NewsOnline game publisher Outspark has announced it has raised $11 million in Series B financing in a round led by Chinese internet portal and instant messaging company Tencent. Existing investors DCM and Altos Ventures also participated in the round, which Outspark says it will use for growth, expansion, and enhancing its current offering, which includes Fiesta and Secret of the Solstice. The company's primary goal is to help PC-based online games find the same market in North America as they currently enjoy in Asia. Outspark says it's attracted over 1 million registered users in less than five months to its "virtual playground" community, where it aims to support the work of Asian independent developers and continue the growth of those properties. The company also plans to cooperate further with Tencent and seek partnerships with other online game developers globally. Outspark founder and CEO Susan Choe, previously COO of NHN USA and international director of Yahoo! Games is joined at the helm by chief studio officer Nick Foster, former CTO of Starz Media and head of global FX for DreamWorks Animation. Other Outspark team members come from Blizzard, Nexon, Electronic Arts, Webzen and Yahoo!. Gamasutra recently spoke to Susan Choe and Nick Foster about the unique ways in which they're pulling together experience, trends and proven lessons from these diverse media spheres, hoping to create a new kind of online experience for gamers, social media users, and development communities alike. How did the company come together? Susan Choe: When I was in Yahoo!'s corporate development, what I did was basically fly around the world and see where we could spend money, to expedite Yahoo!'s growth, globally. And saw the games out in Korea in 2000. And I thought: "Man, you know, if there was an infrastructure to be able to deliver this content back home -- meaning North America, the U.S. -- that it'd be a great business to be in." Because game development is really cool, in the sense that they're really doing what they love, and even if it just meant that they don't make a lot of money, they're suffering through... you know, "anything to get the games done," right? So my heart went out to them, and I thought: "One day. One day, it would be really great to work with these guys." So that's where the germination of the idea came from. And how did you translate that idea? You left Yahoo? SC: Yeah. That was in 2000. Then, I was waiting for the right time to actually get into the game space. I was running Yahoo!'s international operations, and when I started to see gamer growth in the Western European market, I started actually trying to rope in this guy, [Nick Foster], who's actually a friend. Nick Foster: We actually knew each other socially at that time. I was working over at DreamWorks, and I was just a big online gamer, and it just felt clear that normal people were being pulled into that space in the U.S., and more community was growing around it, so... Was that regular DreamWorks, or DreamWorks Interactive, when it existed? NF: Actually, I was at Pacific Data Images, which was then bought by DreamWorks; so at that time it was DreamWorks SKG, but then it broke out to DreamWorks Animation. SC: So, fast forward a little bit, I opted to go and run Yahoo!'s International Games, which everybody thought: "What in the world do we want to do that for?" I was like: "There's a reason!" And so, jump to International Games for a bit, try to actually go buy some platforms that would advance gameplay, right? Because as you all know, Yahoo! Games, although it's very large -- it's one of the top players in the casual game space, for "web-board" type of games -- I wanted to see if we could actually add a whole new channel of gameplay, which is these advanced casual games that we're now service-operating here. And that kind of fell through. Well, not "kind of" -- it fell through. So, at the same time, some of the largest Asian game portal publisher/developer teams approached me and said: "Hey, do you wanna help us come into the U.S. market?" And I thought: "Wow, this is great timing, right?" So, no matter what, I just wanted to get into the space and work with game developers; and so I said: "OK. I'll come over and help you guys." But I think it was kinda similar to Yahoo!, in that they were so large that they couldn't be as agile in how they selected, published and operated their games for the Western market. In short, this an entertainment business, right? So you need to have a good mix of people who really understand the gameplay underneath it, but also know how to package the games, so we can have the game developers stop eating ramen. And that was really frustrating. So, basically, I literally "put my money where my mouth is," and started the company on my own dime, for a good part of '06, and then got [initial] funding right at the beginning of '07, and really launched the company. And we have launched our first game -- it was like, what, five, four months ago? NF: Yeah, I think at the beginning of June we went to the closed beta. SC: Right. The type of games that we were focusing on had to have a certain type of gameplay, and a lot of us actually played many, many games. And we all played games, to a point where I needed acupuncture for my wrist! And we played games, from MMORPGs, to first-person shooters, to racing games -- and I'm more of a casual, mid-casual gamer. I'm not a web-board gamer, but I play everything from Kart Rider to Halo, and... these days I don't play much games, unfortunately! But, in a sense, we were really looking for games that everybody can play, even the thirty-five year old women, without a lot of complications. But there are certain specific criteria we also look for in the game developers: 1. They believe in the North American, Western market. 2. They have the capacity to work with us, because -- as you guys know -- these games, once they're launched, that's the beginning of your work, not the end, unlike the console games. And, you know, chemistry with the team, and what-not. So, it's been a lot of fun, and I think Nick and I have really rolled up our sleeves and gotten involved, even in localization. So, you've licensed these games from Korean companies? On your website, two games are listed -- at least publicly -- right now, and there are two different developers. You're not tied to either of these developers? These are games that you selected for the audience? SC: Yes. We license the games exclusively for a pretty much evergreen relationship. And the model is a bit different than other game publishers bringing games from Asia, and particularly Korea. What we noticed was that game developers, if they get a bit of a license fee up-front, they kind of lose the incentive to [provide] on-going support [for] us. And, really, in a way you're being "penny wise and pound foolish," because if we do our marketing right, you could have a trailing revenue for them that's three, four, five, even ten years, right? Talk about a long tail. That's a mighty-ass long tail. When we started down this path, even the VCs said: "Aw, you'll never get that kind of licensing deal." I'm like: "Watch me." So we went out there and we really pounded pavement. I mean, game developer CEOs are in Taiwan or Japan with their games, for example, and we'd fly anywhere just to talk to them. And we started signing up some decent games. One of our criteria was that it had to have been launched and it was already monetizing. And it was an international market, because we knew there would be some difficulty with distance and time and working together. So we've been really fortunate, because we've been able to get great game developer partners who are really responsive. NF: Yeah. They've really embraced the model. So they work very closely with us on localization, game balance, and all the issues that may be different between the Korean and Western markets that we see. So we have been really lucky. So you didn't give them a huge chunk of change up-front? I was at GDC Austin, and Josh Hong was talking about it. SC: K2, right. Right. About how companies are ruining the ability to bring these games out, because they're offering huge chunks of change up-front, and then the games aren't doing well...? NF: It ruins the economy, really. SC: There are certain publishers who license mega-hits. Because they figure the gameplay is proven, and if it's worked in Asia, it's gotta work here. Our belief is a little different, in that it may work here, but really these games are quite different -- as you guys know -- than console [games]. The gamers are really in there because they enjoy the whole "virtual playground" aspect. You go in -- your friends, or even our game masters are in there. And they're not really "customer support"-like game masters, they're really like your friends. And we make it a point to have these game masters be in there, actively running events, at least a couple of times a day in each of the rooms. And they have fan-clubs by the thousands. And it's kind of cute to watch, because you have all these gamer characters surrounding our game master characters, and our game masters are like: "Ah, I love this job!" And they're coming up to them going: "I love you! I wanna marry you!" And they're like, "Oh! I'm like the hero!" And it's very cute -- and that has our systems guys going: "I want to switch jobs. I want to be a game master!" How did you select the two titles that you have out now? SC: It's really a combination of gameplay. Because the first game developer that we're working with -- which is Fiesta's developer, Ons On -- I knew them from a few years back. And when I put this idea together, of not paying licensing fees, really partnering for the long-haul, where we invest in marketing and product management, and game mastering, they heard about the idea -- funny enough -- through one of our investors who was doing due diligence out in Korea. And they somehow ran into him -- and I didn't even orchestrate this at all -- our investor was out there, happened to meet the CEO of Ons On, asked him what he thought of the idea, and he was like: "Ah! That's a great idea! And by the way, do you know a woman by the name of Susan Choe? You should talk to her!" And my investor was like: "Funny you should ask! That's who I'm talking to!" So, despite that, I had to tell them: It's all of our guys, putting our blood, sweat, and tears into a game. Because I know it's gonna take thousands of days, basically, to localize. So we all have to play it at least for a week, and we vote. We vote based on gameplay, and also the depth of content that can commercialize. Because it does us no good if it gets out there, people play it, and there's nothing to sell -- the digital items, worlds, and game maps. So, we looked at gameplay as a team, and of course how willing the game developer would be to work with us, and the content. So you're using a microtransaction model, right? Since you're not doing the license fees, I assume that the original developer and you are profit-sharing on microtransactions. How does that work? I don't think a lot of that has been done before. NF: We can't really talk about the specific deals, but in general, really, it's a revenue share model -- we're partners. And I think that's what appeals with these independent game developers, instead of an up-front license fee. They really believe in their games, and when they're working with a partner that understands the audience that we're marketing to in the West -- which Outspark is -- they see the potential upside for them is far greater, it continues their investment in the product, and they're close working with us. So that's really what we do to split the licensing fee, and to take that away as a disincentive. We really do a revenue share split that helps the game developers benefit directly, linearly proportional to the success of their game. And that appeals to them. SC: But I think we can cut to the quick, and be able to share that we're different from the other publishers, because we do share equally. Straight down the middle. Net of the costs that we agreed to that are just fundamental to transaction-related, but otherwise we split straight down the middle. What is your staff like in the U.S., in terms of demographics, number of people? SC: They're all under-30-year-old teenagers! We all are, actually! NF: I think we're all under-40-year-old-teenagers. SC: No, it's actually a great team, because... we've got Russian, Korean, Philippino, Chinese, British, Korean-Americans, Americans -- and basically we have it all, because we all each bring different strengths to the table. So, we have guys who came from the R&D of platform build -- they've gotta make it scalable. They're all gamers themselves. Some of them run their own WoW servers themselves, so that's great. And ten we have people like myself, who actually were part of running large portals, or game portals in the U.S., or also out in Asia as well. Like, our Executive Producer used to run Blizzard's WoW community, and also Nexon's overall portal. We have guys who are leading Game Mastering, who did that for NHN, my former employer; as well as [people from] Webzen. And so we have a very interesting crew. Even the guy who was part of the Spore team at EA, in product management strategy, he's part of the team as well. So we try to pull from anywhere and everywhere, where we think it makes sense to be able to provide great entertainment for the gamers first; and to be able to monetize that traffic so we can be able to pay the game developers. Because, literally, when you go to see these guys, some of them, they are going from hand to mouth. And so you feel the pressure from that. You don't feel the pressure from VCs -- which I always say: "You guys are important because you funded us, but really, what drives us is those developers." Because when I go out there, and they're like, "When are you going to commercialize?" I'm like: "Wow, tomorrow." Right? Because I know they're waiting for that check. And what are they going to do with it? They're going to make more games. And how great is that, to help people live their dream? Because that is a worthwhile job. So how many people do you actually have in your San Francisco office? SC: We have almost 30 people in the U.S. so far, and growing rapidly. Is a large proportion of that community management? SC: Probably half of that is service team. Game Masters, and, you know... NF: Web designers, web developers, things like that. Question about localization -- I looked at Solstice, and it's like super Korean. Like, you look at it, and it's like: "Well, I know where that came from. Because they're wearing Korean wedding dresses, and things like that." SC: We didn't spend our weeks and nights doing the localization for it. The intention behind that one is that we're going to fix a lot of the localization issues during closed beta. We wanted to test the game out as-is -- pretty much as-is -- and see what the userbase would say. I think that when you watch Nickelodeon, and Cartoon Network, it's all YuGiOh, Naruto, and all of these characters. Maybe not the Korean dresses -- that's a little too much -- but in terms of look and feel of the characters, I think it could fly. The Korean look is different from the Japanese look and feel. Although most of that animation -- the film animation -- is done in Korea anyway. NF: We've found, and were kind of surprised, that our audience -- the younger audience in particular -- really isn't sensitive to that kind of particular difference. I think they're very used to Asian culture -- a lot of it coming from Japan, and most of it coming from Japan these days -- but also, they're familiar with other games in the same genre. And, as I said, we've been really surprised that the audience hasn't been sensitive to that. If it's a consistent, well-designed game -- as long as the gameplay is smooth, people seem OK with it. SC: I think the performance of Fiesta is -- can't tell you exact numbers, but -- essentially it's mapping to one of probably the most successful Korean games that are running out there right now. In America, you mean? SC: Yeah. And so I know some details around, say, MapleStory, because of having worked at NHN, and some of the discussions that went between the two companies, but essentially we're very, very happy about how Fiesta is doing, and as a first game especially, we're actually very pleasantly -- not surprised, but pleasantly pleased. And the second game, despite all the "not enough localization" -- partially on purpose, partially because we just wanted to get it out there and see what reaction we get from the baseline of gameplay -- is also starting to map to Fiesta's results during closed beta. And so we'll definitely work hard to make the fit better for the Western audience. But right now, when we take a look at the performance, we're very happy. So you're not concerned at all about possibly confusing some of the existing audience by changing? It depends on what kinds of changes you make. When you make game balance changes, the ones before will always complain. Like closed beta 1 testers will always complain because the way they like to play it has already been changed. Right, because they've adapted to it the way that it was. SC: Yeah. That, we're used to. If we take away Korean dresses, and they complain? Well, we'll make it into a Premium Item! They can buy it! That's the good thing about microtransactions, I guess. NF: We've found that people are pretty savvy about the closed beta process. I think this type of game -- because once you go to open beta, you clear the database -- I think people are usually quite savvy about what that might mean, and how the game might change. As I say, the complaints we may get about game balance are usually just another sign that these people are really into the game, and notice very subtle changes. SC: Yeah, and I think the interesting thing about this game service operation is that it's very, very data heavy in the background. There's so much data on how people are moving through the game -- their leveling, how much time, which area, and all of that -- you've got to look at all of that and make the changes. And also in terms of the items, too. Which types of items are being consumed most, by what types of users. And you've got to look at that every day, basically, and it's traditional product marketing, but accelerated. Because in the traditional product marketing world of console games, or let's say even more far removed, like PNG, we actually have time to define the features, make it, market it, sell it, and then get feedback. We're on the fight every day. So this is really high-intensity business. It's part qualitative feel, based on interacting with the users every day, and part analysis. NF: Yeah, retail sales. So you need to determine which things are selling -- if one kind of item is popular, are you going to make a whole bunch more of that type? SC: No, no-no-no. I think this is where it gets interesting. This is where you actually start to apply the macro-econ principles of inventory management and pricing. And you actually get to test: How many items, during what period, at what price, do you want to release? And you see the reaction, and based on that, you may axe that product. It's pretty easy to take it off the shelf; it's virtual. Or, you may actually say: "Hmm, this is selling well! Let's try it in purple!" Because people love red, you know? And let's price it maybe twenty cents more. And so this is where it gets fun. And of course we have to respect the users, because we don't want to, basically, beggar them. You know, 'rob from Paul and give to Mary' -- or whatever it is! But that's the part where I think we will really be able to add value to game developers the world over. I mean, we're starting with Korean game developers because that's where a lot of this inventory rests. But I'm hoping, and starting to see friends of mine, in fact, who all work around here, who are starting to develop games. So you're thinking about expanding into releasing Western-developed products as well? NF: Our goal really is to open up Outspark as a publisher to global game developers, and really look for games that meet these criteria of: community games, good monetization strategy, very good developers who can continually put out new content and really are in for a long haul for a game, and a community that likes that game. Korea, right now, is just the most experienced at that. You see great game engines there that really understand how this process is built in. So we're starting; the first kind-of portfolio of games is coming out of Korea. And then we're also starting some initiatives to look both in Europe, here in the U.S., and China as well. It's probably good to diversify past Korea, considering the sheer number of companies that are trying to do that here. Because it feels like every couple months, another company is launching that's trying to tackle this market, and there's obviously going to be a breaking point. SC: Well, I think our advantage is this: We're not going to be a developer. We leave that creativity work to people who know how to do it. I think we know what our strengths are -- which is taking all of this experience across U.S. and Asian portal and game service operation. Frankly, when I was at Yahoo!, I went to Korea and tried to license KartRider back in 2003. I told the Nexon guys, "Hey, I'll pay you X million dollars,. We've got twenty million uniques a month, just in the U.S.; let us run it." They said: "Who's going to operate it?" And I was like: "Ding! Good question. ...Me?" NF: "We'll be back in a couple of years!" SC: Yeah! So there are a lot of game developers who are on that sort of evolution of understanding how to plan for a game launch -- almost like a product launch -- where you have to design in when you visit these guys. From the start, they have almost multi-variant matrices of game characters, to items of various levels, when you launch this stuff. But some guys understand that really well, and that's what Nick meant in terms of, you know, engines that are well worked-in. Asian game developers have been doing this sometimes for five, ten years, and U.S. casual game developers are, I think ,starting to do more of this. So we'd love to be the guys who help all of these developers reach out to the market, and be able to monetize, so that they can keep doing what they're doing. And the gamers benefit, because they get free content, and they get to consume as much content as they want, and pay for it as much as they want. And this is... a huge change in how content is delivered and consumed. So we're uniquely positioned to be able to operate these games in a way that benefits both game developers and gamers. Do you foresee getting into a portal-like scenario again, to keep a brand identity? For example, all Nexon games use the same branded currency, because all of their products are localized with a node of Nexon. SC: Sure. Well, I think we would love to partner with a lot of the social portals out there. And while doing that, can we be a game portal? Probably. Because social portals like Facebook and MySpace -- we're partnering up with Oberon and so forth -- they have masses of users. Thirty million, sixty million, eighty million users who are coming into their site every month, and you get bored from just chatting with your same friends. How many people can you just go pick up online every time? -- Well, don't answer that. It all circles back to dating online. SC: Dating! It does, doesn't it? Because I think these games -- when you look at the games that succeeded overseas, there are really three drivers that are common. And I'll euphemize here: One is love -- well, dating -- and one is commerce, and the other is probably competition-slash-challenge. And so, I think, getting back to the 'would we be a portal' question: I think we would be a game portal in that we would have multiple genres of games that appeal to probably, hopefully the whole family, but starting with the youth market. And then, if we can partner up with community types where -- we're currently on our own, generating hundreds of thousands of active users for even just Fiesta alone -- I know that we can probably do something really interesting. How can I do something that would be fun with my friends in New York, or Italy, or Korea, or wherever, where I have friends everywhere that would be a richer experience than just sharing photos? That sort of exists -- Habbo Hotel, for example. That's exactly the thing that they're targeting right now. SC: Right, right. I think they're doing the right things. But I think because our identity is not focused on, necessarily, "Outspark characters," but rather, the gameplay is across different genres. I think it would be easier to partner with other portals, like a Facebook. Because Habbo and sites like that are doing a phenomenal job creating interactivity among their virtual world participants -- I guess, their 'netizens' as Koreans would call it. But I think once you have a sense -- it's almost like a brand identity. [When you think] "Habbo Hotel," you think of those characters, right? So how they can extend that into other games would be, I'm sure, very interesting. So, you were talking about building relationships with these developers, and you're actually going to have a several year relationship with, say the developer of Fiesta, Ons On -- the title persists, has a large audience. Are you going to work with them on developing future titles together? Or are you just picking titles that you see fitting of the Outspark model? Are you going to be guiding the development of titles with developers? NF: We're definitely going to continue to work with them. I mean, it's a relationship we really put effort into, and we think they're a great developer. So one of the things we're looking at, from a "studio" point of view, is really helping developers fund their next project, and things like that. So it's definitely something we'll consider -- especially as we build these kinds of relationships. SC: And that effort is also going to be global. And we hope to be able to connect game developers from Asia with the Western market, because we think that they have complementary skillsets, where they probably can learn from each other quite a bit. Yeah, there are some language issues related, but we can get over it. Our producers will be involved in that kind of an effort. Obviously, some of these developers have a long history of developing these games in the Asian market, but the phenomenon of them coming to the American market is a little newer. Is it safe to say that most of these games are developed primarily with the Asian market in mind? And do you think companies like Outspark will have more influence on the next generation titles that we'll be seeing out of Asia? NF: Yes. Definitely. I mean, that's one of the things we bring in turn to our Asian developers. We can come and help them think past some of these cultural issues, and truly target sort-of the "human drivers" that make games successful everywhere. And you see that in games that are successful everywhere. There are some very common themes. For the game developers, it's really just understanding, as they develop the game, what very slight -- sometimes -- design changes they can plant in, which will make their game far easier for us to localize for a global market. So from their perspective, that's why they would want to continue working with us on future games as well. SC: You know, I think there's a level of trust that develops over time, and, you know, there are times when you yell at each other over the phone or in person, but ultimately we all know that we're gunning for the same result, because that's how the relationship is structured. And I think the great thing about how our team is operating is, some of our Game Master/Product Managers are actually trained game designers. So they are not only game maniacs, but they also want to one day go make games -- and are already establishing relationships with these game developers. Also, because they're Western market-trained, and really Americans working with these Asian game developers, they can see where things should change for the better for the next generation. I think the market right now in the U.S. is able to absorb these types of games that are primarily, probably initially developed more with Asian markets in mind, but I think pretty soon, with all of our friends developing these online MMO -- you know, everybody is. I think it was last GDC, they had this game company CEO dinner for fifty people. It was like forty-nine boys and me, and somebody yelled out: "Who isn't developing a casual game MMO?" And everybody laughed, because they all are. So I'm hoping to be able to work with some of these guys. It seems there is continuing to be a lot of skepticism from the hardcore gaming side, with roots in arcade and action titles. Have you encountered trouble with that at all? SC: No. First of all we're going to be publishing and operating more than MMO games. Our third game will be entirely different. In fact it's going to help drive more women to the site, so that we can have more dating happening. NF: You might find yourself playing MMOs. SC: But you know, it's funny; our Game Masters have female characters too, and when they go in as female characters, people don't know. And it's funny to watch gamers come up to them and, one of the characters' names is Madison: "Madison, I love you!" And I'm going: "Do they know this is a guy in the back?" But yeah, getting back to the point about MMOGs: Casual games that are MMOs seem to bring out also the chatty side of people. Especially the casual MMOG guys. And I think I was joking with our Game Masters, and said: "You know what? Instead of being more men-in-tights killing monsters and spawning bosses, how about we have a dance party? Because we can! You know, we have these rich emoticons in Fiesta, so let's use it!" And it's really interesting, because just like in a real dance contest, you had street crews running through, and people meeting online and practicing. We have an interview with the winners, which are actually three women. I think they're women! But they're asked questions like: How did you meet? "Online." When did you meet? "A week ago. And we practiced every day for an hour, and YAY WE WON!" And you're going: "Wow, see? You don't have to go kill monsters!" So now, we started with something like 80 to 90% male, and dropped a little, but still. NF: It's about 35 percent female on the site? SC: Yeah. Plus, if you do something like a dance party... there's a lot of a stigma around gamers as stay-inside people, which I think is pretty incorrect, but still, not a lot of gamers are willing to go out and go to a real-life dance party. So if you put that sort of thing in-game, it allows people to... NF: I mean, to your point about arcades -- I grew up in arcades, and then it was LAN parties for a while, and you really only play for a fraction of the time you're there. So the way that we look at it from Outspark's point of view, is that you can build the community around the game. It doesn't have to be just people hanging out in the game per-se; people are really playing these games, there are lots of different things you can do, there's PvP mode, there's Guild War mode, people can just go out and level up. But if you build enough around that, it becomes a sort of virtual arcade for people. That's what it really means. Sometimes they're playing, sometimes as a group they can go and play another game that
Q&A: Outspark Gets $11m Funding, Talks 'Virtual Playground'
Gamasutra recently spoke to founder and CEO Susan Choe and chief studio officer Nick Foster of online game publisher Outspark about the company's plans to help independent PC games from Asia find a market in North America, as the company announces it has