There’s a love-hate relationship between Hollywood and gaming, and tremendous friction around licensed properties and what they mean for the gaming industry. In this panel, the experts explore where the relationship is symbiotic, where it is destructive, the underlying sources of friction, and how the relationship is now evolving. This is a continuation of our live blogging at the eighth panel from Digital Media Wire’s LA Games Conference 2008.

Bill Kispert, VP, Interactive, NBC Interactive
Sandi Isaacs, SVP, Interactive & Mobile, Paramount Digital Entertainment
Daniel Offner, Partner, Nixon Peabody LLP
Mike Breslin, VP, Global Marketing, I-play
Moderator: Andrew Wallenstein, Deputy Editor, The Hollywood Reporter

Where are we now in 2008 where things seem divisive in the Hollywood and games dynamics?

Mike – There are a few ways to look at it. You need collaboration between the production and the game developers, sets, and so forth; you can’t just hand over a style guide anymore. It also comes down to finding teams who share the creative vision. So collaboration is improving but it comes down to finding fit early in the process.

Keith – There are only three factors in the film license – time between film and game release, marketing budget, and likelihood of franchise to the film.

Sandi – I feel like everyone’s missing the point. It’s never been a more exciting time for film makers to collaborate with game makers. Now we have a great opportunity to start prototyping early in the process and explore business models, not just stay in the licensing box. At Paramount we’re putting together a team of game industry veterans to help make that happen. It’s also not just about the new release, but also the classics like The Godfather. It’s about the game, making a great experience and making it profitable for the studio.

Daniel – I’m slightly amused by the question, is Hollywood killing the game industry. We’ve worked with THQ for many years, and they make their bread and butter selling licensed games. There are some interesting changes now, though. The convergence of casual games, community and the web, and the access of content through broadband connectivity. The ability to tap the digital distribution platform opens up all kinds of interesting things. The other thing is having great content coming out of the studios and pairing that up with really great talent. I don’t think retail is going away – Wal-Mart, Amazon, etc. – but digital distribution is becoming very important.

Mike – I can speak with mobile industry perspective. One reason there has been consolidation in mobile is the cost of licenses with the peak of interest in mobile. Of course the studios are trying to maximize their license revenue, but from the side of the team investing in these licenses and putting together teams, you overextend on the licenses and can kill your business.

Sandi – Obviously we’re investing heavily in these properties which drives the mobile licensing terms. It’s a tricky fragmented business but the players know the challenge. It’s not the cost of the IP but the economics of the mobile game business overall.

What does the mobile game business look like, all license or some original IP too?

Mike – We’ve had success with some of our own IP. But on the license side, I think that Hollywood can help the game industry with the co-marketing and opportunity to leverage a brand where the studios are spending millions of dollars.

Keith – That’s a key point, you have to work with the license holder, because if you don’t, you’ll lose the value of the marketing, events, co-marketing if you don’t check in regularly and see what they are doing with the IP.

Sandi – Another factor is the broadening of the game demographic overall, expanding the scope of movies that work for games.

Keith – And now for the first time you have gamers making movies; the producer or director says from day one ‘where’s my game’, and wants to be involved on a creative level and ensure quality. They are also not demanding large up front payments as part of the deals.

Bill – You could argue that Hollywood can drive the game industry going forward – places, characters and worlds, with game play layered on top of it. Then there are millions of other promotional touch points, like theme parks, television, fast food, and more.

Keith – The other really important point is that when you talk about these $8 million marketing budgets, you can piggyback on those budgets and have credibility going into Wal-Mart for retail distribution and retail promotion. By paying for the license, you get to piggyback the buy for the sell-in level, let alone the consumer level.

Daniel – My question for the studios is, as what point will you be in my clients’ business and not need them any more.

Sandi – I think we already are and that’s the issue. There are going to be different parts of the value chain where we need the game companies, but other parts of the value chain where we don’t. We’re looking to work with partners based on value-added for both parties, not a single model.

Keith – That’s no different for any other part of the studios’ businesses.

Bill – Our ability to take things on ourselves also depends on the capacity we have available at different points of time. But it’s a very good time for independent developers to have conversations with studios. It used to be that we would go to Vivendi or another publisher and they in term would deal with the independent developers.

Sandi – It’s going to be very similar to the TV and film industry, lots of co-financing, lots of distribution deals.

With all these changing models that are happening, are there any upcoming releases that will put things to the test?

Sandi – On our side it will come from the casual gaming side. We are going to put in the time to develop really great games.

Boesky – There’s one coming up in September called Afro-Samurai from Gonzo. Gonzo committed to making a mini-series, and we invested in it from the creative side. Spike picked it up for a nominal license fee. They only got the right to run it; it was a great five episode commercial for us. We pick up revenue from the DVD, iTunes, action figures, and the action game coming out from Namco. All of the revenue from all of those ancillaries go directly to Gonzo, and Spike made so much money from the advertising without paying for content that they commissioned another run from us.

Bill – The notion is that if you’re really trying to build a franchise, you need content across platforms, and think about how you release them strategically.

Keith – The lie we told in the 90s is now true. We actually can use our game assets across media. Disney, Warner are starting to do it sometimes.

With a show of hands – is there a perception that Hollywood games are bad games? (Many hands are in the air)

… Andrew’s note: My fingers can’t keep up with the debate!

Mike – We all know there’s nothing more discerning than a gamer.

Keith – If it’s a bad deal, don’t buy the game. If you have a desperate publisher who wants something, or who messed up and can’t get it right – they won’t pull the public.

Sandi – We’re talking about hard core gaming reviews coming out and killing Sponge Bob. These mass market games are not targeted at the hard core gamer. It’s about being realistic, what game are you playing and what the audience expects for it.

Keith – If you compare these titles to other games, look at what you’re comparing them too. If I invest $30 million in BioShock, I can only invest $10-15 million in a licensed property because of the spend on the license.

Sandi – And that’s why the studios are developing games ourselves, so we can reinvest in our own IP.

Bill – We’ve introduced a hybrid model where we are co-funding games. Some developers said thank god, we’ve been waiting for the studios and networks to put skin in the game, and other showed no interest.

Daniel – A question for Ubisoft, THQ, and the others is will the studios still be giving out their best AAA properties? Will they be asking for a different economic deal, or will the studios just do it themselves and use publishers for retail distribution?

Sandi – If publishers have internal great teams, they often don’t want to put them on licensed properties.

Bill – We’ve tried to adjust our internal model to get involved early and put our publishers in a position to succeed.

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