Friday, March 26, 2010

Guild Hall Talk: Walking the Tight Rope Edition

Some time last year Joseph Olin asked me to speak on a panel at SMU's Guild Hall Game Business Law Summit. I do not do a lot of speaking any more because it stopped being fun when things I said started to be parsed and posted out of context. I can cause enough damage to myself among the people in the room, so there is really no need to create a forum for the spread out of context hyperbole to a bunch of strangers. But the date for the conference was so far away and Guild Hall does good work and I probably could not have been accepted to SMU Law School had I applied, so I accepted. Much to my chagrin, as the date approached I saw the list of speakers and found I was not a speaker, but a moderator. This meant I could not just show up and speak, I had to prepare. Then I saw I was moderating Paul Raines and Christian Svensson. Two very smart guys who could each cause serious damage to my career if I pissed them off - not unlikely. It was as if Joseph had suggested this composition for his own amusement. The panel would either be a delightful show of me squirming while I tried to keep the running commentary in my head from leaking through my lips or a grand example of public self immolation.

At about seven o'clock the night before the speech I emailed another speaker and suggested we get together. He thought this was a great idea and suggested Wednesday. I wondered why he was spending so much time in Dallas. I explained I would not be there until Thursday and we should have breakfast that morning.

He said he would be gone. Then I looked at the schedule and realized he was speaking the same day as I was and I was supposed to be on a plane 5 hours ago. I quickly and violently purged my system of every foul word I had ever heard and create a few of my own - a phenomenal vocabulary building opportunity for my son - and jumped on line to book a red eye flight. Fortunately I was able to leave L.A. shortly after midnight and arrive in Dallas, and my hotel room by 5 a.m. Since the talk did not start until 9, I had plenty of time for coffee some Red Bull and an energy drink with a warning label on the side.

Here is the talk:

While there, I also participated in a panel discussion on game financing. We talked about venture, alternative finance and bunch of other stuff. This one was the next day, and apparently the exercise of such careful control the day before proved to be too exhausting to maintain through a panel discussion. That being said, I did not attack fellow panel members and only made two attacks on audience members. If you have another spare hour and twenty-five minutes, enjoy.

Thursday, March 25, 2010

Blogs: You Gotta Be Kidding Me Edition

I started writing this post almost exactly two years ago and then I never hit the post button. I guess writing was enough to get it out of my system. But I am once again watching a situation where a blogger reported something with no support, no access to facts, no grasp of facts and only a fleeting, tangential connection to the plane of reality we all inhabit, and it is being reported as fact. Needless to say, it pissed me off all over again. Fortunately, except for the updated parts in the middle, I already had a bunch of words written down.

A couple of years ago John Stewart famously attacked Tucker Carlson on Crossfire. Stewart's satirizes the news, CNN purports to be journalist. Stewart tells you not to trust what he is saying. He is not reporting or being objective. CNN and Tucker Carlson on the other hand, say they are news. He called them on it. It's time to do the same thing with bloggers, and I'll give it a shot.

My blog is kind of like The Daily Show - without the John Stewart, cameras, basic cable or humor. I don't report news. I don't pretend to be objective, and I don't hold myself out as a journalist. It is pure opinion. My very large ego compels me to memorialize my thoughts. When I do report facts, I link to the source so any reader can see the source and determine the appropriate weight on their own. I am not a journalist and don't pretend to be. However, there are some "journalists" out there who feel the word "blog" liberates them from the archaic confines of integrity. Blogs are given authority simply because the words are written down. Nobody really gives a shit about my name as a credible news source and I don't expect to be referenced as one. If you do, feel free to sit down and we can talk about it, I promise you will quickly change my mind. When someone is on the hunt for web traffic, it is very easy to confuse - or refuse to acknowledge - an unedited, unreviewed blog post, for a news story. It sounds even more real when the post is picked up by credible news sources. These bloggers post a giant, steaming turd on their site and like a group of dung beetles, the media start to roll pieces of the turd all over the web and into credible news sources, often losing sight of the lack of credibility of the originator.

Whether it is a blog like Engadget mistakenly posting about an iPhone delay and knocking off 4 billion in market value, a journalist/blog hybrid like gamespot and their mistakenly posted, and later corrected coverage of my "announcement" of a Juno game - the very reason I launched this blog- words I actually did say taken grossly out of context or entertainment reporters who choose to cover industry issues and reviews in a manner which would never be allowed to be printed in the magazines which employ them, it is happening all over the place. Even the New York Times is running blogs posted by its writers and The Huffington Post is nothing but bloggers.

