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To quote Richard Branson: “If you want to be a millionaire, start with a billion dollars and launch a new airline.” And the same thinking can also be applied to anyone launching a new games platform. VR technology is undoubtedly exciting, but as Facebook, Sony and Google have found, relatively slow consumer take up has meant championing the space is a long-haul strategy for those with pretty deep pockets.
So what then is the level-headed Koch Media doing moving into the space with its recent acquisition of VR specialists Vertigo Games for €50m of cash and stock? And does the move signify a growing maturity for the segment?
VERTICALLY UNCHALLENGED
For those unfamiliar with the company, Rotterdam-based Vertigo Games is best known for its VR smash hit Arizona Sunshine, A zombie shoot ‘em up it launched back in 2016, generating $1.4m in revenue in just its first month, an incredible figure for the nascent days of the VR segment. Arizona Sunshine has gone on to become a perennial success since launch. It could be considered the GTA V of VR even, selling ever more units with every new tranche of hardware released, and making more money every year along with it. It’s now available on all major headsets, plus the company created an arcade division, licensing a free-roam version of the game to out-of-home VR installations.
Based on that, it also started a publishing arm. Which last year released A Fisherman’s Tale, from Innerspace VR, to great critical acclaim. In other words, Vertigo is on a high and still climbing.
ELEMENTAL TABLE
Koch Media CEO Klemens Kundratitz has certainly been impressed by its trajectory, likening the company to his own: “When we look at Vertigo they are a bit like a mini Koch in the VR space… I think the organisation is well placed in this very special moment.”
Kundratitz explains that all the necessary elements had come together to make the acquisition work: “There are always a number of components to a decision like this. There is a strategic component, a commercial component, an opportunity component. And in this case, these components aligned.
“On the one hand, we have followed the VR space for some time. And we have always been excited by it, but we had not seen, for us as a company, the commercial opportunity. Now there is this tipping point, where we believe that the new generation of hardware,” referring mainly to the £299 Oculus Quest 2, “will change that picture and grow the market significantly.
“In order to enter a market, you need to enter in the right way and Vertigo are VR experts, they are not only technical experts, which they have proven with Arizona Sunshine and other games, but also commercial experts… they are strong in partnering up with other developers and bringing their games to the market as their VR publisher. That’s the direction we want to go here.”
“So we see this is an interesting entry point into a niche that will grow. And we want to, both on the development and publishing side, grow Vertigo into a substantial force in a growing market and help content providers really make the full potential of their games.
“The other component to the decision is we believe the current platform holders are committed for the long-term, I think that with Sony, Valve and Facebook being there, and maybe other people coming into the space, there are important platform holders. And we are only at the beginning of VR, even though it’s been a number of years in the market, it has a very strong potential to grow far beyond what we see today.”
REACHING FOR THE EYEBALLS
It’s no secret, and not that surprising, that some VR platform holders were heavily funding developers to develop exclusive titles, but Richard Stitselaar, CEO of Vertigo Games, tells us that wasn’t a key to his company’s success.
“Our vision has always been, influenced by Valve in a way, to go for all platforms, to reach as many eyeballs in as many headsets as possible. And I think that’s one of the reasons why we’re so successful.”
He notes that some platforms went down an exclusive-based strategy, “they poured a lot of money into products, but then the product needed to survive on that specific platform. But the market was so small, the studios became entirely reliant on the funding they got from [such deals].”
That was the opposite of where Vertigo wanted to be with Arizona Sunshine, which also stood out thanks to breadth and depth of its content. “In the early days of VR, there were a lot of ‘VR experiences’, it was a novelty, you shoot a couple of things, and 15 minutes later, you’re done,” Stitselaar recalls, “And me personally, speaking as a gamer, I want to play games, I don’t want to have ‘an experience.’
“So we went for a full game with six hours of content, multiplayer, co-op, horde mode, the whole package, and I think combining these things together, you can make a lot of money in VR, if everything sort of aligns.”
HEADSETS AS A SERVICE
Arizona Sunshine has made a lot of money, for a VR title anyway, and that was without the kind of forward planning that most modern games benefit from in regards to serving their audiences. As Kimara Rouwit, marketing director at Vertigo Games recalls.
“When we launched Arizona Sunshine, back in 2016, we hoped that it would become the game that it is now… most recently, the numbers are around one in every ten VR players owns a copy of Arizona Sunshine.
“So that was like the dream. But realistically, that wasn’t what we had expected. we didn’t expect this amount of success. So, to be honest, we didn’t really plan for a service model with Arizona Sunshine, because nobody knew how big the player base was that you might be servicing.”
Of course since then, the company has raced to launch DLC and free updates to the title in order to keep the community happy. “I think that scratches what servicing is, but it wasn’t like we went into it with that plan,” Rouwit adds.
