Once Part of Sony, Daybreak Games Looks to Conquer New Worlds

After operating for close to 20 years as part of Sony in San Diego, the creators of EverQuest, DC Universe Online, PlanetSide, and other massively multiplayer online games are starting over with a new identity as the Daybreak Game Company.

“We’ve finally become an independent studio,” Laura Naviaux, Daybreak’s senior vice president of global sales and marketing, told me earlier this week.

The San Diego-based studio has operated as part of Sony’s game division since 1995, and has been known since 1999 as Sony Online Entertainment. While SOE was focused chiefly on developing and publishing games for PCs, being part of Sony meant the only other outlet for the studio’s work was the PlayStation video game console.

“It meant that we could never really be the company we wanted to be,” Daybreak president John Smedley told reporter Dave Tach of Polygon, a Vox Media website that covers the game industry.

Daybreak’s spinout was made possible when Columbus Nova, a New York investment firm that manages about $15 billion in assets, acquired Sony Online Entertainment at the end of 2014. The acquisition was announced on February 2—the price was not disclosed—and the business was renamed Daybreak Game Company. A reorganization soon followed that included 140 layoffs.

Daybreak now has about 250 employees, Naviaux said, including 50 or so at the Daybreak studio in Austin, TX, which is focused on DC Universe Online. 

Over the past 16 years, Sony Online Entertainment has evolved from a traditional game developer and publisher to a multi-platform business focused on the emerging possibilities in massively multiplayer online (MMO) gaming, where the price of admission is usually free. As a spinout, however, Daybreak now faces the challenge of finding new ways to make money online.

Unlike a startup, Naviaux said Daybreak has the advantage of an existing economic structure, with revenue streams from its PlayStation and computer-based games. “Future growth comes from taking these games to new platforms and developing new games,” she said.

A scene from the game PlanetSide (Daybreak Game)

A scene from the game PlanetSide (Daybreak Game)

A key tenet of Daybreak’s new business strategy, Naviaux said, is to cultivate and build the gaming community around each game. Daybreak’s Austin group demonstrated the viability of building a business around a particular gaming community through its support of DC Universe Online. One idea for generating revenue from a particular gaming community is to move earlier into the development cycle by giving players early access to internal software development tools and to regularly release “style guides” that detail the look and feel of new game worlds.

“Our players are developing content for the game alongside us,” Naviaux said. They are making things like weapons, armor, and camouflage for game avatars, and heraldic displays and other items to decorate their in-game homes and other parts of their make-believe worlds, she explained. Players can buy these items through online micro-transactions to enhance their game experience, and outside developers can get 40 percent of such sales, Naviaux said.

Daybreak also sells after-market downloadable content, such as expansions for existing games, and plans to charge membership fees for such added experiences as online competitions.

Daybreak has the freedom now to make its games available on other platforms, including (or especially) Microsoft’s Xbox. New opportunities also are emerging in mobile—especially for streaming live video games on Amazon’s Twitch and rivals like hitbox.tv and Gaming Live.

“From day one, we’ve thought about what would make a game Twitch-worthy,” Naviaux said.

A lot of that has to do with the surging popularity of e-sports—professional video game competitions and tournaments that pit gamer teams against each other. Some tournaments routinely sell out giant arenas—tickets for a League of Legends tournament sold out in an hour at the Staples Center in Los Angeles in 2013—and some streaming games attract at-home audiences as big as or bigger than the most-popular traditional sporting events.

As The New York Times reported last year, “Prize money has soared to the millions of dollars, and top players earn six- or seven-figure incomes and attract big and passionate followings, luring a generation of younger players to seek fame and fortune as gamers.”

Daybreak has moved to capitalize on the lucrative phenomenon by introducing what it calls “Battle Royale mode,” a virtual free-for-all that enables 120 players to duke it out online until just one survivor remains. Daybreak has tested the feature in its recently released zombie game, H1Z1, and Naviaux said, “It’s really fun to watch it unfold.”

In 1998, when Sony’s San Diego-based group was developing EverQuest, video games were about a $5 billion to $6 billion industry, Naviaux said. Since then, the computer and video game industry has eclipsed Hollywood’s global box office revenue (estimated at $40 billion for 2015), with global revenue projected to hit about $88 billion this year.

Paradoxically, the video game industry has see-sawed dramatically, and the fortunes of many console makers and game developers have waxed and waned. Even the big game publishers like Electronic Arts and Activision seem to go through substantial layoffs on a regular basis. The industry’s latest downturn hit in 2013, when consumer spending on game-playing devices tipped in favor of smartphones and tablets, and away from game-optimized handheld devices.

The leadership at Daybreak, however, sees a new day dawning. After spending the past four months reorganizing its business, Daybreak says it is now emerging with a new company logo, corporate website, expanded strategy, and updated game sites. “The spirit around here feels more like a startup now,” Naviaux said. “It has reinvigorated our workforce.”

Bruce V. Bigelow was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Follow @bvbigelow

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