We speak to the CEO of Australia's newest computer Games Publishing Company, Vivendi Universal Interactive Publishing about the local industry, marketing in Oz, the future of games hardware and their world-famous product line which includes the popular Diablo 2.

Pascal Brochier is the calmly confident CEO of Vivendi Universal Interactive Publishing Australia, which has only last week launched their Australian and Asia-Pacific operations.

Vivendi is the most recent large-scale computer Games Publishing company to emerge, yet it has an incredible set of game developers under its umbrella such as Valve Software, Dynamix and Blizzard Entertainment. These studios are responsible for some of the world's most famous and successful games such as the Half-Life, Diablo, Warcraft and Tribes series of games which are spectacularly popular worldwide. We spoke to Pascal recently about the set-up of the VU Interactive Publishing Sydney office, which will serve as the central command for the Asia-Pacific region.

Pascal had much to say about the state of the games industry, the Australian gaming market and the virtues of quality game production.

The Interview

1.  Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.  Moving into the movies      6.   Launching into the dot-com crash

Moving to Sydney

Why did you choose Sydney as the focal point for VU Interactive Publishing in the Asia-Pacific?

Probably because we recognised right away that the Australian market was a significant market, and also there was a great pool of talent here to help service the Asia-Pacific region. We are starting obviously both the Australian operation, and the rest of Asia-Pacific, where a team is being put together, based here in Sydney, to cover the rest of Asia.

What are your core objectives for year one?

Year one for us ends up at the end of December, so I even have short-term objectives for the next six months. But if we can grow successfully, we have a few major releases, Lord of Destruction (Diablo 2 expansion) Empire Earth, Arcanum, Throne of Darkness - so establishing records in day one releases. That'll be quite good. It's also establishing a smooth relationship with the customer base. That's ensuring we are gearing up to take a leading role in the Australian market. ...One step at a time, we think we can get there. Market share obviously gained, service level with our retailer customer base, obviously establish a relationship with the gamers, the users. And we've got a good team in Sonia (Sonia Fattore, Marketing Manager), who you know is very familiar with the market and that's gonna help us do that.

As you've just mentioned, some of the world's best software developers are developing products for your line up, people such as Blizzard, Valve Software and Dynamix. Are you excited to be working with such world-class products?

Oh, fantastic. I've been told, coming on board here, that I'm joining the -Holy Grail" of games here. And I truly believe that. Just listening to the feedback in the market, studios and properties which are almost mythology standard. Actually when I was in California I spent a bit of time at Blizzard, and saw some of the early development of Warcraft 3. You would appreciate that after five years, the culture with Blizzard is sensational. And after (being employed for) five years with the studio, people get a giant wooden box. And when you open it, inside is a sculpted sword. And if you do ten years you have a shield, a sculpted shield. Absolutely, the Holy Grail.

Diablo 2 was the best-selling Australian game in 2000. For very famous games like this, how much organisation does it take to help them be successful? Would you say that they virtually sell themselves?

Up to a certain extent because you establish the franchise, but however when we look at the results we tend to believe that you can always do more. When I look at other markets, I see the results on the day one releases, and still I think it's underdeveloped, on what we can get. The entertainment value that you get out of a copy of Diablo 2 is absolutely sensational. When you compare it with other forms of entertainment whether it's movies or music, what you get inside the box, for the number of hours, for the pleasure of it, for the interactivity, is underdeveloped. And you just go through some of the other areas in the region and you see the success of gaming rooms, the success of tournaments, the success of these games. I mean we've just sold over one million copies of Diablo 1 in Korea. Which is just absolutely sensational. And we think we still have a lot of upside for this type of title, and franchise.

So yes, we're very happy to have the most successful game for 2000, but we think that there's still a lot of upside. When we look at Warcraft 3, and some of the other major titles, we'll be looking at bigger numbers. And bringing a bigger franchise. And I think the bigger the franchise the more the local play becomes interesting. And for us, at some stage, I don't know how but we're looking at having a local server, we're talking about it. So this is what we need to push.

The Interview

1.   Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.   Moving into the movies      6.   Launching into the dot-com crash

New markets, new games

Vivendi Universal Interactive recently signed a three-year worldwide publishing agreement with Fox Interactive as well as Tolkien Enterprises, does this mean games based on the Lord of the Rings films?

Yes. It is, it's an Xbox standard, I've seen some early development on the game, we were showing behind closed doors at E3 and it looks sensational. It'll be very interesting. Because unlike watching a movie or reading a book, it's interactive. That's the fun part of it.

