Where there's such money to be made, Wall Street is sure to follow. By the mid-'90s the money men had seen the diagrams showing how the industrial age had given way to the information age, they had read about the Internet, and they were eager for a piece of the action.
"Look at the economics of the business," explains Mike Wallace, an analyst with Warburg, Dillon, Read, a New York City brokerage firm. "Let's say you sell 3 million copies of a product at $40 a copy [wholesale]. You get 120 million in revenue. It usually costs a couple of million to develop a game. Compare that to what it costs to make a movie. So the economics in this business are similar to movies, but better."
One of the ways Wall Street got its slice was by funding companies like Eidos, publishing greenhorns looking to become the next CBS Records. Flush with cash from initial public offerings, the new publishers went scouting for talent. The deals work like book and record contracts. The publisher agrees to pay the game developer a percentage of the wholesale price of each game sold. To enable the artists to develop their games, publishers also loan, or "advance," some royalties. The advance is usually payable in installments, with a portion payable on signing and subsequent chunks to be dispersed upon reaching certain milestones (say, completion of the "design document," or master blueprint for the game). Once the game ships and starts selling, the publisher recoups its advance from the developer's royalties.
"Honestly, I didn't see how it could miss," recalls former ION Storm CEO Mike Wilson. "I had just driven up the rates for a PC game well beyond where they had ever been...It went up over the course of a year from, like, a million dollars a game to two or three or four [million] in advances. And I'd just renegotiated the Quake royalty [rate] up into the 40s [percent]...So I knew that the going rates were pretty good. And with John's name, and Tom's--you know."
As he speaks, Wilson leans back in the conference room of the neo-Gothic church that houses GoD, a publishing cooperative he started a year ago after leaving ION Storm. At the time he departed from ION Storm, both issued public statements claiming Wilson was leaving of his own accord to start GoD. In truth, internal ION documents and interviews indicate he was edged out by Todd Porter, stripped of his 5 percent equity and shown the door after he tangled repeatedly with Porter over a variety of business and personal issues.
Thanks to a mutual non-disparagement provision in Wilson's severance agreement, in print the two companies give each other the PR equivalent of air kisses. But in the semi-privacy of company e-mail, they say what they really think. "[Tell Wilson], 'You better be fucking glad we wrote off your car and house, you fucking rat-faced bitch,'" wrote ION partner and art director Jerry O'Flaherty, after Wilson and his former partners skirmished over a minor business issue last October.
Now, in late November 1998--almost a year to the day after his ouster from ION--Wilson was about to even the score.
The latest round of hostilities began in October over taxes--specifically, whether ION would pay Wilson's partnership taxes as they had done for the other partners. Porter agreed to pay the taxman so long as Wilson signed a document releasing all claims Wilson might ever have against ION.
Fine, Wilson said. Just make it mutual.
What Wilson knew but Porter did not was that in October Wilson had gotten a call from the team developing Daikatana. They had been unhappy for a long time. They had threatened to walk out last May, but the uprising had been quelled. Now they were ready to go again.
"Game developers are a special breed," he explains. "They're very loyal, and all you have to do is treat them with a minimal amount of respect, and they'll stay with you forever. But if you don't, these guys have talents, and they're going to go off. You can shit on them only so many times."
The timing of the Daikatana team's call was fortuitous. Wilson was in the midst of negotiations for the rights to develop a game based on KISS: Psycho-Circus, a best-selling series of comic books by Todd McFarlane featuring rock dinosaurs KISS. (If all this reeks of adolescent geekiness, just remember we're talking about a $2.5 billion gaming industry.) In October, there was still no development team attached. And now, here was one on the horn. Wilson and the "ION Eight"--now expanded to 11 ION employees known as Bloodshot Entertainment--quickly came to terms. By the afternoon of November 18, they were all set. They had even drafted a public statement, which they planned to release at 6 p.m., when they handed in their resignations.