Recommendations

Based on the above analysis, I have carried out a SWOT analysis of the company. SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is a way to divide up various aspects of a company’s operations, and show them graphically, in order to make it easier to see what’s important when developing new strategeies.

Strengths Own game engine Proven ability to make good games Strong reputation in the industry	Weaknesses No own IP’s Weak bargaining position as a small studio Difficult to cut costs
Opportunities Game engine could be interesting to others Downloadable content and casual games Increasing number of loyal customers	Threats Difficult to find competent employees Tough competition from other studios Never certain that a new contract will appear

Based on this analysis I have developed five recommendations which I think could strengthen Starbreeze’s position, guarantee more continuous cash flow, and increase its ability to create value in the future.

1. Offer the game engine to other developers. This may be simpler said than done, but it wouldn’t cost much to check around and see if there exists any interest in licensing the engine from Starbreeze. This isn’t a new market. Other game developers that are already licensing their engines include Valve corporation with its source engine (used in Half-Life 2), Epic with its Unreal engine (used in Gear of War) and Crytek with its Cryengine (used in Far Cry and the coming Crysis). These companies all use their engines primarily for their own games, but have realised that there is money to be made in licensing the engines to others. Licensing the engine would be a complement to Starbreeze’s primary vocation as a game developer, which could be tried out at low cost and low risk. Since Starbreeze will continue to develop its game engine regardless, the relevant costs for doing this would likely be quite low, and Starbreeze would be able to spread its fixed costs for engine development over more customers, pushing up profit margins.
2. Focus more on downloadable content and casual games. This is another area which has potential to become a cash cow for the company The market for casual games is growing enormously. More people play casual games on-line than visit video-sharing or social-networking sites. Since consoles are also increasingly linked up to the net, it is possible to sell casual games straight to the living room via services such as Xbox Live Marketplace, allowing developers to bypass publishers and retailers. Casual games can also be converted in to mobile games, another market which is growing strongly. Xbox Live Marketplace and similar services have also opened up a market for downloadable content for larger games. Downloadable content and casual games are made on a small scale, and no outside funding would therefore be required, allowing Starbreeze to capture the lion’s share of any income itself. The low cost would also mean low risk, and the speed with which downloadable content and casual games can be developed and distributed would allow Starbreeze to gain more continuous cash flow. Focusing more in this area would make Starbreeze less dependent on publishers, strengthening its bargaining position when negotiating with them. It could also give Starbreeze some much needed cash cows, which would increase the possibilities of making own larger scale projects in future.
3. Create a community around the company. Game developers, just like other creators of entertainment, often get fans. These are very useful, since they preach the company’s excellence to their friends (and nothing beats word of mouth). They often have a large amount of knowledge about games, and can therefore be used as a form of unpaid consultants, which the company can use when deciding on all the various aspects of game design. For these reasons, fans are worth putting time and effort in to. Companies which actively interact with and listen to their cusomers have a strong competitive advantage, and thanks to the internet, interacting with customers is both cheap and easy. For example, though Starbreeze has a forum on its website, it is hidden away where visitors are unlikely to find it. If Starbreeze wishes to be serious about having a strong relationship with its customers, it should make the forum easy to find, and its employees should spend time using it to interact with the fans. This is something which Bethesda Softworks has been very successful at, helping it to develop a cult following. Loyal fans are a very useful asset for a game company, and go a long way toward strengthening the brand. During the second half of the nineties, Black Isle became synonymous with good computer role playing games. It was practically impossible to talk about role playing games without the company name Black Isle coming up (though Black Isle was actually a division of Interplay rather than an independent company). It is possible to turn a game developer in to a brand, just as it is possible to turn an author or a rock band in to a brand, as long as you work at it. A very important part of that is nurturing the fans.
4. Create an internship program to find good employees. The computer games industry suffers from a very strange problem. Lots of people want to work in games, and far too many are educated to work in games, and yet the game companies are having a tough time finding employees! This is because of the very high requirements demanded by the companies. Starbreeze has plenty of in-house competence, so taking in more newly educated people and training them internally probably wouldn’t be a problem. Their formal educations have already given them the technical skills they need, so its hardly like Starbreeze would have to train them up from scratch. Since so many are desperate to get in to the industry, many would likely be willing to work as unpaid interns for a couple of months, giving Starbreeze a chance to test them and then choose the very best, at low cost and low risk. Interns could for example be put to work on downloadable content, casual games or Quality Assurance. These could likely be taught the skills they need quite quickly by the experienced personnel already working at the company. And employees coming in to the company in this way would likely be both more loyal (since Starbreeze gave them their “break”), and cheaper, than people who have to be convinced to come to Sweden from the United States or England.
5. Create an own original IP (or buy one). This is the largest and most risky of the recommendations, but absolutely necessary if Starbreeze is ever going to grow out of its present predicament, with profit margins that are practically non-existent, and a heavy dependence on publishers. Successful examples can be found in the Nordic region. For example, Norwegian Funcom, which owns Anarchy On-line, an IP developed completely in-house. Another alternative, which is more expensive in the short term, but perhaps less risky in the long term, is to buy an existing IP. For example, Icelandic Crowd Control Productions, creators of the MMO Eve On-line, has bought White Wolf, a pencil-and-paper role playing games company which owns the rights to World of Darkness, including the well known Vampire: The Masquerade. Developing an own IP is a big step, and nothing Starbreeze is in acute need of doing immediately, but work should begin in this area, with the long term goal of creating own games in own settings. If Starbreeze is ever to move beyond first base as a small design company, and start generating decent profits for its owners, this step is completely necessary.