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Online video game studio gets cash infusion
2006-12-11
Red 5 Studios, an online video-game developer led by members of the team behind the wildly popular "World of Warcraft" game, said on Monday it has raised $18.5 million in venture capital. The funding from Benchmark Capital and Sierra Ventures comes as a rise in high-speed Internet usage in the United States and elsewhere fuels interest in online gaming -- the standard mode of play in many Asian countries. "World of Warcraft" from Vivendi's (VIV.PA) Blizzard Entertainment provides an online world in which thousands of players compete simultaneously. Revenue comes from game sales of about $20 per unit, subscription fees of some $15 per month, and downloads of add-on content. The game has obliterated former usage records with a subscriber base of more than 6.5 million globally, and forced U.S. video-game publishers to rethink online gaming as development costs climb. In the United States, games for consoles like Sony Corp.'s (6758.T) PlayStation 2 and Microsoft Corp.'s (Nasdaq:MSFT) Xbox 360 are dominant. Top titles sell for $50 to $60, and play time is often measured in hours rather than months. Mark Kern, Red 5's chief executive and former team leader on "World of Warcraft," said his California-based game studio will create original games for online game operators and distributors -- much as Pixar Animation Studios did in the movie world with its animated films such as "Toy Story" and "Finding Nemo." "Pixar really showed that you can have a content-focused strategy," Kern said of the animated film maker that is now owned by the Walt Disney Co. (NYSE:DIS) Red 5 is already working on a massively multiplayer online game for Webzen Inc. (069080.KQ) The South Korean company is financing the development of the game, which Webzen will distribute. Online games are currently sold at retail outlets or via Internet download. Benchmark General Partner Bill Gurley predicted that massive online games like "World of Warcraft" will become a dominant form of entertainment. "Major media companies are paying attention in a major way," said Gurley, whose firm's investments have included "Second Life" virtual reality game maker Linden Lab and mobile game maker Jamdat, which sold to video game publishing giant Electronic Arts Inc. (Nasdaq:ERTS) earlier this year for $684 million.
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