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How Undead Labs saved itself and State of Decay from oblivion · The Game Business Show

0:00
SPEAKER_01: We had several offers and we were happy to pick the one that we did.
0:05
SPEAKER_01: It's going to be a great partner for us long term,
0:07
SPEAKER_01: you know,
0:08
SPEAKER_01: but we also have to transition from kind of one investment thesis to another.
0:14
SPEAKER_01: With most of our teams sitting in Seattle,
0:15
SPEAKER_01: Washington,
0:16
SPEAKER_01: we're in one of the most expensive places in the world to make video games.
0:20
SPEAKER_01: We created a company that was the sort of vehicle that acquired Undead Labs.
0:25
SPEAKER_01: And so that company has several shareholders that are all employees of Undead Labs.
0:30
SPEAKER_01: And we're in the process of issuing stock options to all employees.
0:34
SPEAKER_01: I don't know that we would be in the place that we are today if not for the Game Pass audience.
0:41
SPEAKER_00: Hello and welcome to The Game Business Show.
0:43
SPEAKER_00: This is our Tuesday edition where every week we speak to a big video game leader.
0:49
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0:50
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0:52
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1:04
SPEAKER_00: and you can find out more about it at thegamebusiness.com.
1:09
SPEAKER_00: Now,
1:09
SPEAKER_00: today we are talking to one of the studios that Microsoft has just said goodbye to,
1:13
SPEAKER_00: Undead Labs.
1:14
SPEAKER_00: Now, Undead Labs is the team behind the open world survival horror series,
1:18
SPEAKER_00: State of Decay,
1:19
SPEAKER_00: and it's about a year away from shipping its next game, State of Decay 3.
1:24
SPEAKER_00: But Xbox has decided that the franchise and the team isn't part of its new future.
1:28
SPEAKER_00: And after seeking a buyer for the studio,
1:30
SPEAKER_00: and it had interest,
1:31
SPEAKER_00: including from UK developer Slash Damage,
1:33
SPEAKER_00: ultimately the Undead Labs management bought themselves out and the company is now
1:37
SPEAKER_00: under employee ownership.
1:40
SPEAKER_00: It's partially been able to do this thanks to a publishing deal for State of Decay 3.
1:43
SPEAKER_00: Now, we don't know who that publisher is,
1:45
SPEAKER_00: and I'm not going to find out who it is today either,
1:48
SPEAKER_00: but the deal has enabled Undead Labs to become an independent team.
1:52
SPEAKER_00: However, that independence has come at a price.
1:54
SPEAKER_00: The team has had to significantly downsize as it finishes up development on its upcoming game.
2:00
SPEAKER_00: Now, today we are speaking to Undead Labs boss Philip Holt, and I have a lot to ask him.
2:04
SPEAKER_00: There was an article in Kotaku some four years ago reporting on an unhappy workplace culture.
2:09
SPEAKER_00: So I want to hear about how things are today.
2:12
SPEAKER_00: State of Decay has been a big Game Pass hit, so I want to ask about that.
2:15
SPEAKER_00: Indeed, State of Decay 3 is still coming to Xbox Game Pass.
2:19
SPEAKER_00: I wanted to talk about the team's hopes for the future,
2:21
SPEAKER_00: what independence might allow it to do that it couldn't do before,
2:24
SPEAKER_00: why the team couldn't find a buyer for the studio,
2:27
SPEAKER_00: and find out what exactly employee ownership means.
2:30
SPEAKER_00: And to answer those questions, I'm pleased to welcome Philip Holt.
2:34
SPEAKER_00: Hello, Philip.
2:34
SPEAKER_00: Welcome to the show.
2:36
SPEAKER_01: Hi, Chris.
2:36
SPEAKER_01: Thank you.
2:37
SPEAKER_01: Thank you for having me.
2:38
SPEAKER_00: It's been quite a challenging rollercoaster for Undead Blabs over the last few months.
2:43
SPEAKER_00: How's that whole, like, crazy summer been?
2:47
SPEAKER_01: Well, I think, you know, singular in a career doesn't happen that often.
2:52
SPEAKER_01: You know, so you don't have a lot of prior experience to draw from.
2:57
SPEAKER_01: And so you just sort of have to dig deep, I suppose.
3:01
SPEAKER_01: You know, this may seem slightly unrelated, but I've been thinking a lot about names of things.
3:09
SPEAKER_01: You know, I think State of Decay, I didn't name it, but I think it's a pretty good name.
3:13
SPEAKER_01: And it's clever because it's a common enough expression that we all know it.
3:18
SPEAKER_01: But when you sort of stop to think about each of the words,
3:21
SPEAKER_01: it's a proxy for the things that we all go through in our lives.
3:24
SPEAKER_01: You know,
3:25
SPEAKER_01: it's obviously related to the world of the zombie apocalypse,
3:28
SPEAKER_01: but I think, you know, We all have difficulties.
3:31
SPEAKER_01: We all have losses.
3:32
SPEAKER_01: You know,
3:33
SPEAKER_01: we all have marriages that come to an end,
3:35
SPEAKER_01: or a job that's lost,
3:36
SPEAKER_01: or a diagnosis we don't like, or,
3:38
SPEAKER_01: you know,
3:39
SPEAKER_01: the sort of vision of our future that we have for ourselves suddenly stops.
3:44
SPEAKER_01: And, you know, we have to do something about it.
3:47
SPEAKER_01: And I think it's not just enough to endure.
3:51
SPEAKER_01: These times force us to sort of dig deep within ourselves and find,
3:55
SPEAKER_01: you know,
3:55
SPEAKER_01: the resolve,
3:56
SPEAKER_01: the resilience, the The depth of our own characters that can carry us through.
4:01
SPEAKER_01: And, you know,
4:01
SPEAKER_01: so I think that's true for the game,
4:03
SPEAKER_01: and it's always struck me that our game mirrors the sort of culture of the studio,
4:11
SPEAKER_01: the sort of situation we find ourselves in frequently.
4:14
SPEAKER_01: You know, so I think we can turn to the game for some ideas about how we get through things.
4:19
SPEAKER_00: Wow.
4:21
SPEAKER_00: Talk to me about this.
4:23
SPEAKER_00: Initially, the plan was to be acquired by someone, right?
4:25
SPEAKER_00: At least that was the vision of Microsoft.
4:28
SPEAKER_00: What went wrong there, if you can call it that?
4:31
SPEAKER_01: Well, I don't know that anything went wrong.
4:33
SPEAKER_01: You know,
4:33
SPEAKER_01: it was an accelerated period of time for Microsoft's divestiture of all the studios
4:38
SPEAKER_01: that were included,
4:40
SPEAKER_01: and we had a lot of interest, and we talked to a number of people.
4:45
SPEAKER_01: And, you know,
4:46
SPEAKER_01: I also thought that because of,
4:48
SPEAKER_01: you know,
4:49
SPEAKER_01: we were so close to being in revenue,
4:52
SPEAKER_01: that the amount of capital that we needed to finish was,
4:55
SPEAKER_01: you know, not an insurmountable amount that we couldn't go raise it ourselves.
4:59
SPEAKER_01: So I submitted, I knew that a couple of other studios were doing management buyouts.
5:03
SPEAKER_01: And so I submitted an offer for a management led acquisition.
5:08
SPEAKER_01: And I think Microsoft thought that that would be a good idea.
5:11
SPEAKER_00: I'll be honest, I do understand Microsoft's current business strategy.
5:15
SPEAKER_00: I understand their thinking.
5:17
SPEAKER_00: On this show,
5:17
SPEAKER_00: we've been talking about the importance of trying to be innovative, but also focus.
5:21
SPEAKER_00: I have to say,
5:21
SPEAKER_00: I was somewhat surprised that State of the K was in that,
5:25
SPEAKER_00: particularly with so close to, you know, not that far from finished, really.
