Wim Stocks says his game-publishing start-up, Elephant Entertainment, offers opportunity in online gaming for both players and retailers.
Minneapolis-based video game publisher Elephant Entertainment is charging trunk-raised into the fast-growing, competitive online game market.
Though small, the startup has ambitions that suit its outsized name -- Elephant Entertainment aims to clear a path that affords retailers, who have largely been bypassed as the music industry thundered online, a spot at the digital watering hole.
The idea, according to founder and president Wim Stocks, is to have retailers promote online titles that Elephant Entertainment publishes to customers in their stores. The retailers, in turn, get a share of the recurring revenue that Elephant Entertainment receives from game developers.
"The one thing about an online game that a retailer gets nervous about is they sell the box version in their stores but then there's all this recurring revenue that accumulates on the backside that they never see a penny of," Stocks said. "Our model is that we're sharing that recurring revenue with the retailer."
Besides producing games, developers typically manage online gaming platforms and communities. Publishers get a cut of the recurring revenue that developers derive from online gamers, who can pay subscription-like fees to access premium service levels or one-off charges to get a special object or asset to use in game play.
"We had a lot of philosophical discussions about the wisdom of [sharing revenues with retailers] ... but we believe our game is connecting with a consumer of theirs. ... There's no bigger value added than the job that they're doing leveraging their brand to help us sell one of our products to their audience."
The practice is well-established in such markets as the cellular phone industry, where carriers pay retailers for signing up new subscribers. But it's new to gaming, Stocks said.
So far the fledgling publisher's approach has won over retailing behemoths Target, Best Buy, Wal-Mart and GameStop, which account for 85 percent of the U.S. computer and video game market, Stocks said.
Overall, the gaming industry racked up more than $7 billion in retail sales in 2006, according to the Entertainment Software Association, an industry trade group based in Washington, D.C.
In its first 12 months of operation, ended in October, Elephant Entertainment tusked its way to revenue "north of $6 million," a figure the company projects will at least double in 2008, according to a statement.
Elephant attracts attention
"The potential is great, and is getting full attention from retailers even at the upper levels of the organization," Stocks said. "If anything, we're probably getting more attention than our volume would indicate because it's such an important realm that they're trying to figure out."
Stocks, a gaming industry veteran, left his post as executive vice president of Atari, the legendary but struggling gamemaker and publisher, to launch Elephant Entertainment in June 2006. His experience -- he oversaw sales, marketing, distribution, licensing and operations at Atari -- and contacts among retailers and game developers were critical in spotting the opportunity and starting his company.
"We've grown up with so many of these people when they were buyers, and now they're in senior positions at retailers," said Stocks, who self-financed the start-up. "Also, on the content side, there are lots of connections that were enabled by virtue of my background and my group's background.''
Stocks tries to operate virtually wherever possible. His offices are within those of Compass Marketing, which also provides administrative support. Third parties handle manufacturing, logistics and distribution. Partners for content and online platform management include K2 Network and Oberon Media.
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