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Game firms create core of budding industry

Rochester Business Journal
December 27, 2013

The global video game industry in 2012 grossed $79 billion-$14.8 billion in the United States-and is predicted to reach $93 billion in 2013, market research firms report.
 
Locally, the game industry has a bright future, officials say.
 
Among the leading companies that focus on games in the Rochester region are Broken Myth Studios LLC, Second Avenue Software Inc., Darkwind Media Ltd. and Workinman Interactive LLC. Other companies use games as part of their offerings, including StormFrog Inc., which builds brands with an interactive approach.
 
New York already is a player in the video game industry. The industry contributes $268.8 million to the state's economy, the Entertainment Software Association states in "Video Games in the 21st Century: The 2010 Report."
 
From 2005 to 2009, the national game industry's rate of growth was more than seven times the real rate of growth for the U.S. economy. The industry has grown by an annual rate of 5 percent since 2005, more than six times the growth of the New York State economy.
 
Two factors that have contributed to video game industry growth, experts say, are the role of the Internet in game production and the democratization of tools to build games.
 
"There's a wealth of potential, and the trick is to find the combination of financial resources and local support to help these small efforts to really get a foothold," said Stephen Jacobs, a professor, associate director of the Media, Arts, Games, Interaction & Creativity Center at Rochester Institute of Technology, and a visiting scholar at the Strong International Center for the History of Electronic Games. "The other way you do that is hope to attract a large studio or something to start here."
 
The culture in Rochester is helpful to an industry that needs no geographic concentration.
 
"The Rochester game industry, it actually is growing," said David Schwartz, associate professor and undergraduate program coordinator for RIT's School of Interactive Games and Media. "I think whenever you have a really strong high-tech school, you have this entrepreneurial spirit, and add in the fact that RIT's tradition of connecting to industry and students with skills-it's just growing technical prowess."
 
New York ranks fourth in the nation for video game industry employment. The state had 5,474 direct and indirect jobs with an average compensation for entertainment software industry jobs totaling $96,062, the Entertainment Software Association states.
 
"One thing that the community does well is blend an interest in high technology but also an interest in the arts," said Jon-Paul Dyson, director of the Strong's International Center for the History of Electronic Games.
 
Since Rochester is home to the Strong National Museum of Play and RIT's School of Interactive Games and Media, games are a critical component of its makeup. RIT ranked fourth on the Prince-ton Review list of the top undergraduate schools for video game design in 2013. RIT's MAGIC Center, formed this year, contains a research lab and production studio. Students and faculty can produce games by MAGIC Spell Studios LLC, with RIT acting as a third-party publisher.
 
"I can imagine it almost as a slow burn. It's not like we'll see a news report tomorrow that a particular famous game company plops down a studio here. I think we're just going to see more of the smaller development and people being surprised about how much stuff actually happens here," Schwartz said. "Then give it a decade; maybe you'll see a watershed moment."
 
RIT's Office of Cooperative Education and Career Services places students at game companies in the area and at RIT's Center for Student Innovation and other departments where faculty make games and can hire game design and development students.
 
Other non-game industry companies here hire RIT students with game design and development skills. Such graduates work in traditional game studios and the entertainment industry, and they also apply the skills to fields such as medical, military and computing technology.
 
As the games industry evolves, Rochester companies diversify the part that games play in meeting their business objectives.
 
Workinman Interactive, Broken Myth Studios, Second Avenue Software and Darkwind Media have found different ways to incorporate gaming into their business models.

Workinman Interactive
Workinman Interactive LLC, an entertainment-based gaming company, is approaching its ninth year in business with a focus on casual entertainment games.
 
The Pittsford company grew out of founder Jason Arena's volume of freelance work. Working for Nickelodeon Inc. in New York City, Arena decided to move back to his hometown, bringing his love of games to the region in 2005 when the gaming industry here was beginning to gain momentum.
 
"It was pretty light," said Arena, CEO, founder and president of Workinman. "I think it was more academic-based, the gaming culture here in Rochester. I don't think there were a lot of companies like Workinman. I felt like I was very isolated."
 
The company's client roster includes Nickelodeon Inc., Nick Jr., the Walt Disney Co., Paramount Pictures Corp. and Verizon Communications Inc. All of its business is in the United States.
 
It has 32 employees, and Arena expects the studio to grow to meet client demand.
 
Initially the company was focused on interactive design and game development; however, the focus shifted to purely game design and development a couple of years ago. Most of the company's work is focused in the youth market.
 
A way to stay nimble in the games entertainment business is to listen to a client's predictions.
 
