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Interview: Why Stardock Sold To GameStop

Interview: Why Stardock Sold To GameStop

April 8, 2011 | By Chris Morris

Stardock's recent sale of its Impulse digital distribution service to GameStop is in the history books now, but the retailer was hardly the only bidder for the service.

Brad Wardell, CEO of Stardock, says there were conversations with dozens of companies - with roughly a half-dozen of those presenting term sheets - before Stardock made its final decision. And even then, it took a lot of convincing on GameStop's part.

"At first I wasn't sure," he says in an exclusive talk with Gamasutra. "We're a PC game distributor and we knew GameStop had largely moved to consoles. Also, they're brick and mortar -- and we weren't sure we wanted to hand off Impulse to [that sort of company]."

"We wanted to sell it to someone who wanted to build the digital distribution market for PC gaming," he said. "They went to great lengths to demonstrate this was something they were taking very seriously."

Those efforts worked. By the end of the negotiations, which began late last year, the companies were getting along like old gaming buddies, even debating which was better: Ultima IV or Ultima V.

With a user base of between 3 and 4 million users, Impulse is far from the largest player in the digital space, but it had grown into a notable one. While the growth was something Stardock was happy with - and profiting nicely from - the company found itself at a crossroads at the end of last summer: Did it want to remain a technology firm or become a retailer?

That's when it decided it was time to sell off its most profitable venture.

"We realized Impulse was taking over the company with its revenues and profits," says Wardell. "Normally, that's great, but we're a technology company. We looked at what it would require to take Impulse to the next step."

He explained, "We would need account managers, a lot more technical staff, a lot more business people. ... For example, every time we would talk to a publisher, they'd want us to demo Impulse. The problem is: We're in Michigan. I can't just go down the street and grab engineers. Sending out a technical guy to San Francisco or L.A. or wherever is a disruption to everything else we're doing."

That resource issue also kept the company from growing Impulse at the rate it wanted to, letting Valve Software's Steam, with its 30 million-plus accounts, get a bigger foothold in the market. With GameStop now backing the service, Wardell says he expects advances such as Impulse Reactor (which seeks to add features like achievements and social integration) will happen at a faster pace.

Stardock will remain a partner to Impulse for the foreseeable future, and Wardell is contractually committed to assist with the transition for a year. But as it hands over control to GameStop, the company, which develops and publishes games including Galactic Civilizations and Elemental, is looking at new opportunities in the gaming space.

For now, it's not talking a lot about the details of what it has planned, but Wardell did drop some hints.

"There's a whole bunch of cool things going on in the gaming business that are just in their infancy," he says. "For example, in the [social gaming space], there's a lot of cool tech that can make the game experience much more interesting."

For the most part, GameStop's purchase of Impulse has met with generally positive feedback. But the praise hasn't been universal.

Earlier this week, Blind Mind Studios announced that it would remove its Star Ruler game from the service in protest of the takeover.

"We are ending sales through Impulse due to GameStop's long, negative behavior toward the PC platform and independent games," the company wrote in a forum post. "We would never have signed onto distribution through GameStop, and being forced into this situation has only made it worse for us. We feel GameStop cannot serve as the leader of a true competitor in the digital distribution market. ... We supported Brad Wardell's direction of Impulse, and his absence ruins our faith in the service's future."

While Wardell acknowledges such proclamations of faith in him are flattering, he says he was caught off guard by the action.

"I was really surprised," he says. "By his own admission, Impulse is 25 percent of his revenue. Impulse is going to continue to function as it has. If a developer wasn't paying attention to this, they wouldn't notice any difference. ... On one hand, they [say they] trust me, but they don't trust me enough to realize I vetted [GameStop]. Stardock didn't have to sell Impulse."

To demonstrate this, Wardell talks about one of the other companies that submitted a term sheet for the service. He only specifies them as a multimillion-dollar national company, but what they wanted was to use Impulse to manage licenses on an enterprise software system. The offer was rejected.

"That was an example of where we really wanted to stay with our roots," he says. "We want to see PC gaming expanded. ... I feel like it's in pretty good hands. They're good guys, even if they don't agree which version of Ultima was the best."

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