|
Conclusion
Rage has finally exhausted its funding options and its bankers have begun proceedings to place it
in liquidation in order to realise some value from the remaining tangible and, more importantly, intangible (eg products in development) assets. Equity lines of credit, deep discounted equity issues and bank debt
have all been used to the greatest extent the Company could get away with in an attempt to return the Company to profitability.
A lackluster Christmas trading period has obviously proven the last straw for the
Company's bankers (with whom it had a £6.2m manufacturing credit facility). Although Rocky shipped in volume, it was clearly failing to sell through at full price and the Company was struggling to pay its bankers
back. As warned in the previous version of this conclusion, the high fixed development cost base gave the Company little leeway for failure with this product. In addition, the Company warned in its fund-raising
documents in May 02 that its future, irrespective of the amount raised in that round, was dependent on the continued provision of its bank facility. The conclusion to the Rage story should therefore have come as
little surprise.
Rage's problems stemmed, ultimately, from its inability to manage the transition from development to publishing. As a developer, the Company slipped into the trap of trying to demonstrate sales
growth by growing the volume of development teams and deals it signed rather than improving the quality of its products and deals. As is often the case, such a strategy actually had an inverse effect on product
quality and, not surprisingly, Rage began to find that it was unable to secure a sufficient flow of good quality publishing deals. With inferior quality product being published by lower tier publishers (with limited
market reach), Rage found itself almost forced to move into the higher risk/reward publishing market in an attempt to improve its product distribution and increase its sales.
Publishing, though, requires not
only considerable more capital, but also a different business strategy and a completely different set of skills to development. There have been precious few successful transitions from development to publishing in
the history of the games industry and none in recent years. Rage's timing also could not have been worse with the Company converting to publishing at the start of the industry transition from PSOne to PS2, Xbox and
Game Cube. Rage was therefore trying to sell B quality product with limited promotional resource into either a saturated and declining market (PSOne/Game Boy) or a nascent market with limited installed base (PS2,
Xbox and Game Cube). With direct publishing unable to support its huge development overhead Rage began to plough through all the third party funding options it could find but this only partly alleviated the overhead
pressure. Rage sought to offset the remaining pressure with distribution and overseas publishing advances but again, its need for cash led it to choose the highest up-front cash offers from lower quality publishers
rather than offers from the larger publishers offering the lower up-front advances but greater sell-through potential. The inevitable low sell-though combined with some unfortunate bad debts from some of these
overseas partners kept Rage in a continuous downward spiral that could have only been broken by a substantial hit.
The Company's decision to scale back its operation and focus on a smaller number of higher
quality titles to produce such a hit came too late and ironically, Rage had finally begun to produce some AAA quality titles when it went into liquidation.
|
|
