplomat.com/2015/08/chinese-infrastructure-investment-goes-abroad/

Unity Prototypes (Gibson)

Last spring as I was developing the curriculum for my Digital Game Design course, I decided to adopt Jeremy Gibson’s “Introduction to Game Design, Prototyping, and Development using Unity and C#” as the textbook. I went through the prototypes in the book, coded them, and here are videos of the completed projects.

Boids is an exercise in the middle of the book and not a formal prototype. Every frame the “boids” check how far they are from their neighbors and from the cursor. The boids chase the cursor , but scatter once they get too close. This exercise simulates a flock of birds.

Apple Picker is the first prototype in the text. Apples fall from the tree and must be caught in the basket for points. If an apple is missed, a basket is destroyed and the scene resets. Once all baskets are destroyed, the game is over. The lateral speed of the tree, the rate at which apples drop, and the chance of the tree changing direction are all adjustable.

Mission Demolition is an Angry Birds clone prototype. One thing I have not coded is health for the castle walls, allowing them to be damaged and ultimately destroyed. Once a cannon ball hits the green square, the level is completed. With the walls simply piling up and never leaving the scene, this can make hitting the target troublesome.

Space SHMUP (shoot em’ up) is a familiar genre and the first big prototype in the text. When an enemy is killed, the enemy is supposed to drop 0 or 1 power-up. You can see in the video that sometimes an enemy will drop 2-4 power-ups. I believe this is a result of the enemies being composed of multiple 3D objects with multiple colliders. I tried only having the parent object having a collider, but this didn’t seem to help.

Prospector is a solitaire game that introduces using XML files in your coding. The art assets used were supplied by the publisher. The game works, but one thing you can notice is that the draw pile sits too high in the scene, and the discard pile sits too low. I have no idea why this is. The XML files used determine the location of the cards, and no changes I made altered the layout. There’s an artifact somewhere superseding my changes that I was unable to find. Other than that, the game works great.

There are 4 more prototypes in the book, but these are the ones I have completed thus far. I have my students build the Apple Picker, Mission Demolition, and Space SHMUP prototypes, plus another of their own choosing before they begin work on their own digital game.

Programming with Unity, Norco College

During the Summer of 2015 I took an online course through Norco College on Video Game Programming to better prepare myself for the classes I would be teaching during the 2105-16 school year. The course is part of Norco’s Game Development program that has specializes in Art, Audio, Programming, and Design. I highly recommend Norco to anyone interested in Video Game Development (norcocollege.edu). Here are short videos of the projects I completed during the course. All projects were done in Unity using C# as the scripting language.

One of the first project I completed was a Tic-Tac-Toe game. The crux of this project was scripting checks (booleans) for 3-in-a-row every update. The game switches between two players and the current player determines what color the block turns when clicked.

Next we made a Flappy Bird clone. This project focused on collision detection between the bird and the pipes. Secondly, pipes are spawned semi-randomly every few seconds, so we learned some procedural generation too. Altering the amount of velocity imparted to the bird on button press had a large impact on the feel of the game as well.

No game programming course is complete without a Space SHMUP. The own I made for Norco wasn’t as involved as the one in Jeremy Gibson’s Unity textbook (which I had already done at this point), but was still good practice. We had to create a second weapon type besides the standard laser, and I went with an Ion Cannon (ala Star Wars). The purple bolts only disable enemy shields, and don’t actually destroy the enemy ship. They have to be hit with a laser to be destroyed. The player shield can be activated voluntarily as an emergency measure, but points are not awarded when it is used to destroy an enemy ship.

One of the last projects was a cooperative puzzle game. I really enjoyed this project. The white and black spheres need to work together to get to their respective blocks to finish the level. While working on this project we essentially created a level-editor tool so it is very easy to create additional levels once all the unique pieces have been created. The green spheres tell the player which paths are open to them (the spheres are colliders that check whether open ground is in front of the player). The left player uses WASD for movement, and the right player uses the arrows, so both players play simultaneously.

The cumulative project was a check for how to script a variety of functions. We had to script a bouncing ball, a light that clicks on and off, spawning an object when two buttons are held simultaneously, and a few others. I’m a fan of the color-changing spheres. The “reset” sphere wasn’t a requirement but I felt it provided more utility to the player so I added it in.

Overall I really enjoyed the class. It’s a 3-unit class that’s only $150 for California residents and is usually offered online. I recommend it for anyone interested in scripting in Unity.

