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Activision Blizzard Inc
Time Warner Inc
Perfect World Co Ltd
“Let’s say you have a werewolf, a vampire, and a human, and you all have to battle for survival,” Jeff Hilbert says as he drives to a meeting in Los Angeles. “The human needs armor and weapons. Otherwise, as soon as one of the other characters touches him—boom!—he’s dead. The vampire needs to have speed, agility, and smarts. Otherwise, the werewolf can just rip his head off. You see? Everybody’s powers have to be balanced really carefully or nobody wants to play this game.”
Hilbert knows something about the dynamics of a successful video game. His talent agency, Digital Development Management, represents some of the trade’s leading game creators, such as Slant Six Games, the Vancouver (B.C.) company working on the latest version of Resident Evil, a franchise that has sold 45 million units worldwide and has generated four movies starring actress-model Milla Jovovich as the game’s zombie-slaying heroine.
DDM also represents Vatra Games, a Czech developer which is completing the next iteration of Silent Hill, a gloomy “survival-horror” series, which has sold more than 4 million copies and inspired its own budding Hollywood franchise, and Turtle Rock Studios, a Southern California developer whose principals were part of the team that created Left 4 Dead, another man-vs.-zombie property, which has sold more than 6 million copies.
In other words, Hilbert, who founded DDM six years ago, is a fulcrum in an industry that makes enormous sums of money and is challenging the cultural primacy of action movies, edgy cable television, and Stieg Larsson novels. This is especially true for young men who have grown up with game controllers in hand.
Hilbert, 46, has slightly graying, shoulder-length hair that makes him look like an aging surfer. He’s always grinning, as if someone just told him a pretty good joke. He works from his home in Burlingame, outside of San Francisco, rather than a plush Los Angeles office.
Still, like a typical Hollywood agent, Hilbert has his manic moments. Heading to the meeting in L.A., he gets lost and steers his rented Kia sedan with his right hand while he charts the route on his BlackBerry with his left. He can’t make sense of the directions and scolds his smartphone for providing him with misinformation. “This is the wrong way to do this,” he says. “Stop, stop, Google Maps!”
It takes several abrupt U-turns before Hilbert gets his bearings. It’s a bit like a scene from one of the Need for Speed racing games, which have sold more than 100 million copies and generated over $2.7 billion in sales. The current edition, Shift 2 Unleashed, was developed by Slightly Mad Studios, a DDM client.
Hilbert’s days tend to be unpredictable. “I was at a Boy Scout meeting the other day with my sons,” he says. “I had these other dads pitching me IPhone apps. Everybody’s into games these days.”
Talent agents have long been part of the book, movie, and music industries. This wasn’t always so in video games, but the arrival of people such as Hilbert is a sure sign of a maturing and increasingly influential art form. Two decades ago developers made games in their garages, advertised them on the backs of comic books, and mailed them to customers in zip-lock bags. They saw themselves as software designers rather than as “talent,” a word traditionally used in the entertainment world to describe the likes of Tom Cruise, Jennifer Lopez, or anyone else who does something in front of a camera or microphone or on a keyboard.
Agents go where there’s money, and the video game industry is overflowing with it. Revenues reached $25 billion in the U.S. last year, according to the Entertainment Software Assn. That’s more than double Hollywood’s theatrical receipts. In November, Activision Blizzard (ATVI)‘s Call of Duty: Black Ops sold 5.6 million copies in the U.S. and the U.K. in its first day at a price of $59 each, plus special editions—a $360 million opening, according to the company. By comparison, Warner Bros. (TWX) took in $125 million in ticket sales during the first weekend of the heavily promoted movie Harry Potter and the Deathly Hallows Part 1. The New York Times’s video game critic, Seth Schiesel, approaches the industry’s products with as much gravitas as his Arts page colleagues do Jonathan Franzen novels. And in a 7-2 decision on June 27, the U.S. Supreme Court struck down a California law that banned the sale of violent video games to minors. The court ruled that “like the protected books, plays, and movies that preceded them, video games communicate ideas” and are thus entitled to the same First Amendment protections. No wonder developers view themselves as auteurs in need of professional handlers.
Hilbert won’t disclose much about his compensation. He says, however, that popular games such as Resident Evil and Silent Hill have production budgets ranging from $25 million to $30 million. DDM pockets 5 percent to 10 percent of that amount. His clients seem comfortable with the arrangement.