Is it a role-playing sort of game?

Yes it is, yes. Different periods, and very different depth also. I think it will be a very exciting game.

According to a recent press release of yours, the Australian Gaming market is growing 17 percent, year over year. How does this compare internationally, and do you see this growth trend continuing?

These numbers were quoted from a Fin Review source (The Australian Financial Review), which was published just before E3. We still see growth in the PC-CDROM market here in Australia. As I explain, you have several growth factors. The first is that the penetration of multimedia PCs is actually quite high. From the numbers I've seen, it's about fifty-four percent. Which is higher than the US which is about fifty percent. That's what we're in the process of trying to push -- the difference between a console and a PC is that I think the PC is underdeveloped.

You have a lot of people who own a multimedia PC who have never really seriously played games. That's where we see an opportunity for us to tap into. Whereas if you buy a console, you buy it with a primary objective to play games. A it's a very different objective. So what we think is that we can covert existing, multimedia home PC users to start getting into interactive entertainment. We see very much ourselves as having a role in driving the category. That's why I think we're still going to see some growth in that segment of the market here in Australia.

Some other probably more depressed or flatter markets in some parts of Europe or in the United States. And then you have the whole console area with the graphical improvements in the latest delivery platforms. Plus you see also the advent of the Internet. Again, adding value to some of the games and enabling multi-user. That's a very different experience from a console player. When you are in front of other players in these games, you have to watch your language. (laughs)

On which platforms do you see the strong future gaming markets? Can you tell us something about the percentage breakdown there?

Well there are different sources and I was trying actually to reconcile some of these numbers. I need to do a bit more work to really validate. Discovering the real information is certainly quite difficult. But if you look at the installed base of hardware as a starting point, you have about a 3.8 million multimedia home PC base in Australia. And at the end of 2000, you had about 2.6 million consoles, of all different formats. That's going to change, because there is a lot of innovation in the console market, as you are aware.

I still think though that the multimedia PC is still going to continue to grow, because of the benefit of the Internet access. Which the consoles are not delivering, as previously expected. So that's going to drive growth. Probably from an advertising investment perspective there will be a bit more from the console part, with the Xbox, 'Cube (Nintendo Gamecube), and PS2 (Sony Playstation 2) continuing to grow. But it's very hard to say which of them is going to continue to dominate.

The beauty of it is I think whenever you have a console company or even developers, publishers advertising it benefits the whole market. The vision behind Vivendi is to become a leading content provider across all platforms. So for us, I think it a win-win. We have a stronger heritage on the PC. But we have announced a number of releases on the console format. Which I think is going to help us tremendously.

The Interview

1.   Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.   Moving into the movies      6.   Launching into the dot-com crash

Making a mark

There's been a lot of market consolidation in the games publishing business recently. Do you think this will continue, and would you say it is a good thing for the industry?

Its hard to see the impact of it. I guess the verdict will be if the quality of the games continues to improve, then you say the outcome is a pretty good outcome. There are a lot of titles out there. And when you look at the penetration of these titles, I mean yes you need to have a very wide variety of choice, but some of them economically are not viable. Just because to advertise the development costs into a very small number of units is going to be very difficult.

I think perhaps it's going to be a bit like the movie industry, as long as you can continue to produce and come out with creative titles then that's going to be very encouraging. It's hard to tell what consolidation is going to do for the industry, but I would say it's going to help focus on better long term titles and franchises, and so forth. Which we've been able to prove and demonstrate with Blizzard and Sierra.

Traditionally speaking, Australian games publishing companies don't spend a great deal of money advertising their products, especially on new generation formats like the Internet. Is this smart business?

Advertising is actually awareness building, which is a bit of a catch twenty-two. If you look at the numbers on day one, they're relatively small numbers versus mass media tools. So it's a matter of targeting and looking at your regional investment. But as we start expanding that user base, and I think the dynamics of how they are launched and advertised is going to change. And you just need to look at some of the other markets, and what they do.

That's one of the challenges we have marketing-wise, in saying how we expand and I would hope that we would see some new marketing initiatives when we release in the next eighteen months or so. Some of the fairly, what you call -broad titles". You take an Empire Earth for example. I'd like to think that we can do things a bit differently. And contact our potential user base. In a very effective way.

Do you plan to differentiate yourselves from the other games publishers, and if so, how?