"The big caveat was when iPads came out, iPhones came out and they weren't embracing Flash technology," Arena said. "We had to transition quickly into our new system of HTML 5 gaming. One of our main clients-Nickelodeon-pretty much came to us one day and said, "We're not making any more Flash games.'"
 
Creating games for the younger market can be difficult as the idea of fun for each age group varies.
 
"Because our games are youth-focused, we tend to do ones that are very casual and therefore very clicky and punchy and fun, (with) a heavy focus on polish and presentation that looks and feels cool," said Keith McCullough, chief technology officer, co-partner and lead developer for Workinman. "The fun factor in a game is something that borders on intangible."
 
He added: "I played lots of games as a kid, and that's the reason that I can make them."
 
Education plays a role in some casual youth games as more parents are looking for their children's screen time to be productive.
 
"I think that's the big trick when I go down below into (ages) 4, 5, 6, 7, where people want education in their games, and that's a big change," McCullough said. "So instead of just being fun, you have to teach somehow, and that brings in a lot of questions about goals, learning, what you're trying to teach."
 
Being able to track use of the company's games shows their worth to the customer but also is a source of gratification for the company.
 
"I get a big kick off seeing how many people play our games," Arena said. "I still haven't gotten over that, and I've been in the entertainment business for a while. For the past several years our games have had the most, and sometimes it's like 35 million (plays)."
 
A combination of creativity and technical skill is imperative for creating games, especially to reach the youth audience.
 
"I went into my daughter's second-grade class last year to do a talk about what we do here, and I put up one of our games and the entire gymnasium-100 and something second-graders-were like, 'I played that game!'" Arena said. "And I bet I could walk into any second-grade classroom in the nation and would have gotten the same response. All of these kids know it, and we're making content that is entertaining them."

Broken Myth Studios LLC
What started in 2007 as a game design studio has morphed into a company that employs gaming techniques and technology for the corporate world. That transformation has made Broken Myth Studios a tool for businesses seeking to customize e-learning, mobile development, 3-D visualization and commercial game development.
 
"We're very much connected with the gaming community, but we're working in a business industry, so there's a big difference between somebody who is, say, a very corporate-America person trying to make a game, as opposed to a gamer trying to make a game for somebody who's in corporate America," said Joshua Cowell, co-founder and managing director of Broken Myth Studios.
 
That difference is in outlook. A gamer can often see new ways for creative approaches to a business, but it is not always easy for those in the corporate world to see how games could fit into their daily activities, Broken Myth Studios officials said. In the six years since the company began, it has become easier for clients to understand the need for games, but initially it took some convincing.
 
"We try to make things as fun as possible," Cowell said. "At first people couldn't really see a game in their own world, but when they go home, they're playing Nintendo Wii with their kids. It's not foreign to play a game, but at home and when they go to work it's totally different. We try to merge them as much as possible."
 
Based in Fairport, the company works with businesses to discover how gaming can fit into their workplace, such as making training more accessible and engaging, providing 3-D interactivity and building a game for a company's internal employees to get them to know the company's brand.
 
"I think my biggest challenge is conveying a message within an organization, just to say, 'Hey, this is one application to what we could do.' Literally, the sky is the limit, based on what the organization will allow," said Aaron Nieboer, co-founder and creative director, "really opening up the floodgates that this could be a game-changer-pun intended."
 
Roughly half of its 11 employees come from RIT. Sixty-five percent of its business is in the Rochester region, and 15 percent is international.
 
"A lot of the gaming industry companies were moving away from the brick-and-mortar location and having agents and groups," Nieboer said. "We saw an opportunity there to be that kind of extension for game development companies."
 
Rochester makes sense for the commercial side of gaming.
 
"From a business standpoint it's a great place to be, because cost of living is somewhat low in Rochester," said Jeffrey Roeters, director of business development. "So we're able to beat a lot of the prices that people in New York or L.A. are quoting (for) similar projects, and they're sometimes two, three times higher than us.
 
"We're able to give our clients a better quality product solution at a price that's much more manageable for them, especially when they're just getting their toe in the water to start."
 
Corporations are becoming more open to gaming.
 
"A lot of the technologies that are out there-people are becoming way more savvy, it's more accepted now. So being able to propose an idea (and) it's not off the table, that's what's really cool about what we do," Nieboer said.
 
The company's clients include Bausch & Lomb Inc., Eastman Kodak Co., Johnson & Johnson Services Inc., Time Warner Cable Inc. and Xerox Corp.
 
One client who has become a believer in games in the workforce is Jack Schickler. His company, Pro-Mech Learning Systems LLC, provides truck and diesel technician training.
 
"The business I'm in is training technicians in how to fix diesel engines, and I've had a lot of experience with it. But all the tools that I had to be able to do that were basically PowerPoint slides, and I wanted something to make it come alive," CEO Schickler said. "I wanted to be able to engage the technician more."
 
