San Francisco based Outspark, a publisher of online community driven games announced the closing of sizable $11m Series B Financing Thursday. China’s largest Internet portal and instant messaging operator Tencent Holdings led the round. Series A investors DCM (formerly Doll Capital Management) and Altos Ventures also participated. DCM has invested in other gaming co’s recently, including Trion World Network.
Outspark was founded in 2006 by CEO Susan Choe. Choe was formerly COO of NHN USA and also International Director of Yahoo Games. Outspark’s studio services are run by Nick Foster, former CTO of Starz Media and former head of global FX at DreamWorks Animation.
Outspark is purely a publisher and game operator. They do not develop games themselves. Their model is centered on licensing launched games from international markets (currently China and Korea) and localizing them for redistribution in western markets.
So far, the games fit the bill of MMOG’s (“Massively Multiplayer Online Games”). Two titles are present now but the portfolio promises to expand to include other games, and game styles. Susan Choe has said in interviews that their 3rd game will be “entirely different.” With it, they’re reportedly targeting female audiences in particular.
A flash game is due later this month. Other titles are in the works as well. All of the games are free to play. The company plans to make money off of embedded advertising, virtual economy, and the opportunities to upgrade game play with micro-transactions. It’s a similar model to that used by Nexon with Maplestory and with the game Kart Rider. Subscribers to Outspark will get a single ID for use with the different games the company offers. Social features are planned, possibly through partnerships.
Outspark’s content licensing model is somewhat unique. Rather than paying a large upfront fee and gambling on a game’s ability to translate from eastern to western cultures, they are crafting long term partnerships. In each development deal, Outspark will take on responsibility for marketing, product management and game mastering (e.g. support/operation). The game’s original developers will help Outspark localize (e.g. westernize) the games. The deals, sources indicate, are exclusive licenses and largely perpetual (there are always some escape clauses). To incentivize long term commitment, Outspark and the developer split revenue (after costs for bringing the game west) 50/50.
The concept for Outspark was apparently borne out of Susan Choe’s experiences at NHN and Yahoo. In particular, story has it her plans were inspired by failed efforts to expand the largely board game style titles offered on the Yahoo Games portal to include MMOG’s. From those failed efforts, she gained insights in to the industry and developed some of the relationships that eventually led to Outspark.
Outspark was initially self funded. The company closed a previous professional round last April. Terms were not disclosed but that round was believed to be worth about $4m.
Proceeds from the new deal will go toward typical operational expenses and further development. Some may be used to try and cultivate operational partnerships with larger publishers like Yahoo and EA. Other proceeds, may be used to expand development partnerships out of Asia and into Europe. With China based Tencent leading this current round, however, it’s more likely that they’ll retain their heavy focus on sourcing games from the Asian marketplace. They already seem to have a blossoming reputation in the region and Tencent’s contacts might open doors to new titles and partnerships.
Over the past 5 months in open beta tests, Outspark’s two current games, Fiesta and Secret of Solstice, have drawn more than 1million registered subscribers.
The online gaming industry is estimated to grow to more than $10b by 2011.
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