If GAMEProducer had launched its online marketplace that matches game creators with publishers a bit earlier than it did in 2000, it might not be here today, says Lloyd Melnick, president and co-founder.

The company, which Melnick told Localtechwire began profitable cash flow in June, managed to switch gears to resell technologies to game companies.

“I think we’re lucky we came in on the tail-end of the popularity of exchanges like SciQuest and Buildnet,” he says. “If someone had given us $1 million, we would have gotten our expenses up and fallen into the same trap as many others unable to survive the changing economy.”

The company was founded with $500,000 in support, much in services, from Perry, Florida-based askSam. Melnick says that in three years or so the company might consider looking for venture capital again, but right now plans to make money the old fashioned way, “by bringing in more cash than goes out.”

The three-person Chapel Hill-based company successfully signed up just about the entire gaming industry, 725 game developers and 170 publishers, including all the major players: Microsoft; Sony; Disney; Simon & Schuster Interactive, New York, NY; Electronic Arts, world’s largest game publisher, San Mateo, Calif.; Infogrames (#2 game publisher) Lyon, France; Eidos (largest British game publisher) Wimbledon, UK; Activision ,Santa Monica, Calif.; and Nortel Networks.

GAMEproducer charges 2 percent of the first million on development funding set up through the exchange, yet to date it produced less than 5 percent of the company’s revenue.

Reselling software providing revenue

The bulk of its income now comes from reselling technology such as Cary-based LipsINC’s software for quickly animating mouths on characters, once a tedious proposition. It also resells Perry, Florida-based DigiMask’s software for putting a user’s face on a game character.

“You take two pictures of the user’s head and it will put the head on one characters, so that if you’re playing a football game, it might appear on the quarterback,” Melnick says.

Melnick says that one advantage the company has is that it is selling to a market, the interactive entertainment industry, that is very open to technology based solutions. “Everything done is digital,” he says.

At Cary-based LipsInc, Donovan Moxy, co-foudner and director of business development, tells Localtechwire that the relationship with GAMEappealed to them because “we wanted our product to have instant penetration and credibility in that space. And those guys have a lot of experience, expertise and contacts in the game community.”

LipsInc sells six products based on its lip synchonization software, some aimed at small animation shops, some at major studio producers, and its AniMeter product at game makers. Moxy says the two companies are only really just getting started at working together, but the relationship has already led to good leads he expects to see closed as deals.

“We recognize that they have expertise and consult with them on the best way to approach the game community with our products,” he adds.

Game scouting brings in revenue

Melnick himself brings in extra company revenue by scouting for game companies and broadband and wireless providers helping them find gaming content. That results in either a $5,000 monthly retainer or $8,000 outright fee.

Melnick obtained his game expertise at Octagon, an agency he started and ran for seven-years with GAMEproducer co-founder Jerod Kirby. The relationships they established then helps give people in the industry confidence in them, Melnick says.

Kirby is COO of GAMEproducer and Lloyd president, but Melnick notes that in a two-person company titles don’t matter so much. They also have one employee. The company steadfastly avoided the bloat that dragged down so many other online exchanges.

Octagon itself, also headquartered in Chapel Hill, has grown to ten people and is now one of the top two players in the gaming agency business.

Epic and NDL, other area gaming success stories

Other local gaming companies, with a few exceptions, have either been sold to larger firms or are struggling.

Raleigh-based Epic, which created the huge game success Unreal, now sells licenses to its game engine at $250,000 a pop, industry sources say.

Chapel Hill-based NDL, which makes a game engine, is profiting from a change in the way many game companies do business. At one time most wanted to create their own game engine. Now most use “middleware,” a software engine that does the tasks of rendering animated action and scenery for them.

Red Storm, another successful Triangle area gaming startup sold to Paris-based UbiSoft for $45 million last year after establishing its Rainbow Six game as a PC top-seller.

Triangle-based Timeline, which marketed a much less successful game based on plots by best-selling author and film director Michael Crichton, closed its doors last year.

“Games are a very hit-dependent business,” Melnick explains.

Melnick said that for the future, the company expects to continue growing its business organically. The exchange, once the marquee attraction, is dropping to lessor billing. “We’re thinking about changing the way we charge, making it a subscription-based service,” he said.

For more information:GAMEproducer