Let's talk business

maximaz

maximaz

Sonny, I Watched the Vault Bein' Built!
So I just saw this Behind The Scenes Of Skyrim video that was just posted on Gameinformer. It shows Bethesda's new office space and it's beyond pimped out and looks like a REALLY cool place to work and all but it makes no sense to me from business perspective. Now, I'm no Donald Trump but I have a decent business experience and I've both started up and ran businesses of small to medium size so I like to think that I have a good eye for these things. I'm a bit confused here, however.

Bethesda got 100 people just working on a single game. Some get paid more than others but let's say that it averages out to 60k a year per person. (Just to be clear, I have no idea how much game developers make so this is a VERY wild guess.) That's already 6 million right there. Then they got all the extra people wiping their asses or whatnot. Then, they got an enormous two story building with a garden and a very freaking nice huge gym and their own freaking restaurant.

I don't know what the prices in Rockvile are like but around Laurel, Maryland, where I used to live, this set up would cost them several million a year and Laurel was not an expensive area to live.

Whatever the case, they have got to be spending 10-15 million a year, including salaries. Considering that Bethesda releases a single game every several years and they don't exactly sell Blizzard or Rockstar numbers, how do they afford it? Obviously, they make very good money and probably enough to run another house just like that one but these costs have to be a substantial portion of their earnings. If that's the case, it makes no sense why they would do this. They probably have more money than I realize. So what am I missing? Any opinions?
 
i once worked in a 6 story building for an ISP and 2 floors were servers and routing equip and such.

their rent was 1.5 mil a month, water was 150k a month, power was 1 mil a month.

also keep in mind...

they sold over 1 mil copies of oblivion at full retail which means even if they got $30 per copy they made over 30 mil off oblivion. plus "legacy" sales. plus DLC.

all things considered they are probably doing pretty well. but they do not have a whole lot of comfort zone.

if they release a failure of a game, it would probably ruin them.
 
maximaz said:
Then, they got an enormous two story building with a garden and a very freaking nice huge gym and their own freaking restaurant.
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No they don't. They've got the SECOND FLOOR of a two story building.

As for the gym, it's overly large & too well equiped to be for 100 employees. I'd suspect it's a shared space (or one of the bosses' wives is a distributor of fitness appliances ;) ).

The cafeteria is not extremely outlandish. It's a bit over the top for 100 employees, but you have to understand that such facilities pretty much pays for itself. On one side you keep your employees in house so they don't go out to lunch. This means they'll usually be cutting their lunch short rather than being gone the entire hour. They're also readily available when you need them. On the other side, you also feed them good food, so you keep them healthy and off junk. Means more energy, more motivation & less sickdays.

What did strike me as over the two were the two cinema presentation rooms, but I'm guessing that the second one is yet again a shared space.


Yes, it seems outlandish, but you need to realise that the games industry is really shit to work in. It's a whole lot of overtime and once the game is nearing completion you have the crunch. For months you don't have any life at all and are working ridiculous hours. On the long term this is only possible with the facilities mentioned above. And still, Blizzard (also a lot of luxury) is having a very hard time keeping good devs on World of Warcraft for instance because so many get sick & tired of it.

Development in general is a very competitive business and the right people make all the difference. Keeping those guru devs is insanely important for your business. As such, you'll buy them $1500 desk chairs, give them a fitness room, get them a pool table and so on. Example: see the Fogbugz offices @ http://picasaweb.google.com/spolsky/FogCreekSNewOffice#

TheWesDude said:
all things considered they are probably doing pretty well. but they do not have a whole lot of comfort zone.

if they release a failure of a game, it would probably ruin them.
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You forget who Bethesda is backed by...
 
I think SuAside pretty much nailed it. This isn't an uncommon set up for this type of organization. You want your employees comfortable and well taken care of. Especially during "crunch time", you will be spending most of your time in the office.

I would guess a lot of big name gaming studios look similar, except EA of course, I think they keep most of their devs in a dungeon.
 
Suaside mentiones it already somewhat. Its not like Bethesda never suffered some issues with money. Thing is just that when this happend Zenimax was the money life saver.
 
ZeniMax is or was initially backed by Bethesda. ZeniMax was created from Bethesda money and sure, it has taken out loans and made new deals, but it is not in essence some major financial backer. Their faiths are tied. The loans ZeniMax has taken are significant (in the hundreds of millions), but they can only take out said loans because of Bethesda's financial strength.

Bethesda's games sell millions of copies, not to mention the essentially free money of DLC, and then money gained from publisher activities (though Bethesda is not especially successful in that field). Bethesda has not just been profitable since Morrowind onwards, it has been wildly profitable, with the wild profits going into buying and founding other studios and expanding publishing and distributing activities (ZeniMax has offices all over the world, including one in the Netherlands).

