Interview with Mathieu Nouzareth, President of Boonty

Boonty is a company that creates, operates and merchandises video game channels for portals and ISPs throughout the world. That means that we partner with video game publishers for the right to download their games over the Internet. We completely operate the video game channel; this includes customer support, handling transactions, etc. Everything is under the look and feel of our partners. Our other main job is to try and boost sales of those video games.

That is correct. Our model is based upon revenue sharing with our partners. The more games we sell, the greater our revenue.

It was at the beginning of the year 2000 and my brother and I started the business after we saw the Napster and Kazaa phenomena. There were millions of individuals who were willing to swap music and other files over the internet, we simply thought that there must be a sizeable market of individuals who would prefer to purchase software over the Internet legally. We decided that there was an untapped market for digital distribution. At the time we thought that music was too difficult of a market to enter for many reasons. However, we felt the video game market was ready to embrace digital distribution.

That is true. It is a huge market with many people believing that it is a niche market. It is now worth over $30 billion per year and it has expanded to encompass for more than just young male players. The demographics are quite representative of the population as a whole. It has become a mass market.

In the beginning, it was very difficult. When you first start out you don’t have a publisher to present to an ISP or an ISP to present to the publishers so you have to pretend. You have to work very hard to get content on the one side and then you have to run very quickly to sign a distribution deal with an ISP. It is quite a balancing act. Initially, it is a vicious cycle because you have nothing to offer. Then as the ball started rolling it became much easier.

Exactly. Companies only want to give their content to partners with the best distribution and the ISPs only want to work with people with the most content.

That is definitely true. Most of the large ISPs have tried and most of them haven’t been successful. This is because they need to have a broad choice of video games, which required that they deal with lots of different publishers. Initially it is very difficult for ISPs to set up all these relationships. They would have to build a platform, which is also very costly. It would be financially prohibitive for them to build a platform that would handle this type of system.

We have been able to build a platform and spread its associated costs throughout our entire network. We have hundreds of different partners, so the cost of the platform is very affordable for each of them separately.

This model is also very efficient when you want to aggregate content. This model also works from the other perspective. Video game publishers often think they can work directly with the ISPs, which they definitely can. However, they find that they would need to sign deals with hundreds of different ISPs. It is a huge undertaking.

Mostly it was about connections. You have to know the right people at the right places. Once you have the correct contacts, the work is only beginning. You must convince them that it is in their best interest to work with you.

It is almost nothing today. In the US the PC gaming market was $1 billion last year and games distributed digitally represented only $100 million.

This market is really divided into two separate markets. The first one is the traditional video game market, which is what we call the hardcore gaming market. The second market is made up of the casual gamers. Until now the casual gaming market has been untapped. It is a market that is served very well by online distribution and is the fastest growing video game market. The casual game market is all about selling very simple games.

It is much more mass market. Over half of these game sales are to women, which is very unusual for the video game market as a whole.

I can’t give you the actual figures. Every time a game is sold each party takes their share. Boonty is responsible for distributing the royalties out to the individual video game publishers.

These numbers are confidential, but I can say that it is a range of a few percentage points depending upon the game. The number of people interested in casual games is enormous. Every Internet user can be interested in one of the games.

Up to $20 to $25 for this market. Above that range, and conversion drops off fairly rapidly.

The largest office is in Paris with smaller offices in New York, Shanghai, Seoul, Tokyo and Singapore. First of all, you have to be very flexible and use all the tools that are available like Skype (www.skype.com), video conferencing, email, instant messaging, etc. The key thing is to hire top people to run those offices.

In New York I hired my brother who I trust very much. If you want to expand quickly and internationally you have to be very flexible. You have to recruit top people.

Ideally, you are looking for someone who has experience working for multinational corporations as well as experience working with startups as well. This is not an easy combination to find. You need to have a mix, because people from large companies tend not to understand how small companies operate and what they need to be successful.

Top managers of the company have to be able to do everything at the same time. These types of people are extremely valuable. I look for someone who can manage a team, communicate with customers, create a budget and in essence run a startup. They have to be very entrepreneurial in their own right.

