Entrepreneur shifts strategy in volatile online game business [Orlando Sentinel :: ]
(Orlando Sentinel (FL) Via Acquire Media NewsEdge) April 20--Technology entrepreneur Philip Holt took a detour in the online-game business late last year -- one he says is paying off now with lucrative deals for his startup once known as Row Sham Bow Inc.
The former chief of EA Sports' Maitland operation jettisoned Row Sham Bow's game-making work, cut its Orlando work force in half and refocused the business on marketing web-traffic software it had developed to study usage of its own online games.
Now known as SPLYT, the company works in the growing field of data analytics -- the tracking and forecasting of online behavior.
Holt said he expects to increase revenue with the new strategy, but the change of direction by one of the best-known players in Orlando's entrepreneurial online-game community has highlighted the hurdles game-makers face in a rapidly changing industry.
"Every business is hard; every industry has challenges," Holt said. "Small companies need focus, and we felt a clear focus around data was more interesting, more challenging, more investable and potentially more lucrative." He plans to announce his first big customer this week -- a major digital-game company.
Meanwhile, he also is leading a nonprofit group that recently leased 17,000 square feet to establish a startup tech hub in downtown's Church Street Exchange. Holt said he already has enough interested companies to fill half the available space by July.
Though most regard it as a smart strategic change, SPLYT's move into data analytics has its own risks and potential rewards, said Ben Noel, a former EA Sports vice president and now executive director of UCF's digital-media graduate program, known as Florida Interactive Entertainment Academy.
"They started as a game company, put out some good games and did OK, though probably not as well as they wanted to," he said. "So they pivoted, which is what good companies do, and focused on data analytics technology. It'll be challenging in that space too. They'll be competing with the likes of Google, Amazon and Zynga."
Holt's new strategy is not surprising, given the volatility of the online-game industry, said Richard Fox, a high-tech finance expert and partner in Orlando-based Astralis Group, a business-advisory firm. Even some of the country's biggest players have not done well on Wall Street, he noted.
The stock price of Zynga Inc., maker of the popular FarmVille online game, is down 60 percent since its initial public offering in 2012. More recently, the price of King Digital, maker of Candy Crush, is down 20 percent since its late-March IPO.
"It's a very fickle industry," Fox said. "There can be a fad element to it -- what's hot one week turns cold the next. In the whole landscape of entrepreneurial shops, maybe one in a thousand manages to come up with a breakthrough."
Row Sham Bow seemed to have a good shot at breaking through. Buoyed by savvy managers, game developers and venture investors, it rolled out some nationally popular games after opening in 2011. Its games received industry awards, positive reviews and, cumulatively, hundreds of thousands of users.
Last year, however, it began phasing out its game development and online management work. On April 30, it plans to terminate Knights of the Rose, an adventure game that once drew a slew of users on Facebook. The company will have one active game remaining: Letter By Letter, an online word puzzle.
Chris Yarn, an avid gamer from Orlando, said he enjoyed playing Knights of the Rose. The insurance salesman said he also liked that it was produced by former EA Sports veterans such as Holt. He was sorry to hear that Row Sham Bow was no longer making games.
"It's kind of disappointing that happened; they made some great games," Yarn said. "I think the entire gaming community got very excited about these guys defecting from a big company like EA and doing their own thing."
Holt, whose company now employs 12 people, acknowledged that Knights of the Rose is being pulled because "the game doesn't make enough money to support its cost of operations." He insisted, however, that the decision to leave game-making was based not on lagging revenues but exclusively on the lucrative prospects of data analytics.
"What we have done is to develop software that automates and refines the process of establishing context and meaning of online user data," he said. "It can be applied to all sorts of things, like online buying patterns and purchasing behavior. We think of it as analogous to the oil business: Data comes in like oil into the refinery, which turns it into energy."
Andrew J. Tosh, another Orlando tech entrepreneur and former EA Sports engineer, said all gaming companies have to be ready to retool their strategy when the market changes. His company, Orlando-based GameSim Technologies Inc., diversified into computer-game training for the military and developing commercial games for other publishers.
"We focused less on trying to catch lightning in a bottle and hitting it big and more on being a typical game studio, getting hired to develop games for outside publishers."
Noel, the UCF digital-media administrator, said Orlando's gaming industry is expanding and diversifying beyond commercial game production into medical simulation, education and other fields.
"Like most industries, gaming has had its share of success stories," he said. "But too often people just don't understand how tough it is. They get into it and think everything's going to come out rosy. They don't know that for every success, there are probably 20 failures."
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