NCWest: Stage 1 complete; Farewell, European MMO Industry!

Yesterday’s announcements of layoffs at NCsoft (both in USA and Europe) caught many people by surprise, judging from the number of emails and conversations I’ve had where people have brought it up. I think it’s interesting to try to understand why this is happening, and given Scott’s point that this is really not the right way to do layoffs (bits and pieces at different times), then to look at how it could in this situation be done better (if it could; that may not be possible).

But in terms of the surpise? No. I find there is no surprise here. There’s IMHO two major things going on.

1. Clean up the mess created last summer in Europe

From yesterday’s announcement:

“The European office is transitioning to have a stronger focus in marketing and sales”

Last Summer, they made redundant the entire Development division of NCsoft Europe. Traditionally, in games, you have Development and Publishing. In online games you have a third major wing: Operations/Support.

Publishing and Ops have to be / should be local to the country(ies) where they are being sold – it makes things much cheaper, and it makes things more successful, as the staff are actually immersed in the culture and timezone of the people they’re selling to or serving.

I was a little surprised when the Dev division was cut that it wasn’t done cleanly. As Scott points out “Hey, management? You’re doing it wrong”. If you get rid of Dev, then certain other things HAVE to happen:

1. Get rid of all Dev-sub-depts in their entirety – including things like QA, that “can” have a foothold on the side of both Ops and to a lesser extent Publishing. If you’re actively *cutting* dev, then that QA dept (as an example) is an abandoned outpost that will get left to rot, politically speaking, and you can guarantee it will be starved and eventually killed (or die of hunger)
2. Get rid of a large chunk of Publishing and Ops that are *not* part of Dev, but are co-supporting of them. If you had a Dev division, you would have built up extra resource in those areas; that resource is now under-utilized. If you’ve had to do something as brutal as destroying your Dev division, you clearly are desperate enough that you need to be making those cuts as well

NCsoft Europe did *some* of the above – but clearly not all. I’m not expecting you to tell from the headcounts (that would take some effort with LinkedIn, or buying beers for a few people after work) – there’s an easier way: look at what “departments” still had staff. Once the redundancies had completed, there should have been *no-one left* in a bunch of departments that – in fact – were left with a handful of lost, abandoned, individuals.

Going back to that press release, what it really meant was:

“The European office has finally implemented the strategic plan from last Summer, so is transitioning toeffecting immediately have a strongerpure focus in marketing and sales”

Cutting Development in 2008 meant one thing: NCsoft Europe was now purely an off-shore Publishing division (coincidentally, back to its historic roots). In the games industry that means you are (in decreasing order of importance): Sales, Marketing, Localization. You’ll be lucky to keep anything in teams like QA because there’s no need for QA to work hand in hand with sales teams – they could be located anywhere (unlike QA + dev, which really need to be colocated). In some companies, with the number of people remaining relatively small, the CEO’s would have left the abandoned people to sit in their jobs not being very useful, while the management got on with bigger issues of trying to do whatever the strategic plan was that they were doing. But that couldn’t happen for NCsoft, for reason 2 (see below).

PS: I like to believe that the reason it took so long for this week’s cuts (in Europe) to happen is largely that the exec team in Brighton were trying hard to keep as many good people within the company as possible. I don’t know Geoff Heath (the CEO) well, but he’s always come across as genuine and proactive in his concern for his staff. The rest of the exec team also – whatever their faults and failings – have tended to put a lot of effort into “looking after” their people, whether or not it’s worked.

2. Convert the overall company to “how it should have been run back in 2001”

Last summer’s re-organization in NCsoft America was all about giving total control of the non-Asian subsidiaries to ArenaNet. Reading news articles etc, I do occasionally wonder how many people grokked what had happened. A quick summary…

All this waffle about becoming “a unified organization under NC West”, and the reporting by bloggers and journalists that this was “consolidating” the subsidiaries and offices (they were already consolidated, you know) … what a load of crap. Follow the money, guys: who has the power now, and what unites those people? And if the answer is “nothing”, then ask yourself: who stands to benefit from an exec team comprised of individuals that are likely to be in conflict?