Bethesda is a cash cow, which ZeniMax has been using in its mission to become a real power player in the gaming industry. A swank office is the least of its concerns.
 
I was working in Hollywood many years ago when a new internet company moved into the building next door. The company was named "Load Media" and I think they wanted to pioneer internet video entertainment. This is not the same company now operating out of the UK under the same name distributing music. This company was started by a guy with more ambition than sense. Somehow, he managed to talk somebody into financing his company with outrageous loans during the internet boom of the 90's. He then proceeded to hire most of his high school graduating class as employees. That company offered gym memberships, delivered meals, laundry service, pet care, everything you could imagine. I understand they were spending about $1 million a month and it was the most arrogant bunch of people you ever met. It looked like the greatest thing going, until they declared bankruptcy and closed up shop. Everything was auctioned off right there on the premises, including the furniture. I had the luxury of working in the building next door and was able to attend part of the auction. After having to put up with their arrogant crap for several months, I enjoyed that.

The prosperity projected by these kind of expenditures can be a dangerous illusion. How much money Bethesda spends on it's employees is not an indication of prosperity. They could be digging a hole they may not be able to climb out of. I've literally seen this happen.
 
Richwizard said:
The prosperity projected by these kind of expenditures can be a dangerous illusion. How much money Bethesda spends on it's employees is not an indication of prosperity. They could be digging a hole they may not be able to climb out of. I've literally seen this happen.
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They're not. But you're right that they are playing a dangerous game, but in another field, taking out huge loans to expand swiftly. If a large project like TES V or the TES MMO busts it'd be interesting to see how they'd respond.

Not likely to happen though.
 
Having worked for a time at Ubisoft and knowing some people in the electronic entertainment industry (not just video games, but film CGI studios as well), this is not uncommon. As SuAside said, this is an industry in which the right people make all the difference, and you want to keep them (especially in Montreal where the market for devs and programmers is very competitive). These kind of facilities are a must to keep people happy, and what Ubisoft has in Montreal beats Bethesda's installation, even if not by much. Hell, I had a video tour of Relic's (Dawn of War series, among others) installations, and they are also pretty good looking, even if Relic is nothing like Beth, let alone Blizzard or Ubisoft in terms of profit, but they have talent, and talent is the one commodity the game industry needs to keep paying for.

And as BN said, you also underestimate Bethesda's ability to make money. Their last two game sold very well indeed; what's a couple hundred thousand dollars (or even millions) compared to the sales these guys bring in? And no way a Beth game is going to fail, not with their very large fanbase and excellent reputation among, err, 'professional' critics.
 
The IT boom was an insane time for a lot of companies like that. It was a time of excess. My own company use to spend money the same way, though we've gone through a couple buyouts and name changes since then. We've settled into an equilibrium and now we're happy (and lucky) to get free coffee and some Friday muffins.
 
@ korindabar

You ARE lucky. I saw the equivalent of a whole high school graduating class loose their jobs.
 
SuAside said:
Yes, it seems outlandish, but you need to realise that the games industry is really shit to work in. It's a whole lot of overtime and once the game is nearing completion you have the crunch. For months you don't have any life at all and are working ridiculous hours. On the long term this is only possible with the facilities mentioned above. And still, Blizzard (also a lot of luxury) is having a very hard time keeping good devs on World of Warcraft for instance because so many get sick & tired of it.

Development in general is a very competitive business and the right people make all the difference. Keeping those guru devs is insanely important for your business. As such, you'll buy them $1500 desk chairs, give them a fitness room, get them a pool table and so on.
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This reminds me of a quote I read a few time ago...

There it is.

"Kotick noted that in the past he changed the employee incentive program so that it "really rewards profit and nothing else." He continued, "You have studio heads who five years ago didn't know the difference between a balance sheet and a bed sheet who are now arguing allocations in our CFO's office pretty regularly. ... We have a real culture of thrift. The goal that I had in bringing a lot of the packaged goods folks into Activision about 10 years ago was to take all the fun out of making video games."

Yes, he just said that.

Ultimately, Kotick doesn't want his employees to take anything for granted. They should always be aware of "skepticism, pessimism, and fear" in the midst of the global economic downturn. "We are very good at keeping people focused on the deep depression," he said."
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And...

"If we don't waste money on golden toilets and what have you, that gives us the resources to invest in the games so we make a great game. Subsequently, it gives us the ability to spend big in marketing a game.