Our little microcosm of the world was impacted, and continues to be impacted by the West and Zampella affair. The only things we know for sure come from Activision's press release and the unanswered complaint filed by West and Zampella - put more simply, not much. This does not stop the bloggers from creating facts to make the story more interesting, not the least of which is West and Zampella's discussions with EA. Fascinating, if true, but wholly manufactured in a blog. G4TVspeculated the guys were talking to EA based on an internal memo. The wrote "The memo seems to indicate that Activision may have suspected West and Zampella were looking outside the company." The memo does not indicate that at all. The memo indicates Activision is going to ask for everything under the sun. It is a discovery outline. Nothing more, nothing less. But this one erroneous post on line became truth and turned into "Rumor: Infinity Ward Had Been Courting EA, Other Publishers." , "Rumor: Activision internal memo claims West and Zampella were talking to EA"
and others across the web when the memo said nothing like that. I hope you got the hits you were looking for Mr. Blogger, but you are messing with people's lives here. Think I am melodramatic, try being them.

Worse yet, the story does not stop there. As the feeding frenzy dies down, the analysis commences. But the analysis is based on a set of facts manufactured by bloggers. Mona Ibrahim took it upon herself to write a gamasutra article entitled: Analysis: Can West and
Zampella Win
The article would appear to be premature considering only one side has filed a complaint, but not to Ms. Ibrahim. She has a world of Interblogfacts at her disposal. She acknowledges she does not have the facts. The problem is she keeps writing and gives credence to rumors which do not exist.

We can’t see the contract and no one knows all of the facts, so confirming this allegation will be impossible until March 31, when the payment is due; and for all we know West and Zampella really were engaged in talks with EA as some of the rumors suggest.

In case that is not bad enough, she actually gives provides an opinion on how they should handle the case "WITHOUT KNOWING ANY FACTS"

Unfortunately, showing wrongful termination in a case like this will be difficult. With hope West and Zampella will settle this matter quickly and be fairly compensated so they can move on with their lives and careers; unfortunately, it is just as likely that Activision will be forced to fight if only to defend itself in the court of public opinion.

. . .and other sites are linking to this article.

You are about to point out, correctly, that just two posts ago I wrote about West, Zampella and Activision. I did and my post was very much like hers - in the sense that it was made of words. It was completely different in the sense that, I did not make any judgments about the case. I merely pointed out similarities to a prior developer action and addressed both sides of the argument. I am in no position to assess the merits of the case or the claims and did not try.

Blog posts are easy to make. Too easy. They can be written on the fly and posted in a hurry. For many of the "news" blogs the pressure of the 24/7 news cycle and the desire for the next making scoop drives writers to post quickly. Too quickly. Once a post is made, if there is a sexy keyword, it will immediately spread across the blogosphere and into the mainstream media. Corrections never get that far. Moreover, blogs are more permanent than newspapers. Newspapers and news stories go away after a few days. Blogs stick to google search results likes ticks to your calves.

This subject came up in a panel discussion where Carl Bernstein addressed the impact of blogs on the press. As a bit of a Watergate junkie I was especially interested in his Watergate discussion. This story is arguably the single most significant story of the last century. He talked about the arguments among editors and attorneys about what could be printed and what couldn't. He was sent back out into the field to get more support for statements and to make sure everything was verified. The process must have been frustrating and it would have made me wish I could just post a story and not be subject to review and verification by a bunch of editors and lawyers. Afterward I asked him if the story would have been different if he had a blog. "Absolutely. It would not have been as good."

Thursday, March 18, 2010

Cool Sony Move Video: Misplaced Sniping Edition

Sony’s new video is great, but the silly rabbits over there still think the Natal is for games. While the game world continues to try to figure out how to turn us all into Marcel Marceau in front of our 360s, linear content creators are recognizing the real value. Natal is not an attack on the other game consoles. It is an attack on the remote control. The natural input to drive your television experience is just one more reason my wife will be willing to use the Xbox, and maybe even more than me. I know I said it a lot before, but the 360 is cable and every move Microsoft makes moves them one step closer.

