GDC 2009: Flagship sifts through Hellgate ruins

Director of biz dev and general counsel Stephen Goldstein offers 10 lessons independent developers can take away from heavily hyped studio's demise.

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By and large, it's typically a bad sign when a lawyer is called in to deliver the closing remarks on a game project. Indeed, that was the case with "My Lessons Learned from Flagship Studios," a 2009 Game Developers Conference session given by Flagship's director of business development and general counsel Stephen Goldstein (now of Stubbs Alderton & Markiles, LLP).

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Flagship Studios was formed in 2005 by a number of notable Blizzard North alums, including Bill Roper, David Brevik, Max Schaefer, Eric Schaefer, and Tyler Thompson. Following years of prelaunch hype, the online-enabled Hellgate: London launched to a decent critical reaction. However, the game's many issues, both technical and otherwise, quickly elicited a vitriolic response from a rapidly shrinking pool of subscribers. Finally, in October 2008, the highly promising studio officially announced that Hellgate was to be shut down as of January 31, 2009.

Goldstein's session was as much about Flagship's ultimate demise as it was about offering his personal insights on what independent developers should not do. His talk began with a quick recap of the studio's nascent period, saying that by October 2007--30 days before Hellgate shipped--Flagship was riding high with 60 magazine covers, six publishers, five comarketing partners, four merchandising partners, and two online operations and publishing subsidiaries.

That had all changed by July 2008, he said. At that point, he said, Flagship was forced to lay off more than 100 employees, it had lost the rights to Hellgate, and the ensuing fallout caused substantial controversy and bad blood.

"For all intents and purposes, everyone was Flagshipped," he said, referencing the disparaging Internet meme that has become synonymous with failing in a colossal way.

So, given the talent of the team, he posited in a slide, "What happened To Flagship?"

"The mistakes Flagship made happen time and time again by entrepreneurs," Goldstein said, before saying that game developers are wonderful because they have unparalleled optimism. This disposition, though, can lead to the type of monumental disaster that befell Flagship, he said.

"The entire Flagship structure was built on swinging for the fences," Goldstein said as part of his first of 10 lessons. "Everything was solely plan A; there was no Plan B." Especially in these uncertain times, Goldstein said, it's important to not swing for the fences. "If you are in a startup right now, survival is the new success," he said, before urging independent developers to scale back whatever it is they may be working on.

Goldstein's second lesson was the importance of knowing the right economic model. Flagship, he said, was by its nature an online company that was designed to subsist on player subscriptions. Unfortunately, when the game shipped, it was sold as a boxed product at retail, and then it had a single-player option, a free multiplayer option, and a for-pay online component.

It took four steps for the company to begin seeing the type of revenue that would sustain the company, which was way too many, he said, continuing, "We should have just pissed off our community up front, and say it is going to be subs."

Goldstein's next lesson was that a developer should not try to do more than one new thing with their game. Flagship, he said, went completely overboard here, as Hellgate was the team's first 3D game, first-person shooter, subscription-based title, among other things. "The fact that we got this far is a testament to the team we built," he said. They didn't get the credit that they deserved."

Lesson four, Goldstein said, was to limit the partnerships. Taking the full blame for this misstep, Goldstein said that the back of Hellgate's box began to resemble a NASCAR car, and each of those partners wants something in return for the support.

Goldstein's fifth lesson distilled addressed the minefield of launching a game simultaneously in multiple territories, before moving on to the sixth lesson that infrastructure isn't as easy as it seems. "Do not leave your billing to the last minute," he warned. "It got left to the last minute, we ran out of resources, we ran out of time, which led to a situation where a very small percentage of users got charged twice." This was especially bad for the company's business model, because it made it all the harder to convince nonpaying customers to subscribe.

Next, he addressed the importance of not buying into hype. Noting that hype for Hellgate had been building at a feverish pace for three years, he said, "Expectations for the product were so incredibly high, no matter what we delivered, it was impossible to meet those expectations."

"If someone offers you money, take it!!!!" a slide emphatically noted as part of Goldstein's eighth lesson. In 2006, he said, venture capital firms were falling over themselves to invest in game companies. "We had a title a year from launch, with a team that had sold 17 million units," he said. "My guess is we could have raised $20-25 million to stick in a coffer." Goldstein noted that this alone wouldn't have necessarily saved the studio, but it would have given the team the additional four or five months Hellgate needed before it was shipped.

Goldstein's ninth lesson was that it is important to bring in an objective point of view. "Everyone there was in the trenches," he said. "We weren't having regular meetings with someone with an outside perspective to put us in check. No one said, 'You may need to rethink this business model.'"

As his final lesson, Goldstein said, "We're all in this together." He said that despite Flagship's problems and missteps, many others within the development community stepped in to lend a hand when they could. "Businesses are going down now for reasons beyond their control," he said. "Now, I'm not sure people are in the position to help today."

Goldstein did close on a positive note, however, saying that even though the economic environment is hostile, it presents "a massive opportunity," as people will figure out new ways to get their games made that don't necessarily require a substantial infusion of funding.

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