It has taken a while to get this one up, apologies! This is the third and final part of my series of interviews with Russian game developers which all told form my ‘Conversations on Russia’. These conversations led to this piece on The Reticule being written. In this final part I talk to Alexander Scherbakov of Dreamlore Interactive (Stalin vs Martians.)

Chris – How has the economic crisis impacted on the Russian PC market? Are there any types of games which are still performing well?

Alexander – As you know, Russian/ex-USSR market is very different from European market. The retail prices are different. But the market could absorb almost everything. Most of the Russian/Ukrainian developers lived off the domestic market. The market which now lies in ruins. The Russian online market is still doing very well and still growing. The traditional PC market we had is almost dead. By the New Year 2009 holidays local publishers were selling half from what they expected (compared to the same period of 2007). By the end of spring, they were selling 5 times less, than during the spring of 2008. Right now (compared to Fall 2007) the publishers are selling like 7 or 8 times less.

At first it looked like the low-quality titles will be thrown up by the market, people will buy only quality (or somehow remarkable) titles, and from the customer’s/critic’s point of view everything will be healthier. But right now it looks like, well, “7 or 8 times less” and that’s it. Yes, you can’t sell unremarkable supercrap without any USP as the publishers used to, since the retailers won’t order that. But everything else is just selling bad. Even AAA titles.

So why it happened? Because Russian economy suffered badly from the crisis. Not a bad as some of the Baltic states or Ukraine. But bad enough: inflation of ruble, prices getting higher and higher (which is completely different from Europe, where the prices are mostly falling a bit), the salaries are normally getting cut.

Previously, the people could come to the store, notice a promising game and make an [impulse purchase], the game is cheap anyway. $10? Okay!

Now the customer comes to the store, notices a game, goes home and downloads it from a torrent tracker, ’cause the games don’t look that cheap anymore. $10? Will spend it on something else.

Next thing: large retailer chains were all credit-bound. So now they don’t really like taking new titles, ’cause its so hard to sell them, and the publishers don’t like to give them new titles because of significant delays with payments (and yes it sounds like a dead circle). You basically give a copy of the game to a retailer chain, but you won’t get paid. There are still small retailers and they comprise I don’t really know how much, perhaps about 70% of all retailers. But you still have troubles with them. And people don’t want to buy games anymore.

Chris – How are developers responding to the new economic climate, are they focusing on online games or simply cutting down the number of titles they release to the market?

Alexander – Most of the developers can’t respond. They’re making a game. The publisher funds them and keeps in mind that they will sell this number of copies guaranteed and that number of copies if they’re lucky. And suddenly they realise they will sell 20% of the expected minimum. They close the project.

The fully independent (funded not by the publisher) developer makes a game and keeps in mind the same number of copies, minus revenue split with the publisher. Suddenly, Grim Reaper knocks at the door.

Chris – Do you think that there are any developers at risk of going out of business? Will they do so because of they have failed to adapt to the economic changes?

Alexander – I think 80% of developers are at risk. As I already mentioned, most of the local developers made games for the local market. And you can’t make ends meet when you’re selling 5 or 10 thousand copies. Or even less. And obviously it’s hard to get funding.

And there’s more. Publishers don’t invest in new projects. Well, almost. They know they will hardly earn anything from the domestic market, and most of them can’t invest (or find it risky) into the worldwide-oriented projects.

There’s not much ways to survive for a developer in ex-USSR, if you’re not GSC or Katauri, or your father is an oil tycoon/politician. First option is going online or successfully going online. Second, is working directly with a Western (or Eastern!) publisher. Third option is outsourcing, but this one is pretty hard right now, not much orders nowadays.

Chris – Is it healthy for the Russian games market to have a publisher like 1C dominate the market as much as they do?

Alexander – In fact, 1C is not dominating the market. Indeed, it is still the leading publisher. But we also had few other relatively large publishers: Akella, Buka, ND Games (Noviy Disk) and, to a lesser extent, Russobit-M (aka GFI).

One thing you should understand about 1C is that, in fact, there are few branches of that company. First of all, 1C is a business software developer/publisher. Their main business is ERP (Enterprise Resource Planning) software. A huge number of companies in ex-USSR utilise 1C’s solutions. 1C has a branch 1C: Multimedia. You all know it simply as 1C. It was a games branch of the company. Obviously, 1C: Multimedia was (and still is) the largest publisher in Russia, because of the parent company’s money. The had a huge number of titles published and developed, but as far as I know, 1C: Multimedia was never profitable. Right now we have a huge crisis and parent 1C cannot afford to feed the almost non-profitable games branch. So 1C: Multimedia had to merge with SoftClub, the company specialising mostly in videogames, distributor of SCEE and Blizzard. Basically, right now it is 1C/SoftClub and it is very questionable who’s dominating in this tandem. But their not really dominating the market, which has extremely hard times as we speak.

Other publishers are fighting for survival. ND Games prominently closed their production department, so they don’t fund games anymore, work mostly like a distributor. And in fact their distribution right now is quite possibly the strongest (stronger than 1C’s). Russobit-M is very isolated, but they invest in games development right now. Buka seems to be dead than alive, Akella is struggling hard.

Speaking of the pre-crisis days, there was a domination of few publishers, which formed the Russian market. And they formed the system which was quite unfriendly to the developers. That’s actually a really complex issue, and it will take a long time to discuss, but in my opinion, the publishers made much more bad stuff, than good stuff. First of all, they formed the system where independent developers hardly could grow. They were never interested in that and the vast majority of developers were absolutely dependant on the publisher’s will. Second, they did everything to create unfavourable conditions for work with the publishers abroad. For example, they had a tendency to give publishing rights to Western publishers on almost any terms, just to get the game released outside of Russia. Which leads to a problem, when independent Eastern European developer comes to a publisher and gets offered a deal which will be much, much less favourable then the deal offered to a Western European/American developer. And we’re speaking not about the budget, which is sometimes quite understandable, but about royalties. The publishers expect that wild Eastern Europeans will say yes to any revenue split offered, because that’s how our glorious Russian publishers liked to work.

Chris – What kind of game would you be looking to develop now in order to cope with the present economic demands?

Alexander – Personally me and my good friends at BWF (we’re working together) are obviously thinking about the online direction, and possibly will have something to unveil pretty soon. Speaking of Dreamlore, in early September we released our visual novel (it is something like an interactive comic) Eugene Onegin and possibly will finish and release a new title in this genre early next year. Because we just have to do it. I don’t really know what will come next, but I’m thinking about a small browser-based online game as an option.

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