This is why the smarter agents in Hollywood are pitching content to Microsoft. This may be a surprise to those who view the Xbox 360 as just a game console or the three people who heard of the Zune. It could also be viewed as a step back to those who pitched content to MSN and other Microsoft incarnations in dot com days, but they better take another look if they want their clients to be in on the first wave. Through Xbox Live, Microsoft now has access to 20 million television screens through a closed, proprietary network – and the network is expected to grow to over 100 million worldwide before Microsoft replaces the Xbox 360 with the next console. As Netflix explained in their most recent announcement of record earnings, subscribers are watching a lot of movies and television shows on these boxes. Microsoft wants them to watch even more. For the past year senior executives discuss a growing interest in linear content and set top box-like services and recently the New York Times reported on rumors of discussions with Disney for ESPN content.

To put it in perspective, if Microsoft was a cable company this subscriber base would put them just behind Comcast’s 24 million subscribers and well ahead of Time Warner’s 13 million, placing them in the number two position in the United States. However, from a content creator’s perspective, the closed, IP addressable, broadband, bi-directional, commerce enabled, proprietary media network with high-powered computers and mass storage makes them much better. This network makes Microsoft the only distribution partner who can put content on the screen it was meant for, while providing all the viral, commerce and direct measurement advantages of the Web. Because the programming is all on demand, unlike network or cable with a limited amount of slots, content can remain available until it finds an audience, even if the audience is very small. It also means Microsoft needs the creators. Microsoft is not preaching user generated content they need content from people who know how to make it.

This may sound familiar to folks who did AOL deals in the mid to late nineties, and that would be a good thing. Content creators allowed into AOL’s walled garden moved much higher up on the revenue ladder and made significant amounts of money as direct gross participants. Microsoft has not publicly disclosed the nature of the content deals moving forward. In the past they have done everything from paying for content creation, to time buys to straight distribution. Currently, the Xbox Live service offers free original video, sponsored content, music videos for sale, films for purchase and rental, the Netflix service, and access to Facebook and Like Google, the company also has the ability to sell sponsorship into everything from the search term identifying your content to the web page displaying and into the video streaming it. Unlike Google, it can also sell space into a console game and display it in the living room. Good luck to Google playing catch up with its rumored set top box.

For linear folks this is great news. They no longer have to choose between the networks or posting on youtube next to a dancing cat with the hope it will catch on. There is a real, grown up business out there ready to deliver content in a user-friendly format, into a user-friendly environment.

For game folks, it starts to get a bit troubling. Not only are we competing with other games for consumer time and attention, but we are competing against cheaper to make, faster to market content with a deep, deep, deep, library of content on the very box – make that the only box into which we sell.

Sunday, March 7, 2010

Infinity Ward and Activision: Deja Vu All Over Again Edition

Ten years ago I sat in an outdoor booth overlooking the garden of the Bel Air Hotel eating breakfast with Charles Cornwall. Charles grew up in South Africa and our Eidos conversation reminded him of a story he often heard as a child. Parents would bring home a baby lion cub and give it to their child as a pet. The lion would act as part of the family and play with the children purring like a kitten. Then, inevitably, one day the lion would lash out and rip the child's arm off. The action would send the family into shock. The lion, on the other hand, would just look at them and say "What do you want from me? I’m a fucking lion?"

Since every gamer writer, blogger and twiterererer on and off the web - not to mention the forums - are covering every portion of it, I didn't think there was much reason to wake from my four month blog hibernation to write about Infinity Ward and Activision. But then I got a call from an analyst who started asking questions and having been on both the publisher and the developer side, I could answer them two ways. Without knowing any of the relevant facts I gave him both.

"If Activision made a billion dollars on the franchise, and all these guys want is 36 million, why don't they just pay?"

Developer - Because they don’t have to honor the agreement.
Publisher - Because we have no reason to pay people who breach their agreement before royalties are due.

"Would Activision really give these guys creative input or control over the franchise?"

Developer - Yes. see question 1.
Publisher - Yes. We want to incentivize creators to stay with their work.

"Would someone really start talking to publishers and investors about a new deal while they are still employed?"

Developer - Yes. See questions one and two.
Publisher - Yes. See what we have to put up with?

"Wouldn't this make it so no developers want to work with Activision again?"

You’ll have to wait to the end for that one.

I quickly realized the real world just doesn't get us. The gaming press is able to immediately understand, dissect and surmise the real story because they are reporting from the penumbra, not the facts themselves. Kind of like the Vestimentiferan Worms that thrive in superheated, inhospitable deep sea vents where scientists never believed life could exist, game developers adapted to a world of grossly, exponentially, unfathomably disproportionate bargaining power and publishers adapted to running public companies while developers of major revenue streams held the corporate testicles in their coding-calloused hands. We see and understand this scenario all the time and the only uncertainty is whether this is the time David will finally slay Goliath.

