Top-manager at Wargaming Andrew Yarantsev: Large investors and venture capital funds offered us money and connections

Wargaming became a true phenomenon of information technologies business by having acquired the status of the most profitable computer gaming company. The success of Wargaming discovered a new niche original in entertainment business where now plenty of followers and imitators try to settle down. Top-manager at Wargaming Andrew Yarantsev told Digital Report about peculiarities of gaming business, the situation in the world industry, royalties and safety of the company clients.

Wargaming has become a source of pride for Belarus. The company is often held up as a paragon of service exports and a testament that the Belarusian IT sector is moving in the right direction. Doesn’t that seem strange to you that World of Tanks’ remarkable success didn’t boost the growth of games industry in the country? No courses in game design in universities were opened, no economic preferences for game development studios were granted by the state authorities. Don’t you think that Wargaming’s success should have served as a big push for Belarusian games industry?

World of Tanks’ success was a big push for the Belarusian games industry. In fact, it’s proven to the world that we even have a games industry. Our success helped show that the county has great potential in this field. The state sees it, just like the global market players and IT crowd here in Belarus sees it, too. However, it takes much more than one success story to build the foundation for our games industry to grow and flourish.

I’d outline three key directions here: growing the hub of specialists, building a positive image for video games and people who work on them, and creating a favorable economic environment for start-ups. Securing these three goals means that you have a strong platform for others to grow upon. It’s a multistep process that calls for combined efforts and coordinated actions from the authorities and IT companies. And Wargaming’s among Belarusian companies actively contributing to this cause. To be exact, it’s the company’s Minsk-based development center Game Stream that is spearheading this.

European and American universities and colleges offer plentiful game design related programs. Eastern Europe is a totally different story. Until recently, there were hardly any game design courses in Belarus and throughout the whole of the CIS. Students who wanted to pursue a career in video games would either opt for self-education or study abroad. Needless to say that many of those who got a degree somewhere else often choose to stay there rather than return home. That’s a negative trend—a brain drain of sorts—which prevents the region from growing a hub of specialists.

To reverse this trend, Wargaming joined forces with the Belarusian Hi-Tech Park and the Belarusian State University of Informatics and Radioelectronics. In 2015, we opened the “Information systems and technologies in the games industry” course at the university. It provides aspiring developers with the industry knowledge and skills they need, as well as gives them a chance to put that knowledge to use. The latter works by inviting them to partake in open educational programs run by local game development studios. That’s how the program benefits graduates. As for the country’s games industry, the initiative tackles two major obstacles preventing its growth: it plugs the brain drain and grows the number of specialists. In the program’s first year, there were 30 admissions and twice as many applicants, which proves there is a demand for courses like this.

Evolving video game related higher education is a step forward, but it’s not enough. You need to dig deeper in order to override persistent negative stereotypes about video games, and convince parents that game development is as viable an occupation for their kids as any other in the IT sector. That’s the objective behind another initiative of ours: the “Game Development Basics” course for 9–14 year olds launched by Wargaming and Melsoft (our partners in this endeavor), within the Hi-Tech Park’s IT Academy. It teaches kids the ins and outs of programming, math, animation in a fun, exciting way, breeds interest towards full-blown game design and serves as a neat starting point for those who’ll decide to pursue a career in the industry.

Are these initiatives a signal that Belarus is capable of becoming Europe’s new game development center?

Well, that’s a great goal, for sure. However, there are still a few barriers that prevent the country from reaching it.

For one thing, the visa policy in place hinders businesspeople and investors from coming here. Although more people have been visiting Belarus in the last several years, and the country is open to foreign investments, the state is far from making the procedure of getting a visa easy. Foreign businesspeople still have to provide a lot of documents/forms to enter the country.

The legislation (tax law) is yet another obstacle. Just as with visas, certain improvements have to be made. For example, the state seems to neglect the fact that game development is a high-risk business that rarely generates profit right away. It might take months if not years for a business to deliver value, and companies operate at a loss.

Finally, the overall investment climate in Belarus remains uncertain. At the formative stage the industry is undergoing, it needs angel investors who’ll lend money and provide their expertise to business challenges. In reality, there’s little to no angel investments in Belarus at the moment. And it’s not surprising. The comparative legal complexity complicates enforcing contracts and increases the risks and costs of doing business.

Overall, Belarus is in a catch-22 kind of situation now, but hopefully Hi-Tech Park and its residents will succeed in lifting or at least lowering legal barriers for foreign investment in the near future.

What about the Russia game industry? Its games market has a plenty of studios, some cool products were made there, and I bet that local startups receive are invested from abroad. Seems that it has what it takes to hop on board of Europe’s game development centers, yet it’s dragging behind. Why so?

