1C is the biggest European-owned games publisher outside of Ubisoft. So why have most English-speaking gamers not heard of it? Two years ago, after years of publishing boxed titles through the likes of Ubisoft and Atari, the PC specialist decided to retain the digital rights of all of its titles. Fed up with unspectacular High Street sales and uncooperative retailers, it was ready to put its eggs in Steam's basket.
It was a ballsy strategy; letting concerns over how visible its games were in the likes of GAME slide - and instead concentrating on Gabe Newell's Brave New World.
According to UK-based publishing director Darryl Still, it was the smartest move the company could have made.
Here, former EA and Nvidia man Still - who launched the Atari ST, Lynx and Jaguar in the past - offers CVG his extremely forthright views on the emergence of the digital market, why Steam proves that PC gaming is far from dead - and why retail "short-sightedness" means you're often more likely to find pink plush toys than bright new games on UK High Street shelves...
As a veteran of nearly 30 years in the industry, is the digital market one of the biggest revolutions you've seen?
I think of it as less a revolution, more a filling of a void. A new government coming into a territory that has been pretty much ungoverned for the previous few years.
The PC has been at the forefront of most technology shifts in the market. I was very aware of this at Nvidia. Most breakthroughs in console technology have their roots in the PC market. Most leaps in games development come to the PC first and then work their way into the SDK's of the console manufacturers. But for the longest time we've been told by retail, in the UK and US especially, that PC games is a dying market.
It has been getting less and less shelf space and less and less focus in store, but in all that time we, as a PC publisher have seen absolutely no drop off in demand. In fact the dichotomy between us being told by retail there is no demand for our product and us being asked by customers - by e-mail, phone etc. - where they can find our games is quite shocking.
You committed to digital and Steam early. What benefits did you see in it?
Well once again, PC was the driving format, with XBLA and PSN now following. The fact that the guys at Valve, who created the Steam digital client, are a bunch of top quality games developers meant that the format was designed perfectly with both the gamers and the developers/publishers in mind. 
Darryl Still, 1CAs a platform it is easy to adapt and move with the time and with technology. It has not been locked in stone and is therefore hugely flexible. The other enormous benefit is that it delivers a larger percentage of our revenue more quickly than the boxed publishing model does, so for the revenue and cash flow of a company like ours it is very welcome. Oh and of course we don't have to worry about inventory or [boxed] returns issues. And we can put our product right there in the eye of the people that matter most - the gamer - without being interrupted and bottlenecked by retail buyers.
Do you have any examples of this 'bottleneck'?
Many, but my favourite example is when one of our UK publishers came to explain why they had only managed to get 30 copies into the UK's largest retail chain. He passed on: "They told us there was hardly any demand for the title".
At that time I had my digital sales reporting tool open, which tracks download sales instantly as they happen, I hit refresh and informed our partner: "In the few seconds that's it has taken you to explain there is only demand for 30 units in the UK, we have sold twice as many as that digitally."
But you have successful series in the marketplace?
Our success in our core territories in Eastern Europe is helped by excellent retail support - but in the UK and US, its been driven by digital. Take the Kings Bounty series, for example. The original Kings Bounty game initially sold just 2,500 units in North America, despite glowing reviews. Since we launched that title and its sequel, Armored Princess, and expansion pack, Crossworlds, digitally, we now have over a quarter of a million players of Kings Bounty games on the Steam portal.
Off the back of that, and a change of US box publisher to THQ, the Game of The Year edition has now been accepted by Walmart and North American sales are finally matching the product's quality. But had it not been for the digital breakthrough we would still be running at one per cent of where we are today.
Men Of War: Assault Squad (1C)Meanwhile, both Men of War and Men of War: Red Tide sold very well digitally, but the boxed publishers, 505 Games and Focus respectively, struggled to get retail numbers to match. The next two releases in the series will come through Lace Mamba, the first of which, Men of War: Assault Squad, has recently launched to great reviews and amazing digital sales - our best-selling launch title ever. Boxed numbers through Lace are looking promising.
But you believe retail has not entirely caught on?
They have been forced to, to an extent, by the digital success. But then on the one hand they moan about the sales they lose to digital, and on the other, when Lace produce a stunning special edition boxed set - including T-shirts and other special items - that is designed specifically to give them something that cannot be replicated digitally, the UK's biggest chain decline to stock it... preferring apparently to use that shelf space for fluffy Princess Peach plushes!
You seem a little bitter?
