Bioware/Pandemic: What the Deal Means

Talk to Greg Zeschuk, joint CEO of Bioware and Andrew Goldman, CEO of Pandemic and the triple meaning of this deal becomes clear. It is an emphatic alternative to acquisition from a publisher. It is also a resolution to the problem of the increasing stakes involved in top-end game development. And, through security, it is a route to growth.

What it is not, they say, is a step towards becoming a publisher. But we'll come to that later.

1) It's about independence

With their respective business partners, both men have helped create and steer successful development entities, with solid IP, and great reputations among consumers and publishers. But the next generation beckons, and with it the next level of growth and risk potential. The usual route leads straight to acquisition by Big Publisher.

Neither Bioware nor Pandemic much fancied selling out to Big Publisher or cashing in for a life on the links. Goldman says, "The journey for us as entrepreneurs is not done yet. We both feel that our entrepreneurial spirit has a lot of value. It's been a natural progression for developers [to be acquired] but oftentimes it seems that the developer loses a lot of what made them special when they become part of a larger organization."

The subtext of that is a certain historical inevitability to acquisition, unless an alternative can be found. Goldman makes it clear that avoiding acquisition has been a big motivation. "We want to build our companies and build our brands so I think we would have avoided that as much as possible. But the industry is changing and the products are getting bigger. It's really hard to create a sustainable business model at the levels where we want to operate."

At Bioware, Zeschuk views independence as a key to creativity. "We want to make it really clear to folks that this deal is a way for us to continue our focus as an independent company. If you look at brands like Madden, Halo and Grand Theft Auto, they all came out of independent companies. We want to maintain that focus on independence. We want to carry on being hungry. This lets us dream big and really just keep doing what we love to do."

2) It's about resources

This is a deal worth $300 million, money that can be spent on acquiring and creating IP. It also offers Bioware / Pandemic the skills of Elevation's management board. Additionally, the two companies get one another.

a) IP acquisition

First of all, there's the ability to compete in the market for valuable Intellectual Property. "We can access all kinds of resources we couldn't access before," says Zeschuk. "As a company we can directly compete for IP. We can put together the resources for something like the next Lord of the Rings. Now we can throw our hat in the ring."

b) IP development

Of course, every publisher and developer is trying to carve out new IP for the next generation. But it's an expensive, risky and difficult process that demands time and resources. Companies need to be able to fail before they get it right; a luxury that is only available to those with resources.

Goldman says, "We have been under a lot of [financial] pressure and have never really been able to build the infrastructure of the company. So we are really excited about being able to take a longer term planning horizon and really being able to give people the opportunity to build and hone new IP so they are really cohesive by the time we bring then out to show publishers. It will lead to better products."

c) Heavyweight management

The board of the new company will include John Riccitiello, a former head of Electronic Arts and an undoubted Player in the industry's higher echelons. It will also include Greg Richardson, former VP of EA Partners, where his responsibilities included the development and co-publishing of third party products. He was also head of development at Eidos.

Zeschuk says this means he can focus on what's important, while relying on other management members for big picture stuff. "We can continue our work on a day-to-day basis but we also have additional management resources via Elevation and we can make collective decisions with them."

Of course, working with new people isn't always a simple matter. "There are some challenges that we face like getting to know one another well and getting strong working relationships but we think we can overcome those," he says.

d) Trading expertise

In very rough terms, Pandemic is seen as an action house while Bioware is viewed as an adventure house. The new company is playing up the benefits these two skill-sets can offer to one another although, of course, transferring skills and cultural outlooks is easier said than done.

Even so, it's part of the plan. Goldman explains, "I think what is exciting to us is an opportunity to really build out and add and innovate in our space by bringing in elements of expertise from Bioware. What you'll see is little elements of RPG coming into action adventure so we can create better, richer characters and give people a stronger connection to the games. We see this as a benefit in pushing forward the type of games we make."

But, he cautions, this doesn't mean the two companies will be jumping hand-in-hand into a melting pot. "Bioware will remain as Bioware and Pandemic will remain as Pandemic. Each will remain absolutely loyal to our fan-base and what people associate with our brands."

3) It's about growth

In order to justify the money being poured into this project, the new entity will need to create games that sell more; and more of them. This means growth.

Zeschuk says the nature of Elevation gives a clue to the plan ahead. "A part of this process, for us, was understanding how private equity works. In general in the videogame space people are more familiar with venture capitalists and the traditional VC view of short-term holds, quick flips and that sort of thing. We had to learn about private equity and understand that it's about a longer hold, about partnering with management to build a stronger company. Really we are building something for long tem value and that for us is what's crucial."

This leads to the inevitable questin...

Aren't you on the road that leads to self-publishing?

It seems barely conceivable that a company churning out a significant number of top notch games every year is going to continue farming out the lucrative publishing responsibility to third parties. Particularly with the experience and resources held by Elevation. But both Goldman and Zeschuk say this misses the point entirely.

Goldman explains, "That has been a very common question but we are focused on building an organization that has a singular focus on product development."

He adds, "It's our absolute belief that the whole company -- the culture, the management, the financial underpinnings of the business -- is built around the idea that 'we make blockbuster games'. It will, in the end, give us the flexibility and the cultural energy to be the most competitive force out there in creating intellectual properties.

"For us being in the publishing business would just be a diversion from creating what we want to create. There are a lot of great publishers out there that are very focused on what they do and they will be wonderful partners for us in bringing the product to market."

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