5:29
SPEAKER_00: And it's a very big favor, particularly on Game Pass.
5:31
SPEAKER_00: Were you surprised?
5:34
SPEAKER_01: Um, yeah, sure, I was surprised.
5:37
SPEAKER_01: And, uh, you know, we were, um,
5:41
SPEAKER_01: You know, but I honestly, I didn't spend a lot of time like litigating those decisions.
5:48
SPEAKER_01: I mean, once the decision was made,
5:50
SPEAKER_01: you know,
5:50
SPEAKER_01: my focus shifted to what's the path forward for us that keeps us,
5:54
SPEAKER_01: you know, the studio intact, the team intact and us shipping this game.
5:58
SPEAKER_01: So all of my attention really was thinking about how do we save the studio and the game.
6:02
SPEAKER_00: All right.
6:03
SPEAKER_00: Let's talk about yourself.
6:04
SPEAKER_00: Obviously,
6:04
SPEAKER_00: I know that you've run a company before,
6:06
SPEAKER_00: but the last decade you've been part of big organizations,
6:10
SPEAKER_00: Microsoft, MarinaNet, those sort of places.
6:13
SPEAKER_00: So how have you found this transition?
6:15
SPEAKER_00: I mean, speaking of some of your peers,
6:17
SPEAKER_00: I know there's quite a difference in running a team and in running a business.
6:22
SPEAKER_01: Yes, indeed there is.
6:24
SPEAKER_01: I would say that Undead Labs Was, you know, run as a business.
6:29
SPEAKER_01: So there's not a lot that's actually changed.
6:31
SPEAKER_01: You know,
6:32
SPEAKER_01: we ran kind of most aspects that any sort
6:35
SPEAKER_01: of independent company would consider essential to keeping a company afloat.
6:40
SPEAKER_01: You know, the way that we were financed was different.
6:43
SPEAKER_01: And, you know, we were part of an annual budget process.
6:45
SPEAKER_01: But I always viewed that as us appealing to an investor.
6:50
SPEAKER_01: And, you know,
6:51
SPEAKER_01: inside of a large company, there's more things to fund than there's funds available.
6:55
SPEAKER_01: And so you have to present an attractive investment opportunity in order to be considered.
7:01
SPEAKER_01: And so we always sort of viewed it that way and try to approach it that way.
7:05
SPEAKER_00: I know that, obviously, you've had to make significant cuts, I think is the word you used.
7:09
SPEAKER_00: This might be a naive question.
7:11
SPEAKER_00: I'm assuming it's just to make sure that the money coming in matches the money going out.
7:14
SPEAKER_00: But why was that necessity?
7:18
SPEAKER_01: Yeah, I think that very much that.
7:19
SPEAKER_01: It's interesting.
7:20
SPEAKER_01: I think it's a challenging market right now.
7:23
SPEAKER_01: You know,
7:23
SPEAKER_01: there's capital available,
7:25
SPEAKER_01: but I think it's Nervous,
7:27
SPEAKER_01: perhaps, sitting on the sidelines waiting for obvious slam dunks.
7:32
SPEAKER_01: I can't speak for investors,
7:33
SPEAKER_01: but I can say from my experience in talking to a lot of people that would be in
7:36
SPEAKER_01: a position to invest in State of Decay to bring it to market,
7:40
SPEAKER_01: I think there was several factors there.
7:42
SPEAKER_01: So sort of amount of money, cost of team, one sort of side of the economics.
7:47
SPEAKER_01: I think the other was the speed in which decisions would be made was another.
7:51
SPEAKER_01: And I think any time there's challenge in an investment opportunity,
7:56
SPEAKER_01: It's just easy for people to say no.
7:58
SPEAKER_01: And, you know, so we had several offers and we were happy to pick the one that we did.
8:05
SPEAKER_01: I think it's going to be a great partner for us long term,
8:08
SPEAKER_01: you know,
8:08
SPEAKER_01: but we also have to Transition from kind of one investment thesis to another.
8:14
SPEAKER_01: And so inside of first party,
8:16
SPEAKER_01: I think the idea for State of Decay has always been that given proper support,
8:21
SPEAKER_01: it could ascend to kind of tentpole status alongside some of
8:25
SPEAKER_01: the biggest brands inside of Xbox.
8:27
SPEAKER_01: And on the outside,
8:28
SPEAKER_01: as an independent company,
8:30
SPEAKER_01: you know,
8:30
SPEAKER_01: we have to make sure that we can survive and that we have
8:32
SPEAKER_01: a durable cost structure that's going to not only get through launch,
8:35
SPEAKER_01: but it's going to be supported by the revenue that we produce.
8:38
SPEAKER_00: I don't know if you heard it, we had an interview with Bulkhead recently.
8:41
SPEAKER_00: They obviously just released War Dogs, which has done tremendously well.
8:45
SPEAKER_00: And they were owned by Tencent this time last year.
8:47
SPEAKER_00: And they got dropped, which I think may, in hindsight, not have been the best decision.
8:52
SPEAKER_00: They found a new publisher.
8:53
SPEAKER_00: But they had to re-scope, basically.
8:56
SPEAKER_00: And although they still have AAA ambitions for War Dogs,
8:58
SPEAKER_00: they thought, they're not starting there.
8:59
SPEAKER_00: We're going to put out this thing and then hopefully expand it and grow over time,
9:03
SPEAKER_00: which obviously worked for them.
9:04
SPEAKER_00: Is this a similar thing you're talking about here, or is actually you're not having to do that?
9:09
SPEAKER_01: Um, well,
9:10
SPEAKER_01: I don't know what their,
9:11
SPEAKER_01: you know, the details of how they re-scoped, so it's hard for me to compare.
9:14
SPEAKER_01: But I would say that, you know, we, you know, we're pretty close to finishing this game.
9:18
SPEAKER_01: And there's a lot in it.
9:20
SPEAKER_01: And so, I think folks that saw us at Gamescom can attest to that.
9:23
SPEAKER_01: I think our alpha players can attest to that.
9:25
SPEAKER_01: And obviously,
9:26
SPEAKER_01: with a significant number of people leaving the company,
9:28
SPEAKER_01: we've got to make some changes.
9:30
SPEAKER_01: But I don't think we're dramatically addressing scope in that way.
9:33
SPEAKER_00: Okay.
9:34
SPEAKER_00: I mean, I did hear some of the reports coming out of Gamescom were from,
9:37
SPEAKER_00: you know, I didn't get to see it, but I spoke to the people who did.
9:41
SPEAKER_00: And in fact, before this interview, I did as well.
9:43
SPEAKER_00: And yeah, there's a lot of positive buzz ahead of the game.
9:47
SPEAKER_00: How many people are at Undead Labs?
9:49
SPEAKER_01: Well, we haven't really made that number public.
9:54
SPEAKER_01: And the reason why is that I think it would sort of make the arithmetic sort of easy
9:58
SPEAKER_01: to figure out exactly what the size of our layoff was.
10:01
SPEAKER_01: And I've been reluctant to sort of share that number because,
10:05
SPEAKER_01: you know, these are our friends and colleagues that all lost jobs.
10:08
SPEAKER_01: And it was a total heartbreak to have to part ways under the circumstances.
10:13
SPEAKER_01: And I would hate to sort of reduce the impact to those individuals to sort of
10:18
SPEAKER_01: a number or a statistic.
10:19
SPEAKER_01: So, you know,
10:20
SPEAKER_01: I would say that we're,
10:21
SPEAKER_01: you know,
10:22
SPEAKER_01: a small and lean development team that one would expect to see given the ambition
10:28
SPEAKER_01: that we're pursuing as an independent company.
10:30
SPEAKER_00: Are you confident you've got the resource that you need to sort of finish the game?
10:34
SPEAKER_01: Absolutely.
