Founded in 2006, Kabam has become a leader in the development of massively free-to-play mid-core and core social games, on mobile, online and social networks. Focusing on providing high-quality games to its millions of gamers, who are looking for a depth of play and social interaction, the company manages to deliver entertainment with very deep, competitive and strategic games.

Kabam’s watchword is to allow any players to enjoy a fun game, as long as they want and on any devices they want, without spending money. In 2012, the very successful strategy game Kingdoms of Camelot reached number 1 in the US App Store ranking, generating millions in revenue. The company, based in San Francisco, has offices in Austin, Texas, Vancouver, Canada, Beijing and also Luxembourg, chosen for its location and its ability to cover the whole European market from one place. Luxembourg, as the headquarters for Kabam Europe, has been a key factor in Kabam’s commitment to service its international customers. Its recent signature of a distribution deal with the biggest Turkish portal shows the company’s aim to expand into new territories.

Constantly evolving in its genres and titles, from strategy games to role-playing games like the popular Realm of the Mad God, Kabam launched in November 2012 the successful free-to-play game The Hobbit: Kingdoms of Middle-Earth on iPhone, iPad, and Android devices, which hasn’t stopped rising in all the App Store rankings.

Kabam’s main focus today is to keep producing high-quality content for any new platforms and to stay ahead of all the trends in order to fully satisfy its growing audience, and to keep hitting the top 10 with every new production.

Free-to-play games are clearly in the middle of disrupting the videogame industry”, referring to how players worldwide can access their entertainment via online channels for free compared with the need to purchase a $400 console and individual games for up to $60 each, Co-Founder and CEO Kevin Chou said.

And now Kabam is leveraging its franchise IP and technology to become the leader in free-to-play games on mobile devices in the Western world,” Kevin Chou added

An interview with Mr. Boris Pfeiffer, Managing Director at Kabam Europe

Boris, how serious is Kabam in the Gaming Business?

Kabam is a leading producer of free-to-play games for mobile and web platforms. Our aim is to provide high-quality games for serious gamers, as well as a free playing experience. This sets us apart from the traditional game industry where you have to pay 60 Euros for a high-end game that you play on your console. Right now, our focus is clearly the mobile devices. We’ve been extremely successful with our games for iOS and Android. Last year, our game Kingdoms of Camelot, Battle for the North, was the highest grossing game on the US App Store for 2012, meaning that the game generated the most revenue.

What is the business model of the free-to-play approach?

The underlying principle is that we believe everybody should have a chance to check out a game, test a game and play a game for eternity, without having to pay money. However, we realize that certain people who get really engaged would like to advance faster in a game, or gain more power. And we give them the opportunity to trade in money to advance in a game faster and save time. Alternatively, people can just work harder, spend more time and achieve similar results. It also forces the producers to produce very high-quality content, because otherwise you would never convert someone to a paying user.

Do you design the games at Kabam?

The games are built in California, in our San Francisco studio; in Austin, Texas; in Vancouver, Canada; and in Beijing, China, where our production studios are.

How big is the community, for example around Kingdoms of Camelot?

It’s millions of players. But the gamer that plays our games is more a hardcore series gamer. So our community is much smaller than those of casual games, but it’s a very engaged community and people spend hours and hours every day, coming back and playing on our games.

 

“High-quality games for serious gamers”

 

Isn’t quite original that Kabam provides a full service of games production, distribution and promotion on all platforms?

Yes, we have our own platforms and we distribute the games ourselves. We don’t work in a traditional publisher model, where we would just build the games and give it to a publisher.

What are the main trends right now?

The main trend in Kabam is to focus on new platforms as they evolve. To us, it’s clearly the tablet market. And we’re constantly looking out for the next platform. Will it be TV? Will it be a combination of a handheld device and a TV? I think as long as we stay ahead of that trend, and produce quality content for the devices that people choose to play games on, we’ll probably be doing extremely well.

What about the cloud gaming approach?