Look at the Directors of NC West:

1. Jeff Strain – Co-founder of Arena.Net, Director of Arena.net
2. Chris Chung – Director of Arena.Net
3. Pat Wyatt – Co-founder of Arena.Net, Director of Arena.net
4. David Reid – only started working at NCsoft 2 months ago

Notice a pattern?

So NCWest was simply a handing over of the reins of power from the OSI Mafia (ex-Origin people such as: Robert Garriott, Richard Garriott, Peter Jarvis, Starr Long, etc) to the Arena.Net Directors (the only one who stayed behind was Mike O’Brien, who now runs Arena.Net).

Remember that Korea acquired not one but two studios early on in North America: the first was Destination Games, which developed the tragically failed Tabula Rasa, and the second was Arena.Net, which quickly (note) developed Guild Wars, then a bunch of expansions, and is now well on the way to shipping Guild Wars 2.

This is “acquire experienced and skilled American game-developer Directors, and get them to run our non-Asia subsidiaries … attempt 2”.

Which should also point out something pretty obvious (to me at least): Chris Chung has a heck of a lot riding on the success of the revamped NCWest. ArenaNet’s top team has to show that it can do what the Origin team failed to do. They’ve been waiting in the wings all this time, implicitly saying “we could do better than that”, and now they have to prove it.

He’s / they’re re-arranging the entire company to fit with “how we would have done it in the first place if we’d been given the chance” (or something like that).

Doing it Better

I have two criticisms of what’s going on, and neither seems to be shared by the general press. Which either suggests I’m very wrong, or I’m very right. Your choice. Guess which one I’m going for :).

1. Too slow

If you’re reforming a company, do it lightning fast. If you’ve been at that company, playing the politics, for 5 years, you ought to have a battle plan in mind well in advance of being “officially” given the reins. There are always reasons that you “cannot”, from the operational to the legal.

But I’m sure that’s what they said to Lou Gerstner at IBM, and he proved wrong, when he fired the entire middle management, worldwide. I bring up this piece of history regularly, because it’s an excellent reference point: if one of the biggest, most bureaucratic companies in the world can do “the unthinkable” then what excuse does everyone else have left for not going far enough themselves? The redundancy pay-outs cost IBM so much money they booked a sudden loss that year greater than the GDP of entire nations. But they did it.

The “what would we do if could break the rules…?” game was one I played at NCsoft quite a bit; I needed to second-guess what would happen, given the long lead times of any development, organizational, and tech issues, if/when failing teams, projects, and managers got cancelled (as they did). Lots of other people were playing it too. It’s much scarier to actually have to put your thoughts into practice and risk being wrong, so some “more serious” prep may be needed when push comes to shove, and some paralysis is understandable (but still not acceptable). But with all the time we had, the extra due diligence shouldn’t have been necessary. Courage of convictions and all that. I’ve become a fan of moving as fast as possible (although even at NCsoft I still had crises of confidence and over-analysed some of the risky situations, and was fortunate to work with better people who simply said “stop worrying, run with what you’ve got, it’s planned more than well enough already”).

2. NC Europe is screwed

NCsoft had the opportunity to create a giant of the MMO publishing world in Europe; Europe is screaming out for it and just needs a banner to rally behind – and a visionary exec team to say “we’re going to turn Europe into an online gaming powerhouse”.

Europe is a bigger market than the USA (by some 30% or more).

Europe has no multi-title successful MMO developer or publisher.

The UK alone has a lesser but comparable level of mainstream game developers and output of titles to the US (UK currently 4th in the world behind Canada).

So … the development industry is here, less so the publishing industry (although there’s a lot of mid-sized publishers spread through Europe), but there’s a gaping hole in the MMO sphere. For someone bold enough to step into that hole, you could “own” Europe’s online gaming industry for the next decade.

Missed opportunity? Hell yeah.

At the end of the day, I eventually realised that NCsoft won’t do it for one simple reason: Korea still probably doesn’t quite understand how they managed to go so badly wrong with the Garriott brothers as the founders and owners of NCsoft North America, and wouldn’t dare risk another, independent, self-managing, ambitious subsidiary *anywhere* in the world. The Asian subsidiaries are all kept on a very short leash and get practically no independence from the Mothership (in Seoul) at all – the whole western conceptualization of subsidiaries is already anathema to the Koreans.

If anyone out there is interested in taking over Europe like this, drop me a line. I’d love to join in.