Renovation

In an effort to improve my internet presence and my overall “brand”, I’ve decided to rededicate myself to this blog. I have several projects juggling in the air at the moment, and I’ll be dissecting and explaining them as I go. Note that anything on this site is my own personal expression and not that of my employer.

The Lives of Tao, by Wesley Chu

During a recent excursion to the good ol’ Barnes and Noble, I came across this book. You must read it. Mostly you must read it so Mr. Chu can quit his day job and hurry up and right a sequel so I can then read that one too. But let me give you a synopsis if my desire for a sequel isn’t reason enough for you.

The premise of the Lives of Tao is that millions of years ago a race of aliens crash landed on Earth. These aliens are not able to survive in the Earth’s atmosphere, but have the ability to be absorbed by a host, ensuring survival. Essentially the aliens are symbiotes ala Spiderman, but instead of black goo, they are described as amorphous cloudlike entities that are absorbed by the host. I pictured a spectral Metroid. Additionally, the aliens are essentially immortal, and have been bonding with human beings since before we were human beings, and have consequently had some influence on nearly every major event in human history.

These aliens have since split into two rival factions, with humanity caught in the middle. Enter in our protagonist, an unsuspecting new recruit in the fight for humanity’s future. This book is a classic spy novel with prerequisite intrigues, gunplay, and romance, with science fiction influences incorporated for awesomeness. Read this book.

Moro Rock and The General Sherman Tree at Sequoia National Park

Over spring break the family and I took a trip to Sequoia National Park, where I saw the world’s largest tree (by volume) and climbed to the top of Moro Rock. Here are some pictures.

I don’t know the people standing near the tree, I just used them for scale

This sequoia is over 200 feet tall

The large branch sticking out to the left is over 6 feet in diameter

The trail is a series of stairs for 1/4 mile. Not too bad.

I don’t know those people either, they were just in the shot.

The canyon you follow into Sequoia is 4000 feet deep. Almost as deep as the Grand Canyon, but far less vertical so it’s not as impressive. But still, pretty big.

Here’s a view of the road into Sequoia from the top of Moro Rock. It’s full of blind turns with elevation changes and no guard rails. Not fun to drive on, but very pretty views.

Viewed from above, it reminds me of a video game race track you could drive at 80 mph, instead of the actual 15.

There are plenty of hand rails on the trail, but it’s not for the faint of heart. One slip and you fall hundreds if not thousands of feet. Don’t bring small children unless you want to carry them.

Mount Whitney is hidden behind the peaks near the middle.

That’s my brother with his back to me. Some people took a picture of us with my brother’s camera, but I just had my trusty I-phone 3gs.

The General Sherman Tree, while not the tallest tree in the world (I think that honor goes to a Redwood in Northern California that is something like 400 feet tall), the General Sherman Sequoia is the most massive tree in the world. Interesting fact, sequoias don’t die of old age; they have very shallow root systems and once they get too big for the roots and soil to hold them in place, they fall over. The tree then dries out and dies from lack of water.

The trail up Moro Rock, while not physically difficult, is rather daunting. Although there are stairs with handrails all the way up, if you were to slip and fall through the railing you would plunge to your death, and there would be nothing you could do to prevent it. I do not recommend this trail for children unless you want to scare the bejeezus out of them and then carry them up and then back down the narrow, steep stairs. I saw entirely too many children on this walk, and every one of them was clinging to their respective parent for dear life. Beautiful views, easy walk, not for kids.

Why the Veronica Mars Kickstarter is a Very Bad Idea

Let me start by saying I have no opinion about the show Veronica Mars. While I have been aware of the show, I have never watched an episode. I enjoy the star of the show, Kristen Bell, and coincidentally, have in the past very much enjoyed the work of the actor who plays her father Enrico Colantoni in Just Shoot Me and Galaxy Quest. That being said, Veronica Mars is a show I just never got around to.

When I heard about the Kickstarter to fund a Veronica Mars feature film, while listening to the excellent podcast Monkey in the Cage, alarms immediately started to go off. To my limited knowledge of Kickstarter, the majority of projects being funded are for a small niche of the populace, and will not generate a lot of revenue after the project is completed. A Veronica Mars movie, however, is another beast entirely.

According to Nielsen, during its final season (2006-2007) Veronica Mars finished with a rating of 1.1/3. This means that during a showing of Veronica Mars, 1.1% of all households with a television (approximately 1.2 million of the 112 million total), and 3% of all television households with a television on at the time, were watching Veronica Mars. If we assume that a household contains on average 1.5 people, then Veronica Mars had a fan base of 1.8 million people. I believe that assuming half of those 1.8 million people will pay to see the movie in one form or another is reasonable. Additionally, since Veronica Mars left the air, Kristen Bell has expanded her fan base with movies and TV appearances, meaning  the movie will probably bring in viewers who have never heard of Veronica Mars prior to the movie. As a comparison, Kristen Bell’s 2010 film “When in Rome”, which was overwhelmingly panned by reviewers, still grossed $32 million. There is definitely money to be made.

