No love from Lunenburg

From Atlantic Business Magazine
Posted on August 19, 2013
No love from Lunenburg

This story, which originally appeared in the July-August issue of Atlantic Business Magazine, is a finalist in the 2013 Atlantic Journalism Awards. The awards will be presented May 10, 2014 in Halifax.

Canada hadn’t been part of Jeremy Wellard’s master plan. Nova Scotia wasn’t on his map. Lunenburg? Not even on his “this lifetime’s” radar screen. But then, at the what-next age of 31 in the long winter of the changing-of-the-century year of 2000, Wellard unexpectedly found himself in the middle of Nowhere, Nova Scotia, on a plot of land near Lunenburg known as Honey Bee Farm, sorting through what to do with the business side of his suddenly unmoored life.

Wellard, a video game designer from North London, England, had grown up in the belly of the highly competitive global gaming business. His mother owned one of England’s first video game companies, and young Jeremy had cut his gamesplaying teeth testing them for her. By the time he was a teenager, he’d developed his own first soccer video game for the Commodore 64. After his mother sold the company (which eventually became part of Codemasters, one of the most successful independent British game makers), Jeremy signed on as a developer. Combining his talent for video game making with his love of soccer, rugby and cricket – as quintessentially un-Canadian sports as you could then imagine – Wellard developed a number of bestselling video games.

But then in the early nineties, he opted to spend a year studying at Trent, a Canadian university in Peterborough, Ontario. There, he met Anne-Marie Sheppard, a young woman from some speck of a place in Nova Scotia called Caledonia, near the oddly named Kejimkujik National Park. They fell in love and, after graduation, set up housekeeping back on his home turf in London so he could continue his game developer career at Codemasters.

Four years later, however, Sheppard “basically decided she needed to come back then or she never would.” Wellard laughs. “I didn’t have a lot of choice.”

Or, it would have seemed at the time, a lot of career options. “Eastern Canada,” he deadpans, “was not renowned for game development.” After arriving in Canada in 1999, he tried his hand at web page creation, but soon realized he needed something more creative to stimulate his juices.

Why not develop his own video game company? What if—?

One of the games he’d developed for Codemasters – Brian Lara Cricket – seemed in need of a re-think makeover. So Wellard approached his old bosses in London with the idea of doing it for them. At the time, the company wasn’t interested in farming out its game development. Wellard then took his pitch to Redwood, California-based Electronic Arts, one of the world’s most successful game publishers with popular titles like Madden NFL and Tiger Woods PGA Tour on its roster. EA, whose own cricket game hadn’t sold nearly as well as the one Wellard developed for Codemasters, quickly signed Wellard and his then still-nameless company to an exclusive development deal.

The rest, as they say, is… prelude.

Today, HB Studios Multimedia Ltd. (named for the Honey Bee farm where it all began) is Atlantic Canada’s largest video game developer. More than 85 employees work out of the Hive, a funky 20,000-squarefoot three-storey warehouse workspace near downtown Lunenburg. The company has sold 21.5 million units of 41 different game titles it’s created or co-developed – from EA Sports Cricket 2004 and EA Sports Rugby 2004 to Ace Geographer and MLB Home Run Derby – to play on almost every platform known to man or teenaged beast.

HB is a counter-intuitive Atlantic Canadian business success story; a modern, urban, hip company seemingly thriving in a traditional rural economy. Fifty-five per cent of the employees of what is a global exporting business come from within Atlantic Canada, more than one quarter of them from Nova Scotia’s employer-challenged south shore. At the same time, in an aging province and in a town even more desperately in need of newcomers, HB has also lured well-educated, ambitious immigrants to Lunenburg from far-off lands: China, Australia, the Ukraine, the United Kingdom, Turkey, France, Austria and Germany.

You’d think HB would now be a wellpolished jewel in Lunenburg’s economic development crown.

But you’d be…

Well, let’s not get ahead of ourselves.

With EA contract in hand – along with savings from his earlier video game successes, topped up with family money – Wellard approached the Atlantic Canada Opportunities Agency. Despite his decidedly un-business-like attire and demeanor (Wellard is still a laid-back, sallow, vaguely nerdy-looking guy who prefers jeans and T-shirts to suits and ties, and doesn’t “do” your standard-issue business meeting), ACOA was keen to invest. “They were so good,” Wellard says today. “They may be such a grudgingly dour organization in other ways, but they got it. They got what we were doing.”

And although Wellard might have seemed an unlikely candidate for a business loan, he insists “it wasn’t such a big step. I’d been a producer (for Codemasters). I’d run a team (of up to 20 people). I’d handled budgets. I was responsible for delivering a product. This was the same thing, only now I had to worry about the rent too.”

