Q&A: THQ breeds Kaos Studios

In September of 2004, Digital Illusions CE (DICE) purchased New York City-based Trauma Studios, makers of the popular Desert Combat mod for its World War II shooter Battlefield 1942. Over the next nine months, DICE put Trauma to work on Battlefield 2 and "a new PC game based on the Battlefield 2 engine." However, less than a week after Battlefield 2 went gold, DICE announced that it was shutting down Trauma and shorting the crew $200,000 of the originally agreed upon acquisition price of $500,000.

Now, core members from the Battlefield-scarred Trauma Studios are back in the fight, with the backing of THQ.

Tomorrow, the publisher will officially announce that is has created Kaos Studios, a new development studio headed up by Trauma expatriates who are once again working together in New York City. The group's first project, due in 2007, is based on a new intellectual property and is scheduled for release on the PC as well as next-generation consoles.

Kaos joins a stable of 12 THQ-owned studios including Relic (Warhammer 40,000: Dawn of War, The Outfit), Volition (Saint's Row, Red Faction), Rainbow Studios (MX vs. ATV Unleashed), and Heavy Iron (The Incredibles: Rise of the Underminer). THQ is currently advertising 14 open positions at Kaos through its online career center.

Former Trauma Studios president and current Kaos lead designer Frank DeLise and THQ senior vice president of business development Dan Kelly recently spoke with GameSpot about how the new studio came to be and where it's headed.

GameSpot: What's the THQ checklist for considering a purchase of a development studio?

Dan Kelly: Well, I don't know that there's a formal checklist. We saw a very interesting idea for a new piece of original IP that we felt would be meaningful to gamers. Second, we saw a really strong core team from which a strong development team could be built. And thirdly, we saw that they were committed to a geographic market, New York City, where we felt had potential strategic advantages to THQ. New York is a quality pool of talent.

GS: How did this deal move so quickly?

Frank DeLise: After my split, I decided to figure out what I wanted to do next, and what was something I really wanted to do as a game developer and what people wanted to play. I've always been looking around [the forums] and reading what people think about our games. Late last year, I started coming up with a new idea of what I really wanted to do. So, through my agent, I started looking around for whom I would take this idea to. We ended up with THQ because they were the best publisher out there for fostering new ideas. And they allowed me to keep my core team of people that I like working with together. That was a huge plus.

GS: Was the pitch to THQ to sell the idea into the operation, or to sell the development studio?

DK: I've known Frank for a long time. Over the course of that time we've had lots of conversations about things that needed to be done in the game industry. When Frank decided to leave his last position, it was very natural just for us to pick up that conversation again and talk about what we wanted to do. When you get into the complexities of building teams and building new studios and the resources required... they wanted to become really internal to THQ and they felt that served their purposes.

GS: But there must have been something very obvious, apart from the rapport you had with Frank, that tipped you off that this was a group you wanted actually to buy rather than just work with.

DK: Oh, sure. You can't buy things that aren't for sale. If they had been committed, if they thought they were going to be most successful and have the best chance of being successful by remaining independent, we still would have worked with them. We're committed to original ideas and quality teams.

We have multiple ways of working with different people. If you look at our example with Relic, that started out as an external relationship, then became an internal relationship because it was going to position Relic to grow and invest in themselves for the future. Look at Pandemic Studios; they're independent and we work quite well together. It isn't necessarily the case that they have to be internally owned, but [Kaos Studios] came to the decision that would give them the best chance of doing what they wanted to do--focus on making the game, focus less on raising money and real estate deals and technology infrastructure and things like this.

GS: Frank, from your perspective, what do you miss out on by being an owned studio, and what do you gain?

FD: Previously I was an independent developer, and I'll tell you--the great thing about THQ is that you get all the benefits from being an independent developer, plus more. Because now I've got the huge gorilla behind us.

GS: Referring to the acquisition of Relic, a studio with a portfolio of games, and one that I've read was a $10 million all-cash deal, how do you generally put a value on a studio, and then how do you decide how to structure it?

DK: Well, every situation is different. The thing that we focus on is where people are in their development as a company. What do they want to do? Are their interests aligned with ours, and what do they need to get to the next stage? If you want to be internal, then it takes a lot of the risk off the table for the developer, but that doesn't mean that we force things to belong. Square pegs don't fit in a round hole and we recognize that.

GS: Dan, you've seen the 2005 statistics. A so-so year for console games, a down year for PC product--how do you see 2006 panning out for the game industry? What kind of a business environment is THQ preparing for?

DK: 2005 was a bit of a mixed year, but it's a transition year, and the long-term prospects for the industry are as good as they've always been. When we look at opportunities like working with Frank and his team, or some of the other developers that we're in business with, we're focused on a five-year horizon, a 10-year horizon, because it takes that long to really build world-class competitive assets and intellectual property.

The console business is a good business today, and it's going to be an even better business tomorrow. The PC business is still a good category, as long as you're in business with really, really good teams working on great ideas. And one thing we particularly like to do is find teams that are strong in PC and give them the resources and the support to help them transition to perhaps being a multiplatform company. You can see that happening with Relic now, and it's one of the things we hope to do with Kaos. It's not because we aren't supportive of PC--quite the contrary. Our hope is that a really good PC team, with proper management, can actually become a great cross-platform team in time.

GS: Frank, tell me about the culture at Kaos, what kind of games are you most anxious to make?

FD: One thing we were really good at [with the Battlefield 1942 mod Desert Combat] was we really listened to players. What do they want? What do they want to see next? It's really passion about the stuff we make. That obviously paved the way for us to develop the Battlefield 2 R&D projects. But now we have totally different ideas of where the action-drama should go. The most important thing to me was I wanted to keep the core team together and even expand on that.

GS: What's the head count now at Kaos?

FD: Well right now it's about 30. We started off with about 14 core members and we doubled very quickly. New York is an incredible market for talent because there's no competition basically in New York. And a lot of people want to come to New York, so that was another reason why I wanted to originally start my studio here, just because I knew that it's [an] untapped [market].

GS: Is it safe to say that action will remain the target genre for the new studio?

FD: Yeah. You can expect more details later in 2006.