Kabam talks making free-to-play 'cool' and its European expansion

Aaron Lee

By Aaron Lee

January 8th 2014 at 11:00AM

Kabam’s Andrew Sheppard tells Develop about its expansion plans and why its use of science sets it apart from the pack

Free-to-play has got a bad rep’ among hardcore players. But that hasn’t stopped US social game company Kabam from making boatloads off of its 3D free-to-play games that have more in common with Age of Empires than FarmVille.

Last year, the company made more than $325 million in revenue from its titles such as Kingdoms of Camelot, a medieval-themed strategy game, and Edgeworld, as well as licensed IP.

It’s steadily begun diversifying the genres it offers and says that over 70 per cent of its business now comes from mobile platforms. Having set up a Berlin office last year, it has started making a big push for the European gaming market.

Andrew Sheppard, president of Kabam Studios, joined the company in 2009, when it was just 30 people. He tells Develop about the free-to-play studio’s rise, how it plans to expand its presence in Europe and why its use of science sets it apart from other game companies.

Kabam has seen some exceptional revenues in last 18 months. How have you managed to reach this point?
Andrew Sheppard: We’ve had an incredible last four years. When I joined the company there was 30 people. We’re now at seven hundred. The revenue grew 70 per cent last year to $180 million, and [in the current fiscal year] we’re on pace to grow 80 per cent.

What’s kind of unique about Kabam is that we’ve done it across a diverse portfolio of games. Our heritage is in the strategy game category, and Kingdoms of Camelot was clearly an MMO strategy game experience. It was the largest game on Facebook for its time, and it was also the largest game on mobile devices in 2012, as defined in terms of revenue.

We’ve now moved in racing with Fast & Furious 6: The Game, which was one of the fast ramping mobile games period. We had 33 million users install the app in just a few months. Most recently, [we moved into] battle card games.

So you’re diversifying your game business by genre?
Yes, that’s correct. As a company we’re incredibly focused on the mobile free-to-play market opportunity. We see all the forces aligning, the trisected of things coming together: consumer adaptation and expectation for being able to access game services that are always available; mobile hardware growing in technology sophistication and capability to a degree where they’re competitive with consoles; and, then, from our own standpoint, building increasingly higher fidelity games at global level to service that demand.

And those three things have really paid off well for us. At this point, about 70 per cent of our business comes from mobile platforms. So that’s both smartphone and tablet, and both Android and iOS. In terms of scope, we cover one hundred countries in 12 unique languages, which I think is actually quite high for an American company. We’ve really try to think like a global business.

So part of the reason we’re visiting with folks from France, Germany and the UK is that Europe is a key market for us. We’re investing heavily in getting our operating capabilities here [in the continent] up to snuff, or at least smartly designed by European standards.

If you were to peel back the hood of an American company and a European company, you’d largely find that their structures are different. In the case of the United States, reflecting a singular market. In a European case, a market that has multiple, very important and large markets that operate under different rules and languages. So about nine months ago we opened up our Berlin office. It’s now 50 people. That office is a sales and marketing office, which means that they also cover the service side of our business that we call, Live Operations. Just by creating that office we were able to improve our engagement in Europe by ten per cent, and we did that in just two months.

You mentioned that 30 per cent of your business is on browser via Kabam.com. How are users finding Kabam’s games? Is it via Facebook, like so many of the popular free-to-play games?
Facebook is still a super huge partner for us, and our games continue to do well and hold steady, if not grow. That’s very unusual. Most other [free-to-play] companies have not been able to deliver that success.

Also, Facebook is very important to us from a mobile perspective. They are really hitting their stride in the mobile space. But, again, a large majority of our business is now mobile and tablet, and increasingly a large percentage of our business is non-English speaking.

How about mobile? Are people finding Kabam’s games through Facebook there?
That is one of our channels, but one of the things that we’re really pushing [this] year is integrated marketing. So really engaging with what I think is the evolving consumer media presence for games, and specifically mobile games, and really pushing on traditional notions of product marketing and game launches. But always with the underpinning of science that Kabam brings to the table.

If you were to say, ‘what does Kabam do that’s operationally different from other game companies?’, it is this fusion of art and science. I believe very much in the art of game development. It is an artisanal craft. People that have done strategy games all their lives are better at strategy; while people that have done role-playing games all their lives are better at role-playing. It needs to be creative, it needs to be innovative. But with the free-to-play sub-layer or business model, the games have to be profitable on a user basis, so you have to be able to bring traffic in, scale the product, deliver the content that people want at the cadence that they expect. That’s very much a science, and we’ve been very good at both.

And, presumably, bringing in local offices in Europe to expand your market is part of that plan?
Yes, that’s the next step. Our broader goal is ultimately to have as local a presence in every market as possible. I’d say aspirationally the goal would be to have, you know, a British customer, a German customer or a French customer jump into our games and feel like they were developed by a developer from their country.

