Random dude leaves one game company for another

by Rodolfo Rosini

UPDATE Jan 19th: Just two days after I wrote my original post, Trion announced that they have raised $85m in new funding from Ontario Teachers’ Pension Plan as well as existing investor Bertelsmann, thus bringing the entire funding to date to an obscene (and highly enviable) $185m. Despite the fact that none of the previous investor participated in the round and that no VC put money either, not a single journalist questioned the news or Trion’s execution record ($85m buys you a lot of ads). Hardly a sign of confidence in their future.

UPDATE Jan 24th: Today Trion announced that RIFT is going to be available on EA’s digital publishing platform Origin. So much for becoming a publisher, eh Trion?

So,

saw the news on Venturebeat that a Trion (they make an MMO called RIFT) executive defected for CCP (they make another MMO called EVE Online and own White Wolf). None of the companies are named after a dead dog (creepy!). CCP raised a sliver of VC funding compared to Trion but they have been around for longer.

Just wanted to share some of my thoughts, assume that I am full of doodoo because I could end up competing with both companies. Not really but we are in the same industry and it’s not always classy for a CEO to speak out about its peers (but hey ho who gives a fuck).

Basically the underlying problem is that Trion raised too much money. With that cash they were expected to release multiple games and one WoW-killer. Which obviously didn’t happen and the rifts gimmick has gotten stale as it’s not enough to justify switching costs for their users.

Recently (I am assuming, having no inside knowledge) their investors who put money at crazy valuations in exchange of exclusivity in some regions (mostly Asian media funds) found themselves without money or a game to sell. So Trion switched to making noises about being a “publisher” and the fact that they wanted to make a “platform” – obviously in order to do that they need more money and what better chance to do that than going IPO?

Basically their plan was to scam new investors to pay off the old investors. Exactly the same thing Zynga did, only they did it with much bigger stats like revenues, users and growth. But as Zynga went IPO and fizzled (last private round was at $14, went public at $10 and today closed at $9.22) Trion is discovering that public markets like growth.

Maybe I’m reading too much into this but the departure of Trion’s publishing officer signals a shift in their strategy, probably they will not devote significant resources to this rumored “publishing platform” but the reality is that A) they will cut costs and this means reducing unused infrastructure (which is already happening and they are spinning it as trial servers, yeah riiight) B) Lay off customer support and some of the live team B) possibly sell one of their games like Gazillion did to reduce overheads and generate free cash flow D) Reduce price of subscription for RIFT (happened already) so they can massage the numbers and show a surge in subscriptions ahead of E) raising more money from institutional investors, maybe publishers to keep going and aim for a trade sale or maybe still an IPO (UPDATE: lo and behold it happened two days after this post).

Either way I don’t want to be Trion or THQ right now (see $THQI stock price for lulz, unless you are a stockholder in which case no lulz but lots of tears). Late stage Zynga investors are stuffed but the company is healthy and has a massive user base and it’s unlikely to go titsup.

If your model is about selling MMO subscriptions, rely heavily on retailers for distribution, do not have mobile or social products and your company name is not Blizzard – you are all kinds of fucked. Not an “if” question but a “when” one.

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