Movie to videogame business shutters on hype

When it launched little more than a year ago, Brash Entertainment was the videogame industry’s first Hollywood-style publisher, with a group of executives and investors drawn in large part from the traditional entertainment biz led by co-founder and Legendary Pictures topper Thomas Tull, a Sunset Blvd. address, and a slate of games based on licenses from major studios.

A year-and-a-half later, Brash is the videogame biz’s first Hollywood-style flameout, having gone from an announced $400 million cash position to out-of-business, with games being sold off, licenses returned to studios, and employees all left without a job.

Even in the film biz, where companies like Bauer Martinez have come and gone in spectacular fashion, Brash’s short life is a cautionary tale, as well as a lesson that things are often not what they appear to be. While a press release last June declared that Brash launched “with (a) $400 million investment,” most of that was debt it was never able to access (though the company did burn through well over $100 million in its short existence).

Its failure has industryites buzzing about everything from the viability of videogames based on movies to the wisdom of private equity investing in this fast-growing but unstable media sector, to the ability of new companies to compete with industry heavyweights like Electronic Arts and Activision Blizzard.

Theoretically, Brash’s foundations were solid. The vidgame biz, with its double-digit growth rates, is a natural home for private equity funds looking for a profitable investment vehicle. And although games based on movies and other licenses offer tighter margins due to royalty payments, they’re more consistently profitable.

But a diverse group of ex-employees, execs and developers who worked with Brash — many of whom agreed to speak only on background — point to a number of factors that led to the publisher’s rapid downfall:

  • A lack of experience among company leaders. CEO Mitch Davis had never worked for a videogame publisher and prexy Nicholas Longano had never held a role that senior. No other members of the board of directors had videogame industry experience.

  • Frequent conflict and lack of communication among the senior execs who served just below Davis and Longano. While most were experienced, many didn’t get along and rarely worked cooperatively.

  • A leadership vacuum. Davis spent most of his time in New York, leaving others to run things day to day. Between March and August, Brash’s senior veep of biz affairs, president, chief creative officer, senior executive producer and co-founder ankled due to differences over the company’s direction.

  • An ill-considered deal with Fox. In order to get its hands on desirable properties like “A Night at the Museum 2,” Brash agreed to produce videogames based on “Alvin and the Chipmunks,” “Jumper” and “Space Chimps” in less than a year. The latter two were major bombs and all three were low quality, harming Brash’s reputation with partners, the press and consumers — as well as employee morale.

  • Conflicts with Warner Bros., which originally distributed Brash’s videogames. By summer, Brash had canceled its deal with the studio and started building its own distribution operation. Some say the move saved money, but others say it was a waste of resources at a critical time, particularly as the industry is moving toward digital downloads.

  • A lack of understanding of the film biz. In one example repeated by several sources, Brash was projecting sales of its “Space Chimps” game on the assumption that the film would gross $150 million, similar to past Fox toons like “Ice Age” and “Horton Hears a Who.” Execs were apparently unaware that the film wasn’t made by Fox Animation and the studio was only distributing it. “Space Chimps” ended up grossing $30 million.

  • The collapse of the credit market. Despite all of Brash’s problems, most insiders say the company probably could have raised more funds and continued had it not hit a moment of need just as the financial markets froze.

Many Brash employees think the company could have not only survived, but turned a corner. Videogames in development for release in the next two years include ones based on “Saw,” “Clash of the Titans,” “Superman” and “Night at the Museum 2,” based on well-known properties, with higher-quality developers, and production schedules of two years or longer.

“It didn’t have to end this way,” notes Patrick Sweeney, Brash’s former general counsel and senior veep of biz affairs who now works in Nixon Peabody’s interactive team. “There were a lot of talented people there at all levels, and the quality of the games was already starting to improve and would have continued to do so.”

The decision to short the production schedule on “Alvin,” “Jumper” and “Space Chimps” — quality vidgames typically take about two years to produce — hurt Brash in a number of ways. While the “Alvin” game sold decently, moving 360,000 units domestically, “Jumper” and “Space Chimps” sold a miserable 60,000 and 59,000 units, respectively.

All three games, even “Alvin,” lost money. More importantly, Brash quickly gained a reputation for pumping out low-quality titles for quick cash. Several developers and studio execs told Variety they were hesitant to be associated with Brash based on the games it put out.

“The thesis of the company was that no game would have less than 15 months of development time,” says Jonathan Eubanks, Brash’s senior executive producer who departed over the summer and has since started his own company, Invicta. “Senior executives had every intention of making that happen, but there were a host of problems. In the end, our games were not quality offerings and everyone in the company knew that to be the case before they went out.”

Many in the company were still fighting over Brash’s future direction throughout this year. Several insiders, for instance, say they had expected Brash to start developing some original properties, but none were ever greenlit.

One source of frequent distraction was a multiplayer online game focused on stock trading called “Wall Street,” a passion project for Davis that was universally disliked by employees and execs but constantly kept alive by the CEO. (It’s still being developed, with private funding.)

Many lower level employees say decisions like that, as well as some senior execs’ insistence, no matter what happened, that success lay just around the corner, kept morale very low throughout the year.

When Tull ankled the board due to apparent frustration with the quality of Brash’s releases and its strategic direction, that was the first public signal there might be larger problems beyond bad games. Tull played a key role in raising Brash’s financing; with him gone and the credit markets vanishing, Brash’s ability to draw on the debt portion of its $400 million “investment” rapidly dissipated.

Tull was the last of a number of key execs to ankle by summer, including Sweeney, Eubanks, Longano and chief creative officer Larry Shapiro.

Come fall, insiders say the remaining execs – primarily Davis, chief financial officer Bill Chardavoyne, and sales and marketing topper Yasmin Naboa — tried a number of tacks, from raising new funds to talking to potential saviors including Lionsgate and Haim Saban about acquisition. But none of that worked out, and Brash was forced to stop paying its developers, leading to two lawsuits and more reportedly in the works.

Most games in production have been returned to studio licensors, leaving them to either find new publishers, fund the games themselves or kill them for the time being. WB, which has a particularly close relationship with Brash due to its distribution deal and Tull’s position, has at least five games formerly at Brash back in its control to sort through.

Lionsgate and Fox have “Saw” and “Night at the Museum 2,” respectively, two games well into production for 2009, while Universal has to deal with “The Tale of Desperaux,” which was set to come out this month.

By Nov. 14, Brash finally ran out of cash and shut down.

With just a few folks remaining to clean up the company’s assets, many ex-employees are bitter, and some blame specific individuals for the company’s fate. But almost every person who worked there retains some faith in Brash’s original premise and, whether they blame bad leadership or bad luck, agree that things shouldn’t have ended so badly so soon.

“There was some really great talent and a lot of potential,” says Shapiro, a CAA vet who is now prexy of developer Oddworld Inhabitants. “But the company was managed by looking in the rear view mirror and then crashed with the future promise right in front of it.”

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