10:35
SPEAKER_01: And we still have several partners that we're working with and,
10:38
SPEAKER_01: you know, that helps build out the sort of size of the team as well.
10:41
SPEAKER_01: And those have been partners that we've been working alongside for many years now
10:45
SPEAKER_01: and they're standing by us as well.
10:47
SPEAKER_01: Is that co-dev partners and things like that?
10:49
SPEAKER_01: Yes, exactly.
10:50
SPEAKER_00: Yeah.
10:50
SPEAKER_00: And I think you called it an employee owned studio.
10:55
SPEAKER_00: So is that, is it,
10:56
SPEAKER_00: is it just a management buyout or is there like these shares being passed around
10:59
SPEAKER_00: the studio?
10:59
SPEAKER_00: What does that mean?
11:04
SPEAKER_01: Yeah, we haven't talked about it publicly.
11:06
SPEAKER_01: I think somebody reported that I was the buyer, which is not really true.
11:12
SPEAKER_01: So we created a company that was the sort of vehicle that acquired Undead Labs.
11:18
SPEAKER_01: And so that company has several shareholders that are all employees of Undead Labs.
11:24
SPEAKER_01: And we're in the process of issuing stock options to all employees.
11:28
SPEAKER_01: You know, and as you know, there's like steps that you have to go through in order to do this.
11:31
SPEAKER_01: You got to get a valuation and a plan and then hand out options.
11:35
SPEAKER_01: But we're in the middle of all that right now.
11:37
SPEAKER_01: It was really important to me,
11:39
SPEAKER_01: speaking of just this sort of notion,
11:40
SPEAKER_01: this is not a typical founding of a company like I didn't.
11:45
SPEAKER_01: You know, I wasn't employee one.
11:46
SPEAKER_01: I didn't raise the initial startup capital.
11:49
SPEAKER_01: I didn't take on all the commercial risks myself.
11:51
SPEAKER_01: You know,
11:51
SPEAKER_01: the value that's present has been created by the team that's here and,
11:56
SPEAKER_01: you know, the team that just left as well.
11:58
SPEAKER_01: Like, you know, that doesn't change.
12:01
SPEAKER_01: And so it was really important to me that everybody have sort of a stake and have,
12:05
SPEAKER_01: you know,
12:06
SPEAKER_01: opportunity for upside participation because,
12:09
SPEAKER_01: you know,
12:09
SPEAKER_01: so much of what the company's worth acquiring is the work that they have contributed
12:14
SPEAKER_01: to.
12:14
SPEAKER_00: Well,
12:14
SPEAKER_00: I'll talk about being independent because I do think there might be some advantages
12:17
SPEAKER_00: to it.
12:17
SPEAKER_00: You've got the financial runway you need.
12:20
SPEAKER_00: Are you having to branch out at all and do some pitch work or are you all set
12:24
SPEAKER_00: for what you need in order to get the game to release?
12:26
SPEAKER_01: Yes, we are.
12:28
SPEAKER_01: We have everything we need to ship State of Decay 3 and that is our singular focus.
12:32
SPEAKER_01: And I'm also grateful that,
12:34
SPEAKER_01: you know,
12:34
SPEAKER_01: we were able to do this exclusively through a relationship with a publisher rather
12:39
SPEAKER_01: than bringing in investors.
12:42
SPEAKER_01: And not to say that there's anything wrong with investors,
12:44
SPEAKER_01: and I would hope in the future at some point if we needed to scale
12:47
SPEAKER_01: that we would be looking at investors to come along in.
12:49
SPEAKER_01: But at this stage,
12:50
SPEAKER_01: just because we are pre-revenue and there's a fair bit of risk of sort
12:54
SPEAKER_01: of this divestment from Microsoft and do we have what it takes to become a durable,
12:59
SPEAKER_01: independent company,
13:00
SPEAKER_01: any sort of Financial institution that came in would probably be looking for
13:06
SPEAKER_01: a majority share and then control.
13:10
SPEAKER_01: And so independence to me is about we,
13:15
SPEAKER_01: the creators of State of Decay,
13:16
SPEAKER_01: are in a position where we're really just accountable to our audience.
13:20
SPEAKER_01: And that sort of Directness, that clear line of sight, I think is extraordinarily healthy.
13:28
SPEAKER_01: And of all of the things that we've been through over the last several months,
13:33
SPEAKER_01: I think that's probably the thing that I've been most excited about is just
13:36
SPEAKER_01: that directness and closeness of a relationship that we exist to serve an audience.
13:42
SPEAKER_01: And the better we do,
13:44
SPEAKER_01: the more the audience rewards us and the more we get to keep making the game
13:47
SPEAKER_01: that they like.
13:48
SPEAKER_00: Yeah.
13:49
SPEAKER_00: Well, that's the thing.
13:50
SPEAKER_00: Whenever I speak to studios that have gone independent,
13:52
SPEAKER_00: like, you know, I use IO Interactive as an example.
13:55
SPEAKER_00: We were part of Square Enix and they went independent and they did the thing with Hitman.
13:58
SPEAKER_00: They always talk about the fact that they can get closer to the community
14:03
SPEAKER_00: and it allows them to get...
14:04
SPEAKER_00: And I'm always a bit surprised about that because I'm like, could you not before?
14:08
SPEAKER_00: But I'm interested.
14:09
SPEAKER_00: Is it that motivation?
14:10
SPEAKER_00: Is it the fact that, you know, there is no now really any barrier or any other party?
14:14
SPEAKER_00: It's really just that fan base.
14:17
SPEAKER_01: Yeah, it's a fair question.
14:18
SPEAKER_01: I think we've always had a really close relationship with our community and,
14:22
SPEAKER_01: you know, we're grateful to have earned their goodwill.
14:25
SPEAKER_01: But I do think inside of a larger company, you know, you serve multiple objectives.
14:32
SPEAKER_01: And, you know,
14:33
SPEAKER_01: there's,
14:34
SPEAKER_01: you know, We just don't have those kinds of directives that we need to go achieve.
14:40
SPEAKER_01: It's just make the best possible game.
14:42
SPEAKER_01: Of course, inside of Xbox, that was the primary objective, is make great games.
14:47
SPEAKER_01: It's just a cleaner, clear line of sight to the audience.
14:55
SPEAKER_01: I don't have a boss, for example.
14:58
SPEAKER_01: Ultimately,
14:58
SPEAKER_01: you say the success or failure of the company is down to whether
15:02
SPEAKER_01: or not we create something an audience is going to support.
15:06
SPEAKER_00: How is, obviously,
15:07
SPEAKER_00: I appreciate they're probably hurting at the moment,
15:08
SPEAKER_00: the layoffs and things, but how is, generally speaking, the mood in the team?
15:13
SPEAKER_00: Instead of Undead Labs?
15:14
SPEAKER_01: Yeah.
15:17
SPEAKER_01: You know, I think over, they've been through a lot.
15:20
SPEAKER_01: And, you know, I chose early on to be transparent with the team.
15:25
SPEAKER_01: I mean, maybe irresponsibly transparent, honestly.
15:28
SPEAKER_01: Like, I shared a lot.
15:30
SPEAKER_01: And...
15:32
SPEAKER_01: And partly because the news was just already out there from the beginning.
15:35
SPEAKER_01: And, you know,
15:36
SPEAKER_01: sort of Microsoft's divestment decisions were made public,
15:39
SPEAKER_01: I don't know, back in July, I suppose.
15:41
SPEAKER_01: And, you know, so the team sort of knew.
15:44
SPEAKER_01: And rather than, I don't know, keep them in the dark or...
15:48
SPEAKER_01: Manufacture some alternate reality.
15:50
SPEAKER_01: I just kind of brought them alongside.
15:52
SPEAKER_01: You know,
15:53
SPEAKER_01: I kept the individual parties,
15:55
SPEAKER_01: you know,
15:56
SPEAKER_01: confidential as we were going through all various negotiations,
15:59
SPEAKER_01: but they sort of knew what was happening.
