Gree’s Andrew Sheppard is placing his bets to take original mobile games higher

Andrew Sheppard left mobile game publisher Kabam last August after five years overseeing its worldwide studios. He then took a post as chief operating officer at Gree International, the overseas arm of Japanese mobile gaming company that had revenues last year over $1 billion.

Now Sheppard has stepped up to the CEO job at Gree International, which means he runs the 350-person operations of Gree in the U.S., Europe, and Latin America. He has taken on the responsibility of running product development, marketing, and publishing in these key markets from Gree’s office in San Francisco.

Kabam generated significant revenue by focusing on highly social games that often had big-brand tie-ins like The Hobbit or Fast and Furious 6. Sheppard will create original games at Gree, and he’s making some big bets.

Gree already has some big hits like Knights & Dragons, War of Nations, and Crime City. I interviewed Sheppard recently about his plans for growth, which includes hiring 50 more people this year. Here’s an edited transcript of our conversation.

GamesBeat: Why did you leave Kabam and join Gree?

Andrew Sheppard: I left Kabam about seven months ago. I hit it at almost the exact time Alibaba completed their financing. There were a lot of reasons to stay — an amazing team, great products. The three products I greenlit before I left are just now coming to market. One of them is Marvel Contest of Champions, which you can see in the top-grossing charts now.

I was approached by Naoki Aoyagi [head of Gree International at the time] and asked about this opportunity. He wanted me to step in and run the western business. For all intents and purposes that’s what I’m doing. It’s headquartered here in San Francisco, but the sphere of influence covers North America, Latin America, Europe, Russia, and Turkey — the expanded Europe, if you will.

When I started to dig in and talk to Naoki and get to know the team, I realized that there’s something special here. There’s a strong foundation, a great team with great experience in a sector that I view as complementary to my own at Kabam. Also, there’s a great vision to grow in today’s increasingly competitive market. I saw an opportunity to embed with a company that had the scale and profits and investment capability to take gaming to the next level. That’s Naoki’s ambition, and also Yoshikazu Tanaka, our CEO back in Japan.

GamesBeat: Did you join more as a studio head, or did sign up as the head of the whole business at Gree International?

Sheppard: It’s the whole Western business, Gree International. Part of Naoki’s appeal to me was, “Come in, get to know the team, run operations, and then step into this broader role.” Naoki, in turn, was elevated back in Japan to run all aspects of the business from Tokyo, general operations for the global business.

The role spans internal development, publishing, and M&A. I work very closely with the corporate functions like licensing, corp dev and all that.

What’s exciting about Gree is that it’s a dark horse, if you will, in this market. For example, very few people know that Gree, at a global level, is one and a half times the size of Zynga, three times the revenue of Kabam, and four and a half times more revenue than Glu. We’re talking about a massive company, in footprint and scale. Has about 2,000 employees, generates $150 million in operating profit a year. Most important, it has $500 million on the balance sheet.

To answer your initial question a little more crisply, what was compelling about this is that we’re in a market that’s consolidating. This is an opportunity to step in and work with a team that’s been high-growth for the last three or four years, in genres that I have a ton of experience with. It’s a chance to be part of something bigger, in a company that has scale, revenue, profit, and global ambition to be a key leader in this ecosystem. It was very compelling.

GamesBeat: What was the size of the team you managed at Kabam?

Sheppard: It was larger. I was managing 80 percent of the headcount and 90 percent of the revenue, so roughly 700 people. I won’t speak to the numbers, because they’re not my numbers to share anymore, but it was a large part of the business.

GamesBeat: If you look at Gree, it came in relatively early to the U.S. market, in the days of folks like Ngmoco and DeNA coming in. They didn’t have the best organic luck with some of their games. When they made some acquisitions, like Funzio, things started working better. What’s your view of Gree’s history in the Western market?

Sheppard: What I appreciated about Gree’s entry into the market is it showed a lot of conviction. What’s interesting to see in abstract, you see a company that’s young and ambitious, with a lot of conviction, entering the market and pursuing strategies and operational tactics that were very much their strengths in their domestic market. You see this happen with almost every young company that branches into international markets.

Their ambition led to some great choices, like the Funzio acquisition. The company also had some learnings along the way — the OpenFeint acquisition, which we recently wrote off. But all of that led to a body of experience and a talent bench that’s become increasingly strong. If you were to look inside the business here, the echoes of OpenFeint are still present. From that we have an excellent technology team that’s asked to participate at Amazon conferences and speak to their thought leadership. We also have excellent game teams from the Funzio lineage, which feed into not just our RPG studio, but more recent hit titles on the strategy side of things like War of Nations.

