COMPUTER game development may not be the first industry people associate with Brisbane, but it can at least take consolation in success.

With a growth curve like a ‘hockey stick’ in recent years, Australia’s largest games developer Krome Studios will soon release a major Xbox arcade game with Microsoft. So while a high Aussie dollar will make 2010 a tough year for the industry, Krome’s CEO Robert Walsh tells Brisbane Business News why the risks are worth it.

Game on

THERE aren’t too many industries where creating a single product can cost between $1 million and $3 million, but this is the reality facing games developers wishing to make their own original intellectual property.

It’s part the reason why Fortitude Valley-based Krome Studios signs contracts with big international names like Microsoft, LucasArts, Nickelodeon and Mattel Interactive.

But CEO Robert Walsh says despite the barriers to entry in IP, the company is working on four original game brands, in addition to its Microsoft Xbox deal with Game Room.

“The biggest moment for us was when we created Ty the Tasmanian Tiger on many levels, as it showed we were not only able to create games and original IP, but that it resonated with Australia and the rest of the world,” beams Walsh.

“We invested half a million dollars before we actually got signed, but with the new generation console that number has gone up two fold – if you look at the international market though, the risks are worth it.”

The first wave

It all started when the surfing photographer/accountant decided to be a surfing game developer, ‘scouring’ Australia until he found gaming expert Steve Stamatiadis, who is now the company’s creative director.

With a team of five they developed the concept of Championship Surfer, impressed the buttons off Mattel Interactive and haven’t looked back since.

“That really put us on the map as a gaming company. We went from five staff to 30 in the first nine months, and since then we’ve continued to increase our success – the graph looks like a hockey stick,” says Walsh.

“Some of the reasons why we’ve been able to compete are that every single game has been shipped on time and we’ve worked for big clients on a variety of platforms, which is not an easy achievement. We have a good pedigree as a go-to studio for getting things done and that’s been our cornerstone.”

With annual revenues in excess of $30 million, the developer now has 350 staff across its studios in Brisbane, Melbourne and Adelaide.

Walsh hints that Krome could also open a new studio in Canberra in the next 12 months, which is a target in more ways than one.

“I wouldn’t say the government has stifled the sector with red tape, but there is a disparity between the spending on film and TV and gaming, both at the state and federal level,” he says.

“It’s only in the last five to eight years that the average spending of gaming companies has been on par with the media and entertainment industry. When the government’s policies for gaming started they probably made sense, but
not now.”

Walsh believes the gaming industry is not recognised enough in Australia because people don’t understand how it works or
how it contributes to society.

“It’s getting better but I still think people don’t understand how the gaming industry is – they think it’s all done in people’s garages.

“For instance, we had 170 people working on a project last year and that was just for one game,” he says.

Private matters

The company has no immediate plans to list, but will seek offshore capital to further expand its operations.

“It’s hard to say never but I can’t see us going public in Australia – if we do raise capital we’ll go overseas, because there are not enough people in Australia who understand games.

It’s difficult to get the marketing out there no matter how successful you are,” explains Walsh.

“There’s not enough work out there — it’s like any other job, with the advantage being that what you do is really cool.”

With the stigma that surrounds gaming slowly drifting off into a galaxy far away, it would be hard to argue that making Star Wars games is anything but cool.

But despite the creative force that buzzes around the Valley, Brisbane’s gaming hub has nonetheless been an affordable outsourcing option for the biggest global players in recent years.

The question is, what will happen to this trend if the Australian dollar stays so strong?

Wired to the US

The last two years have been fairly flat for the entertainment industry and Walsh expects a similar situation in 2010, with the added difficulty of the exchange rate.

“What people don’t know is that there is a very little Australian market for games, it’s only 1 per cent of the world market. We’re tied more to the US economy than anything in Australia and America still has a long way to go,” he says.

“Plus the Australian dollar is making it really difficult. It’s going to be a challenging year for the sector.”

While Australia may only be a miniscule fraction of the global market, Brisbane Marketing’s investment attraction director Daniel Havas says the country’s gaming retail sales rose by 4 per cent to $2 billion last year.

This comes as games like Call of Duty produce revenues of $1 billion globally, compared to Hollywood blockbusters such as Avatar which is pushing $2 billion.

Havas says gaming is important for the city because of the exports it creates and the foreign direct investment it attracts.

Companies like Toy Head-Quarters (THQ) and Sega Corporation have studios in Brisbane too.

“You also need to look at the time zone perspective for the gaming industry, that between the US and Europe we’re following the sun pattern, and we’re culturally similar with these markets, which are the biggest game playing markets,” he says.

For Walsh, having his game announced at a Microsoft keynote address in January meant more for Krome’s kudos than the financial rewards. In such a challenging industry anything is a gamble, but the bets have paid off so far.

The next game with original IP to be released will be the anime-style Blade Kitten, created by Stamatiadis who also invented Ty the Tasmanian Tiger.

The game description says it’s an adventure of girls, swords and big robots.

“Little does she realise that her actions will affect the destiny of the planet. Her tale is one of liberation. Her tail is pink,” says an excited Walsh.

In the world of games, anything is possible.

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