It’s essentially what we do. All the games are in the cloud, there is nothing downloaded. I mean, you do need to download on your mobile device but all of our web games are cloud games. You can go to any browser and continue your existing game. I think it’s clearly the future of gaming. As soon as the quality of browser games and handheld games has reached the current quality of console games, there may be one more generation of consoles but I think, at that point of time, those mobile devices will have caught up with their abilities.

Do you see other possible extensions of the model to other services such as media or entertainment, related to the games?

I’m clearly not an expert on other media, but to me, free-to-play is certainly the model. I know media is struggling with that concept, with how much you can give away for free. It costs a lot of money to produce these games so we do need some paying users. I know the music industry or the publishing industry are struggling with the same thing. I know magazines have tried with pay walls to get certain users to pay and have not succeeded the way games have.

Do you think that the brand may also gain in revenue in the gaming industry?

I think if you play a game and have fun at it, at some point of time, you start paying because you’re seriously engaged and to you, it’s another form of entertainment. You could be going to the movies and spend 5 to 10 Euros there, or you could spend it on what you like to be doing. There are companies like Rovio that have managed to get into the merchandising and to make lots of money by creating a wonderful brand with Angry Birds. That will continue to happen, but those successes are really rare.

What about the licenses of the movies?

We’ve been doing that quite successfully. Our first license was with Paramount Pictures for a game based on The Godfather franchise, and we produced a web game. Then we partnered with Warner Bros. to launch The Hobbit game on mobile, which is a huge success for us, and the game continues to rise in all the App Store rankings. And we’re currently developing with NBC Universal a game based on Fast & Furious 6 premiering this spring.

 

“Kingdoms of Camelot has franchise and has generated over 100 million dollars of revenue”

 

That’s clearly the way to go in the future, to continue to use licenses. We are extremely proud that we were selected to pull the game on The Hobbit, and with that success I’m sure we can continue on that path.

Could you explain the life-cycle curve of a game? How to regenerate it?

I don’t have an answer to the life-cycle because our first game we ever produced, the web game Kingdoms of Camelot, is still alive and still doing really well. So I can’t tell you what the end of life of a game is, because we haven’t seen that. Kingdoms of Camelot has a franchise and has generated over 100 million dollars of revenue, which makes it actually one of the most successful game franchises in its genre ever. So there’s really no end of life.

The good thing with online games is that you can just continue to innovate; as long as you have a good team behind it that continues to come up with new ideas, the game will stay alive. Then we branched out the game to mobile and we gave it a brand new life. And now people can play the game online or they can play the extension of the game on their handheld devices. A big success of Kingdoms of Camelot on mobile was certainly that the community of people that played on the web also tested it out on mobile. And who knows, maybe there’s another platform beyond that, and the game will just continue to live.

How important is the European market for you?

It’s very important because it’s more than 40% of our overall revenue, and increasing. We’ve had very good growth rates in Europe. Even more so, it’s very important for us to expand into new territories. For example, we just signed a big distribution deal with Mynet, the biggest Turkish portal. We are working on getting into the Russian and the Polish markets.
We also want to open up more markets from this office.

In Luxembourg, you also cover the languages and the localization of the games…

Yes, Kabam Luxembourg is the headquarters for Kabam in Europe. We established our office here in March 2011. We service the entire European market from here. We localize the games for all major European languages. We do not only translate but we also culturally adapt the games. Then we handle all the customer support for
Europe from here and from our office across the border in Saarbrücken, where we also have a support staff. We also handle community management, consumer research and insights, and of course functions like finance. We are 600 people worldwide and about 50 people in Europe, split between Luxembourg and Saarbrücken.

What are the main reasons for covering the European market at this time?

Kabam acquired WonderHill, my company, some years ago and I was heading up to Europe. With this acquisition, they really got their first European presence, and we looked at potential locations where we would want to develop the company.
A couple of factors played into it: it would have to be a European capital, something that people would recognize; it would have to be a city where we can attract and find the personnel we need to grow, and we knew we would want to cover all of Europe from ideally one location, because we were just not big enough to have an office in Paris, then one in London, Milan, Madrid or Berlin.

