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Comment: Are Jagex’s days numbered?

By on January 30, 2009

I’ll readily confess that I am leaping to conclusions here, but I wonder if Jagex‘s days as the poster-child of browser-based MMOs are numbered.

I have no special insight into the situation, but here is my analysis.

CEO Geoff Iddison resigned last month. Geoff was formerly head of Paypal Europe and was brought in to “accelerate international expansion, drive the continued growth of RuneScape and bring new online games to market.” Some commentators also suspect that he was brought in to groom the company for sale, and in these credit-crunch times, that may have proven harder than expected.

During his tenure, the company launched FunOrb, a casual portal that has struggled to break into a crowded market (partially, IMO, due to a cavalier attitude to quality.) Jagex is also working on a new MMO, due in Q1 2009, rumoured to be “MechScape“, a sci-fi version of the sword-and-sorcery Runescape aimed at a mid-20s market.

Geoff has now left, to be replaced as CEO by Mark Gerhard, Jagex CTO and former Principle Security Architect for the National Lottery. That means that the two most influential executives at the company are Andrew Gower (founder and a deeply technical individual) and Mark (whose background suggests that he may also be a committed technologist.)

So the top team no longer has a commercial person who can set out the strategy or maximise revenue. (Co-founder Constant Tedder ceased to be an executive when Geoff joined).

Of course, Jagex could argue that it doesn’t need such a person. Runescape has been a hugely profitable game: the Truthscape forums have analysed Jagex’s financial accounts, showing that the company was turning over in the region of £28 million in 2007 with operating margins of 50%. It has made the founders very wealthy (in cash, not just on paper):  the investment by Insight Ventures primarily went to the founders, rather than being invested to grow the  company, a very rare situation for an equity investment.

But I fear an alternative interpretation: Jagex was formed to commercialise a project its founders thought was cool. And they were lucky enough that millions of other people thought the same thing about that project which turned out to be RuneScape. Now, as the company grows, it desperately needs a strong commercial voice to help it develop to the next level.

And I fear that instead they have appointed a technologist as CEO, when I suspect they need a commercially-savvy individual who will stand up to the founders to get his voice heard. I suspect that this announcement might mark the high watermark of Jagex’s fortunes and the start of a long slow decline.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: