[Gamasutra chats with 11-year old Denmark-based Hitman dev IO Interactive about creating the kid-friendly game Mini Ninjas, and why Kane & Lynch -- whose sequel emerged today -- "could have been better than what it was."] Founded in 1998 and headquartered in Copenhagen, Denmark, IO Interactive is one of the oldest surviving Scandinavian developers. Originally an independent studio, the company was purchased by Eidos and is now part of the Square Enix Group. While mostly known for its action-heavy third person games such as the Hitman franchise and Kane & Lynch, the studio has branched into a new direction with the recently released, lighthearted Mini Ninjas. The game retains IO’s traditional third person perspective, but is otherwise far removed from the violence and machismo of Hitman. As Kane & Lynch 2: Dog Days is officially announced for 2010 on Xbox 360, PlayStation 3 and PC, Gamasutra caught up with the studio's managing director Niels Jorgensen at IO’s Copenhagen studio to get an update on the company today -- and catch up on its history. IO Interactive started up in an interesting way. It was half-owned by Scandinavia’s biggest movie and television distributor, Nordiskfilm, who is also the sole distributor of the PlayStation in Scandinavia. Neils Jorgensen: Nordiskfilm originally owned 50 percent of IO and the other 50 percent was owned by the seven guys who founded IO. Then we started developing Hitman with Eidos. We did Hitman 1 and 2, then we did Freedom Fighters with Electronic Arts, and as we released Hitman: Contracts in 2004, the entire company got sold to Eidos. Then in 2005, Eidos in turn got sold to SCi, which strangely enough was a smaller British publisher. In April 2009 we got bought by Square Enix. It’s been interesting, to say the least. How do you go from seven to hundreds of people, especially in Scandinavia? NJ: It's taken 11 years to grow the studio to its current workforce (several hundred). We have 23 nationalities, so we have a very international working environment. It's very challenging to be the biggest developer in Denmark. It’s very difficult to recruit experienced local people, so we hire a lot of people from other countries. There's no question that the various expenses, like cost of living in Scandinavia, are a factor which we often think about. Over the last three years we’ve outsourced more and more of our graphics production to Shanghai. We had two people there to set it up and currently have one Danish person living there permanently, making sure that our outsourcing pipeline works efficiently. If we didn’t outsource, we’d have to grow the Copenhagen studio even bigger, and that doesn’t seem feasible. It is a challenge, and especially when you look at Taipei and Canada, where you get supplements in tax that encourage games development. We have none of that here in Denmark. But we are recognized for being able to produce great quality games and we have a pretty good track record, so that helps in the hiring process. How do you assess the current situation for video game developers in Scandinavia? The last 18 months have been especially tough here with studios like Deadline and GRIN shutting down. NJ: Over the last year and a half, most of the bigger studios have closed down, with Deadline being the biggest [to close] in Denmark. Zeitgeist never managed to release a game, and there are more smaller companies also that have closed down. In Sweden, GRIN have closed and some others are closing too. It's a huge challenge; we are the biggest developer in Denmark, and the second largest is Unity, who produce engine technology. After those, you go down to 10- to 15-person studios. The credit crunch has made it very difficult to get loans, and it's definitely not made it easier for independent developers. The entry level is increasing; you have to go from zero to super high quality very fast and that's very difficult. Still, there are more small developers specializing in handheld games and the iPhone than ever before. NJ: I'm a bit nervous about the iPhone market. Sure, it's compelling to make a game that's not expensive to do, but it's a drop in the ocean -- the competition is ruthless. If you browse the App Store, you flip through the top 25, 50, and maybe 75 and probably don't go below that. So if you are not in the top 75, you are not existing -- and some of these games are free. It's tough since there's so little marketing money to go around. Some of the iPhone developers have had great success and that's great for them, but I fear a lot of them will have a very challenging future. Didn't IO at one point have a Hungarian studio, helping out on Hitman? What happened to that studio? NJ: Around 2003 we decided to start a IO Interactive Hungary. We hired 50 people and took them to IO in Copenhagen for six months to do training. The initial idea was that they return to Hungary to start their own team with instructions from us. However, we didn’t achieve the kind of progress we hoped for. We had a lot of talented people but not a lot of leaders, which was a big problem. We then decided that we wouldn’t start a full studio in Hungary, but offered everybody in the Hungarian studio job here at Copenhagen. I think after six months only a few went back to Hungary and I think around a third of them are still here seven years later, so that at least worked out. Since recruitment is a problem, especially in Scandinavia, does IO work with local universities to try and develop programs that could could help students to become future IO game developers? NJ: Yes, we helped to design a masters degree on top of engineer and designer degrees, where students can focus on computer games development. We helped design and structure the courses and when we get the chance, we also teach at participating universities. Kane & Lynch had a lot of potential for combining elements of your previous work in Freedom Fighters and Hitman, but the game didn’t really work out and even your traditionally strong tech was weak. What happened? NJ: I think as with most games, not enough time. Eidos hadn't performed well and neither did SCi; they lost more than 90% of their share value before they got bought by Square Enix. So with Kane & Lynch we had to reach the Christmas market. We had a lot of challenges with the game on the development side, and many things to get resolved in the polish phase. We were in a situation where our owners needed the game to be out for Christmas. Ideally, we would have loved to have more time and polish various elements, but a decision was made that we had to release it. I feel that the game could have been better than what it was; it's challenging for us because we really pride ourselves on doing our best, but we have to understand commercial realities as well. Were you isolated from the SCi and Eidos problems in Denmark, or did it affect the morale at the studio as well? NJ: When you are a part of a group that's suffering, it's uncomfortable for everybody. You always want to be in a flood of success with great titles and money pouring in and that wasn't the case, and obviously a lot of discussions and decisions [were] taken. The game industry is in many ways reaching an interesting point where the development costs are increasing so rapidly that it's a challenge for all games to really make money. Only the biggest or the smartest succeed in this market. In many ways I'm glad to be part of Square Enix Group and to have more leverage on the market and financial strength that will be needed in the future to help us make progress at IO. Hopefully we are a part of something that is going to be very successful. IO's known for violent action games, so with kid- and casual-friendly Mini Ninjas, the studio is venturing into new territory. There are quite a lot of games developed in Scandinavia for kids, but how did IO reach this idea? NJ: We wanted to reach a broader demographic, but we have toyed with the idea of entering the children's games market for years. The market is mature enough for a game that is not based on an animated movie or on an old traditional IP that's been around for years. We believe that our abilities in storytelling and in producing quality games that entertain people are something that we can transform from the adult market to the broader market with a focus on children. I'm sure a lot of the team members who had worked on Hitman were glad to do something completely different, but did Mini Ninjas meet some resistance internally? NJ: Not really. Staffing up internally was not hard for this game. People embraced the idea of Mini Ninjas very quickly. I think the entire studio looks at Mini Ninjas as a little brother and is very protective of it, and internally there's a lot of passion for the game. A lot of people really liked the challenge of looking at a different market and producing a different kind of game -- it's been a great challenge.