16:01
SPEAKER_01: And I think that that, you know, probably reduced some anxiety.
16:05
SPEAKER_01: And I just tried to put myself in their shoes, like,
16:09
SPEAKER_01: It would be a difficult thing to experience if,
16:12
SPEAKER_01: you know,
16:12
SPEAKER_01: you're not in control,
16:13
SPEAKER_01: you don't really know what's happening, you know your job might be at risk.
16:16
SPEAKER_01: You know, is this game actually going to finish or not?
16:19
SPEAKER_01: So I tried to just share as much as I could.
16:21
SPEAKER_01: And it was pretty direct conversations.
16:23
SPEAKER_01: You know, we talked early on that under probably any scenario, there'd be some job losses.
16:29
SPEAKER_01: And so it was pretty direct about that.
16:30
SPEAKER_01: People sort of asked me to quantify the scale of impact.
16:34
SPEAKER_01: I was pretty honest about that.
16:37
SPEAKER_01: You know,
16:37
SPEAKER_01: so the day of the layoff,
16:39
SPEAKER_01: you know,
16:40
SPEAKER_01: I think people were prepared and they'd had the summer to sort of think
16:44
SPEAKER_01: through what they would do next.
16:45
SPEAKER_01: And I think that ended up being a real courtesy to people, you know, as painful as it was.
16:50
SPEAKER_01: Nobody, of course, wants to lose a job, but I think people understood the reason for it.
16:56
SPEAKER_01: And as a result,
16:57
SPEAKER_01: I think the surviving team You know,
16:59
SPEAKER_01: they don't look at the company or they don't look at me
17:02
SPEAKER_01: as this person that's done great damage to the people that they love.
17:07
SPEAKER_01: I think they sort of saw it as a necessary consequence of the reality that we're in.
17:13
SPEAKER_01: And I think, you know, the game is always the best medicine.
17:17
SPEAKER_01: You know,
17:17
SPEAKER_01: if you're sitting on a game that is great and it sort of solves all of
17:22
SPEAKER_01: the internal problems in a way,
17:24
SPEAKER_01: so people are highly motivated to finish the game because they believe in it
17:28
SPEAKER_01: so much.
17:29
SPEAKER_00: I'm interested in that before this How thing,
17:31
SPEAKER_00: because obviously it's been a long development, this game.
17:33
SPEAKER_00: It's been,
17:34
SPEAKER_00: you know,
17:34
SPEAKER_00: and you've had all sorts of challenges and COVIDs and all sorts of things going on.
17:39
SPEAKER_00: Where was things before that?
17:41
SPEAKER_00: I mean, it feels like it's been a bit of,
17:43
SPEAKER_00: I imagine there's a lot of people that will be quite relieved to see
17:45
SPEAKER_00: the game come out.
17:47
SPEAKER_01: Yeah.
17:48
SPEAKER_01: In some ways, yes, it feels like most of my adult life I've been working on State of Decay 3.
17:52
SPEAKER_01: But actually, that's sort of an amnesia aspect, I suppose, of looking backwards.
17:58
SPEAKER_01: When I joined the company in 2019,
18:00
SPEAKER_01: State of Decay 2 had just launched,
18:03
SPEAKER_01: and it was doing remarkably well inside of Game Pass,
18:06
SPEAKER_01: and there really was no content strategy behind the game at all.
18:09
SPEAKER_01: And so we built out a content strategy, and I think we shipped something like 38 updates.
18:16
SPEAKER_01: So we supported State of Decay 2 for, I don't know, the last six years post-launch.
18:20
SPEAKER_01: I think just our last update was in November 24.
18:22
SPEAKER_01: So we had a team actively working against State of Decay 2.
18:26
SPEAKER_01: And we did that for several reasons.
18:30
SPEAKER_01: One, of course, is just to serve the audience that was there.
18:33
SPEAKER_01: But it also became kind of a laboratory for us in terms
18:35
SPEAKER_01: of what we should be thinking about for State of Decay 3.
18:38
SPEAKER_01: So most of the updates that we pushed out ended up being experiments.
18:43
SPEAKER_01: We learned an extraordinary amount about the game,
18:48
SPEAKER_01: the ideas that we had about extending State of Decay 2,
18:51
SPEAKER_01: what the audience was really reacting to,
18:54
SPEAKER_01: that all informed Design for State of Decay 3.
18:57
SPEAKER_01: And so, you know,
19:00
SPEAKER_01: we're in a spot today where Alpha players are coming in and they're like,
19:04
SPEAKER_01: man, this game's amazing.
19:05
SPEAKER_01: It's leveled up in really every possible way.
19:07
SPEAKER_01: You know, I'm proud of what we've achieved in the game.
19:11
SPEAKER_01: I think, yes, COVID was disruptive for us, and maybe us particularly.
19:16
SPEAKER_01: I know it's difficult for every team,
19:19
SPEAKER_01: but it's coinciding close to the purchase of the company,
19:24
SPEAKER_01: to the founder leaving, to a new guy coming in and taking charge.
19:28
SPEAKER_01: That by itself is disruptive in the best of times.
19:30
SPEAKER_00: Now we're going back quite a way now,
19:32
SPEAKER_00: but I read that Kotaku article and I ran Best Places to Work Awards back then,
19:36
SPEAKER_00: you know, for the UK, but a bit for the US and Canada.
19:39
SPEAKER_00: And I actually found a lot of studios at that point in time.
19:42
SPEAKER_00: There were pockets of people that weren't happy.
19:45
SPEAKER_00: It wasn't necessarily the whole company.
19:46
SPEAKER_00: And in fact, a lot of the times it wasn't.
19:47
SPEAKER_00: It was small pockets of things.
19:49
SPEAKER_00: And COVID put, you know, some projects in difficult spots, but also make people feel isolated.
19:54
SPEAKER_00: And also it can be really hard as a company to work out how to shape the culture
19:57
SPEAKER_00: when things like that.
19:58
SPEAKER_00: And particularly if you're scaling up.
19:59
SPEAKER_00: And you're getting bigger as lots.
20:01
SPEAKER_00: I don't know if Undead Labs were at the time,
20:02
SPEAKER_00: but I know that a lot of companies were at that period in time.
20:05
SPEAKER_00: But what question do I have to that?
20:08
SPEAKER_00: I guess it might be a bit of a general question,
20:10
SPEAKER_00: but how have you sort of reshaped the culture of Undead Labs since then,
20:13
SPEAKER_00: you know, since all those changes and all those moments?
20:17
SPEAKER_00: It's a big question.
20:19
SPEAKER_00: Sorry.
20:20
SPEAKER_01: No, no, no.
20:20
SPEAKER_01: I think it's a good question.
20:22
SPEAKER_01: And it's been a minute since I've thought about it because I did a lot of work with
20:27
SPEAKER_01: the team early on.
20:29
SPEAKER_01: You know,
20:30
SPEAKER_01: because State of Decay 2 was,
20:32
SPEAKER_01: you know,
20:32
SPEAKER_01: State of Decay 1 and 2 were both conceived as small games built by
20:36
SPEAKER_01: an independent company that was published by Microsoft.
20:39
SPEAKER_01: And then inside,
20:41
SPEAKER_01: after acquisition,
20:42
SPEAKER_01: being a first party studio with a different set of objectives about really trying
20:46
SPEAKER_01: to achieve,
20:48
SPEAKER_01: you know,
20:48
SPEAKER_01: ascending to a temple kind of release,
20:52
SPEAKER_01: you know, that's a big journey to take anybody through.
20:57
SPEAKER_01: It felt to me,
20:58
SPEAKER_01: just based on past experience,
20:59
SPEAKER_01: that the number one most valuable thing that I could help
21:01
SPEAKER_01: the organization achieve is to just really become a learning place.
