9-9-13 1:44 PM EDT | Email Article

By Dan Gallagher, MarketWatch


SAN FRANCISCO (MarketWatch) -- John Schappert, a longtime videogame executive who most recently served in a brief-but-tumultuous stint as Zynga's chief operating officer, has started his own game development studio and landed an investment from Nexon Co.


The partnership will pursue the development of free-to-play games, which is becoming a popular trend in an industry that is grappling with declining sales of game disks that sell for $60 a pop at retail.


On Monday, Nexon announced an equity investment and publishing deal in Shiver Entertainment -- a new game studio started by Schappert. The amount of the investment for a minority stake in Shiver was not disclosed, though Nexon chief financial officer Owen Mahoney will take a seat on Shiver's board.


Schappert has laid low since his high-profile departure last summer from Zynga Inc. (ZNGA) , where he served as chief operating officer for a little over a year after being lured to the social-game maker from a high-ranking job at Electronic Arts Inc. (EA) . His exit came as Zynga began a high-level shake-up to refocus its business on mobile games as growth for its once-popular social properties such as "FarmVille" began to stall.


Looking back, Schappert says his time at Zynga drove home the point that the game industry was shifting, and that he needed to get in front of it.


"I think Zynga deserves an awful lot of credit for helping to bring free-to-play gaming to the west," he told MarketWatch. "I went from being a pay-to-play guy to free-to-play guy. It taught me that there were a lot of people like myself who were looking for next chapter in this business."


Many game publishers are moving toward a free-to-play model, as sales of retail-based game disks have been on a multiyear slide. Electronic Arts launched the most recent sequel to its popular "Plants vs. Zombies" franchise as free-to-play, as well as its "Real Racing 3" sequel for mobile devices.


Tokyo-based Nexon has been focused on free-to-play games made mostly for the Asian market. The company had second-quarter revenues of about $366 million -- up 60% from the same period last year. But only about 4% of its overall revenue base comes out of North America.


In an interview on Monday, Nexon CFO Own Mahoney said the company is trying to expand its presence in the North American market, and saw a good opportunity to partner with Schappert. Mahoney and Schappert worked several years together at EA.


"Since we both left EA, we've always kept in contact. We found that, as we were talking after he [Schappert] left Zynga, that we very much had a meeting of the minds on where we think the industry is going."


Shiver does not yet have any games under development, though Schappert said he expects to focus on what he describes as "traditional games with high production values" that could appeal to core gamers, but designed for a free-to-play model.

-Dan Gallagher; 415-439-6400; AskNewswires@dowjones.com


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09-09-13 1344ET

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Morningstar - 2013/9/9 - Nexon invests in new game studio by Schappert
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