Obsidian on the right way to fight used game sales

At the International Game Developers Association Leadership Forum last week, Obsidian CEO Feargus Urquhart touched on his affinity for working with licenses during a presentation on his independent studio. Afterward, Urquhart sat down with GameSpot to explain a little more about his company's approach to the industry and surviving as an independent in the crowded--and expensive--field of AAA game development.

During the conversation, Urquhart touched on a number of hot topics in the industry, explaining how his studio fits--or more precisely, doesn't fit--into the burgeoning social and mobile gaming scene, and how to avoid ticking off its fan base when it comes to downloadable content and other tactics designed to boost revenues and limit secondhand game sales.

GameSpot: Do you think it's getting easier or harder to make it as an independent studio these days?

Feargus Urquhart: I think it depends on your perspective. I think originally you could be an indie developer and not really have to be a business man. And I wouldn't say that I'm a business man, but I have some of the traits that go along with that. And I have had to learn a lot of things about accounting, and taxes, and other things to a point. I think in the past, it was possible to be effective without being really focused on business because the teams were much smaller. If you were eight guys and you made a bunch of money on your previous product, you can go six months without signing a deal. Our burn rate is $1 million a month, so we have to have games all the time. I am not independently wealthy, so I think a lot of it is harder now if you don't understand that you really have to focus on the business side.

GS: What do you think about the success stories in the indie scene like Notch with Minecraft? Is it a matter of the form you take as an independent developer that changes the viability of it now?

FU: I think I would look at it as what is an anomaly and what isn't. For example, Angry Birds. Is that a model or is it an anomaly? Is Minecraft a model or an anomaly? PC Data was one of the original data tracking services that would put out information on the top five games of the previous year, and in trying to figure out all of the similarities between the releases, they couldn't come up with a correlation to why the hits were successful. As it relates to indie successes, it's important that people understand that there is opportunity, and people are going to have those kinds of hits. But on the flip side, the reason we don't do iPhones games is we have all this overhead in people and such, and we have to make a hit for it to be worthwhile. But if I'm one guy and a friend, and I need to sell 20,000 copies to make money, then that's awesome. Maybe who you are is what defines where the opportunity is.

Our burn rate is $1 million a month, so we have to have games all the time.

GS: Your conference session was probably the first one this year where the words "mobile," "social," and "microtransactions" haven't come up. Is that just because Obsidian is as big as it is? So those options just aren't as viable?

FU: It's our focus. I'm not a believer in the death of the console. And that's because there is no way that 20 million people buy a Call of Duty: Black Ops, and that means the console is dead. I understand people's reasoning behind why they believe something is going to happen with the consoles, but I still think you can be very successful if you know what you are doing. I think you can see that with products like those from BioWare and Bethesda, and the kinds of products they are building with DLC follow-ups. So I think what we try to do is explicitly understand how the kind of products we want to make fit into the market we are targeting. That often means we need to figure out how to make games not just a rental. And how to prevent re-sells back to GameStop. Those are our things to solve. It's different from the mobile and social markets. Their problem is how to attain attachment rate; ours is how to retain our attachment rate. So there are two sides to the coin, but when it comes to us, at least for the big role-playing games, there is a parallel to Hollywood. People still go see Transformers. You can still make money with a $200 million movie. So I still think there is still a place for that kind of entertainment, and there will continue to be.

GS: You mentioned that the cost of developing AAA games is going up, but publishers are increasingly less likely to fund them externally. Is this causing you to lose sleep at night?

FU: I would say that that is the way it's been for 15 years. Even when I was back at Interplay, they would fund $3 million internal projects, but they wouldn't go over $1.5 million externally. I think part of that comes down to when a publisher goes and signs a contract with an independent developer, the big price tag is all in one place, and someone has to sign that. When it comes to internal projects, that's just man-month rate that is being constantly spent. It's not that the budget isn't there, it's just that it's not like, "Oh crap, we are signing off on $25 million right here." I think that results in two different systems.

GS: You mentioned that it's your job to keep your games from being rentals and re-sells. The market for used games has been around for years as well, but with the ways different people are trying to combat them now, a pretty vocal cross-section of gamers who are vehemently against this has sprung up. How have you dealt with trying to stay conscious of not upsetting your player base, while…

FU: Yeah, so one of the recent issues is not putting the full game in the package and requiring downloadable content to move on. Also, including DLC in the package that will have to be repurchased for secondhand buyers. I think you have to go in and forget those gimmicks, and say, "How do I make them want to keep the game on the shelf?" I think each genre has a way to do it. Battlefield and Call of Duty have it in multiplayer with maps, rankings, leveling up, and unlocks. There are different things, but the idea is making people feel, "I want to keep on playing it."

If you cut it back and made an RPG that was 12 hours, then suddenly there is an eight-hour expansion out a month after release; that's when you start getting into trouble.

With a role-playing game, it is the same thing. We come up with things to make players want to keep on playing it. It was never developed this way, but it's funny how it has become a way to do this. By having a good and evil track, like Knights of the Old Republic II, I can play as a light or dark Jedi. I may play through as a light Jedi, but I know that I could play through as a dark Jedi. So I think, "I'm gonna do that some day." So I put it back on my shelf and I don't take it back to GameStop. If I play Fallout: New Vegas for 50 hours, but there are all these other quests, and there's this whole other area I didn't go to, and online there are people talking about all these things that you could have done all these different ways, I'll feel like "Wow, I could play this game again," because there is all this stuff I didn't get. And knowing that, publishers announce DLC plans the day the game comes out. And now, as a player who hasn't experienced everything yet, I know there are these new stories, and I'm going to be able to level up my character and get better stuff, be more of a hero. The game is going to go back on my shelf, not back to GameStop.

GS: Do you think the recent complaints are more about how these things are conveyed to players rather than the actual tactics being used? Because so many players are saying "I know this is on the disc I paid for. How can you charge me extra for it?"

FU: I think you're right. That stuff is really hard because there are all these logistics. A lot of players don't know that a certain amount of your team is off of the product for months before the game comes out, and you may have them creating art. For example, there were a lot of areas done for the expansion pack of World of Warcraft before it came out, and no one is complaining about that. I think I could explain that if someone asks, "Why didn't you put that in the game?" Well, it's not really done. So it really is just a matter of being careful about when that stuff comes out. Ultimately, if they felt that the game was worth it, if the vast majority of the players feel like they got their fun out of the game--I wanted to play Mass Effect 2, and I played it for 35 hours--they'll feel like they got their $60 out of it and will be open to DLC. As long as the core of it makes people feel like "I got my fun out of the game," I think most people won't have a problem. If you cut it back and made an RPG that was 12 hours, then suddenly there is an eight-hour expansion out a month after release; that's when you start getting into trouble.

GS: Is there anything that you would have changed about the way Obsidian has handled DLC?

FU: I wish some of the stuff had come out faster, but there were lots of reasons for that. Overall, I've been happy. The $10 price point for DLC is hard because we see that the average Fallout player spends 30-50 hours with the game, or however many hours, so if we provide one-sixth of that game time in a DLC pack we are fine, and people won't feel negatively about it. If we don't provide eight-ish hours or more, then people feel like, "Why did I pay the $10?" Particularly if it's three-to-five hours. We always felt before that that was a good length since it's more content than your typical movie, and it also changes things in the main game, but that's not the case for many people. That's been the challenge. To make the money worth it, you have to sell a lot of them to make back the development budget at $10.