This is not the first time this sort of thing has happened in the industry and it is not even the first time it happened with this publisher, developer, or title. Unlike the other postings, I try to not get too excited about the litigation filings. West and Zampella’s attorneys did a fantastic job of using the protections afforded complaints to write a powerful and quote worthy document for the court. Kudos for entertainment value and the drafting skill, and if it is true, the two should get everything requested and a pony. But when assessing the merits of the case, the press must understand, the documents are written to be persuasive so if it was done right, you believe it. Activision will soon answer with an equally persuasive, only probably not as colorful, answer the complaint and likely cross claims. If the answer does its job half as well as the complaint, the whole thing will be played out with public opinion moving like a ping pong ball with the filings. If so many peoples' livelihoods weren't involved it would be funny.

We needn't wait for it to play out and instead want to push the fast forward, we can just look back in history. Like Yogi Berra said, “It is déjà vu all over again.” Use the Google, it's all there. Over on Gamasutra we can see a contract entered into in 2002 between Spark and Activision. In the interest of full disclosure, I should take this time to note I have been representing Spark Unlimited since late 2004 and many of the guys over there, including CEO, Craig Allen, are personal friends. I was not involved in their lawsuit with Activision and the information in this post comes from the same websites you probably read if you are reading this post. I know, I know, it's a different company you say, but the contract covered Spark's development of a Call of Duty console game. At the time, Infinity Ward was developing only the PC version and their name was mentioned in Spark's contract. The biggest difference between these two contracts to work on the same title was the company ownership. While IW sold Activision a 30% stake in their company for 1.5 million USD and provided an option over the other 70% of the company, Spark secured, startup funding a right of first refusal over sequels to the product and a commitment to financially support the company in between titles. Most people reading this may say Spark got the better deal and may even wonder why IW did what they did, they never met Diego Angel. In every deal we did, Diego used to warn me "watch out kiddo, we don’t want to get too good a deal."

Spark released its first title under the agreement in November of 2004 - later than either party had planned and about a year after IW released the PC version. In late 2003 and early 2004, Activision and IW started working on a sequel to the first Call of Duty title despite Spark's rights of first refusal over the Sequel. When it came time to submit the proposal for the sequel, Activision not only rejected it, but rejected its obligation to support Spark in between titles. Of course there are two sides to every story. Those on the Activision side may say Spark just didn't submit a strong sequel proposal and the original title was delivered late (even though the sequel was already in development), and those on the Spark side will point to incentives created by the lack of royalty obligations on a title built by the wholly owned IW. Differing perspectives like these are the parents of lawsuits.

Claiming that Activision failed to pay any royalties on the game that went on to sell over 3.5 million units, Spark filed an action, for among other things, unpaid royalties and the right to stay involved with the franchise. Eerily similar to the claim filed by West and Zampella. While rumors are only starting to fly about the IW/Activision relationship, the facts underlying the Spark suit came out. Driven by a leaked internal post mortem memo written by Spark for Activision - not unlike the leaked memo about West and Zampella discussed below - the action started out being characterized as atypical story of a disgruntled, troubled developer against a publisher. As more facts came out, it quickly turned into Grisham-like story of over reaching by Activision, or in the words of West and Zampella in their lawsuit "an act of astonishing arrogance and unbridled greed."

West and Zampella's complaint tells a story of Activision's searching for reasons to avoid paying royalties owing under the agreement. They allege that after being interrogated in a windowless room for an extended period of time, Activision came up
with a bunch of false reasons leading to termination for insubordination. The termination, if valid, relieves Activision of its obligation to pay royalties. A similar end was allegedly reached through different tactics with Spark. Spark's lawsuit uncovered an internal email among Activision executives which read:

[Spark] will not be seeing a royalty check from me. I think this means that we’ve essentially replicated the ‘scorched earth’ scenario… royalty reductions [are] locked in, as [is Activision’s] ability to make them recoup against every expense known to man.

According to Spark's complaint, the email describes Activision's revisions to their agreement provided by Spark in consideration of Activision's commitment to a larger marketing campaign and a sequel commitment - better than a right of first refusal - for Spark. Similarly, West and Zampella allege in their complaint that Activision convinced them to make Modern Warfare 2 in consideration of more control over the studio, the franchise and a piece of the revenue stream. Just as in the case of Spark, none of the allegations of evils arose from Activision until after the game was released and before royalties were owing.