“I can get a meeting with anybody in the industry,” says Feargus Urquhart, chief executive officer of Obsidian Entertainment, the Irvine (Calif.) developer of the post-apocalyptic Fallout: New Vegas, which shipped 5 million copies when it made its debut in November. “Jeff’s the kind of guy who can find us the crazy s–t that we would never think of ourselves.”
DDM is something of a virtual agency. Like Hilbert, most of its 13 employees work from home. Joe Minton, the agency’s president, manages its day-to-day affairs from an office near his house in Northampton, Mass. There are also agents in Los Angeles, Stockholm, and Osaka, and one in Seattle who works primarily on product placement and sponsorship arrangements with advertising agencies. They meet twice a year, once at the Northampton headquarters and once in Los Angeles.
During the video game boom of the last decade, the production pattern for developers such as DDM’s clients became fairly routine. They made games that would be played on Sony’s PlayStation, Microsoft’s Xbox, and the Nintendo Wii for large publishers such as Activision Blizzard and Electronic Arts, which would then distribute them in boxes to Wal-Mart Stores and other retailers. If games sold well, developers got a share of the profits in addition to their initial production budgets. “It’s been a pretty predictable model,” says Billy Pidgeon, senior analyst at M2 Research, a firm that specializes in game studies.
That model, though, is being stretched. According to Bank of America Merrill Lynch, sales of packaged games in the U.S. and Europe fell 6 percent in 2010, to $18 billion. The bank predicts the market will be essentially flat this year and in 2012. This is bad for DDM. “Console games are our bread and butter,” says Hilbert.
Meanwhile, revenues from games for mobile phones and social networking sites such as Facebook are expected to rise substantially in 2011. These are known as free-to-play games, as they’re usually given away, and the revenue comes from ads and the sale of virtual goods. The most popular Facebook game is Zynga’s family-friendly CityVille. It has an average 88 million monthly users, who construct virtual towns that rise or fall depending on the urban planning talents of their designers. Zynga makes money by selling pixilated statues and tennis courts and inundating players with advertising from movies such as Kung Fu Panda 2. Hilbert says he’s had difficulty finding a place for his bloody-minded clients in the G-rated world of free-to-play. “It’s a different way of thinking,” he says. “But we are starting to get some of those deals.”
Recently he brokered one in which Perfect World (PWRD), China’s fourth-largest online game company, agreed to license Blacklight Retribution, a violent free-to-play game created by DDM client Zombie Studios. It’s about a future war between high-tech U.S. spies and biogenetically enhanced insurgents. Hilbert must broker more deals like this to offset the stagnant console market. That’s why he’s driving around Los Angeles, yelling at his phone.
A typical Hilbert day is spent in transit to meetings, conducting meetings, and eating well. On a Thursday morning he starts at Verve, a talent agency that represents Jon and Erich Hoeber, screenwriters of several comic-book adaptations, including 2010’s Red, a loud movie starring Bruce Willis as a retired CIA agent. Verve and DDM have a venture to create characters and stories that can be developed simultaneously into movies and games. The first collaboration is Blood & Glory. Says Verve co-founder Bryan Besser: “It’s a world-creating, monster-creating, sci-fi extravaganza.”
The Hoebers are writing the Blood & Glory script. Bedlam Games, a DDM client in Toronto, is devising something playable to go with it. Besser says the screenwriters are impressed with the game designers’ detail-oriented enthusiasm for the macabre. “They want to know, if there are going to be vampires, what would their mandibles look like?” Besser says. “How would they bite people?”
Hilbert nods. His clients often create charts with numerical formulas to distribute the powers of their various characters, ensuring that the fights are fair and that they escalate in difficulty.
Lunch is at Katsuya—a sushi restaurant in Brentwood where a four-person meal can cost almost $400—with Stephen Goldstein, an attorney whose practice is focused entirely on the video game trade. “There are a lot of us now,” he says. “We are starting our own bar association.”
“The most important thing a developer can do is get a good attorney,” Hilbert says.
“You mean, a good agent,” says Goldstein.
In the early evening, Hilbert has drinks with Mark Long, co-CEO of Zombie Studios, at the SLS Hotel in Beverly Hills. With crystal skulls available for purchase in the gift shop, the SLS looks like a place that might be frequented by Dante, the dashing underworld mercenary in Devil May Cry, a “hack-and-slash” series that has sold more than 10 million units.
