Marvel's 10 year MMO deal with new company Gazillion

Gazillion sure knows how to make a splash. The MMO (massively multi-player online game) publisher has been operating in stealth mode for three years, putting together a collection of development studios and signing one of the biggest video game licensing deals in recent memory: A 10 year pact with Marvel giving it exclusive rights to make MMOs based on every single character in the comic book publisher's library.

It already has two Marvel MMOs in the works: One is a casual game based on the "Super Hero Squad" kids property that's coming as a TV series on Cartoon Network and a THQ console game later this year; and "Marvel Universe," a rebooted version of the AAA game that Microsoft canceled (leaving developer Cryptic Studios to turn its work into the upcoming "Champions Online").

So what the hell is Gazillion? In a nutshell, it's private equity backed — I'm not sure how much, but you can assume it's substantial, well into the tens of millions if not more — and it has four major MMO development studios under its umbrella and eight projects either planned or in the works:

• NetDevil, which Gazillion recently acquired, already has "Lego Universe" and "Jumpgate Evolution" in development, along with an unannounced MMO. The Lego Group controls its eponymous game and will handle publishing. But Gazillion got the rights to "Jumpgate" when it acquired NetDevil and will co-publish it in the U.S. with Codemasters, which is handling retail distribution.
• Gargantuan, a studio founded by Gazillion, is making "Marvel Universe."
• Slipgate Ironworks, started by id co-founder John Romero, which Gazillion has quietly been involved in from the beginning. It's producing an unannounced original MMO.
• Amazing Society, another existing studio that Gazillion has quietly been working with from its inception, is developing the "Super Hero Squad" MMO and two unannounced titles.

Founder and CEO Rob Hutter knows that MMOs are a huge risk. But in a down economy when traditional console publishers in particular are struggling, he sees it as the biggest opportunity, particularly when combined with licenses.

"We saw the meteoric success of 'World of Warcraft' and now more casual titles like 'Runescape,' 'Club Penguin' and 'MapleStory' are proving the format really has traction," he explained. "The missing piece is bringing worldwide dominant entertainment brands into the space in a way that delivers high quality MMOs with properties that have a tremendous amount of recognition."

And Marvel isn't the only license with which Gazillion is working. See those four "unannounced MMOs" listed above? The three that don't say "original" are also based on licenses. Gazillion won't yet say what they are, but Hutter did note that they will be brands with an ongoing presence, not one-off movies or TV shows. (That was also his way of explaining why Gazillion won't suffer a dismal fate with a licensed MMO like Warner Bros. did with "The Matrix Online.")

The closest analogy in the market might be Trion World Networks, which has raised over $100 million from investors including Time Warner and NBC Universal and has a game based on a Sci-Fi Channel property in the works, along with an original MMO.

But Gazillion's decade-long licensing deal with Marvel helps it to stand out. The comic publisher's worldwide consumer products president Simon Phillips considered plenty of offers after the Microsoft deal fell apart before betting on a major partnership with Gazillion, despite its lack of a track record.

"We didn't look at what they've done, but what the people involved have done and who their backers are," Phillips said. "Financially they're in a situation where they would be able to not only invest in, but continually manage and market the games. We felt strongly that they were the team that could deliver the best experience for an MMO."

Gazillion certainly boasts plenty of pedigree, with developers who have experience at Blizzard, Pixar, Microsoft, Apple, and other companies. And while Hutter doesn't have any experience in the video game industry, he is an experienced venture capitalist who helped bring that other element Phillips cares about: the financial resources.

Signing such a long partnership with a major brand gives Gazillion the ability to build its business on a much more reliable base. "Over the next 10 years we could do as many titles as make sense," said Hutter. "We could pull from their catalog of characters in any format or combination that we want and we will work closely with them to figure out the most promising opportunities."

So can Gazillion make a successful "Marvel Universe" MMO after Microsoft abandoned the project? At the time, then-Microsoft Game Studios head Shane Kim said he simply didn't think it was financially viable, telling MTV, "If you look at the data, there's basically one [MMO] that's successful and everything else wouldn't meet our level or definition of commercial success."

But Gazillion still sees the opportunities as huge. Hutter said Microsoft simply didn't want to prioritize a Marvel MMO and his company will. "There was a lot of thinking at the Xbox division about where they should be spending their time," he explained. "Should they enable an MMO or pursue a partnership with Netflix? I think it was driven around the changes in strategic emphasis more than the market capability. IGN did a poll and 'Marvel Universe' was the number one most anticipated MMO. I don't think there's any lack of appetite."

Phillips also notes that Gazillion's long-term deal will make it easy to tie "Marvel Universe" into his company's slate of films. "There could be various expansion packs that launch around a movie schedule," he noted. So if the game was already operating, for instance, you might see a Wolverine expansion in May.

Can Gazillion make it work? MMOs often fail (see the recent travails of "Warhammer Online," "Age of Conan," and "Tabula Rasa"), but they're still probably the best video game opportunity in the current economy if you want to aim higher than casual titles for the Wii, DS, or iPhone. "World of Warcraft," after all, has seen huge growth recently despite the economic downturn, probably because it's an amazing value ($15 per month for unlimited entertainment).

Gazillion does have a fairly diverse slate of casual and hard-core MMOs and plans the full array of business models you would expect, from subscriptions to micro-transactions to advertising. And while its games are being developed largely independently, it is hoping to benefit from the same type of shared operational and billing infrastructure that Sony Online Entertainment enjoys.

But MMOs, even more than most video games, live and die by their quality. You can sell a few million units of a console game licensed from a hit movie even if it's total crap (e.g. last summer's "Iron Man" and "Transformers"). But if an MMO isn't good, people won't stick around.

If nothing else, Gazillion gets that:

"Licensed MMOs are only a winning proposition if you can convince folks to spend time for six months and beyond," Hutter affirmed. "That long-term relationship means your audience is a check on quality. It's very different from a one-shot retail sale where you're just going off the marketing of another property. The safest strategy for us is a high quality title."

Original article.

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