His company now has 30 courses focused on the capabilities of Broken Myth Studios.
 
"In vehicles, a lot of that stuff is hidden, and so what Broken Myth does is they actually come and film it; it's a real location, and then they convert that into the gaming feature by doing their graphics over again in virtual, including how to get at it," he said. "The other part of it is being able to convert the complexity into something graphic. It's amazing the way they can actually pull it apart and duplicate the actual item."
 
Broken Myth focuses mostly on connectivity and relating to others, as well as debunking myths about what gaming can be.
 
"Everybody wants to be somewhat connected in a business too," Cowell said. "Our core is about engagement and interactivity."

Second Avenue Learning
Pittsford-based Second Avenue Software, which does business as Second Avenue Learning, was launched in 2006 by educators and gamers to develop a holistic approach to the creation of educational materials blended with gaming strategies. The company has 25 employees locally.
 
"We understand the full spectrum of learning tools, from lecture and text to labs and more traditional educational simulation activities, all the way to serious games-which is unusual," CEO Victoria Van Voorhis said. "Oftentimes they'll focus on one thing or they'll just do animation or they'll just do games. One of the things that makes us different is that we actually have on staff people that are focused on how children learn."
 
The company was awarded two grants, one from the Department of Education and the other from the National Science Foundation, to support educational development projects. The Education Department grant was a Phase 1 grant of $150,000, and the National Science Foundation awarded the company a Phase 2 grant this year totaling $500,000. The company is applying for a Phase 2 grant from the Department of Education, seeking $900,000.
 
The company develops products such as its recent Martha Madison: Marvelous Machines game, which supports the learning of simple machines by pairing students, who assume avatars or visual representations, to solve real-world challenges. The game encourages development of skills such as critical thinking, problem-solving, technology literacy and adaptability.
 
Anne Snyder, a researcher from Columbia University, was brought on staff this year to ensure that the company focused on the evolving ways children learn.
 
"We look at it from the learner's perspective, not from the instructor's perspective, so we deliberately call it learning design, not structural design," Van Voorhis said. "We're trying to focus on the student that is needing to master new content, whether that student is a third-grader or a college student.
 
"We know that we need to situate that in an educational context, which might be a traditional classroom or increasingly a blended environment or an online environment or home-schooled, and we've created materials for all those different markets."
 
One focus is to create educational games that serve all the stakeholders. The game is fun and educationally targeted for students, but administrators, teachers and parents also can see quantifiable metrics such as scores or levels completed to better understand a student's progress.
 
Clients such as McGraw-Hill Education Inc. have found the company's forward thinking to be helpful.
 
In education, the idea of games as a distraction has been a barrier to incorporating game technology in the classroom.
 
Most industries in the United States have gone through a major overhaul because of the digitization of content and the emergence of computers in the workplace, Van Voorhis said.
 
"Schools in the last 10 years, their biggest push was whiteboards and colored markers. And computers still sat in labs, and we didn't have one-to-one computing-and even if we did, they couldn't connect to something called the World Wide Web because they were sipping data through a cocktail straw, because they had one wireless hub near the principal's office," she said.
 
Companies such as Second Avenue are looking to link students and technology to prepare the next generation for what the world will look like when they graduate.
 
The George W. Bush administration began a push to give schools better Internet access, and the initiative has been continued by the Barack Obama administration.
 
"Now we're seeing a trend in critical states toward distributing instructional dollars not just towards textbooks, but they're explicitly now calling for districts to split their money between textbooks and digital-first products," Van Voorhis said.
 
Attitudes toward video games for younger generations are changing as new parents accept digital technology as a way of life.
 
"(For) my generation, screen time was inherently passive," Van Voorhis said. "We sat in front of the TV and we weren't creating, we weren't thinking critically and we weren't doing. There's very little passive screen time now. Kids are active, and they're having to think, they're having to problem-solve, they're having to do, which is very different from sort of vegging in front of the TV."
 
She added: "Over time I think what we're going to see is that generation of parents is going to be more comfortable with games and media being a core part of a curriculum rather than being just a supplemental nice-have."
 
With the Strong National Museum of Play in Rochester, Second Avenue has many resources available. The company's aim is to get American students on track with technology.
 
"(There is) potential (for) media to really help the next generation of students," Van Voorhis said. "The United States is falling behind by all international measures in terms of our educational outcomes, and that is limiting for the individuals as well as the country.
 
"At my heart I'm an educator, and I see this as a way of being able to educate a lot more students than I could as an individual teacher."

Darkwind Media
Locally grown Darkwind Media was launched in 2007 by three RIT grads looking to match their love of gaming with a consulting and development business model. The firm has 13 employees and is based in Henrietta at RIT's tech park.
 