We were looking at locations that were attractive for people to move to, and we settled on Luxembourg. People were one of the deciding factors. The other factor was that the government of Luxembourg was really forthcoming and helpful. It helped us to set up here and was very open to discuss everything with us, which we haven’t seen in any other country. We were able to secure a solid tax position that was not contested two years down the road, which is always a risk. You know how you go to some other countries, they promise you big tax benefits, the government changes and you have to go back to the drawing board, etc. Luxembourg made us feel that this is not going to happen. We can sit down, discuss the position and be safe.

Is Luxembourg attractive?

There are certainly places where you can go and get much better deals. We haven’t received or taken any kind of subsidy from the government to establish here but we like the fact that it’s stable and open, that you know exactly what to expect, so you take uncertainty out of the picture.

What are the main reasonsforestablishing your HQ here ?

One of the key factor is that it’s a very neutral place to be. So if you plan to support all of Europe from one place, Luxembourg is one of the best places to be. If you set up in France, you may have troubles supporting the English because they don’t want to be supported by French. No one has any animosity against Luxembourg, and people here don’t have animosity against anyone either. So it’s a really good place to be, also from that standpoint. I think that’s very attractive, especially if you come from outside Europe to set up here. It’s a small place, you have direct access to all the ministers, even if you’re not huge. I’m German and I couldn’t even imagine trying to go to Berlin and secure high-level meetings for setting up a company where I’m the only employee. You would probably have to bring 5,000 people to Germany to get them mildly interested. It’s just very different here. And on the other hand, from the outside world, Luxembourg has a much better standing than other small States. It attracts gaming companies, for example, because they are very strict on whom they accept or not. They maintain a good reputation around the world, which also helps.

In terms of infrastructure, do you also set apart from your cloud infrastructure or services in Luxembourg?

We just signed our first agreement with a local datacenter provider, ebrc, to set up a first server here. So far, we don’t have any infrastructure in Luxembourg, it will be the first server that we set up to handle localizations. So that wasn’t a deciding factor for us to move our infrastructure here, but we are starting to do that now.

Do you see the potential of the country?

I clearly see the potential. I’ve talked to people, I’ve presented the Luxembourg infrastructure to our datacenter team. They were very impressed and will definitely consider it. But it’s more a factor of “when are we going to do this?” than “are we going to do it or not?”. What has been set up and created here is certainly impressive, it’s very secured, very fast. Everything is super redundant, linked up to multiple European countries. They really use that geographic advantage very well and they have done a good job doing that.

As a player, do you recognize the importance of having references to other big companies, such as Amazon or Skype? Did it help in your decision?

Our initial decision to come here was certainly affected by the fact that Amazon, Skype, iTunes and other companies are here. Without them here, I don’t think Luxembourg would have made the race in the end. I would compare it to a decision to install SAP as your ERP system. It’s just safe, a lot of big companies use it. If you fail, it’s you and not the system. One big online game company was already here, Zynga, which was certainly a deciding factor, and then other huge online players had set up here. It definitely influenced our decision.

Where do you see Kabam tomorrow? What are your plans?

The beauty of our industry, and most of the success of Kabam, lies in the fact that we manage to do things totally differently tomorrow than we do today. To give you a history, we used to be 100% on Facebook. Everything was focused around it and all of our games were on Facebook. Within just a few months, we managed to build up Kabam.com as a new distribution platform for our games, because we felt that hardcore gamers would be looking at some other places to play the games, so we needed to give them an experience outside Facebook. While we were building that, the iPad, iPhone and Android rose in importance, and high-quality games came to those devices. So we turned ourselves into a mobile games company and our very first game became a huge success and hit. Now we’re doing more of that. All this happened within a year. So to ask me what we are going to do tomorrow, I would say that whatever the market demands us to do, we’ll probably be able to do. We are still small and agile enough to do it.

What would you wish for Kabam?

Produce more hit games. I hope every single game we release will be another huge success and hit the top 10 in the App Stores, of course. That’s all we can wish for. And of course, everybody should stay healthy, I think it’s even more important.