Playing video games for profit? Sounds like a dream for video game enthusiasts. As the CEO of Groove Media, a global publisher and developer of interactive entertainment software, Jon Walsh gets to live that dream. Walsh has been involved in the videogame industry for over 12 years, starting out as the owner of a retail store in 1995, and then moving on to Canadian sales manager of Activision, a top-five global publisher of video games. In 2001, he founded Groove, which went on to earn about $20 million from 20 game titles, including Marine Sharpshooter (which sold over 1 million units), and Playboy: The Mansion (which sold over 600,000 units). Now, Walsh has moved his company’s focus from the increasingly expensive world of traditional game publishing to the growing online market. Groove now publishes Internet-based games, such as UTour Golf, that allow players to compete for cash prizes. Walsh, who earned his MBA from the Richard Ivey School of Business, has great expectations for his 50-plus person operation, which he plans to take public in a few years. We asked him six questions.
• What is the greatest challenge currently facing Groove Media and what are you doing about it?
Right now our greatest challenge as it relates to online game technology is just creating awareness around it. We’re at a place now where we’re very happy with the technology and how it works. Now we’ve just got to go tell people about it. We decided that our customer acquisition strategy and awareness strategy is to rely on partnerships. Going out and acquiring customers for a new brand and a new category, a new way to play games, is very expensive. So from about a year ago we’ve been reaching out to big branded companies, high-traffic portal sites, sites that span a number of different categories, and showing them what our business model looks like. We got great interest, and now that interest is starting to transform into actual partnerships. We did co-promotions with companies like Golf.com, Sports Illustrated, GolfLink.com, and we found that that positive brand association, or co-branding, led to much higher conversion — by conversion I mean players coming to the web site that actually register for an account and ultimately become game players.
• Who else — person or company — do you feel is doing innovative work and in what way?
I think what Apple’s done with iTunes is they’ve basically revolutionized the music industry. The really cool thing that Apple did was they responded to consumer demand with a really high quality product. Ultimately, consumers wanted to obtain their music in a different way. I think that’s really interesting because those types of concepts are all driven by consumer choice and how that’s changing. That’s what our business model is based on. We’ve published more than 20 retail games and typically a game costs about $50 at a retail store and contains about 20 hours of game play. Less than 5% of all games are played from start to finish. So most consumers go out, they buy a videogame, play it for a few hours but they never finish it. It takes a long time and there’s a lot of depth to the game. So our business model is get online, download the game for free, and play as much as you want. It’s broken down into bite-sized chunks.
• How would you describe your leadership approach/style?
I’m pretty excited by what we’re doing. I think that we’ve got a great opportunity here. And I think I’ve been fortunate enough to attract similar types of people who are passionate about games and who have grown up playing them. As a company, I think we just really get the space. We’re customers first. We’ve been playing games our whole lives and as a result I think we have pretty strong opinions about what we want as consumers and that’s translating into being able to clearly execute on this business model — because everybody gets it. What goes along with that is giving people a clear vision — letting them know where we’re trying to go and constantly reminding them. I think just keeping people up-to-date on the progress we’re making on the business development side. Insuring information across the various departments in the company and keeping everybody motivated towards that final goal. And defining those goals for people within their departments and getting good leadership in those departments.
• Your online games are free to play — how do you pay the bills?
We take cash facilitation fees from the tournaments. We’re also working on having micro-transactions, which let you pay for a game as you go. We give you the golf game. You start out with all of your basic equipment. But at any time you can go into the pro shop and you can purchase additional equipment for real dollars. So you say, “Wow, I’m having a really hard time getting off the tee in this game. I’m going to go buy the Calloway driver.” What the Calloway driver does is it makes the ball go longer and straighter. And you can go in and buy that virtual club for real dollars. And we can actually look at the demographic information on those customers. We can say, “Everybody in the southwestern United States that’s 30 to 40 years old tends to favour this driver.” Think of how powerful that is for a company like a golf manufacturer! And we’re going to have in-game advertising revenue, which is the fastest-growing segment of any form of advertising in the world.
• The stock markets have plummeted as of late. Have you made moves to protect your investments?
I’ll be totally honest with you — most of my personal wealth is tied up in this company. I don’t have any significant investments outside of this one so I’ve been in the fortunate position to not have the ability to decide what to do with the market. I feel like if I’m going to bet my money, I’d rather have control over the outcome. Although you never have as much control as you think you have, I’d just much rather invest in my company. Then I can at least have some visibility as to what’s happened, versus more of a blind bet on picking stocks.
• You’re a golfer — are you better in the real world or the virtual one?
I’ve always loved golf and I’ve always been really bad at it. So the reason I love our game is I think I’m a two handicap in the virtual world and about a 25 handicap in real life. It’s just a videogame but it really helps improve my understanding of things like swing pacing, club selection, ball control, and on-course strategy. I think when I played a couple of times last year, as rusty as I was, when I thought about the videogame and what the swing mechanic looked like — because you look at it so much when you’re playing — it actually helped improve my contact with the ball.