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G5 Entertainment: CEO comments on US office and business model

I came across an interview with G5 Entertainment CEO Vlad Suglobov, published by a Swedish stock market blogger on http://www.aktieexperterna.se/forum/200?page=7. I take the liberty to re-publish it here, due to its information value. Keep up the good work!

Q:”Aktieexperterna”

A: Vlad Suglobov, CEO G5 Entertainment

Q: The investment in US. For me it could seem a bit risky/costly to spend money on an office in the US with the main purpose of over viewing the marketing in the country. Although I have notices that you have had a little bit harder to reach the top spots with your newest games over there, but can’t the main marketing be handled over the internet from Russia or Ukraine?. Can you give some more detailed information about this investment, what is the pupose of the office in detail?

A: There is no investment. “US office” may sound expensive but in fact it’s just one person sitting in a very small office (which costs less than comparable size office in Moscow), and overseeing our marketing materials and marketing activities in USA. The value this person brings is tremendous for the cost, because:

1.1 While we have people speaking English in Russian and UKraine, nothing comes close to native speaking person who knows the mentality, the popular culture, the native language and lingo and any kind of slang that Americans are used to. Also, this person contributes this way not only to US but also to all English-speaking territories.

1.2 While we did not have many releases, in face myself personally was responsible for final approvals of all marketing texts and images, and recently this became my 2nd workday. I would spend 8 hours on being CEO and another 4 to 6 hours on being marketing director. This became unrealistic and impossible to continue, so we had to get a Director of Marketing. Unfortunately, there are no people in Russia or Ukraine with the experience of marketing mobile games to English-speaking and US audiences, because Russia doesn’t have significant numbers of global companies in the field. While San Francisco is home to many such companies and finding such person there was easy.

 1.3 Moscow salaries are not far from US salaries when it comes to marketing people. While engineers get high salaries in San Francisco and Silicon Valley in general, because of all high tech companies there, marketing people with international experience tend to have bloated salaries in Russian and Ukraine because there aren’t many of them. So it’s great price/quality to hire engineers out of Russia and Ukraine while hiring marketing executives out of US, when selling games to US and EU. Also, USD is now weak compared to Euro, which makes US even more attractive.

1.4 Apple and Google, and the people at Apple and Google who decide on whether or not a particular game gets promoted in US, are based near San Francisco. Needless to say, seeing someone local and being able to call them on the local phone during normal work hours is a great benefit to communication, and speedy communication is important when we release one game a week. It makes a lot of difference.

1.5 Main press outlets like IGN and other media companies covering mobile games are located in USA. I hope this clarifies regarding US office. There may be ups and downs with our efforts in promoting our games in USA. But competition is tough there, and what’s important is that we continue doing it, and continue to be persistent and establish ourselves as a local presence. With the current cost structure for the US office, and with our current revenues, we already cover our expenses on the Marketing Director (and a cheap office for her to sit in). So I’m not sure which risks you are referring to when you say it’s risky. We’re not making any investments. There are no risks. We simply hired a person in USA because it was the best thing we could do price/quality-wise. ¨

Q: How do you think the 2 new board members, with their experience, will help G5?

A: I think having Peter (Traction, my note) is good in order to raise profile and bring more attention from specialist investor media in Sweden. We have already heard positive comments from some investment banks on extending the board – this was considered a good thing. And having Jeffrey is good to create a frame of reference in USA. Jeffrey is very connected in the video game industry and he works with us for several years. He can benefit G5 by providing valuable insights on how US video game industry works, provide some introductions, and create this sort of bridge between so distant Sweden and Russia where g5 is located and Silicon Valley, where the behemoths of this sector are: Apple, Google, Facebook, Zynga, etc. And if G5 wants to grow big, we’re going to do more work on that side of the ocean.

Q: When I look at the top grossing lists on the app store i can see that a lot of the top selling games have in app purchases. Why don’t you make more games with in-app purchases like Virtual city or mystery of the crystal portal where you pay for hints? Do you have any plans of doing so?

A: All I can say on this is follow our news.

Q: How do you think a financial crisis would affect G5. What affects have you seen during the last crisisis?

A: I think G5 is well-prepared for the financial crisis, if there’s going to be one. We are in a much better situation now than in 2008, when we were dependent to a great extent on the orders from the publishers, and these were affected by the crisis. Right now we don’t have long-term debt, so any increases in the cost of borrowing will not affect us. We control the pricing and we own all revenue from the games we publish. The prices for our games are rather low compared to other forms of entertainment and I can only see more people switching from more expensive forms of entertainment to G5 games. We have a profitable business model so we don’t depend on the availability of the external financing, and our sales are global, not depending entirely on any specific part of the world which may get in trouble. There can be some short-term effects on the stock market of course, but I think G5 has great fundamentals to withstand those.

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