Long, 53, has a shaved head and is dressed in black. He has a decidedly bleak view of the video game business. “Everybody talks about how this is a $25 billion industry,” he gripes. “Well, where is all the money going? I would venture to guess that it’s going into the hands of poorly run, publicly traded video game publishers.”
“Let’s get the waitress to come over with the drink menu,” Hilbert interjects. “They have great cocktails here.”
Soon he and Long head off for dinner and more drinks at Craig’s, a West Hollywood restaurant where a veal chop runs $44. They meet up with Mark Caplan, vice-president for licensing at Sony Pictures. A DDM client, 3G Studios, just produced a Facebook game based on the The Dating Game television show. Sony controls its rights.
Caplan, a stocky guy with dark hair and an affable manner, is another of Hilbert’s admirers. “We trust each other, and we always have good ideas together,” he says.
“Did you clear those trademarks yet?” Hilbert nags him.
At about 10, Hilbert suggests an after-dinner visit to Jumbo’s Clown Room, a local burlesque club. His publicist gives him a please-don’t look. Hilbert settles for a nightcap with Caplan instead.
Early the next morning, with little sign of a hangover, Hilbert is once again behind the wheel of his rented Kia with his smartphone in his hand, driving Long to the Agoura Hills headquarters of THQ, the fourth-largest American game publisher. He and the Zombie Studios chief are eager to capitalize on their successful deal to license Blacklight Retribution to Perfect World. They want to pitch more of Long’s free-to-play ideas, such as Rubicon, a game about Navy Seals in Afghanistan, and Shrapnel, which its creator describes as “Joan of Arc in space.”
First, Hilbert has to discuss a wrinkle in the Blacklight deal. Hilbert orchestrated a bidding war for the game between Perfect World and Konami, a large Japanese publisher. Konami thought it had the game. At the last minute, however, Zombie reached an agreement with the Chinese company. Konami, it seems, is still upset.
Hilbert assures Long that he “was totally transparent” and offers to accompany him later to a meeting at Konami’s Los Angeles office. “You should just dump the whole thing on your agent,” Hilbert says. “If you want, I’ll sit in the corner and get yelled at.”
“No,” says Long, forlornly. “I have to put on my man pants and get beaten up.”
They arrive at THQ headquarters in a verdant suburban office park and enter the lobby. It is guarded by two large action figures from the company’s games.
The receptionist sends them to a second-floor conference room, where they meet with Lenny Brown, THQ’s director of creative and business development. Hilbert says, “I just want to tell you, we expect to leave here with a deal.” Long describes Rubicon. “That’s bad-ass,” says Brown, who has a shaved head and wears a green shirt and jeans. “I like that.” He doesn’t say anything more.
Brown seems less impressed with the futuristic Shrapnel. He, like many large video game publishers, is conflicted about the free-to-play games. “It cannibalizes my core business,” Brown says. “Why spend $60 on a game when you can do this?”
Long and Hilbert respond that they have data showing that heavy users of these games spend as much as $70 a month on virtual goods. “Are you looking at free-to-play or not?” asks Hilbert.
“We are not going to rush into a speculative market,” Brown replies. He notes that THQ recently canceled a big-budget free-to-play game and had to write down $18 million in costs.
“You don’t have to spend that much on a free-to-play game,” Hilbert says.
Brown sighs. “Thanks, Jeff,” he says. “If you were here, we wouldn’t have spent $18 million.” Still, Hilbert leaves without a deal.
Hilbert grew up in Rochester, N.Y., and preferred skiing and basketball to video games. He also cultivated an appreciation for the music of Rush and Styx. He majored in marketing and psychology at the University of Pittsburgh and got a job selling mainframe computer peripherals after he graduated in 1987. Hilbert spent a lot of time with corporate IT folks.
He met some game developers at a trade show and thought they would make more interesting company. In 1991 he talked his way into a job at Viveros & Associates, then a San Francisco advertising and marketing firm specializing in game launches. “I just saw him as a real dealmaker, a real good sales guy, and a really good people person who wanted to get into a business he knew nothing about,” says Lou Viveros, the agency’s president.
