We're not game enough
Israelis consider investing in a computer game company too risky, claims the head of the only such firm in the country. Big mistake, he says
Eyal Netanel took great pains to formulate careful responses throughout the interview, and provided vague answers to quite a few tough questions, but he answered one question straight from the hip. No, he does not regret entering the world of computer games five years ago, and yes, he wants to remain in the field, despite the fact that the difficulties and frustrations he experienced there in recent years should perhaps have caused him to stay away from the industry as if it were fire.
The interview with Netanel, the chief executive of the only computer games company operating in Israel in recent years, which worked on a game for the international market, took place in his "office" - the food court of Netanya's Hadarim Mall, at a time of extreme uncertainty even by the standards of Majorem, his company.
After development of Ballerium, the game his company had been working on since 2000, was frozen because the investors ran out of money and withdrew from the project, Netanel and the handful of people who remained committed to the project received good news. Interplay signed a contract with Majorem to finance the final stage of the game's development and to begin distribution this summer, and in return, Interplay would receive distribution rights for the game and profits from future sales.
However, the new spirit that the signing of the deal provided to the last remaining workers at Majorem did not last long. Last week, reports appeared that Titus, the parent company of Interplay, had declared bankruptcy and that Interplay's assets would be foreclosed. In the meantime, the status of Majorem and the game it developed, Ballerium, remain unclear. Thus far around $2 million in liquid assets have been invested in the project, plus several thousand hours of free work put in by the development team, the value of which has never been calculated.
From Sde Boker to LA
It wasn't always this way. Five years ago, when Netanel and a few gaming friends left top-earning jobs in the high-tech industry and decided to embark on an enchanting and mysterious journey to develop an Israeli computer game for the international market, Majorem's vision seemed very rosy. The idea behind Ballerium was to create an innovative technology platform that would enable thousands of players to compete against each other in an on-line strategy game in a rich fantasy world, or - as Netanel describes the game - "your opportunity to realize your darkest fantasies of dominating the world."
The game was part of the MMO (massively multiplayer on-line) genre, which was then in its infancy, and its income model was promising: players would not only buy the game CD like a regular game, but would also pay monthly subscription fees to be part of the huge and thriving on-line world that Netanel and his friends sought to develop. Initial funding for the project came from the pockets of Majorem's founders, who at the same time tried, unsuccessfully, to raise funds from Israeli venture capital funds.
"In the rest of the world, they understood a long time ago that this is a huge industry that is only getting bigger, that people are spending increasing amounts on leisure, but not in Israel," says Netanel. "Here, it's considered a field with risks. Just like when a film is made, in computer games as well, it's impossible to be sure that a game will succeed, even if you follow all the rules of the process. We learned that in Israel, people like to stay in familiar surroundings, but that's a mistake. Whoever doesn't enter the field now won't be there in the coming years. Investors who think they can wait on the outside and then come into the field when it's less risky are wrong, in my opinion. Just like in the film industry, this field will shortly close, and whoever isn't inside will not be in the thick of things."
Luckily for the small founding core of Majorem, the Industry and Trade Ministry's chief scientist believed in the technology they developed a bit more than the Israeli venture capital funds and added them to the incubator project by providing an initial grant of $150,000 ("a brave decision to enter a field where Israelis did not previously have a foothold," says Netanel). This initial funding enabled Majorem to create a preliminary demo of the game and present it in August 2001 at a London exhibition. "There was interest there in what we presented, and we were contacted by a group of investors from Taiwan who wanted to get into the world of MMOs," Netanel says.
With funding from the chief scientist and the Taiwanese investors, Majorem moved to Sde Boker, and over the course of several months expanded the development staff from four to eight people. Afterward, when there were already 18 people working there, the company moved to more impressive offices in Bnei Brak and started piquing the interest of the international gaming community as well as the Israeli community. At the annual 3E convention in Los Angeles in May 2003, it seemed the only Israeli game company was on the brink of joining the international league of game developers. But at the beginning of the year things deteriorated. "We heard from [the investors] that they were having financial troubles, we went to Taiwan for a meeting, we reached some kind of agreement that they would transfer more money to complete the development of the game, and then we returned to Israel," says Netanel. "They told us the money was transferred, but we checked our account several times and nothing was transferred. We called them to ask what was happening and they said that their manager had quit and in the meantime the whole game project was frozen."
A day beforehand, Netanel approved spending for an external project for the game's collection system, and now he had to cancel it. He says, "There was a very bad atmosphere in the company. I was confused, and the agreement with the investors essentially became a piece of paper that couldn't even be used as a rag. We had to reduce our manpower, but there were people who believed so strongly in the game that they kept coming to work even they'd been dismissed. When the money to rent the office space ran out, basically everything fell apart."
Was it a shock for you?
Netanel: "Not really, because it's not a single moment when everything happens, but like an illness that slowly worsens. When you reach this moment, you're already prepared. We had no illusions, that wasn't the case."
What mistakes did you make over the years?
"Many, of every kind, which makes us experts, but at least we didn't make many mistakes twice."
Is there a future for the Israeli game industry?
"I know that there's a lot of will. Occasionally, people who want to get into the field approach me, and I describe to them what we went through and let them decide for themselves. From our perspective, we saw that the Israeli venture capital funds are very trend-oriented in their approach, and that makes it hard for them to jump at an opportunity of this kind. This means that whoever doesn't come with money in his pocket will have a very hard time. When I'm asked what the best way to get into the swing of things is, I advise people to start with something small - a shareware game, for example. Many of the mistakes people make in developing a game that may not be the game of their dreams can teach them later on how to cope with similar problems in a much more expensive project, and of course, how to reduce the risk."