Well we've got very strong studios, so that's a very strong point of differentiation. And that helps already. Versus maybe some of the publishers. Well we've got three elements to the products we sell. We've got the title which is probably most important in identification, then you've got the studio, which for us is very strong. And you have the Vivendi umbrella brand that basically puts all of the pieces together. For us the heroes are going to be the titles, and the studios. Vivendi will just be a support and logistics in its traditional arm. But we're not going to be spending money on establishing Vivendi. It's a waste of resources, at this stage. We're going to focus on the titles.

The Interview

1.   Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.   Moving into the movies      6.   Launching into the dot-com crash

Moving into the movies

Being Vivendi Universal Interactive, you have some connection to Universal Pictures. How does that impact you in terms of business, and the kind of titles you have?

When we merged with Universal, if you look at the four core content categories of Vivendi Universal, you've got music, you've got games, and you have education. Those are really the four. And right now we've been operating fairly separately. But I'm sure as the delivery platforms evolve we'll start to see content doing things together. It's a bit early to talk about it but there will be some very interesting synergies.

Like Interactive Movies, that kind of thing?

For example, just take a very simple example, it's timing together when we launch The Mummy, The Mummy Returns, you have a movie, but you also have a game. And the game that we are releasing is on the Gameboy Colour, as well as the PS2 platform. But they're being released relatively separately and the way we've done it is because the deal with Universal was still relatively recent. But in the future you could pick up a VHS tape of the movie, you would have a trailer about the game. I mean there are synergies between Limp Bizkit, Listener, and Diablo 2 or Warcraft 3. Funny ways, that you find synergies.

It's very early to talk about it but I would hope that in the next couple of years we would start to see a little bit of that happening. When you decide which platforms to use you need to think as broadly as possible. And the music people have announced initiatives with Sony and Yahoo, so we'll see some things there. We just need to take one step at a time. The vision of Vivendi is to be the preferred and leading content provider over as many distribution platforms as possible. Music, films, games and education.

Considering the technology bent of Vivendi, Along those lines, are you planning to go really high-tech with your education product line?

If you just look already at education dot com, which is us also. We've started creating like electronic satchels, trying to be a lot more interactive. And that's the beauty of using a medium like the Internet. We just have to be careful, and cautious going forward. It has to be profitable, a long term viable business model. There's no point having fireworks today, then nothing in six months time or twelve months time because it doesn't work. It has to be sustainable, and whatever we do has to work. And we're probably going to end up with a lot of it being subscription based models like you see on some of the gaming on the Internet, subscription based play on the Internet.

Do you think the Internet will play an important role in consumer education, particularly in regards to product information?

Definitely, definitely. In Australia we haven't done much yet, and it's still very early. It will not replace, but it will be a very nice add-on component to what we're doing already on a software basis.

I think probably also when you look at it the penetration and number of people using education is growing actually quite significantly. And education software has a great future because the interactivity you get in front of a PC really stimulates and helps children learn. Interactivity is definitely part of the learning process. So that's very interesting. We are making acquisitions in the education area, we just acquired in the US an additional education publisher. Reinforcing our content base on education is definitely one of the objectives of the company. Kids is very important for us.

Next generation platforms like the Xbox are touting online play as a critical feature, claiming it will usher in a new era of subscription-based gaming formats. Similarly, new generation mobile phones and wireless devices also promise to connect the mass consumer with a group entertainment experience. Do you think this is an important objective for the industry?

I think it is. Again, you have to see the adoption pace of the technology. You are always going to have the early adopters, however before it becomes a wide distribution platform which works from a technology and a business perspective, that's where the challenges are. But the interactivity and the multiplay is definitely a trend, that's part of the social entertainment part that I really think people are looking for.

Will you be pursuing games with that sort of subscription format?

It's very early stages for us, remember this is day one of going live. But in the long term plan, yes these are things we would love to have a look at, and would love to come up with something that's going to work out. Just to refocus on the Internet, which is already here, the fact that you look at the pace and growth of Broadband, which is a lot slower than everyone anticipated. And that's slowing down. That's what you're going to put, probably, as one of the brakes on online gaming. Because with a slow response, you have no platform. Would other platforms go faster? - I don't know. The vision is clear. Multiple platform, multiple player, realtime. That's what people would like to have. However there's a gap between the technology and what they want.

The Interview

1.   Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.   Moving into the movies      5.   Launching into the dot-com crash

Launching into the dot-com crash

Regarding the recent dot-com crash, do you think it was a wake-up call for Internet companies reliant on banner advertising? Where do you see the future of web advertising going?