They need to understand the technology. We don’t need everyone to be the CTO (Chief Technology Officer), but we do need people who know how the system works. We look for people who are familiar with computers and technology in general.

All of the markets are extremely different. The US is quite lucky because it is one unified market with 250 million consumers with one common culture. On the other hand Europe is more fragmented so you have to adapt to local cultures. You can’t run a single marketing effort in Europe; it needs to be localized for the different languages and customs. It has been fairly easy to run the operations from Paris, because English is a common language across almost all of the European the markets.

It is even more difficult, because there is no such thing as one Asia. You have China, Korea, Japan, India, Singapore, Australia and all those markets are extremely different. They don’t speak English very well, and so you don’t have that common capability for communication. In Japan, even individuals working for large US multinationals don’t necessarily speak English. Their ways of doing business are much different as well.

For example, in China we are not selling games; we are selling subscriptions. They value services much more than they do content. A game that would normally sell for $20 in most markets, we have to sell subscriptions for a few dollars a month.

Definitely. We had to rework all of our contracts and we did have to adapt the platform to be able to handle subscription services. We had to be very flexible in terms of our approach, our price points, etc. in response to each individual market. It was quite an undertaking for a small organization.

I have to rely on my people. You can’t have a top down approach or give directions for every issue and opportunity. You have to provide a general framework and trust in your employees to move the company forward. We use a tool called the balanced scorecard.

It is mostly a communication tool between everyone in the company. The concept is that you can’t run a company simply by numbers; revenue, profits, margin, etc. Simply because by the time you read them it may be too late. These metrics are very late stage indicators. Of course you have to monitor them, but you need to focus the company on early stage metrics. These include customer satisfaction, employee retention, sales conversions, training, etc. It is a way to communicate the goals of the organization to all employees and not focus solely on financial numbers.

I think it works if you are both very different. If you both have similar personalities then it is very difficult. My brother and I have completely different ways of doing business and communicating with people. He’s more focused on sales, whereas I focus more on the relationship.

The founder of Intel said to be successful in business you have to be paranoid. However, I believe he forgot something, which is that you have to be schizophrenic as well.

CEOs in small companies have to be very optimistic and grow the organization as quickly as possible, while at the same time be very cautious and conserve cash and resources. One day you are thinking about spending money and the next day you want to save it all. It is a very difficult balance to strike successfully. That is why; if you have another individual that can provide a good counterweight to you then it is much more dynamic.

Everything is based upon the people you have hired. You read that in all the books, but it is truly the case. I spend a lot of time recruiting and don’t hesitate to meet with someone who is interviewing for a top spot four to five times. You are going to work very closely with these people and you want to ensure that they are right for your organization. Learn to delegate responsibilities and don’t try to control everything.

You can’t see all your customers, manage all your people, and develop all projects. It is just not possible. You have to trust in the people you have hired to be able to do their jobs. An entrepreneur has to be willing to work very hard and trust in their instincts.

You have to know where and when to stop. If you look at successful companies such as Google and Yahoo, the founders have moved aside so that people with the necessary skill set and capabilities can run the company. It is a very different job running a two person company than it is a 300 or 1,000 person company.

People should do what they enjoy. Many CEOs step aside because they don’t enjoy running a large company as much as they did a startup.

It is a bit harder in France. Culturally entrepreneurs are not as well recognized here as they are in the US and Britain. Technically, it is more difficult to set up a company as well. There are laws that make it hard to fire people even if you need it badly. It isn?t forbidden, but it takes time and resources that you may or may not have. As a result quite a few French companies do not hire as much as they probably should. It is also more expensive with higher tax rates. On the other hand we have extremely skilled technical people. Outside Asia, France has one of the largest broadband markets.

I was born in Paris and this is my home. We could have based the company in London, but then we would have had to start from scratch.

We started the company in 2001, which was the worst time to start the company. Venture funding was very difficult to come by and the overall outlook for a new startup was not positive.

You want to start at the low point of the wave, because when the wave goes up again you will be able to ride it much more successfully. Your costs will be lower, your efficiencies will be greater, and your organization is a survivor.

A culture of flexibility, openness, professionalism and fun. It is very difficult to mix all of those together successfully.