GamesBeat: Do you have any stated goals, like how many people you want to grow to by the end of the year?

Sheppard: Our aspiration over the next six months is to grow our headcount by 50. Those hires will be concentrated against extending the capabilities of our teams in new directions. 3D is a key growth factor for us. We know we need to go there. We want the quality of our next-generation games to be competitive with console and PC and other platforms.

To put that in context, 50 hires is roughly 15 percent of our total headcount today in the western business. It also encompasses a number of key leadership roles, targeting expansion of marketing activity and evolution of product management capabilities, although we have a strong foundation there.

Our push will be to compete on original IP. We’re going to build worlds that people will want to live in all the time. We want them to jump into the games first thing and take on their friends, take on the next challenge, face the next competition. We want those worlds to feel lush and exist for decades. We’re building the team and the capability to do that.

You’ll also see that headcount increase push us into new markets, similar to what you saw me doing at Kabam. We’ll be moving into Europe. We’re very confident that our games will do well there and that we can unlock a new audience that we haven’t approached up until now. Almost all of our games are purely in English. That tells you a lot about the opportunity there.

GamesBeat: How do you feel about expanding at a time when there’s other people out there with a lot of resources as well? It used to be Gree and DeNA competing. Now you have King, Supercell, Gung Ho, a lot of different companies all on the worldwide expansion path.

Sheppard: It’s probably the most fun time to be in this space, if you’re at a big company. It’s going to be a different story for people at smaller companies, companies that aren’t at our scale of profits. Certainly there are people bigger than us and more profitable than us, but we can fund almost any investment we’d like to do.

If you look back to the prior cycles of gaming in console, PC, even coin-op, every generation of platforms or business models went through some degree of consolidation at a certain point. I think that time is now. It’s one of the key drivers behind my jump over here to Gree. That means the way we play the game is different, from an industry perspective, but it also means we’re going to build teams today that become the Infinity Wards of tomorrow, the Blizzards of tomorrow. My main activity is to focus on that, to make everything circular, in a good way.

The revenue scale, the profit scale of this business gives us the luxury of investing in building those teams. Protecting the business is the best way to protect talent and grow talent, and having the patience to win long-term. That gives you the ability to bring people along in a way that I’ve never had a chance to in prior roles. It changes my role a bit, from being chief growth agent in my prior role to being someone who focuses on talent growth.

GamesBeat: How large is your business now, as far as giving you the foundation in the west to make more investments? What’s your most successful game? Have you talked about some of your Western stats, like monthly users and things like that?

Sheppard: We don’t break out our Western revenues, but I can tell you we’ve grown four times in revenue over the last three years. The business in the west is profitable. Our two biggest games in the west now are War of Nations and Knights and Dragons. Those are not only our top titles, but War of Nations is an internally produced title from people who came in through Gree, OpenFeint, and Funzio. It’s produced by our strategy studio. Knights and Dragons is produced by our development partner in Vancouver, IUGO. That’s an example of our RPG publishing efforts. Both are great games, award-winners in their own regard, and destined to be very large players in their genres.

We continue to invest in those games. We continue to invest in the Funzio titles from back in the day. We have an enormous footprint of loyal customers who are actively engaged. I’m working with the teams on those games to raise their quality to the next level. There’s so much more we could be doing in terms of visual interaction. The overall fidelity of the games can be up-rezzed.

Our smartphone business is growing globally in a very compelling way.

GamesBeat: Do you feel like you have to run the business as a profitable Western division, or can you use a lot of Japan’s resources as well?

Sheppard: On an operating basis, I prefer to run it as a Western business that’s profitable unto itself. It creates discipline. What’s unique about free-to-play is that the service aspects of the game mean you have to run games in addition to building new games. What’s implicit in that financial arithmetic, and a lot of companies don’t take this into account, is that by operating games today you learn how to build better games tomorrow. It becomes about making the right operational, talent development, and tech choices along the way to free your team up to pursue more innovative game design, tech, experiences, all of that. I’m a fan of doing that.

What’s great from a balance sheet perspective is that we are very much a part of the broader Gree business. We have access to that $500 million on the balance sheet. We’re actively looking for investment opportunities to help grow Gree to the next level, and also to expand our footprint. We’re attacking RPG and strategy because, when I came here and interviewed during the first 60 days, that was clearly what the team here is passionate about. Our ambitions are quite large.