21:06
SPEAKER_01: And where we don't know what problems we're going to face in the future,
21:10
SPEAKER_01: but if we have a learning orientation that we meet any of those problems with,
21:16
SPEAKER_01: then, you know, we could solve almost anything.
21:19
SPEAKER_01: And, you know,
21:20
SPEAKER_01: the first component I think of learning is to recognize that you have to learn,
21:24
SPEAKER_01: you know, this sort of humility and curiosity.
21:28
SPEAKER_01: And so, you know, we did a lot of work around our values, the sort of
21:35
SPEAKER_01: The rules for internal behavior and,
21:38
SPEAKER_01: you know, humility and curiosity were the first among them.
21:43
SPEAKER_01: In a team orientation and,
21:44
SPEAKER_01: you know,
21:45
SPEAKER_01: this sort of rising to the moment is I think we've really had to call on
21:50
SPEAKER_01: in this last summer of, you know, recognizing that making games is not easy ever.
21:55
SPEAKER_01: And, you know,
21:56
SPEAKER_01: we're asked to do extraordinary things and we all have to dig deep in order to find
22:02
SPEAKER_01: The sort of internal metal that's going to allow us to deliver.
22:06
SPEAKER_01: And so, yeah,
22:09
SPEAKER_01: so values work,
22:09
SPEAKER_01: I think,
22:10
SPEAKER_01: was the way that I approached that and then just making sure that I'm accountable
22:14
SPEAKER_01: to those values just like anyone else and that we reinforce them
22:18
SPEAKER_01: through our behavior as a company.
22:19
SPEAKER_00: The move to independence can bring, well, I mean, it does bring extra pressure, right?
22:23
SPEAKER_00: You're in a situation where you're missing some deadlines or something not entirely working out.
22:26
SPEAKER_00: That can be the difference in life and death, really.
22:28
SPEAKER_00: So are you Thinking about that from a cultural point of view when it comes
22:32
SPEAKER_00: to your team,
22:33
SPEAKER_00: an expectation that perhaps is even,
22:35
SPEAKER_00: maybe I'm wrong,
22:35
SPEAKER_00: but my expectation is far more critical than perhaps there was before.
22:39
SPEAKER_00: That makes sense.
22:41
SPEAKER_01: Yes, yes.
22:42
SPEAKER_01: Well, earlier I mentioned that I had to,
22:45
SPEAKER_01: you know, I created this company as the acquisition vehicle for Undead Labs.
22:49
SPEAKER_01: And so, you know, you have to think about, okay, well, I got to name this thing.
22:52
SPEAKER_01: Hey, you know, it needs a name.
22:53
SPEAKER_01: And, you know, could have picked anything, but naming things is fun for me.
22:57
SPEAKER_01: So I spent a little bit of time thinking about it, and it's called Full Measure.
23:03
SPEAKER_01: Which is kind of a reference to the Gettysburg Address,
23:06
SPEAKER_01: which if I could be so ambitious for a minute to sort of speak
23:10
SPEAKER_01: to what Lincoln wrote, but he talked about the last full measure of devotion.
23:14
SPEAKER_01: And, you know,
23:15
SPEAKER_01: so to your question about being an independent company and just the sort of life
23:19
SPEAKER_01: and death nature of hitting your milestones and things like that,
23:23
SPEAKER_01: you know, there's this commitment that You know, we have to engender in our studio.
23:30
SPEAKER_01: I can't say require because commitment, I think, is a thing that we freely choose to do.
23:36
SPEAKER_01: You know, I can't command somebody to commit themselves to something.
23:39
SPEAKER_01: I can only get compliance in that if I make a command.
23:43
SPEAKER_01: So I think the reason I selected that name is that I think that The company,
23:48
SPEAKER_01: any company's obligation is to be worthy of a team's commitment,
23:53
SPEAKER_01: is to sort of conduct itself in a way that engenders that level of,
23:58
SPEAKER_01: like, dedication from a team.
24:00
SPEAKER_01: Like, I will do what I can to the best of my ability to make this thing happen.
24:05
SPEAKER_01: And so what is that?
24:07
SPEAKER_01: So that's sort of the philosophical idea.
24:09
SPEAKER_01: And then how does that translate into the things that we do?
24:13
SPEAKER_01: Employee ownership is a part of that.
24:15
SPEAKER_01: Being transparent and sort of sharing the good news and especially the bad news so
24:20
SPEAKER_01: that people know what the score is.
24:23
SPEAKER_01: I think those are part of the way that a company can be worthy of the commitment of a team.
24:28
SPEAKER_00: Are you in an office?
24:29
SPEAKER_00: Are you in a central location?
24:31
SPEAKER_00: What's the setup like?
24:33
SPEAKER_01: Yeah, I'm actually, this is, I'm a bit on vacation, so... No, it's totally fine.
24:38
SPEAKER_01: This is the first time in many months that I've had a bit of a break.
24:44
SPEAKER_01: But yes, our main office is in Pioneer Square in Seattle, in the middle of the city.
24:49
SPEAKER_01: And then we have satellite teams that we built actually during the sort
24:52
SPEAKER_01: of remote era of COVID in Illinois and in Florida.
24:57
SPEAKER_01: And we still have presence in both of those locations as well,
25:00
SPEAKER_01: as well as a handful of remote employees in other parts of the country.
25:04
SPEAKER_01: And, you know, we made, during COVID, as we were building out the team, everyone was remote.
25:09
SPEAKER_01: And so, you know,
25:10
SPEAKER_01: and there,
25:10
SPEAKER_01: of course, was incredible demand for talent, and it was a very competitive market.
25:14
SPEAKER_01: So we sort of went to where we could hire talent.
25:18
SPEAKER_01: And we were also expanding our footprint amongst co-developers.
25:21
SPEAKER_01: And of course, they're far flung around the world.
25:25
SPEAKER_01: And so we just,
25:27
SPEAKER_01: you know,
25:27
SPEAKER_01: sort of built a culture that could be both in office,
25:30
SPEAKER_01: be present together, and, you know, knew how to work with remote people.
25:34
SPEAKER_00: I was going to ask the question.
25:35
SPEAKER_00: This sounds like a little bit of a hostile question.
25:37
SPEAKER_00: I don't mean it to be.
25:37
SPEAKER_00: But what's taken State of Decay 3 so long?
25:40
SPEAKER_00: Is it what you were talking about earlier with all the experimentation you did
25:43
SPEAKER_00: with State of Decay 2?
25:45
SPEAKER_00: Yeah, you know, I don't think it's taken that long, actually.
25:48
SPEAKER_00: Well, particularly,
25:49
SPEAKER_00: you mentioned the ambition for this was to be a temporal title,
25:52
SPEAKER_00: so I guess in that context, no, it hasn't.
25:55
SPEAKER_01: Yeah, well, yeah, that's true.
25:57
SPEAKER_01: But I'd have to give a think to when you really start the clock on State of Decay 3 development.
26:01
SPEAKER_01: So, I mean,
26:02
SPEAKER_01: if you measure it from when State of Decay 2 shipped,
26:05
SPEAKER_01: yeah, we're approaching You know, eight years, I suppose, even longer.
26:10
SPEAKER_01: And if you measure it from our first trailer,
26:12
SPEAKER_01: the 2020 trailer that features the infamous zombie deer, that's also a long time.
26:18
SPEAKER_01: You know,
26:18
SPEAKER_01: but I got myself in a little bit of trouble by saying that we didn't really have
26:22
SPEAKER_01: a team working on the game at that point.
26:24
SPEAKER_01: Not entirely true.
26:25
SPEAKER_01: I mean, we had a really small team.
26:26
SPEAKER_01: So we've had a small team on the game since maybe 2020.
26:29
SPEAKER_01: But, you know, I wouldn't say that development really picked up until 23.
26:36
SPEAKER_01: How early?