Not bitter at all. I'm pretty sure that over the next few years we will replace pretty much every sale we lose at retail's short-sightedness through our digital partners. But as someone who started out as a retailer of Computer Games - selling BBC, Oric and ZX Spectrum titles out of Reading University's bookshop - and as a long-term enthusiast for the games industry, and a gamer myself, I am extremely sad to see the way retail has helped build its own gallows.
Do you think it's that serious?
Potentially, yes. 1C does also develop console titles for some of the biggest publishers in US and Japan - IL-2 Sturmovik : Birds of Prey is possibly the best known - and more and more of these guys are requesting XBLA or PSN titles rather than fully boxed console SKUs. 
IL-2 Sturmovik: Birds Of Prey (1C)There will hopefully always be a need for retail shops selling games to the mass market consumer, but my view is that they would better serve this type of consumer by building their stores around the enthusiast gamer. It is, after all, those guys who drive the demand, and whose buying patterns the mass market buyer will ape. As I said, I started off in retail and am still a fan of the whole retail experience, but by abandoning the format that drives the whole market forwards, retail in the UK and US have been hugely culpable of creating the void that digital has stepped in to fill.
So it's all about Steam now then?
Steam are without doubt the leader in the digital market, but there are a number of other players who have very viable online stores that offer a slightly different offering for the consumer. 1C has always worked very closely with Gamersgate, who work very well on the "Long Tail" principal of stocking our entire range and turning over a good, solid revenue on back catalogue titles as well as our new releases.
Green Man Gaming are a newer launch company who have been inspired by retails pre-owned model (for which the creators of the games receive absolutely nothing) with a unique business model that allows gamers to trade back their game code when they have finished with the game, and use the credit they receive to buy other games....and in this model the publisher gets a cut of the subsequent second and third sales of the titles. How is that for supporting the hand that feeds instead of biting it?
There are a number of other very good digital outlets such as Impulse, Direct2Drive and big players like Amazon and Microsoft Games For Windows entering the fray. As ever, competition will be healthy for the developers and publishers. And maybe that is the crux of the retail problem, too much of the competition has been absorbed into too few big chains with too little understanding of what the consumer really wants.
You mentioned the financial benefits of digital, can you give us an example?
Well the easiest way is to look at a sale of a game made today. Let's say one of our titles was sold through a till in a retail store right now for, say, £20. After retail report the sale to our third party publisher - at the end of the quarter following sale - and they then report the sale to us - 60 days after receiving their cut - 1C would receive around £7 for the sale of the game. That would come into our bank, in around September.
But if we sold the same game through someone pushing the download button at one of our digital partners' websites for the same £20, we would net £14 - twice as much - into our bank by the end of May; three or four months' sooner.
So if Steam is so dominant, does this not allow Valve to dictate entirely to their suppliers?
They don't at all. I think because they come from a developer background their aims mesh perfectly with ours, which is principally to get our games into the hands of as many users as possible. They will reject a game if it does not meet their quality requirements - fortunately we've not suffered too much from this - but once accepted they work closely with us to make sure that the price and promotions we set maximises the interest and revenue available, as well as supporting our retail partners with their boxed stock.
For example, if your product is in the Steam holiday sale twice a year, you can make many additional sales during that period, but the product will return to its recommended price at the end of the sale. In almost every case it does so with an uplift in full price sales both on Steam and at the retail stores who stock it, because there is usually a whole new base of consumers playing and enthusing about the game on the forums. This phenomenon contrasts completely with retail, where once a game is discounted, it is heading to the dump bins and then out the door. 
We compare our IL-2 Sturmovik games. The original PC game sold solidly for Ubisoft at a sliding number of price points, for 10 years. The console game charted at number 3, but within 6 weeks of release was no longer being promoted or stock renewed at retail. A ridiculously short time frame for any product.
So no, Steam do not dictate at all. They are supremely easy to deal with and superbly competent at what they do. Their confidence in their offering, which pays no heed to any rival in store activities, compares very favourably to that of the retail chains who recently sent a command to publishers that if they include Steamworks in their title it will not be stocked. Those guys need to grow up, stop bullying, and focus their attentions on making their offerings as attractive as the people they are obviously looking over their shoulders in panic at.
What can your experience with retail and Steam teach gamers?
Buy the games you want in the way you want to buy them. Insist your supplier supports you as a customer. If your local retailer does not stock a boxed product you want, ask them to get it in, and if they decline, let them know that you will be using a supplier who will support their customer base. And, of course, try our excellent Men of War and Kings Bounty games!
http://www.computerandvideogames.com/304378/how-valve-shook-up-the-pc-market-1c-on-steams-true-value/
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