That’s very difficult. The cost of doing that is quite high. No just in term of how you build the franchise, how you execute the creative, but in terms of technology and process. So we have game teams that are running in the 70-people size at a direct level, and then 150 people at an indirect level. And that is operating at our current level sophistication. I believe what you’ll find in the next year or so is that we’ll continue to double down on getting the regional execution excellent. With the newer games we’ll be able to do that because of the technology investments we’re making today. Ultimately, it will just lead to a better consumer experience.

What have you learned so far from your forays in Europe? Especially as the region itself has clusters of free-to-play competitors.
We definitely see different strands to the business. There’s the marketing side and there’s the development of the game and then there’s the operation of the game. So on the marketing side there’s definitely an element of cultural sensitivity that’s key to being successful. So building great creative for ads, building really compelling marketing campaigns. But, then, also know which channels to pull on when and how. That is very country specific.

Now, there are certainly some channels, like Facebook, that allow you to reach everyone, but it does vary by market. In terms of building a game, we are pretty good in our development process at [predicting] whether a game will have appeal in Europe. It’s safe to say that a really good game in the US will work in Europe, and a really good game in Europe will work in the US. But there are certainly things you can do during development to make a game more successful in both regions of the world. That’s part of the reason we do focus groups in Germany, the US and Japan when we build our games. We’re actively engaging consumers prior to shipping the title. And then once a game is live, definitely through our Berlin, [South] Korea and San Francisco offices we are able to provide higher levels of staff via local staff.

Berlin is interesting because it’s such as cosmopolitan city, just like London. It’s also a place where their lots of talent, free-to-play talent [particularly] in Germany. So we’ve been able to establish a very international team. The way that team operates is very different from the way we would operate in the US. What we’re finding is running local events with local sensitivities works. And what works in Italy doesn’t necessary work in Germany.

So I think we are learning that the markets are different, and it’s very much changing the requirements from a game dev teams and the tools teams.

And how have your audiences taken to your games in terms of genre. For instance, have you found a racing title, like Fast & Furious 6, to be more popular in the US, whereas a strategy game, like Wartune, may be more popular overseas?
Fast & Furious is a phenomenal franchise to be working with because it is global. I didn’t realise this. I thought it would have been more of a US phenomenon, and that shows the implicit geocentricism of being a consumer in a certain country. But that [franchise] is massive in China, it’s massive in South America. It’s actually quite popular in Germany.

We do see variants of countries by franchise. So, for example, if you were to sort our key markets, it would be the US, the UK, Germany and France. But for one of our longest-lived franchises and original IP, Dragons of Atlantis, the second [biggest] market in terms of revenues is France. So, for some reason, that theme of dragons really resonate with the French audience. It’s questions like that that we’re trying to understand via our European operations.

What social elements are present in Kabam’s games? And have they affected how Kabam’s audiences interact with each other?
Kabam differentiated itself early on Facebook, and later Kabam.com and mobile as being the company that was at the forefront of hardcore game development. Although ‘hardcare’ can be polarising and it sounds niches, our games are actually quite mass-market. Fifty-eight per cent of our players are male, and 29 per cent are between the ages of 25 and 34. And so, by extrapolation, you can imagine that we have a good number of women and people of different age strata playing our games. That ultimately leads to a better overall social ecosystem. So the hardcore gameplay that’s accessible, but deep and compelling, coupled with the MMO social features that we pioneered on Facebook, really bring to life gameplay experiences that are much longer lived and much more endearing than your standard paid application.

Ways that that manifest is that people form friendships in our games by way of these social functions. It’s those friendships that persist. You know, all the MMORPG companies have talked about how people are getting married [because of] their games to a degree that is sounds cliché. But it is a powerful, powerful concept. This notion of returning to a game that you love, to hang out with the people that you enjoy hanging out with; it’s basically like a virtual living room.

Free-to-play as a business model is changing very rapidly. Recently, some gaming executives have said that free-to-play has no future on console, and are doubtful of its ability for growth. How do you see it developing yourself?
There’s a lot of speculation about what will happen with free-to-play on console. As a company, we believe in two immutable forces: there’s the transition of consumer demand from existing gaming platforms to mobile and there’s the rise of free-to-play. Both have a very substantial impact on the entire gaming market.

If you think historically about gaming, there are three distinct phases. There’s the first phase, which is coin-op, where it was a very defined hardware spec that evolved over time and games that would basically be funded through quarter play. Then it moved to being retail packaged products, and console and PC. And now we’re seeing mobile and free-to-play come to market.

In each of those three distinct phases you see that the companies that was at the forefront, especially at maturity, were not companies that had existed in the prior phase. So the top coin-op companies were not the top console companies. My firm belief is that you’ll see the exact same thing happen with free-to-play and mobile.