26:37
SPEAKER_01: 22, somewhere in there.
26:37
SPEAKER_01: So by that measure, I wouldn't say that we've been in development for a long time.
26:41
SPEAKER_00: I know that a lot of the game,
26:42
SPEAKER_00: I know particularly during that time that,
26:44
SPEAKER_00: speaking to some other studios that announced games quite early,
26:47
SPEAKER_00: part of it was about trying to find staff, right?
26:49
SPEAKER_00: Because it was so, people forget, it's the market so different now.
26:53
SPEAKER_00: But the situation back then is everybody was poaching Everybody,
26:57
SPEAKER_00: benefits were rising and everything was getting a bit,
26:59
SPEAKER_00: and everyone was trying to say,
27:00
SPEAKER_00: it was really hard if you were,
27:01
SPEAKER_00: I don't know,
27:02
SPEAKER_00: a studio going out there saying, hey,
27:04
SPEAKER_00: come work for us,
27:04
SPEAKER_00: but you couldn't tell people what game you were building
27:06
SPEAKER_00: and what game you were working on.
27:07
SPEAKER_00: I mean, I know maybe people could have worked that out with Undead Labs,
27:10
SPEAKER_00: but there's a part,
27:12
SPEAKER_00: there was an element of that,
27:13
SPEAKER_00: I think perhaps,
27:14
SPEAKER_00: you know,
27:14
SPEAKER_00: I don't know if that was true with you,
27:16
SPEAKER_00: but I know it's true of some of the other games that were announced at that time.
27:18
SPEAKER_00: Well, I'll
27:18
SPEAKER_01: tell you,
27:19
SPEAKER_01: um, Part of my thinking,
27:22
SPEAKER_01: you know,
27:22
SPEAKER_01: Undead was a small company in a,
27:25
SPEAKER_01: it was a relatively small game inside of a giant organization.
27:30
SPEAKER_01: And I didn't think that, uh,
27:32
SPEAKER_01: Microsoft was done being acquisitive and,
27:36
SPEAKER_01: and I assumed that they would I mean,
27:39
SPEAKER_01: I suppose if I tell this story,
27:40
SPEAKER_01: it makes it sound like I was prescient or something,
27:43
SPEAKER_01: but I just didn't think that they were gonna continue buying small developers.
27:47
SPEAKER_01: I figured they'd start buying big things.
27:49
SPEAKER_01: And so I was a little worried about just getting swallowed up or even divested
27:55
SPEAKER_01: before we had a chance to present to the world what we were working on.
28:00
SPEAKER_01: So it was a bit of a marker on the table for me of saying State
28:03
SPEAKER_01: of Decay 3 is We're announcing it.
28:06
SPEAKER_01: It's public.
28:06
SPEAKER_01: It's, you know, the audience now knows it's in development.
28:09
SPEAKER_01: And, you know, here's a trailer to demonstrate what our vision is.
28:13
SPEAKER_00: I can understand that.
28:14
SPEAKER_00: I remember when they bought Obsidian and my thinking was, oh, that's really exciting.
28:18
SPEAKER_00: Obsidian's always on the cusp of something.
28:20
SPEAKER_00: You know, they're a very good studio, very good double up.
28:22
SPEAKER_00: I thought they've got a step up they can take.
28:24
SPEAKER_00: Maybe Microsoft could take them.
28:25
SPEAKER_00: And then when they bought Bethesda,
28:27
SPEAKER_00: I kind of felt to myself, I'm not quite sure what role Obsidian play now.
28:31
SPEAKER_00: I don't think that's necessarily specifically what you're going through your head.
28:34
SPEAKER_00: But I know that for me,
28:36
SPEAKER_00: looking on the outside,
28:37
SPEAKER_00: when the Bethesda acquisitions were being made and
28:39
SPEAKER_00: the Activision acquisitions were being made,
28:41
SPEAKER_00: I started to worry about those Smaller teams as early acquisitions
28:44
SPEAKER_00: that were being made and how they fit into,
28:46
SPEAKER_00: you know,
28:47
SPEAKER_00: you're making a game in a Call of Duty world, you know, what role would you play?
28:51
SPEAKER_00: And ultimately that's come to pass in some ways.
28:54
SPEAKER_00: Obviously though, you have benefited a lot from Game Pass.
28:56
SPEAKER_01: Absolutely.
28:57
SPEAKER_01: It's been, I think, hugely valuable to State of Decay.
29:00
SPEAKER_01: And I don't know that we'd be in the place that we are today, if not for the Game Pass audience.
29:05
SPEAKER_01: It's just that we wouldn't have achieved any kind of scale.
29:08
SPEAKER_01: And one of the things that's interesting is, you know, it's free user acquisition.
29:12
SPEAKER_01: And I mean,
29:13
SPEAKER_01: I think even today we've got several thousand people coming through
29:15
SPEAKER_01: the front door every day.
29:18
SPEAKER_01: And, you know, the benefit of State of Decay is that it's a very retentive game.
29:25
SPEAKER_01: And, you know, so we,
29:27
SPEAKER_01: I think the last time I looked at some of these numbers, you know, something like...
29:34
SPEAKER_01: Half of our monthly active users have been in the game for close to two years,
29:38
SPEAKER_01: and a quarter have been in the game for more than five.
29:42
SPEAKER_01: So, yeah,
29:44
SPEAKER_01: players come in,
29:46
SPEAKER_01: and I think there's a lot of players that come in from Game Pass,
29:48
SPEAKER_01: and they're like, oh, this isn't really for me, and then they leave.
29:51
SPEAKER_01: So there is a high churn rate.
29:55
SPEAKER_01: But of the players that we capture,
29:57
SPEAKER_01: we capture them for a long time and then they become franchise fans
30:01
SPEAKER_01: and they consume other titles in the franchise and they're excited
30:04
SPEAKER_01: about what's coming for State of Decay 3.
30:07
SPEAKER_01: So, yeah, I think it's really helped us achieve scale.
30:11
SPEAKER_01: Now, like,
30:12
SPEAKER_01: how do we,
30:15
SPEAKER_01: you know,
30:15
SPEAKER_01: make the most of that for State of Decay 3 has been obviously a key area of,
30:21
SPEAKER_01: you know,
30:22
SPEAKER_01: thought and So our biggest investment in State of Decay 3
30:27
SPEAKER_01: by far is four player co-op shared world.
30:30
SPEAKER_01: So a large audience becomes a real benefit because,
30:33
SPEAKER_01: you know,
30:33
SPEAKER_01: they play State of Decay 3 and it is a great experience to play with your friends.
30:39
SPEAKER_01: And so they want to invite their friends and many of those friends are going to be
30:43
SPEAKER_01: on other platforms.
30:44
SPEAKER_01: So it is a vector for growth for us.
30:46
SPEAKER_00: I've spoken to a few people about Game Pass recently.
30:48
SPEAKER_00: They've all got slightly different experiences.
30:50
SPEAKER_00: One studio that I spoke to was saying that people in Game Pass don't necessarily spend money.
30:55
SPEAKER_00: They are within that ecosystem and they spend money on the subscription but not
30:59
SPEAKER_00: the same as other things.
31:00
SPEAKER_00: But another perspective I had from another studio that's going
31:03
SPEAKER_00: into Game Pass They were saying that there's almost like a self-contained audience,
31:06
SPEAKER_00: like you wouldn't necessarily reach those players if you weren't in Game Pass.
31:10
SPEAKER_00: So for them,
31:10
SPEAKER_00: they didn't see much of a harm for being in it
31:13
SPEAKER_00: because there's almost two different audiences to it.
31:15
SPEAKER_00: So it was interesting.
31:17
SPEAKER_00: And you're right,
31:17
SPEAKER_00: you know,
31:18
SPEAKER_00: if you're multi-platformer,
31:19
SPEAKER_00: you've got that base of players and then that can spread out.