GamesBeat: I’ve seen some churn for Gree over time. How do you feel about the level of talent now? The guys who made War of Nation left and started their own studio.

Sheppard: We have lost folks who were part of the original teams. That’s part of any healthy business that’s maturing over time. What’s cool to see – and kind of unique to Gree – is that if I were to walk out the door here, there’s a good cross-section of folks who are still friends with everyone who used to work here. They’re always welcome to come back and visit. There will always be a deep level of respect, and a deep friendship, with all the people who helped make this business the success it is today.

On the flip, to be very honest, there are capabilities we need to build that we don’t have in terms of the organization, that are not good for us to build organically, that we should be pursuing through publishing relationships or strategic M&A. We’ll do that.

GamesBeat: What do you feel about the amount of people it takes to make games now, and how much time? I hear very different things. Machine Zone had 80 people working for 18 months on Game of War. That seemed to pay off. But Supercell still has just 15 people working on Clash of Clans.

Sheppard: This is where I go back to your question about how the industry unfolds from this point forward, with bigger companies in the mix. You’re going to find different companies placing their bets in different ways. I’ve always been a fan of more talented teams as opposed to bigger teams. But a lot of the choices we make along the way in this business dictate the team size you ultimately have to have in order to run a game.

If you rush to market with something very quickly, building something for the very first time, it’s going to take more people to build and to operate once it’s live. You’re making a lot of decisions without putting forethought into the reality that you’re going to be running this game for years, possibly decades. What we’re starting to do now is elevate our planning horizon when we do R&D. That’s prompting us to be more thoughtful about the way we build our tech, the way we build our gameplay, the way we operate our live games.

Our team sizes are growing. Our development durations are going up. My general bias is to break the culture of minimum viable product. I don’t think that’s the right way to win in today’s world. It has not been the way that great games have been built in the past. It’s more a hallmark of the high growth period in the early days of free-to-play in social gaming and mobile gaming. Today it’s much more about building a game that establishes, unequivocally, that it’s something new, special, different, something people should stop playing other games in order to play. For that reason, the game needs to ship and be awesome.

We’re thinking in terms of optimal first releases. What’s the best thing we can bring to market to blow people’s minds within a genre? The definition of that is very genre-specific. You could talk about a strategy game team being quite large. You could talk about an RPG team being quite large. A racing game team could be very small. You can outsource a lot of different kinds of productions. It depends on the genre and the approach.

We also believe — building off our platform heritage in Japan and in the states — in the social aspect of our games. Machine Zone crushed it in that regard. You’ll definitely see us investing in those capabilities over time. When you talk to people here, they’re playing MMOs, whether it’s EVE Online or World of Warcraft. They love the fact that mobile games are inherently social. That’s part of the reason why the games in our portfolio have such durability, why our customers are so loyal to our franchises. You’ll see us step up our game in that regard and do it in a way that’s very smart, that respects our platform heritage.

GamesBeat: How are you feeling about brands right now?

Sheppard: A lot of people are doing smart things with licensing. Licenses are a great addition to the portfolio. Certain companies have strengths with respect to licensing.

I’m not someone who likes to do what everyone is doing. I joined Kabam and everyone asked me why. I joined Gree for a reason. I think the market is moving toward licensed products in a way that’s not healthy. It’s not organic in the long term. I want to build a team that can create great original IP. There’s a great foundation for that here, something to build off from. It’s part of the reason why I do my best to surround the company with people who’ve been great in the industry before us, so that we can learn from them.

GamesBeat: I went to the Dice Summit and heard Brandon Beck from Riot Games talk about talent and how Wall Street doesn’t value it properly. Investing in your culture and your teams matters a lot. One of the points he made was that in his view, the team is more valuable than the franchise.

It’s the opposite of what you see at Activision. Bobby Kotick took Call of Duty from Infinity Ward and said, “This isn’t your franchise anymore. We’ll spread it across a bunch of studios.” The team that made Call of Duty was no longer the team running the franchise. It became an interesting bet. Call of Duty is now a billion-dollar game every year. It’s different from the craftsman sort of approach, where the team has most of the decision-making power. I wonder about that difference in philosophy.

Sheppard: It might reflect the fact that the audiences they’re crafting that message for are different. I’ll give you my honest answer to that, which is that I think it really depends. Ultimately the team is the most important thing, because if you don’t have the right team, you can’t build the right product. But at the same time, once you have the right product, you want to give the team flexibility to do what they want to do in the long term. That doesn’t necessarily mean keeping them on the product. Sometimes that does mean asking them to work on a product that’s a bit older.

