A HERO OR ZERO GAME FOR EIDOS CHIEF
Copyright 2002 www.theindependent.co.uk

[ August 5th 2002 ]

Mike McGarvey grabs a promotional poster of the new Tomb Raider computer game from the wall of his bright, modern office. This is it, he says excitedly pointing at the scantily clad figure of the Lara Croft character flying through the air over the strapline Lara Croft Tomb Raider: The Angel of Darkness. Is that the same woman as last time, I enquire? "No. We have to change the model every year. The whole fame thing gets to them and, well..." he says, his voice trailing off. Whatever can he mean?

Mr McGarvey runs Eidos, the computer games publisher behind the Tomb Raider series. Appropriately, he looks like he's just walked out of Hollywood central casting. Aged 36, the casually dressed Californian has the light tan and uniform features of the all-American boy. It comes as no surprise that he played college-standard American football in his youth before giving it up after a tendonitis problem in his throwing arm. "I was a quarterback," he says sitting in his office in Wimbledon, south-west London. "It's the hero or zero position. But I was too small, really. These guys are six feet nine these days."

In a sense, he is in the hero or zero position again. Eidos has been dogged by a catalogue of errors including missed launch dates, profits warnings and fears over a weak roster of games. Incredibly, the so-called "Golden Age of Gaming", which has seen the Microsoft X-Box and the Nintendo Gamecube being launched into a market already bubbling with the Sony PlayStation2, seems to have passed Eidos by. Its shares are bumping along close to their all-time lows. Things have got so bad that investors must sometimes fear they would one day see the headline "Eidos: GAME OVER" flashing on their screens.

Now the business is at a crucial stage. With a balance sheet boosted by a £50m rights issue last year and a better launch schedule of new games, the future should be brighter. The Angel of Darkness Tomb Raider game (the sixth in the series) is scheduled for launch in mid-November on Playstation2 and PC, followed by a second film in June 2003. But if there are any slip-ups Eidos is likely to lose its independence. And Mr McGarvey, chief executive since November 2000, will be on the next plane back to the America.

"We were labelled the one-product company, which we were for many years," Mr McGarvey concedes. "But it is very difficult to be a public company, that is global without having a big franchise. We still wanted Tomb Raider as a significant part of our business. But we stalled a bit in generating other content. We'd done five in a row (Tomb Raider games) and the rest of our list got a bit thin. But we were all a bit new to the business and we felt Tomb Raider was strong enough to carry our business through that period."

As it turned out, it wasn't. A game based on the TV programme Who Wants to be a Millionaire had one good year but then Millionaire 2 bombed. There were other problems as well. The finance director left and took a long time to be replaced. Then takeover talks with Infogrames of France took six months and proved a damaging distraction. Since then, Mr McGarvey has tried to focus on business basics rather than chasing the next big thing. "We've been reducing costs and focusing more on leveraging the content we have. We've recapitalised the company and are still investing a third of revenue in R&D. Another 8 to 10 per cent goes on advertising and marketing."

Crucially, the pipeline of games launches looks better. As well as Tomb Raider, Eidos has Timesplitters 2, Hitman 2, Championship Manager 4 and Deus Ex 11 coming up. Hopes are high too for Fear Effect, a game based on two women detectives who develop a love interest in each other. "That kind of thing's just right for our demographic," he says. Ninety per cent of game customers are 18 to 25 year old males, apparently.

Mr McGarvey knows he has much work to do to raise the company's standing in the City. "There has clearly been a credibility issue and we need to close the gap, he admits. "Slippage (delay of game launches) has been one of the key things people have focussed on and we are addressing that. We were so close to making a profit last year. But Millionaire just fell on its face." After last year's thumping £96m loss analysts are forecasting Eidos to record reduced losses of £21.7m next month for the 15 months to June. But profits should hit £12m-plus, in the current year, they say.

Mr McGarvey says Lara Croft still has plenty of legs and will run and run. "There are older characters than her. Look at Super Mario and Sonic the Hedgehog. Mickey Mouse still seems to work. Spiderman still seems to work. Content can be robust if you are creative enough."

Born in Pennsylvania, Mr McGarvey moved to Seattle at the age of two where his father worked for a company called AMP, selling electrical components to corporate customers such as Boeing. Aged eight he moved to San Jose, southern California when his father set up his own management consultancy. University days were spent at the campus in San Diego where he studied marketing. But he was already imbued with the work ethic and, like Angus Monro, the former Matalan chief executive, started off as a shoe salesman.

"I worked my way through college at Nordstrom's (the department store retailer), selling ladies shoes. It was a great introduction to the working world because their approach to the customer was just fantastic. They would always take a pair of shoes back if someone complained, even if the customer had worn them. I sold so many shoes that I made $30,000 one year." After a spell working for an electronics company ("it wasn't quite as sexy as I thought") he quit to go into the computer games business. "I started at Domark, an English company in the US. Nine months later it merged with Eidos and I later took over the US office."

By 1997 he was asked to move to the UK. "I was reluctant, but they said it would just be for a year. Five years later, I'm still here." He says he loves the British sense of humour and that "culturally, it's great." Predictably, though, he hates the weather. "Then on Monday when we had good weather, our air conditioning broke," he says in disbelief. "It was 96 degrees in here."

He seems happy enough to stay, though, and expresses confidence that Eidos can remain independent despite recent speculation about take-over interest from another French rival, Ubi Soft. "I don't think we're going to see a lot of consolidation right now," he says. "Is it (a take-over) possible? Maybe. Is it inevitable? Absolutely not."