I’d argue with the assumption that Russia has what it takes to become a true games development center. Yes, there were some success stories, yet this market doesn’t have enough strong studios and delivers too niche products that don’t gather a massive following.

Game development in Russia is predominantly PC and mobile. If we go back just over a decade, in early 2000, the market was close to being dead with piracy. Then it got flooded with localized MMOs from Asia, and local devs were not able to compete with them. On top of that, there are scarcely any studios that create console games, which is a no go for entering the global market where the console segment is big.

One more thing in the way of the market’s growth is that the job market overheated with a labor shortage. Talented game developers are head hunted by big players like Mail.Ru and Yandex, which leaves startups and small studios with little creative force.

Do game development studios need government support and preferential economic conditions? The US government does a lot in this direction, and American studios can easily get a loan.

That’s a tricky one. If I were to choose from existing practices, I would go for the model used in Finland.

To support the game industry, the state executes a series of tax waive policy. In addition to this, the Finnish government has been supporting the local game industry since 90^th through Tekes (the Finnish Funding Agency for Innovation), Finnvera and other organizations/funds that finances research, development and innovation. For example, each project submitted to Tekes is processed by a team of specialists that analyze its potential, and if it fits their criteria a startup can receive up to 70% of the total required budget from Tekes (grant or loan). And the best thing about it is that the Finnish government doesn’t expect a return on investment right away.

Finland doesn’t have a large domestic market; local game companies often hire abroad and the state is not just OK with it: it provides favorable conditions for building international teams.

Long-term success is impossible without constant innovation. Player get bored quickly and would leave a game for good is it doesn’t evolve, regardless of how great it is. Wargaming, on the other hand, has focused on a single product for quite a time and rarely introduces new mechanics and monetization tweaks to World of Tanks. Yet the game remains a massive hit. What’s your trick?

That’s quite a theory you’ve just built! Sorry, but I’ve got a few arguments to ruin it.

First off, the fact that a certain model is a success doesn’t mean there’s no way to evolve it further. Dropping good mechanics just because you’ve been using it for a while sounds like an irrational business move to me. If it ain’t broke, don’t fix it. Just think about World of Warcraft, for instance: it’s been on the market for over 10 years, remains relevant, and continues to attract new users. World of Tanks has turned five recently and isn’t slowing down either: the churn rate is low and the audience keeps growing. There’s no magic trick here: the two products constantly evolve, introducing new content and new ways to increase player loyalty.

World of Tanks back in 2010 and World of Tanks now are two different games. The project has changed greatly over the last 5 years: the sheer amount of vehicles has multiplied by four (from 100 to 400), new game modes were added, and the title now has a companion app (World of Tanks Assistant), a rapidly-evolving meta game (Clan Wars) and its own international eSports platform: the Wargaming.net League. The monetization system underwent a massive overhaul, as well. Having analyzed the weaknesses of classic free-to-play, Wargaming devised its own monetization model—free-to-win—that provides all users—payers and non-payers—with equal in-game options.

Along with improving and growing the game on PC, we broadened the market niche we created with World of Tanks by expanding onto console (Xbox 360 in 2014 and Xbox One in 2015) and mobile platforms (World of Tanks Blitz). I doubt there’s any other FTP online shooter on the market that has this wide of a presence.

Also, World of Tanks is a part of something bigger: the Wargaming.net universe. Although games it includes share the same core concept (MMO genre, WWII setting, team-based PvP battles, monetization system), each has its own gameplay style. World of Tanks is about considered tactics and team play, World of Warplanes is about reacting fast and individual skill, and strategy is what lies at the heart of World of Warships.

Finally, I wouldn’t agree that Wargaming is focused solely on military warfare. We don’t limit ourselves and experiment with other settings, genres, mechanics, and business models. In the last two years we’ve been putting a lot of effort into growing our expertise in mobile. New partnerships were formed (with Melsoft and DropForge) and in July 2015 we launched our innovation platform, WG Labs. Within it we’ll produce games that go far beyond the company’s traditional paradigm.

Does the company’s overall performance depend on the success of its future products? To clarify: if the new games you release fail to outperform World of Tanks, will it have a negative effect on the business?

World of Tanks set a high standard for Wargaming and its competitors alike. It’d take years to create a product that would be able to compete with it or outperform it.

That’s a challenge for us, but challenges are what inspire us in the first place. 10–15% of Wargaming specialists are involved in this quest of sorts. They create concepts for new games, prototype, test, evaluate prospective new titles, and shortlist those with high potential.

Talking about the business strategy, Wargaming altered its approach to financing and marketing after establishing a global presence with World of Tanks. We diversified our offering by going multiplatform. We now utilize a regional approach and promote products with regard to platforms that are most popular in a certain area. For example, a few years ago revenue from the CIS region made up to 60% of the company’s total income. As of now, the diversification allowed us to readjust our consumer basket and increase revenue from platforms (mobile, PC, console) and other markets (Europe, North America, Asia).