Now, why is free-to-play happening and why is mobile happening? Free-to-play is happening because increasingly consumers are demanding choice. And they are getting content upfront for free. So what happened with music, and later movies and television, is happening with games. People want choice, and they only want to play things that they love and they’re only going to pay for things that they love. The entire free-to-play business model is about that. It’s being willing to give your [products] away, because you believe – and in our case, we believe this very strongly – you can deliver a gameplay experience and service that compels people to pay. That people feel is rewarding enough that they will pay for.

The mobile transition is happening for another reason. Certainly, it’s driven by tech, but the consumer adoption is unequivocal. The adoption of smartphones first, and now tablets, both still at high growth rates in Europe. Smartphones being somewhat mature in North America, tablets still at a high growth rate. Tablets are going to grow 42 per cent annually for the next five years, off of a base of four per cent adoption, relative to the total addressable market.

What you’re seeing is a fundamental shift in the way people want to interact with content and browse the web. Gaming is the most popular use case on mobile devices. Mobile devices are inherently portable. And increasingly mobile devices are competitive with console from a hardware standpoint.

So you pull all that together and you say, ‘Will free-to-play work on console or not?’, and you realise it’s somewhat of an irrelevant question. It’s more about asking where are consumers going to be? And, for Kabam, we’re very much focused on where the consumer is going to be. It’s about mobile, it’s about free-to-play and then giving people choice. So if console does become one of the ways with which people want to engage with their free-to-play games, then we’ll be there for sure.

It’s intriguing that Kabam has been focused on bringing hardcore games and production values to free-to-play, since the sector, and label itself, has gained a reputation for social games with questionable gameplay systems. Do you have a desire for people to see free-to-play games different?
You know, it is a polarising term. Increasingly a minority and vocal group of individuals is decrying the category. But what we see in the data is that consumers are not having any resistance adopting free-to-play games. And, in fact, consumers are increasingly choosing free-to-play games because they offer accessibility and choice to a degree that paid applications in games do not.

So, for us, we always care about what the market is telling us, and we listen very closely because we’re always tiring to understand where consumers are going and what they want from Kabam. But I think most of the voices that are opposed to free-to-play are very similar to the voices that were opposed to console when coin-op was at maturity. So for that reason we don’t pay much heed to it.

Also, the notion of free-to-play, it’s really more of an industry term than a consumer term, so we rarely use it in customer communications. Our consumers look at our games as games. They believe them to be services and they want us to operate them very much as a television channel operates a television series, so we always have to feed them with content, both innovative and mind-blowing.

Let’s talk bit more about platforms. When and how did Kabam make the move to mobile?
We made a conscious choice upfront to work on bringing our web games to mobile. The reason for that was we could see already in the data back then [that mobile would be a big deal]. This was 2011, and we’d just started development of Kingdoms of Camelot, which hit peak in 2012 and launch on mobile [the same year]. We could already see that consumers who we’re playing the web version were starting to spend more time on mobile devices. So we basically went where the consumers were. Our customers, the people that play Kingdoms of Camelot, are incredibly loyal, and that’s true for all of out games whether it’s original IP or a licensed title, like Fast & Furious.

Working with the IP that we’d already established made sense now. When you’re starting from scratch and you’re working on a new game, focused especially on mobile, that opens up a lot of new, creative explorations to pursue.

So with our newer titles, like Dark District, that game is designed from the ground up for the mobile platform. That’s also true of Blast Zone! and our newer titles. In all of those cases it’s original IP, and the interaction and gameplay is tailored to mobile.

Finally, the free-to-play market has experienced tumultuous waters, with the likes of Zgnya, Bigpoint and others falling from grace. What are you doing at Kabam to ensure you don’t suffer the same fate as some of your competitors?
We have established early on a very different approach to the way that we build and operate our games. Ultimately, we have foregone the pursuit of shorter-term strategies in favour of things that provide a degree of long-term engagement with our customer base and, therefore, reliability with our business model.

So if you look at our web games, which are consumed every month, every day, those games are running very close to the scale they were at a year ago, and in some cases even two years ago. And we have people in Kingdoms of Camelot for the web that have played since I joined the company [in 2009], when the game launched four years ago.

That’s very unique. No other company has that capability. And that’s not a capability that can be built overnight. It reflects hundreds of millions of dollars and cumulative investment in people, process, tech and gameplay. So, for that reason, we do believe we’re different.

The second thing is as a company we’re incredibly humble. We’re always asking ourselves: are we doing the right thing for the customer? Are we doing the right thing for the market? Are we doing the right thing for the company? That’s part of the reason why we moved from 2D games to Facebook, from Flash to mobile and from 2D to 3D games. We’ve always been very open to change and understanding where the market’s going.

So if something takes off in the future, a new genre, a new platform or new gameplay interaction, we will be there and we will do our best to nail it.