I don't know if you've been at our offices. We've had the same office since forever, and we just replaced the duct tape on the carpet because it became a trip hazard down the stairs. And that took five years to get done. So we are thrifty in the areas where frankly, the consumer doesn't see value. We are not thrifty in the areas where the consumer sees the value, which is in the game development.

That's why we added 300 headcount to Blizzard's development team, 900 headcount to the customer service team, 300 headcount around the Call of Duty franchise. There are many areas where we are making massive investments to improve the gamer experience, and then there are areas where we think it's not worth it. So we don't have a company gym, cafeteria, and valet parking. Because the gamer doesn't care about that. They don't see value in any of that. Go talk to Blizzard or the Treyarch guys or the Sledgehammer guys. We put the money where the gamer's going to see it. "
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Courtesy of the CEO of Activision.
 
Didn't FO3 sell 4M copies or somthing, also, Bethesda published WET, Rouge Warrior, quite a few other games, profited on New Vegas of course, and all the DLC must have earned them a few million to say the least.
 
SuAside said:
Yes, it seems outlandish, but you need to realise that the games industry is really shit to work in. It's a whole lot of overtime and once the game is nearing completion you have the crunch. For months you don't have any life at all and are working ridiculous hours. On the long term this is only possible with the facilities mentioned above. And still, Blizzard (also a lot of luxury) is having a very hard time keeping good devs on World of Warcraft for instance because so many get sick & tired of it.

Development in general is a very competitive business and the right people make all the difference. Keeping those guru devs is insanely important for your business. As such, you'll buy them $1500 desk chairs, give them a fitness room, get them a pool table and so on. Example: see the Fogbugz offices @ http://picasaweb.google.com/spolsky/FogCreekSNewOffice#
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This is pretty much what I was missing. There had to be something that required them to go all out like that and this explains it very well.

Oh and I guess it was just the second floor but the place still seems too extravagant to me for what Bethesda does. And like I said, I realize that they make a decent buck with their multimillion selling titles and the DLC and the publishing. As far as I know though, the biggest titles associated with them have been their own games and those don't come out very often, nor do they bring in the money that Rockstar or Blizzard games do (some of them anyway).

It still makes them very successful, but like TheWesDude said, it just didn't seem to me like they had a whole lot of comfort zone. The above explained it perfectly though. I didn't take into account the peculiarities of this business. They simply may not be able to continue to make the money they are making, without spending the extra cash to keep the employees happy. Which makes me wonder, just how much do those employees make?
 
well there are lots of considerations.

having facilities like these and competitive wages means that when you want to hire a talented person, not only do they have the pay you can offer them, but also the cushy offices.


say google was wanting to hire you for your skills with their huge office buildings and all the amenities and wanted to pay you say $150k a year. now say bethesda in their old offices wanted to hire you and pay you say $175k a year.

admittedly google is in a much higher cost of living area, but their building with all the stuff it has in it and the more expensive area would be worth making that 150k imo.

but by investing in these cushy diggs, it just means that beth is running closer to the vest than they used to. dont kid yourselves. beth may be comfortable now, but what if skyrim only sells say 1-2 mil copies worldwide across all platforms? it could cause problems for them.

thats why i say, even 1 "bomb" of a title could cause severe problems for them.
 
Stanislao Moulinsky said:
<snip>
Courtesy of the CEO of Activision.
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Of course there are going to be alternative views on it.
I would imagine EA to be vastly different as well.
 
It's not just about people choosing to work for you. It's as allready said also about keeping people and keeping them productive.
Looking at how the games industry isn't paying big it's really somewhat relate to keep the inflowing 'human capital' higher than the outflowing.

By the way in-house facilities have the advantage of that normal activities can take become work related.
If you've got a gym people might do their workout site by site and while they normally would do it alone, they would now be able to speak about game-related things.
I think Valve mentioned this as some factor for their development flow.

@Stanislao Moulinsky
Nice quotes from Activision, and looking at Infinity Ward and how they lost more or a less a whole development team and how their legal measures against Zampella and West might scare some developers away from cooperating with them it might get interesting in the future to see how well Acitvision is doing with that.
Most likely they won't go down, but i guess EA showed before how you can damage the value of your company by ruining development teams (and therefore ruining games - i can't say if that will be the case for Activision).
 
TheWesDude said:
say google was wanting to hire you for your skills with their huge office buildings and all the amenities and wanted to pay you say $150k a year. now say bethesda in their old offices wanted to hire you and pay you say $175k a year.
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Bad choice. Google will pay you twice what Bethesda will. The Game Industry pays shit wages. Doesn't matter what type of offices they have.

For pretty much any job you could have, whether you are a programmer, artist, general tech, QA, you will make a lot more money in another industry than the Game Industry.
 
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