31:22
SPEAKER_00: And we've seen it going all the way back to when subscriptions sort of started.
31:25
SPEAKER_00: I always think of the Rocket League example.
31:27
SPEAKER_00: That game exploded on multiple platforms.
31:30
SPEAKER_00: You know, last year happened with Clear Obscure, right?
31:31
SPEAKER_00: It can be an excellent for discoverability.
31:35
SPEAKER_01: 100%.
31:36
SPEAKER_01: I mean, I think we're something like 25 million franchise players now,
31:40
SPEAKER_01: which is a pretty big number and I think maybe is a bit of a surprise for folks
31:44
SPEAKER_01: that are aware of State of Decay but haven't really played it themselves.
31:48
SPEAKER_01: Yeah, so I think it has been really valuable for us.
31:51
SPEAKER_00: How are you feeling about being,
31:52
SPEAKER_00: I don't know,
31:52
SPEAKER_00: you obviously didn't tell me how big your studio was,
31:54
SPEAKER_00: so I'm guessing you're sort of a mid-sized team now,
31:57
SPEAKER_00: but that's an interesting spot to be in.
32:00
SPEAKER_00: How do you feel about the sort of spot you're in?
32:03
SPEAKER_01: In terms of being nimble, I feel good.
32:05
SPEAKER_01: So, you know, again,
32:06
SPEAKER_01: with State of Decay 2,
32:07
SPEAKER_01: we had the benefit of You know,
32:09
SPEAKER_01: running a live and evolving game with an active audience.
32:13
SPEAKER_01: And so that allowed us to learn a lot about the sort of content that
32:17
SPEAKER_01: the audience was interested in engaging with,
32:20
SPEAKER_01: but it also created organizational capability for us.
32:25
SPEAKER_01: And just sort of like practices, like runbook almost.
32:30
SPEAKER_01: So for example, you know, once we're Well, this is even true today in our alpha.
32:37
SPEAKER_01: Once you have an audience that's in your game and playing,
32:40
SPEAKER_01: some portion of your team is dedicated to responding to the feedback of
32:46
SPEAKER_01: the audience.
32:48
SPEAKER_01: You know, so we have to be responsive in that way.
32:50
SPEAKER_01: But we also have other things that we want to deliver into the game.
32:53
SPEAKER_01: And so another portion of the team is focused on kind of work on the roadmap.
32:58
SPEAKER_01: And so once we go live,
32:59
SPEAKER_01: we'll be sort of,
33:00
SPEAKER_01: I think,
33:00
SPEAKER_01: situated in a similar way that we're highly responsive to what we're seeing in
33:05
SPEAKER_01: the audience as they're playing the game.
33:08
SPEAKER_01: And then we're also working against our own roadmap.
33:11
SPEAKER_01: Or a roadmap that's, you know, voted on by the, you know, the players of the game as well.
33:15
SPEAKER_01: So you have to have kind of like two tracks running simultaneously
33:20
SPEAKER_00: and minimum.
33:21
SPEAKER_00: I talk to a lot of studios lately and there seems to be a lot more focus on kind
33:24
SPEAKER_00: of keep the team as small as,
33:26
SPEAKER_00: maybe as small as possible isn't quite the right words,
33:28
SPEAKER_00: but certainly keep it small and into the core and
33:31
SPEAKER_00: then using outside support whenever you need to scale or anything like that.
33:35
SPEAKER_00: Is that, is that how you see the future for the studio?
33:39
SPEAKER_01: You know,
33:39
SPEAKER_01: with most of our teams sitting in Seattle,
33:41
SPEAKER_01: Washington,
33:42
SPEAKER_01: we're in one of the most expensive places in the world to make video games.
33:46
SPEAKER_01: And, you know,
33:47
SPEAKER_01: we're seeing,
33:47
SPEAKER_01: I think,
33:48
SPEAKER_01: the rise of incredible games that are coming from parts of the world where the sort
33:53
SPEAKER_01: of labor costs are just much, much lower.
33:55
SPEAKER_01: And I was out talking to lots of people,
33:57
SPEAKER_01: both investors and publishers,
33:59
SPEAKER_01: you know, a lot of scrutiny around our kind of unit cost of labor.
34:03
SPEAKER_01: And, you know,
34:05
SPEAKER_01: I was feeling at one point A little depressed that I'm never gonna win in the race
34:12
SPEAKER_01: to the bottom on economics of labor.
34:15
SPEAKER_01: Then I realized that I don't think that's the battle that I'm in.
34:20
SPEAKER_01: I think I'm in the battle of entertaining an audience.
34:23
SPEAKER_01: And I think as long as I have an audience that appreciates what we make,
34:27
SPEAKER_01: You know, then we scale the business to the size of the audience in that demand.
34:31
SPEAKER_01: And so one of the ways that we do that is by supplementing an internal team
34:36
SPEAKER_01: of experts with great teams from around the world.
34:40
SPEAKER_01: And so we have four, three, four co-devs that we work with.
34:44
SPEAKER_01: Let me get the numbers right.
34:45
SPEAKER_01: We have three primary co-development partners that we're working with today.
34:50
SPEAKER_01: So a lot of our art content comes from Virtuos and Chengdu.
34:54
SPEAKER_00: Oh, great.
34:54
SPEAKER_00: Yeah, they're good.
34:55
SPEAKER_00: I spoke to them in Tokyo actually just a couple of weeks ago.
34:58
SPEAKER_01: A fantastic team.
34:59
SPEAKER_01: We have a group out of Wushu in Liverpool working on environment and vehicles and weapons.
35:05
SPEAKER_01: Oh, I know Wushu.
35:07
SPEAKER_01: And then we have a crew from Blind Squirrel that is working on sort of engineering
35:13
SPEAKER_01: and technical art.
35:14
SPEAKER_01: And each of those groups are very different in their kind of complexity and makeup
35:19
SPEAKER_01: and the way that they're integrated into our team.
35:22
SPEAKER_00: I think,
35:23
SPEAKER_00: I've expressed this before on the show,
35:25
SPEAKER_00: but I've always felt that I understand that we want to bring costs down as much
35:29
SPEAKER_00: as we can,
35:29
SPEAKER_00: everyone wants to be nimble,
35:30
SPEAKER_00: everyone wants to be faster,
35:31
SPEAKER_00: and there's tech and there's tools that might be able to do that,
35:34
SPEAKER_00: and there's certainly different markets where the game development might be cheaper.
35:38
SPEAKER_00: But what is more important than that is we live in
35:41
SPEAKER_00: a really competitive attention economy where there's tons of things competing
35:45
SPEAKER_00: for people's attention, tons of things that are great that don't break through.
35:50
SPEAKER_00: And you can't afford to do something cheaply, right?
35:53
SPEAKER_00: Star Wars Galactic Racer is out tomorrow, right?
35:55
SPEAKER_00: And it's made by people that worked on Need for Speed and Burnout from Criterion.
35:59
SPEAKER_00: They left to form Fuse and they've made a studio.
36:01
SPEAKER_00: Almost all the outsourced and support people they've got are still based in the UK.
36:04
SPEAKER_00: And the UK is cheaper than perhaps Seattle, but it's not...
36:09
SPEAKER_00: Cheap.
36:09
SPEAKER_00: But the truth is,
36:11
SPEAKER_00: if it comes to making racing games, the UK is very good at making racing games.
36:15
SPEAKER_00: And so they want to work with the best racing talent.
36:18
SPEAKER_00: And so they went to,
36:19
SPEAKER_00: and also there's an element of cultural similarities and there's,
36:22
SPEAKER_00: you know, time zones, those sort of benefits as well.
36:24
SPEAKER_00: So in the case of that title,
36:26
SPEAKER_00: actually, it didn't make sense to go to cheaper locations and things like that.