Where do you invest money? Do you buy core assets? Are there any plans to diversify your market offering and invest in incidental assets?

The larger part of our revenue is re-invested in Wargaming studios to support existing titles and develop new games.

Along with that, Wargaming is heavily involved in a number of other projects. We support crowdsourcing, and sponsored an international Wargaming Developers Contest held in the CIS last year. We also fund foundations that support open-source development and provide financing and expertize to third-party studios within WG Labs and the London Venture Partners investment fund.

Have competitors ever approached you offering a merger deal? Or maybe you received a similar offer from a huge video game publishers or conglomerates at some point?

Quite a few big investment and venture funds visited our headquarters in 2012–2013. We were offered financing, partnerships, useful connections and whatnot. However, we wouldn’t trade benefits of our private company status and freedom of direction for our future projects for their offers, regardless of how tempting they were.

Wargaming has been building its own global publishing division since 2011. As of now, it’s one of the leaders in the CIS region and defies competition in Europe and NA operating on the same level with Blizzard, Valve, Riot Games, EA, and Ubisoft. Both partners and competitors treat us as a force that’s can’t be ignored. Even the head of Europe’s Facebook platform, Julien Codorniou, called Wargaming “the most profitable gaming company of all time.”

Is it easy to find experienced specialists and managers? What specialists are hard to find in the CIS/North America/Europe?

Highly skilled professionals will always be in demand in every industry, and video games are no exception.

As for Wargaming, the company’s well passed the stage of massive hiring and is now optimizing the resources it has. Of course, we still hire, but it’s a very selective thing now. The company’s grown exponentially in 2012–2014, and along with this growth we’ve built a superb international human resources division that assists us in finding really seasoned specialists.

The job market differs a lot across regions. In the CIS, for example, there are few skilled game designers, programmers and other specialists involved in development. The US market, on the contrary, is quite mature and offers these in numbers. On the downside, employees from the US are paid a lot more than, let’s say, a programmer from the CIS, but the former are also more efficient workers, so it’s worth the cost.

I believe that there’s no better place than Europe if you’re searching for a good manager. In my experience, European managers are the most flexible and talented when it comes to establishing strong connections within a global team.

If you are looking to hire customer supports specialists, my advice would be to search for them in Asia.

At the end of the day, if I were to build a global company from scratch, I would put together a truly international team with developers from North America, managers from Europe and a customer care service made up of specialists from Asia. And I haven’t forgotten about the Russian speaking world, no. It’s where I’d look for creative force.

After World of Tanks had become a global brand, you must have run across a few copycat competitors. How do you deal with them? Are there any that pose real threat to the business?

As the game market matures and the number of companies operating on it grows, so does the competition, and it’s only natural that successful brands like World of Tanks attract copycats.

In 2010, Wargaming launched a product that was quite unique. Over the course of the last 5 years, it’s evolved into a cultural phenomenon, a trend, a legendary game that unites over 140 million people and is now available on all popular platforms. In business terms, World of Tanks created a new market niche of slow-paced military-history PvP games. It resulted in an increase of the overall market’s volume, providing other companies with an opportunity to create similar products or develop truly original titles within the WWII warfare setting and thrive off them. There’s nothing peculiar to it, it’s just the way the market operates.

Of course, we face unfair competition. Every successful company does. We’ve seen others copy our advertising and marketing campaigns, try to discredit our products and services, ignite hostility within the player community and perform other shady tricks. It’s nowhere close to a positive experience, but it’s experience nonetheless, and we learn from it.

Unfair competition is often the easiest business strategy for smaller companies fighting to get their share of the market. Well, copying what others do or discrediting somebody’s image is a lot easier than building one for your business with truly original, quality products. No one would blame a company for going down this road. However, I doubt anyone would respect a business for it either. As for Wargaming, in most cases, we simply ignore those who operate this way.

The only exception here are companies that organize events and campaigns aimed at the preservation of historical heritage, just like Wargaming does. We encourage both our partners and competitors to continue working in this direction and spread the word about their initiatives on our community websites.

Is the problem of pirate materials topical to Wargaming? Have you faced infringements in this area? How do you address them?

Well, that’s an issue for every game developer and publisher. Those that create games for PC suffer the most. Companies that create products for mobile platforms are in a similar position (the level of piracy on iOS could be up to 60%, Android devices are even more vulnerable).

When developing World of Tanks and the company’s other online products, we made all important game calculations server side. The local client doesn’t determine anything important; it just does what the server tells it to do. This approach to client-server architecture protects the games from cheats and hacks.

