Kirk Owen sees game industry trends early as president of Octagon Entertainment, a firm that represents game developers worldwide. And he sees one emerging that could change how new electronic games are financed.

Owen tells Local Tech Wire three or four companies have approached him about establishing game funds, a new game financing method. The funds would allow investors to put money in several games under development rather than just one.

“It’s an emerging business model,” Owen says. “You aggregate games into a portfolio for investors as a new way to finance them. I think the publishing industry will respond well to the idea. They take on a huge amount of development expense. They also have to market and warehouse the games. As a way to reduce development risk, it might be attractive to them.”

Individual investors would also face less risk than they would backing only one game.

“It’s a hit driven business,” Owen says, repeating the mantra of the industry.

Investing in just one game can be risky even for the wealthy, something author and film director Michael Crichton found out with Triangle-based Timeline, which shut its doors last year after the best-selling author decided losing money wasn’t a game he wanted to play any more. Timeline developed a game based on Crichton’s novel titled Timeline.

Big rewards for winners

On the other hand, rewards can be great for a hit game. Red Storm, another Triangle-based game company, sold to French-based game developer Ubi Soft on the strength of its $60 million sales in 1999 of its Rainbow Six strategy game. Tom Clancy, another best-selling author of thrillers, was chairman of the board and chief idea man at Red Storm, which continues to do well for Ubi Soft.

Game funds would allow investors to spread their risk among a number of promising new games rather than rolling the dice on one.

“I’ve heard rumors game funds are close to being done. It might be a real breakthrough in game financing this year,” Owen says. “I’m sure we’ll see one before the end of the year. It would be good for the Triangle because it’s a whole new funding source. It gives developers an option other than going to publishers for money.”

Owen says he has plans to speak with a group interested in a Game Fund. “It’s one of the things I’m most excited about is our industry beginning to develop more sophisticated financing methods. I think the industry is finally getting to the point where it’s more interesting as an investment.”

Founded in 1993, Octagon arranges financing, publishing, licensing and distribution agreements for game developers worldwide. It maintains relationships with more than 1,000 game publishers and distributors. The company has 11 employees in its 3,000 square foot space in Chapel Hill.