That’s all changed now, with the benefit of hindsight and a good idea of the size of the addressable VR market, Vertigo’s next game is coming fully prepared for life after launch. Or rather life after the apocalypse in this case.
“Next year, we have our new game, After the Fall, on the schedule. And that is a title which is very much focused on multiplayer content and also post launch support.” Although Rouwit notes in reply to our query that it’s still a premium title, and a complete game at launch, just with a better thought out DLC and support roadmap.
“Free to Play is probably not the dominant model going forward at this point. VR is still a subset, a rather niche subset, compared to the overall install base of gamers.” A subset that doesn’t yet have the massive numbers, and
massive competition, that engenders free to play.
LAYERING IT ON
Another aspect of Arizona Sunshine’s continued success were numerous ports of the game, Stitselaar tells us: “We’ve basically rebuilt the game three times… actually three and a half times with Quest 2 now.”
Beyond the original version, for Vive and Rift, it was then “built for full room scale, and then for PlayStation VR – with its different tracking systems and a little bit more limitation on the hardware side, a lot of optimization. And finally for Quest, which is basically a mobile device, we had to do it all over again.”
The stark differences between those platforms, and the ongoing rapid evolution of the hardware – remember, the original consumer Oculus Rift was only four and a half years ago and we’ve numerous headsets since then – makes covering them all significantly more work than putting out an indie title on say PC and consoles.
And that’s a problem that Vertigo is now fully prepared for: “With After the Fall, we have this sort of new SDK, let’s call it a technical layer of tools that we’ve built over the years. The programmers will shoot me for saying it like this, but we can basically export to three platforms with a mouse click, but there’s all this technical stuff going on to make that actually happen. But that makes it so much easier to launch a game that runs on all three platforms,” says Stitselaar.
And with that comes a big prize: “One thing I want to point out is with After the Fall, we have cross platform play.”
Cross-platform was something which simply wasn’t possible with the iterative approach to Arizona Sunshine’s release, and something the fragmented player base of VR headset owners really needs in order to achieve the critical mass required for a perennially successful multiplayer title.
Vertigo Games believes that its technical knowhow will make other aspects of its business plan succeed.
“We’re not just a publisher, we’re also a developer… we can offer a developer that we work with all these tools that we’ve been investing in, whether they work with Unreal or Unity, it’s platform agnostic, certain tools, at least. We can say: ‘Hey, we can publish your game, but we can also offer you this technology to speed up your development.’”
And that toolset covers both the consumer and out-of-home markets. “And if you want, we can bring the same game to arcades and generate even more revenue on that side of things. You do a 30 minute unique experience for arcades, with free roam.
“So having that offer makes us unique in the market. And now adding Koch Media we can also use its physical distribution network, if you want to go to PlayStation, or its marketing muscle – they have local offices everywhere. We can scale and make it as big as we potentially want to.”
TWO-WAY STREET
Vertigo Games also allows Koch to add VR to its existing publishing capabilities in a way that simply wouldn’t have been possible had it decided to go it alone. And there’s also the possibility that such expertise could be
called upon by developers at Koch’s Deep Silver arm, and beyond that right across the full Embracer Group, including THQ Nordic and Saber Interactive.
“Yes, there is big interest from various studios now to engage and how that will materialise in VR games, we need to see,” says Kundratitz cautiously. “We run our company in a sort of decentralised way, where the studios have a lot of autonomy on the one hand, but also are part of the family. And we’re gonna play it the same way with VR. Nobody will be forced to do the next game in VR. But on the other hand, if the idea is suitable, if there is an appetite from the development point of view, then we now have great opportunities to not only dream of it, but actually make it.”
We can’t resist naming Metro as a possible target, with the games already having had various mods to get them working in VR:
“Yes, Metro is certainly an important IP that we have, Kingdom Come Deliverance is another big one, Dead Island is a big one. So there are good opportunities in our stable of IPs,” replies Kundratitz. Some tantalising possibilities there for VR, but it is way too early to expect any commitment from those teams.
And Kundratitiz rounds things off with an invitation to developers who are working in VR.
“We want to engage with people that are serious about VR. We believe that VR lives off big games, high-end hardware, and that the immersive experience will ultimately win over a big portion of all gamers… It’s important to underline our commitment to build this publishing portfolio, people should know that we are open for business,
“This is not strictly a sales and distribution type of conversation,” he clarified, “If it’s just exploring ways of what can be done together. We are totally open and welcoming, we want to help.”
So, now you know where to go. And, all being well in the world, we can see Vertigo Games becoming a fantastic addition to the already buzzing Koch and THQ Nordic stand at Gamescom next year.