The kickstarter is asking for 2 million dollars, and at the time of this writing, it had amassed nearly 3.8 million dollars with 3 weeks still to go. A budget of 2 million (or 3.8) is miniscule by today’s standards. Two million is enough to get the movie made, and not much else. If special effects and the number of locations are kept to a minimum, a movie can be filmed and edited fairly cheaply. For these types of films, where you accrue the most costs is marketing; it doesn’t matter how good a film is if no one knows about it. For an independent film, the best way to market the film is to not market it at all. I know this contradicts the previous sentence, but follow me. If a filmmaker uses their entire budget to produce a quality movie to completion, so all it needs is to be marketed and distributed, you may be able to convince a major studio to market and distribute the film for you. You share your profits with the studio, and everyone is happy. The Veronica Mars television show was produced in cooperation with Warner Bros, so they’re the obvious choice to distribute the film.

So now the question arises, if a movie has a fan base (profits) already in place, a major studio to distribute the film,  the star’s husband (Dax Shepard) has a production company, and the star has a net worth of 8 million dollars meaning she could fund the entire project herself if she really wanted to, why hasn’t the movie been already made? Why go to kickstarter? My answer is Serenity.

The film based on the show Firefly grossed 25 million in theatres. However, it cost 39 million to make and 10 million to market. The movie didn’t make it into the red for the studio until DVD sales. My guess is Warner Bros is unwilling to risk funds producing a Veronica Mars movie, but has told the show if the movie gets made, they’ll distribute it. Serenity may have only grossed 25 million in theatres, but it grossed 39 million from DVD sales, rentals, and TV licensing. Veronica Mars fans are not as rabid (probably)as Firefly fans, but Veronica Mars likely has broader appeal (not Sci-Fi, larger female audience), so I am going to assume that the Veronica Mars film can expect similar figures, while also costing more than 30 million less to make. That means after ticket sales, DVD’s and rentals/TV, the Veronica Mars film can potentially gross 59 million dollars, while only costing 4 million to make. If Warner Bros spends an additional 10 million in marketing/distribution, that is still a gross of 45 million dollars. As an investor in the production of the film, shouldn’t you get some of that money?

For the larger tiers in the Kickstarter for Veronica Mars, you can be an extra, get personalized voicemail/videomail messages from the stars, get tickets to the premieres, and other similar goodies. For the big investor ($10,000), you get a one-line speaking part in the film as a waiter (plus you have to fly yourself to the shoot at an additional cost). Nowhere does it allow the investors of the film to recoup their money or earn a profit. For $10,000 I should get whatever prizes are already offered, and I should get my $10,000 back when the film is profitable.  A film production normally has to hire the extras and bit players at a cost, but why bother when they’ll pay you absurd amounts of money?

Wanna be in a movie kid? That’ll be $10,000

Under normal circumstances, the producer finds funding for a film. Entities invest in the film by giving money to the project, and the investors see a return once the movie makes a profit. It’s kind of like the stock market; you buy shares in a movie, and at some time in the future, they (hopefully) pay out. Now with Kickstarter, studios don’t have to worry about the money owed to the investors eating away at the profits, because there isn’t anything owed. All the risk and cost is taken away from the studio and given to society (kickstarter donators), but the studio still gets all the profit associated with that risk. This represents a huge shift in the way a studio finances a movie. Why go to banks and the like for financing when someone is more than willing to give you $8,000 to be an extra and name a character in the movie? The Veronica Mars kickstarter heralds the unraveling of a proven business model.  If this film makes anywhere close to the numbers I’ve projected, and the investors get none of that money, the investors have been screwed, plain and simple. And judging by how successful the kickstarter is, this isn’t an isolated incident. Shame on them.

*Author’s note: All the figures listed in this article have been culled from various sources on the internet and I cannot vouch for their validity

Possible stories for Episode VII

Disney has purchased Lucasfilm for 4 billion in dollars and stock options, and is already moving towards filming Star Wars episodes 7-9, with episode 7 to be released in 2015. Disney has already shown with the purchase of Marvel that they are more than capable of using an existing property to create high quality movies that generate lots of revenue, so the purchase of Lucasfilm makes sense. That being said, the fact that really matters is that George Lucas is going to take a step back and let a new generation of writers and filmmakers create the movies.

