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The Euro Vision: Eidos' Big Canadian Gamble

The future of UK publishing now appears to rest on Eidos' proposed Montreal development studio. In this week's edition of Gamasutra's 'The Euro Vision' column, Jon Jordan considers a decision that marks the transformation of a one-time risk-adverse publis
Montreal is the perfect place to set up a games company. Ubisoft is planning to take its headcount to 3,000, EA's building a large studio, plus there's the 250-strong indie A2M, and a wealth of tools, middleware and service companies such as Autodesk, Softimage, Quazal, Engenuity and Babel. The universities are great too and - let's face it, the main reason - you can get generous tax breaks covering salaries and start up costs. To that extent, no one is surprised Eidos has announced plans to set up its largest internal studio in Montreal. According to general manager, Stéphane D'Astous, himself a Montreal insider, having previously worked at Babel and Ubisoft as well as commercial flight sim company CAE, the studio will eventually consist of three next-gen development teams and a major QA facility for all Eidos internal development - a total headcount 350 by 2009. "We're offering super conditions for people who want to work in games," he says. "The talent pool in Montreal is unbelievable and growing, and that makes it attractive for companies who want to set up shop." But for anyone who's followed the history of the UK largest publisher, the surprise isn't the location, it's the decision to set up such a studio in the first place. Change Of Philosophy In terms of management structure, the company we all refer to as 'Eidos', isn't really Eidos as North Americans know it. The name might have remained the same, but the management board is populated by its one-time UK rival SCi. Not particularly well known outside of Europe, SCi has actually proved to be one of the best run game publishers ever. Founded in 1988 and floated on the London Stock Exchange in 1997, it's still run by chief executive and founder Jane Cavanagh, while commercial director Bill Ennis has been on board since 1995 and finance director Rob Murphy since 1997. During that time it's never had any huge hits, like Eidos' Tomb Raider. Instead, it's carefully milked relatively successful titles such as Carmageddon and the Conflict series, while keeping a very tight rein on marketing and development costs. Indeed, before it bought out Eidos, SCi's stalwart philosophy was not to own in house development talent. Even after being forced to buy Pivotal, the studio behind the Conflict series for £2.4 million, it stated to investors in 2004 that this was an exception: "outsourced development remains the core of our business, enabling us to deliver profitable growth with maximum flexibility, low overheads and a good record of on-time delivery." The purchase of Eidos a year later effectively destroyed that ethos. Having inherited fully and part owned studios in Denmark, America, Spain, and the UK, and a development headcount in the hundreds, the SCi management had to ditch their convictions about letting third parties take the risk of game development. And most ironically, it's performed this conversion in the knowledge it was investment in in-house talent that almost bankrupted Eidos, enabling SCi to buy it in the first place. Back in the glory days of Tomb Raider, Eidos lavished over £100 million on buying studios, setting up studios and encouraging its studios to be creative. The most notorious example remains ION Storm, the Texan folly that sucked in over $40 million and resulted in Daikatana. But there were plenty of other examples of high profile projects that went wrong. Elixir Studio's Republic: The Revolution, Core Studio's Herdy Gerdy, plus Timeline, a studio set up with Michael Crichton, all ate up Eidos' cashflow for little or no return. Better In Than Out Of course, the current SCi/Eidos management will argue this happened a (console) generation ago and the new situation demands a new response. Even before the Montreal announcement, SCi seemed to have realised the decision to buy Eidos meant it was going to have to step up its performance: in order to play with the big boys, you have to have plenty of people on the payroll. To that extent, activity such as setting up the London-based Beautiful Game Studios (mainly with staff from the defunct Silicon Dreams), to develop the Championship Manager series, taking a 25 percent ownership in ex-Argonaut startup Rocksteady Games, and setting up Eidos Hungary (itself result of the messy breakdown of a relationship between publisher and local developers MGE and Mithis Entertainment), saw the total number of SCi/Eidos development staff rise to over 600 by July 2006. Thanks to the use of completion bonding and other film funding deals, development costs still remain lower than other publishers though, at around £28 million, or 16 percent of turnover. In comparison, in the early 2000s, Eidos' spending on development varied between 20 to 34 percent of turnover. Risky Business When it comes to Eidos Montreal however, the risks are significant. In terms of sheer numbers, the plan to hire 350 staff within three years is bound to be disruptive, both in terms of the Montreal labour force and relationships with existing companies. When fully staffed, Eidos Montreal will also increase the company's burn rate as overall development headcount will have been boosted by over 50 percent. It's much harder to make use of those efficient off-the-books funding models work for in-house projects too. The bottom line is, even with Quebec tax breaks, Eidos Montreal will push up costs considerably. Much more difficult to handle will be the process of successfully setting up a new studio from scratch that can create a debut, world class game; something Eidos has never done before. According to Stéphane D'Astous, it was the only way the company could increase its capacity. "There weren't any good enough opportunities to buy out an existing development studio and as the conditions were aligned, I think Eidos thought, 'Let's set up a studio from scratch'," he says. He does agree that setting up the first development team will be crucial. "Our website almost crashed under the weights of CVs and we're going to be meeting people at GDC too, so I think we'll have the luxury to be very picky," he says. Also important will be the decision of which middleware and tools the studio will choose. "That's something we'll have to discuss once the core team is in place," D'Astous says. Eidos' CTO Julien Merceron (another ex-Ubisoft employee) is based in Montreal to oversee this process. Yet currently without office space, staff, technology, or even a confirmed project, "We have a good idea what project we want to launch with, but we haven't had sufficient time to have all the directors around the same table to discuss it," says D'Astous - it's perhaps unsurprising there's some scepticism surrounding the studio whose success or failure could shape the future of UK game publishing. [Jon Jordan is a freelance games journalist and photographer, based in Manchester, UK. On a flight to New York, he once sat next to a Montreal realtor who knew more about the game business than he did.]

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