Like any good episode of 48 Hours, when everything looks like it favors the plaintiff, we learn about the defendant's case. G4Tv started a rumor that West and Zempella were talking to other publishers. The reporter wrote "I've since reviewed an Activision internal legal memo from a source close to the company that details what documents Activision is searching for related to the current litigation with Zampella and West." The documents include those covering future plans for Modern Warfare, possible spin out of IW, communications with employees about a new studios and documents relating to any ongoing conversations with publishers. The blogosphere picked up on this immediately and lit up with news that the two were already shopping a deal, or had a deal in place. The forums then lit up about how stupid these guys must be to put things in writing. Planting the seed was not hard. It would not be difficult to believe West and Zampella are a couple lions too. The news is playing into a developer stereo type. I mean after all, these are the guys who walked out on 2015 and EA to start Infinity Ward. EA accused them of stealing code and secrets on the way out the door to Activision. Activision defended them in that suit. Who is to say they would not do it again. Right? Maybe, but we don't know yet. If you read the report from G4, it is obvious the assumption is misplaced.

According to the report, Activision's memo outlines documents they are looking for. Not documents in hand. I am about to perform the same speculation as the other blogs, but I'll limit myself to the words on the page. The memo sounds an awful lot like a draft discovery demand. It's the part of the lawsuit where each side asks the other for all the information they need to proceed with the lawsuit - or as we see on tv, the search for the "smoking gun." The document requests usually ask for every document, email, voicemail, etc., etc., relating to anything you have ever done in your life and everything your mother has ever done. Then they go to specifics like requests for the type of information outlined. The G4 post mentions Activision's search for the document, it does not say they found them. I am taking one step further on the limb here, but if someone was willing to leak this document to the press, don't you think they would leak one of the documents listed if they had it?

Before we go all developer friendly here, let’s reel it in for a moment. The majority of posts, dialogue and commentary are siding on the developer side and talking about the injustice befalling West and Zampella. If these guys actually did the things they are accused of, they would not deserve the royalties. Coffee is for closers and royalties are for people who continue to be employed by the company when the royalties are due. If Activision was not honoring its agreement, the proper action of an employee is to pursue an action on the agreement, or leave and do the same. Disparaging the company or setting up a new company while still collecting a paycheck are not options. Employees who choose to do so, do it at their own risk. When I practiced law teams would come in all the time to talk about plans to spin out and feathering a nest to create a soft landing place. My answer was always the same. Leave the company and then come talk to me. Until then, get out of my office.

The reality is both sides started down this path a long time ago. Like unhappy parents staying together for the kids, they stayed together to get Modern Warfare 2 out. Along the way, they forgot the COD titles released were a collaboration between Activision and IW. Neither could have done it on their own. A great title is the result of a collaboration of publisher and developer and a bad titles is the result of a collaboration of a publisher and developer. Neither does it alone. Activision invested a significant amount of time, money and resource into IW and the marketing and support of the franchise. IW and the other developers on the franchise pored their hearts and souls into making the best game they could. The results of the collaboration were tremendous. Looking solely at the allegations, if West and Zampella did the things they are accused of, they deserve to be fired and lose royalties. If they did not and their assessment of their agreement is right, Activision deserves to lose the franchise and pay the money as promised. The point is, no one really knows what happened, and sadly, the decision of the court or ultimate settlement will likely have nothing to do with what actually went down. While it is a lot of fund to create salacious scenarios of overbearing oppressive publishers and evil, lying developers, everyone should really hold off until all the facts come out and both parties decide to explain their position openly, and not through leaks. Until then, it is not really any of our business and the reports are really no more than gossip.

My only certainty is the answer to the analyst's last question. "Wouldn't this make it so no developers want to work with Activision again?"
Unfortunately, no. There will be no impact. Publisher leverage is simply too great and alternative options too few. Sure I know of one developer who refuses to deal with Activision, but any other would heed the call if it came in.

"Hi, it's Activision."
"I just want to let you know, I posted naked pictures of your wife on line.”
“What are you talking about”
“We got them from the cameras we put up in your house."
"The what?"
"Oh yeah, and sorry about the puppies. We had to put them down after we stepped on them. The cameras had to be placed pretty high and . . . "
"you killed my puppies?"
"Yeah, we may do it again if you get new ones. But that’s not what we are calling about. We need a game built and want you to do it."
"Cool, where do I sign?"