36:29
SPEAKER_00: And I think it's just a lot more nuanced than just,
36:32
SPEAKER_00: hey, it's cheap if we outsource to other markets.
36:35
SPEAKER_01: Yeah, I share that perspective.
36:37
SPEAKER_01: Although I think it depends on This is sort of back to the, like, what does independence mean?
36:42
SPEAKER_01: I think it depends on what goal you're trying to serve.
36:47
SPEAKER_01: And in an environment where your objectives are primarily financial,
36:53
SPEAKER_01: like returning some multiple on invested capital, then,
36:58
SPEAKER_01: you know,
36:59
SPEAKER_01: maximizing margin is the primary job of the person in charge is,
37:05
SPEAKER_01: you know,
37:05
SPEAKER_01: reduce your unit costs and increase your,
37:08
SPEAKER_01: you know, Average selling price or whatever, to put it simply.
37:12
SPEAKER_01: But as an independent company, we really get to serve an audience.
37:17
SPEAKER_01: And I don't have to have a 5X multiple on invested capital.
37:22
SPEAKER_01: We need to make a profit.
37:23
SPEAKER_01: We need to be sustainable.
37:25
SPEAKER_01: We need to be able to pay ourselves and our partners appropriately.
37:27
SPEAKER_01: And it is a goal.
37:29
SPEAKER_01: This is not a charity we're doing, but it's not the number one most important objective.
37:37
SPEAKER_01: In the case of Galactic Racer,
37:38
SPEAKER_01: it's a great example that,
37:40
SPEAKER_01: you know,
37:40
SPEAKER_01: the access to talent and delivering
37:43
SPEAKER_01: the best possible experience was perhaps what they were, you know, optimizing for.
37:47
SPEAKER_00: Yeah.
37:48
SPEAKER_00: And I guess that's the advantage of being with a publisher, right?
37:51
SPEAKER_00: It comes all about the game.
37:52
SPEAKER_00: Again, I just, hey, I'd love to know what the publisher is, Philip.
37:56
SPEAKER_00: I can't wait to find out.
37:59
SPEAKER_01: We're excited to share,
38:00
SPEAKER_01: you know,
38:00
SPEAKER_01: and we talked to a lot of people and it's been a while since I've been out sort
38:04
SPEAKER_01: of like looking at the publishing community,
38:07
SPEAKER_01: you know,
38:07
SPEAKER_01: and it used to be,
38:08
SPEAKER_01: I think,
38:08
SPEAKER_01: the case that there were,
38:10
SPEAKER_01: you know,
38:10
SPEAKER_01: the giants that we're all familiar with and that was kind of the extent of it.
38:15
SPEAKER_01: Different today, yeah.
38:17
SPEAKER_01: It's very different today.
38:18
SPEAKER_01: And, you know,
38:19
SPEAKER_01: we found,
38:20
SPEAKER_01: I think, a fantastic partner for us of all of the publishers that we spoke to.
38:25
SPEAKER_01: We just had a really good connection.
38:27
SPEAKER_01: We learned a lot when we talked to them.
38:29
SPEAKER_01: I think that they're well poised to support our game.
38:33
SPEAKER_01: And, you know,
38:34
SPEAKER_01: we're really excited to build a partnership with them that can exist for
38:38
SPEAKER_01: a long time around State of Decay.
38:39
SPEAKER_00: Was there more interest?
38:41
SPEAKER_00: I mean, this is just interest.
38:42
SPEAKER_00: This is not really the best question,
38:45
SPEAKER_00: but was there more interested in people publishing the game
38:47
SPEAKER_00: than there were necessarily buying the studio, did you find?
38:51
SPEAKER_01: I think it had to do with the sort of window of time that we had available.
38:55
SPEAKER_01: So I think it was easier to contemplate a publishing deal than an acquisition
38:59
SPEAKER_01: a shorter window.
39:01
SPEAKER_01: So I think if we had a longer time frame to look for an outside acquirer,
39:08
SPEAKER_01: there may have been more interest in that.
39:11
SPEAKER_00: Hopefully long-term it'll work out for the best.
39:13
SPEAKER_00: I know it's difficult to say that now and people have lost their jobs.
39:16
SPEAKER_00: I was gonna ask where you would like to be in five years,
39:17
SPEAKER_00: but I guess your immediate thought is like,
39:19
SPEAKER_00: get State of Decay 3 out, make sure it delivers, make sure it's a hit.
39:22
SPEAKER_00: And then that's your future, right?
39:24
SPEAKER_01: Yeah, 100%.
39:25
SPEAKER_01: Five years.
39:27
SPEAKER_01: Uh, yeah.
39:28
SPEAKER_01: Seems like an impossibly long period of time into the future.
39:32
SPEAKER_01: But of course it'll be here before you know it.
39:33
SPEAKER_01: Yeah, our focus is State of Decay 3 and supporting State of Decay 3.
39:36
SPEAKER_01: And at some point, you know, if we have earned the right, we get to make more games.
39:41
SPEAKER_01: You know, when we figure out what the next game is.
39:43
SPEAKER_00: Yeah.
39:44
SPEAKER_00: Yeah.
39:44
SPEAKER_00: Is there anything you're going to miss about being part of us?
39:47
SPEAKER_00: I know, was there anything about Xbox Game Studios that you're missing,
39:50
SPEAKER_00: that you're going, oh, we're going to have to find a replacement for that?
39:53
SPEAKER_01: Oh, 100%.
39:53
SPEAKER_01: I mean, it was a...
39:56
SPEAKER_01: I mean, I had eight years inside of Xbox Game Studios.
40:01
SPEAKER_01: It was fantastic.
40:03
SPEAKER_01: And actually we've had like a 15 year partnership with Microsoft.
40:07
SPEAKER_01: They were there at the very beginning of State of Decay and as the first publisher.
40:10
SPEAKER_01: And so that relationship is changing for sure.
40:14
SPEAKER_01: It has changed over the years and it's going to change again, but it's not ending.
40:18
SPEAKER_01: So we'll continue to have,
40:19
SPEAKER_01: I think,
40:19
SPEAKER_01: a close relationship with Xbox and You know, I'm proud to count them as a partner.
40:26
SPEAKER_01: The people inside of that organization were great.
40:28
SPEAKER_01: I learned a ton.
40:30
SPEAKER_01: I always felt supported.
40:31
SPEAKER_01: I think the studio head group of individuals in particular, I've built mentors, friends.
40:38
SPEAKER_01: I'm gonna go see some of them soon.
40:41
SPEAKER_01: You know, so we just, I think those relationships will carry on, obviously.
40:44
SPEAKER_01: You know, well beyond our time together.
40:46
SPEAKER_01: You know,
40:47
SPEAKER_01: I think there's services,
40:48
SPEAKER_01: you know,
40:48
SPEAKER_01: there was research and things like that,
40:51
SPEAKER_01: those usability labs and those kinds of things that were,
40:55
SPEAKER_01: you know, pretty state of the art that we'll miss.
40:57
SPEAKER_01: But yeah, I mean,
40:58
SPEAKER_01: I think we're excited to sort of build those capabilities for ourselves
41:01
SPEAKER_01: or see what our new publisher can bring to the table as well.
41:04
SPEAKER_01: Great.
41:05
SPEAKER_00: Philip, I'm out of questions.
41:06
SPEAKER_00: It's a difficult time, but I am pleased that you have found a way to continue and start the K3.
41:12
SPEAKER_00: And I've heard, as I say, from people that played it at Gamescom, it's shaping up very nicely.
41:15
SPEAKER_00: So fingers crossed that it does very well when it comes out.
41:18
SPEAKER_00: But yeah, thank you for your time.
41:20
SPEAKER_00: Thanks for your time.
41:21
SPEAKER_00: It's good to talk to you.
41:22
SPEAKER_00: That's it for today's episode of The Game Business Show.
41:24
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41:25
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41:25
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41:27
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41:45
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41:47
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