Episode 7 is already in the writing stages of development, and according to one article, it will continue the adventures of the cast from the original trilogy. I think that means they will recast the parts using younger actors (Ryan Gosling gets my vote for Han Solo) ala Star Trek.  As I am sure this would be successful and enjoyable, I find it unfortunate. I would prefer, at least at first, to see the original actors reprise their roles in an age appropriate story, which I will get to in a moment.

Let me begin my argument by stating that my favorite Star Wars film is The Empire Strikes Back. Not only for its visual beauty, but also because of the tragically accurate story of rebels being crushed by superior forces. The movie just works, and I believe a lot of that has to do with the fact that George Lucas didn’t direct it. George’s heavy-handedness in episodes 1-3 are what ruined the films for many moviegoers, and by agreeing to take a step down for these next films, he is acknowledging this.

There currently exists a massive expanded universe in the Star Wars novels, full of stories waiting to be adapted. I have read many, many novels (probably all of them up to the year 2010) and  here are my picks for the possible stories that might be adapted for movie treatments:

The Thrawn Trilogy by Timothy Zahn. These are the books that started the Star Wars books, and will probably be used in some way if they decide to go with younger actors.

It has been five years since Return of the Jedi, and the remnants of the Imperial Fleet have been marshaled by Grand Admiral Thrawn to strike back at the new Galactic Republic and retake what is theirs.

Pros: Direct connection to the previous films, especially since contingency plans Darth Vader had kept hidden come into play. Thrawn is the best type of villain in the sense you know he’s bad, but you root for him anyway. Luke must confront the dark-side and resist succumbing like his father before him.

Cons: Cloning facilities come into play, so it might feel too much like episodes 1-3. In the books defense, it was written 20 years ago, long before episode 1 came out.

The New Jedi Order series by several authors. This is the movie I want to see. This series and the one that follows it would be fantastic episodes 7-12. Not only would it allow the original actors to play their parts, it allows younger actors to take over the story pretty quickly and become the driving force.

It has been over 20 years since Return of the Jedi, and the Galactic Republic is thriving. A new generation of Jedi has been brought forth by Luke Skywalker and his Jedi Academy on Yavin 4, who have reclaimed their role as protectors of the galaxy. From outside the galaxy an unstoppable species arrives, the Yuuzhan Vong. Masters of genetic engineering, violent, viewing technology as blasphemy, and ready to cleanse the galaxy and take it as their own, they march towards Coruscant and complete victory. Worst thing? They can’t be felt in the Force.

Pros: This is a dark story. Whole planets are wiped out as standard procedure. The Yuuzhan Vong are a sadistic species who practice self-mutilation and torture. They view all other species as inferior and have no qualms with murder. They are evil. Being unseen in the Force, the Jedi are at a disadvantage the whole time, giving the movies a sense of desperation. The Vong use biological constructs for their ships/weapons, which would be visually stunning. The major players in the film are Han and Leia’s children along with the original cast, so Harrison Ford and the rest are about the right age to reprise their roles if they desired.  Would be awesome. Possible tagline “Not your grandma’s Star Wars”.

Cons: If done properly, this would be a very dark, sad, violent trilogy; basically everything that would make it fantastic.

Legacy of the Forceseries by several  authors. The follow up to New Jedi Order is the story that episodes 1-3 should have been. Someone deciding to take on the mantle of a Sith shouldn’t be because they had “scary visions of childbirth” like Anakin did in episode 3. It should be meaningful, and most importantly, should be something we would all consider doing if in the same situation. There are some spoilers in this portion of the summary, and I apologize for that.

The Yuuzhan Vong have finally been defeated. The damage done by their terraforming will take generations to undo. Jacen Solo, son of Han and Leia, has been to hell and back, and is determined to never let something like this happen again. Keeping his rank of Colonel earned during the war, Jacen becomes head of the Secret Police and begins using the law to amass power. An attempt on his daughter’s life confirms what he already knows: someone needs to take charge, and that someone is me.

Jaina, Jacen’s twin sister, has decided that she and she alone must destroy her brother. Who do you go to for help when you need to kill the second most dangerous man in the universe? The first most dangerous man in the universe; old man Boba Fett.

Pros: Boba Fett. A realistic tale of tragedy and someone falling to the darkside for all the right reasons. Also Boba Fett.

Cons: if Disney releases a movie every 3 years like they plan to, we wouldn’t be able to see this saga even begin until 2024.

So there’s my take on what I would like to see in the coming episodes. Any thoughts?