The company has a responsibility to invest in its talent. That’s a huge luxury of operating at our scale. I do like the term “team” that Brandon uses. I’ve worked with people in the past who managed their teams like family. The reality is that most people’s families have a weird uncle that you don’t like, though. Similarly, you wouldn’t put Michael Jordan on the football field to play linebacker. The team as a unit, as opposed to a collection of individuals, if that’s what Brandon means I’d agree with him on that, recognizing that you want to give individuals choice.

The franchise is the concentration of all the great work by people who came before. I’d say that the franchise is the amalgamation of the contributions of all the prior teams. That’s one way of connecting it all together.

GamesBeat: You have a big opportunity before you and a lot of resources. There’s no dictated path for what you have to do with those resources. You have a lot of choices ahead of you.

Sheppard: I’m very thankful for this. Naoki said, “It’s almost once in a decade that you’re presented with an opportunity like this, to join a company that’s as large as Gree, with a business as large and stable as it is here in the west, and then have the trust and support of leadership to drive it in a direction that makes sense. ”

Very few people say that externally, and a lot of the people who say it don’t mean it. I feel very lucky. This is my favorite job of all time. You don’t want to be small. You want to be big right now.

GamesBeat: What do you think of the situation among indie developers, who may have some romantic feeling about the need for indies, who want to stay independent?

Sheppard: I love indie games as a consumer. What I love about this market, more so than any other version of the market — except maybe PC — is that as an indie developer, you can make an amazing game. If you look at the Dice awards, you’re very often seeing games that are not made by big teams or big companies. That’s pretty impressive. It’s the industry acknowledging exceptional accomplishments in our craft of building games.

The market is lucky to have companies like Unity, to have all the various middleware providers out there providing analytics and UA capabilities. We have platforms like Apple and Google that care about supporting the indie community. There’s always going to be a large amount of innovation there. I don’t think that’s going away.

What’s happening to consumers — and I feel this as a game player — is that the quality of these games is going up and up, whether they’re indie games or professionally produced games.

There’s a challenge to protecting that part of the industry. For me, the indie community needs to be profitable to a degree where you can be a successful indie and produce multiple games. The stories that make me sad for the community are the indie developers who put their heart and soul into building a game and then aren’t able to recoup their investment in building that game. As an industry we need to do something for those people.

It’s going to change. It’s going to get harder for everyone. But I don’t think the indies will go away. Indies will get better. The people working at both ends of the spectrum will get better. I think you’ll find gameplay innovation on the indie side and franchise innovation at the head of the curve, if you will. You’ll have people redefining categories and genres, resetting our expectations for what great is.

GamesBeat: What do you see as far as the creation of new game studios and where that’s happening? It seems like a lot of San Francisco studios got started a while ago. There are more interesting things happening in places like Helsinki now.

Sheppard: We’re excited about how the global distribution capabilities of mobile have lead to a much more distributed and healthy global ecosystem of developers. Helsinki is the hotbed right now. Berlin is rocking as well. London is doing okay. San Francisco has kind of fallen off. If you look at our peer set in San Francisco, Gree International is the only office that’s really hiring and hiring with confidence.

There’s talent all around the world. When you choose a market, you have to throw yourself at it. We could do more there in terms of our Vancouver studio. But once you’re there, you’re fine. Every location has strengths and weaknesses. You just have to choose. Right now, people are shifting their focus to other markets. I’m pretty psyched to not be doing what everyone else is doing.

GamesBeat: Are there any other topics you wanted to comment on?

Sheppard: Because we haven’t been that vocal in this market, I did want to talk about the way that we’re going to grow in this coming year. Last time around we talked a lot about the things we had accomplished. This time I’m going to try to tell you what we’re going to do and then deliver that.

For Gree International this year, we’re focused on a few things. First and foremost, we’re building the team we want to have as the foundation to move us to the next level. In the background, you’ll see us start to move into Europe.

In the back half of the year, you’ll see us bringing a couple of games to market that are a step up in terms of quality of execution and gameplay compared to what Gree has produced in the past. This is a big step forward relative to where we’ve been — bigger screens, faster processors, faster GPUs. We’re going to move the quality of our games to that next level.

Importantly, with our RPG studio, we’re going to start on our next-gen game this March. It’s going to be a big project — all-in, high conviction. That’s going to take a bit more than a year to get done, but I’m looking forward to sharing our progress on that over time.