By the mid-1990s, Hilbert had transitioned from marketing guy to talent agent. He spent his early years, as he puts it, “slinging deals” from his various homes in the Los Angeles area. He represented Virgin Interactive when it sold off a portfolio of games such as Treasures of the Deep and Drakkhen. “He knows how to talk to everybody,” says Keith Greer, the company’s former vice-president for business development. “He’s one of those guys who is kind of a chameleon.”
Around the same time, Hilbert also brokered a deal for Panasonic’s Ripcord Games to publish Postal one of the most controversial video games of all time. The protagonist, “the Postal Dude,” shot police officers, beheaded women, and set other characters on fire. It was banned in several countries and denounced by Connecticut Senator Joseph Lieberman and former U.S. Postmaster Marvin Runyon. The publicity was great for sales. The Postal series has sold more than 1 million copies and was made into a movie. Does Hilbert have many moral qualms about his involvement with the game? “No,” he replies in an e-mail. “Thanks for asking.”
Finally, Hilbert tired of being a one-man show. In 2005 he founded DDM with Minton, the former president of Cyberlore Studios, the developer of games such as Playboy: The Mansion. Minton says the arrangement allows Hilbert to focus on his primary strength: foraging for deals. “What I’ve done is create a structure so Jeff can have complete free rein,” says Minton, 42.
“A lot of people said partnering with Joe was the smartest thing I’ve ever done,” laughs Hilbert. “It saved me from me.”
Michael Pachter, an analyst who follows the video game industry at Wedbush Securities, says DDM’s only real competition is Creative Artists Agency, the large Hollywood talent agency. “They are the only two making a real effort to represent developers,” he says. Until recently, CAA’s game department was led by Seamus Blackley, a former Microsoft executive who helped launch the Xbox. Blackley brought in clients such as Will Wright, creator of The Sims, and Vince Zampella and Jason West, the former heads of Infinity Ward, the studio behind the Call of Duty series, one of the best-selling video games in history.
In May, however, CAA announced Blackley was leaving the agency. (CAA declined to comment.) Hilbert doesn’t feel the need to gloat. He says Blackley is a friend, and he refers to CAA diplomatically as “a great competitor.”
Another day, another lunch: In late May, Hilbert and Long are in New York pitching Zombie Studios games to investors. If they can raise enough money, they can bypass risk-averse publishers such as THQ.
Dining at the Upper East Side restaurant Serafina Fabulous Grill, they meet with Frédéric Chesnais, a video game financier from France who was once CEO of Atari Interactive. “I don’t know anything about games,” says Chesnais, who dresses more like a guy who works on Wall Street than in his garage. “But I know where the money is.”
Long pitches him Shrapnel: “It’s a sci-fi epic, kind of like Joan of Arc in space.”
“It’s French,” Hilbert adds.
“It takes place all over the solar system,” Long continues.
It becomes clear that Chesnais has his own agenda. He works with Cybergun, a French toy gun maker that has secured the rights to sell along with video games digital versions of weapons made by Colt, Kalashnikov, Mossberg, and other manufacturers. He says these rights will become extremely valuable as free-to-play games grow in popularity. “In three or four years,” he insists, “you won’t be able to sell virtual weapons without a license.”
Chesnais has financed, partly with his money, Long’s Blackwater game for the Xbox 360. (The game was inspired by the private security company, a handful of whose employees have been charged by the U.S. government with allegedly causing the deaths of innocent Iraqis.) Cybergun, which is already marketing Blackwater-branded toy guns, provided the rest. Now Chesnais is looking for a game that is Colt-friendly. Long’s game, Shrapnel, won’t do because it’s set in the future.
“Why not do a futuristic Colt laser blaster?” Long asks.
“It won’t work,” Chesnais insists. “If people have a choice between a futuristic weapon and a Colt 45, they’ll take the Colt 45.”
Long suggests Rubicon. It takes place in present-day Afghanistan and features Navy Seals. “Seals are hot,” Long says.
“Seals are very hot,” Chesnais replies. Long and Hilbert mention that they had a meeting earlier the same day with an investor eager to finance Rubicon. They might even close a deal tomorrow. They say Chesnais might still be able to come into the deal as a co-investor if he moves quickly. Chesnais asks Long to call one of his partners and gives the Zombie Studio CEO the guy’s cell phone number. Hilbert looks pleased.
As Hilbert leaves, he reminds Chesnais that E3, the industry’s biggest yearly trade show, is only two weeks away. “I’ll see you at E3,” Hilbert says. “Which parties are you going to?”