Moreover, World of Tanks is a service, not just a game, and it’s really difficult to build a similar service. However, I should admit that there’ve been a few attempts. Some simply created clones, others were more creative and made some tweaks to the original concept, for instance, using other types of warfare.

When facing copyright infringement, we try to resolve it peacefully by talking to the infringer. If it doesn’t help, we take the case to court the way we did with the Chinese Project Tank.

How long will the WWII theme remain popular in video games? It’s been used for quite a while. Don’t you think that gamers will soon get bored and switch to something else? If so, why not make a clever move and turn to developing games in other settings before they do?

The World War II setting is here to stay. Not just because new quality games created in this setting appear, but for a far bigger reason. Thanks to World of Tanks and others, interest in the war theme and its surrounding history grows, and Wargaming encourages player community to learn more about that period by organizing offline events and festivals, inviting players to take part in tank restoration projects and publishing articles about the mid-20^th century era on our official portals.

The other thing that keeps the topic relevant is that many World War II documents remained unknown to the public for decades and are now being declassified. There’s a lot to learn about this period.

Wargaming has established strong relations with a few military museums, archives and state departments worldwide. They help us find references for new tank models and, while digging in archives, we often come across unknown facts, which we actively share with the game community in social media and the portal on military history warspot.ru (English version is TBD).

You watched the video games industry grow from the 1^st row. From your point of view, what’s the main problem that it’s facing at the moment?

The main problem the industry faces right now is the cost of acquiring new users. That’s the reason up to 80% of products don’t survive.

The other issue that is just as topical is the negative image around video games. They are considered just an entertainment for kids, whilst the industry and technology have evolved to the point it can deliver products that can compete with movie business in terms of storyline, graphics and special effects. Video games are a cultural phenomenon and deserve to be treated as such.

Is it difficult to work with big platform owners like Sony and Microsoft?

Well, it depends on the size of the business. Small development studios are offered little flexibility and have to follow a platform’s rules if they’d like to distribute a product on it. It’s a whole different story if a company approaching Sony or Microsoft is big on the market. If platform owners are genuinely interested in getting your product up and running on their platform, they’ll try to create lucrative terms for you, and are open to discussion.

World of Tanks’ launch on Xbox 360 and Xbox One went smoothly for us. And I wouldn’t credit it to good relationships with platform owners alone. The Wargaming Chicago-Baltimore team (formerly Day 1 Studios) who worked on the project have been creating console products for 10+ years and have vast expertise on Xbox. Not to mention the fact that the game’s publishing producer joined Wargaming after spending 15+ years at Microsoft, and knows all nuts and bolts of the business.

Do you think that video games and the companies behind them should engage in social initiatives like this? For instance, in Belarus, World of Tanks is often used as means to better the image of military service. Are you Ok with it? To you intend to use the game to advertise it in other countries?

Wargaming’s never aimed at attracting people to join the military and we won’t do it.

However, if by social processes you mean patriotism, national consciousness and gratitude to people who sacrificed their lived during WWII, then my answer is “yes”. If a video game can nurture those feelings in its audience, that’s a good thing that should be done. And that’s exactly what World of Tanks does.

Show a picture of, let’s say, a KV-2 or Т-34-85 to a kid who plays World of Tanks, and he’ll not only define what model and modification it is—he’ll tell you the names of the tank aces who fought on it during the war and the renowned battle where the tank was used. Would that be possible if he didn’t play World of Tanks? I doubt that. Is it a bad thing? I don’t think so.

As I said earlier, Wargaming works in close cooperation with military museums, archives and government establishments worldwide. Not only do they assist us in finding references, they also help us organize events for players and allow us to bring real tanks to them.

We intend to continue working with them in future, organizing new events that have both educational and entertainment value.

Hacker attacks and information security is yet another crucial issue for companies that provide services on the internet are facing nowadays. How do you address it?

Security is of high priority to every company operating on the web. Although Wargaming’s MMO products are built in the way that prevents hackers from breaking into the game, we still face security breaches (personal account theft, DDoS attacks, fishing, etc.). It’s the job of the company’s IT Service to prevent and fight those threats.

The team unites 100+ specialists worldwide, and they do an exemplary job. The IT guys are in charge of server maintenance and system administration; they deploy new servers in data centers and ensure this technology works 24/7, buy new hardware to boost server and network capacity, optimize server platforms and communication channels. Their work is of immense importance to the game and its community, but the funny thing is that few people know about it. They are Wargaming’s server guardians, night’s watch of sorts. How come? Well, it’s pretty obvious. They are doing a great job. The game runs smoothly. Everyone assumes that’s the way things are supposed to be. Little do they know that there’s an international team working around the clock so that they can enjoy their favorite game.