Well, that's definitely left-field! (laughs) It's actually quite interesting. What was incredible was that people were willing to change a lot faster than we were actually ready to change. And faster than the broad population was ready to change. So we all thought that even banner advertising which in impact and creativity is pretty boring, compared to what you see in traditional media, I mean even in radio, or television obviously, and some other forms. This is what we underestimated. So the delivery, and the impact, and the return on investment and the cost per impression was just outrageous. Cost for impression, cost for clickthrough was just outrageous. The technology platform of the Internet was not, again, enabling more creative deliveries.

But if you look around there are people in the online advertising who are doing well. They're just more creative, just more focused on regional investment, and they're just taking the net for what it is at the moment, not for what it might be in five years time. That's probably the difference between those who made it and those who didn't.

How important do you see promotion through the distribution channel, or retail placement in the success of a game title?

The retail channel plays a very important role in the launch of a title. In its commitment behind it, and display merchandising. You've got to remember that it's an industry that when you have a major launch, you do a significant portion of your annual sales in the first three weeks. So launch, I mean people say sixty, seventy percent. Just the early part, is very critical. And so the more you get behind it at retail, the more successful you're going to be. The more you'll succeed at the destination for a launch for a new title. And I think everybody wins. So yes, the retailers are critical in the success of a launch. Definitely.

Considering the explosive growth of the Australian retail game software sales (17% YOY), do you think that the marketing expenditure will match that growth?

I have a feeling that the advertising - it's a hard case. We're going to be looking at that advertising, and we're going to be focusing dollars on what we call the growth drivers. So if there's growth of a significant regional investment and that you can successfully increase the day one penetration of a title. Through successful marketing campaigns. Yes, that's going to be an area of investment for us. Definitely. I think, what I'm learning in this industry is that very few people can successfully sell. A lot of people just distribute. And that's the difference between distributing, which is just putting it on the shelf and selling which is creating the demand and following it through to have a successful launch.

Is this the so-called -Push-Pull Marketing" ?

Yeah, you can call it that way. I think your job doesn't stop when you've sold it in. There's a lot of work to do before, to create the demand and afterward, managing, ensuring that it continues to be a success. That's one area where we think we can add some value. One step at a time, but that's what I've tried to do in putting the team together, where I have a mix of people who have games industry experience, together with people who have a more fast moving consumer goods, more traditional marketing background and are also a bit challenging of the ways things have always been done. That makes the dynamics of it actually quite interesting.

Sounds like a lot of fun!

A lot of fun, yeah.

What is your favourite game at the moment?

Oh. I'm probably more of a strategy person than I am a first-person-shooter, but I enjoy the interactivity of it. But I'm not an expert yet so the hours are not enough for me to enter competitions and things but I'll be spending a bit more time. I've got a lot of games I'm quite fond of.

Which title are you most looking forward to in the Vivendi range, coming up?

Obviously Lord of Destruction (Diablo 2 Expansion Pack) is big for us. But I'd like to think that Empire Earth is going to be a huge launch. Just because of it's broad appeal, and also the way the game is structured, it's twelve different epochs -- and you can enter any one. When the time comes we'll talk about it but this is one where we're going to spend a bit of time pre-launching. I'd like to think we can break some records with Empire Earth. Again if you look at the genres, strategy in Australia is the most popular. Like it is in most countries, actually. I think it's just a broader appeal.

But when you have a combination of strategy and history, which has an educational component to it, I think that is a very interesting proposition. And Rick Goodman has done a fantastic job with his team to develop that game. I'm quite impressed with Empire Earth, I must say, from the ones I've seen. That can be huge.

And when's that launching?

Currently we're looking at mid November. It's still a bit early, but we'd like to think that we can make that. As you know one of the frustrations, probably, of a lot of users, and retailers, and even us publishers - one of the frustrations of the industry, is slippage. For everybody. And that's actually a very interesting problem to deal with. There's no other industry I can think of, that has the same problem. Movies doesn't have that problem. Part of the development process is the technology reliance, the technology is always very ambitious. So we prefer to deal with slippage but have a good game when we release it, than having to release early and deal with patches, and that's what has made Blizzard very successful. People are willing to wait for a few years to get a Diablo 2 or a Warcraft 3, that is a dynamite game, and it's been thoroughly tested, and it has to deliver fantastic entertainment value.

Sounds like that's what you're all about.

(laughs). Well we're trying to.

The Interview

1.   Intro      2.   Moving to Australia      3.   New markets, new games      4.   Making a mark      5.   Moving into the movies      5.   Launching into the dot-com crash

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