The focus of the company is game consultation and design. Its business consists of 70 percent client work and 30 percent game development. The company does much of its business internationally but has a few clients in the United States. Clients include RIT, indiePub Entertainment Inc., Nvidia Corp. and Vicarious Visions Inc.
 
Offering consulting services was a deliberate move by the company to diversify its offerings as well as give it some financial stability. It allowed the founders the freedom to create the games they wanted to make, they say.
 
"Taking a big risk can obviously pay off, and it pays off for some developers. But if you really pay attention to the industry and watch what's happening, then for every one big success where someone took that huge risk, really there (are) hundreds of dream games that have failed," said Brian Johnstone, co-founder and programmer.
 
In an industry where there are low barriers to entry and creating a mobile game can take minutes, producing a game that goes viral, is recognized widely and has financial success is a challenge.
 
"I think that's the biggest challenge. You can make a fun game, but the trick is how, after it's released, do you ensure that it becomes successful? And the mobile market is even more difficult. So it's almost like a crapshoot," said Matthew Mikuszewski, co-founder, project manager and programmer for Darkwind Media. "We've made mobile games before that we were really proud of, but there was no viral spark so it didn't do that well financially.
 
"We know if it had that luck-that Angry Birds luck-of just hitting that critical mass of people, they're going to like it."
 
It is nearly impossible for a company to find a viral spark of fan support, as with the many users who flocked to Angry Birds, a game developed by Rovio Entertainment Oy that had $199 million in gross sales last year. In 2012, 188 million video games were sold in the United States.
 
The company spends nine to 15 months developing a game based on the size of the project.
 
It has released Wulver Blade, a game set in 120 A.D. that involves the Roman army's quest to conquer Britannia. It combines ancient British history with native lore to keep gamers engaged. The game has met a positive response so far; however, the company is continuing to work on getting the word out from a marketing standpoint.
 
The success of one game can affect future game design options for any company.
 
"The real problem is if you don't make enough money on the game you made, that means you can't make another one," Johnstone said. "So you do have to make sure that game you made, that you wanted to make, still sells enough so you can make another one, or else you're kind of done."
 
Toeing the line between pursuing the art of games and having a successful business strategy is difficult.
 
"It's a classic example of a starving artist," Mikuszewski said. "We're still on that teetering balance where do you sell out and just make a game that just maximizes profits and that's the end? ... But do you hate yourself at the end of the day for not making a game that is truly enjoyable and satisfactory to the person?"
 
Some of the company's partnerships seek to focus on finding the next "it" game, while others are wedded to their notion of the perfect game and the desire to bring it into existence.
 
"The partnerships have been really good for us, I think, because they've filled sort of gaps that we've had in our skill sets, so it's been useful. Instead of not being able to create the kinds of games that we want to make, we just partner up with another studio and we both get to make a better game than we would have without each other."
 
Releasing games at the right time in such a saturated market is a challenge for many gaming companies that are looking to market their game efficiently.
 
"How many people buy your game also depends on so many external factors," said Colin Doody, co-founder and programmer at Darkwind Media. "It doesn't necessarily reflect on the quality of your game; marketing has a lot to do with it. Timing has a lot to do with it."
 
The company treads carefully when thinking about its next step.
 
"The one thing that has been our vision from the very beginning is to eventually transition into 100 percent nothing but making our own games," Mikuszewski said. "It is much riskier if you go all in on that one game, so we've just been taking tiny steps toward that very carefully."
 
The company continues to stay agile and responsive to the demands of customers.
 
"We go with the wind," Mikuszewski said. "If we get a big client opportunity, we'll figure it out, but we always do have one game that we are working on. At least one at all times-that's been our motto."

Growing here
Rochester is developing a strong base for a successful video games industry.
 
"Having a place like RIT and the Strong, we're able to bring people in," the Strong's Dyson said.
 
"We're beginning to answer the question, 'Why Rochester?' Rochester has a growing, thriving presence in the broader video game world, and there's tremendous potential, given our resources in education, in culture and in the arts and high tech, that Rochester could become not only a major player in that world but also it could be an industry that really helps the local economy."
 
Upstate New York's game industry capabilities are not limited or always well-known.
 
"One of the things I recommend people do is think from Buffalo all the way to Albany," RIT's Schwartz said. "We have (Rensselaer Polytechnic Institute, which) has a game design program, we have Cornell and Ithaca with a game design program, RIT, there's stuff with the digital arts (at) Clarkson. ... There's an amazing sort of Upstate New York corridor. There's a lot going on, and I don't think New York realizes what they've got."

12/27/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.



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