With his own $600,000 and a $500,000 interest-free loan from ACOA in his pocket, Wellard was ready to set up shop. He initially chose near-to-the-farm Lunenburg for its natural beauty (“It’s just a nicer place to be than [nearby] Bridgewater.”), its one-hour proximity to the urban amenities of Halifax and, oh yes, of course, its high speed internet.

In July 2000, HB rented a 1,000 squarefoot storefront space on Lincoln Street in downtown Lunenburg, hired its first nine software programmers and began work on what would become Cricket 2004. “They didn’t have to understand cricket,” Wellard has explained of his first employees, “because I did. They just had to understand programming. I could teach them about cricket.”

No one in Lunenburg seemed quite sure what to make of Wellard and his motley crew, who went about their mysterious business at all hours in what was supposed to be a storefront but, as locals quickly noted, had its windows all blacked out. “They weren’t really blacked out,” Wellard insists today. “We just kept the curtains drawn to keep the sun off the monitors.” But that, of course, sparked rumours. The Hell’s Angels had set up shop in town. “People thought we were up to all sorts of naughty stuff,” he jokes.

Eighteen months later, after the first game shipped and HB expanded into half of the unit next door to make room for halfdozen more employees, Lunenburgers began to understand their town – home of the venerable schooner Bluenose – had joined the video game revolution.

With success breeding success (HB’s next game for EA, Rugby 2004, sold 680,000 units, while FIFA Street, a four-person soccer game, added another 590,000 units), Wellard decided it was time to go into serious growth mode.

In 2002, he had discovered a vacant warehouse near downtown that boasted 12,500 square feet of space, nearly eight times what HB then occupied. Because the building had been shuttered for two years, he was able to make a deal to buy what he calls “a million-dollar building” for just $265,000. Though the space was initially mostly just an empty shell, with the 200-seat Pearl community theatre tacked on to one side, Wellard carved out three staggered floors of eclectically painted, open work areas to accommodate all the software engineers, game designers and graphics geniuses he hired to develop the new games he had contracted to develop for EA.

The core staff soon grew to close to four dozen, which necessitated hiring support staff in human resources and IT. “It became very hectic,” he admits. But he was still “able to do what I wanted.” One Christmas, he simply closed up shop for six weeks because he thought everyone needed a break.

By the end of 2006, Wellard was both feeling “a little vulnerable” about having his company’s future so closely linked to just one games company and also confident enough in HB’s own ability to create and develop games that could compete in the marketplace, he chose not to renew his exclusive development deal with EA. He decided instead to strike out on his own, developing games under the HB banner as well as co-developing others on one-off contracts for larger games companies.

That turned out so well – “at one point we were working on three big projects at the same time” – HB opened a second office in Halifax. By March 2008, the company had 140 employees.

That bubble couldn’t last – and it didn’t. In 2009, as video games began to migrate from consoles and desktops to mobile devices at about the same time the Canadian dollar moved toward par and the 2008 economic meltdown finally filtered down to the basement-dwelling game players and up to games-buying investors, a lot of mid-sized games developers went out of business. “We had a tough time,” Wellard admits. “Luckily we still had a war chest to keep going. But we shrunk too.”

In mid-2012, with the lease on their Halifax headquarters up for renewal, Wellard made two decisions: he closed the Halifax operation and moved everything back to Lunenburg (giving Lunenburg a corporate vote of confidence), and he sat down with key members of his team to rethink the company’s game-making directions.

It was almost impossible, he’d come to realize, for any small developer to compete with the multimillion-dollar, Hollywoodstyle production values in games like Tiger Woods PGA Tour, whose visual recreations of real courses like Augusta and real people like Woods not only required spectacular animation skills but also prohibitively expensive licensing. “Our rugby game” – cheap by the standards of video game development – “cost us $4.5 million to develop, of which $1.2 million was spent on licensing.” Wellard shakes his head. “Imagine how much more you could invest in your game if you didn’t have to license real places and people!”

HB’s new plan was to give game players the tools to download – and modify, and share – their own auto-generated virtual golf courses. Par 3 or 4? How long should the fairway be? How wide? How many trees, sand traps, waterways? “The possibilities are endless,” Wellard says enthusiastically. “We’re creating a new world of interactive shared experience.” Upload your own selfdesigned golf course, and challenge your friends to play it.

While that part of the new direction is still in the development stage (as we talk, HB games creators a tier above us fiddle with the height and thickness of virtual grass on a virtual golf course on a computer screen), the company has already achieved the other new direction it set for itself less than a year ago. “We decided we would spend $1.5 million to figure out how to get on mobile,” Wellard explains. “We had three goals: to become a recognized mobile developer, to establish partners, and to get exposure on all mobile platforms.” They managed to do all three, he says proudly, in just four months.

None of it is easy. Although it’s cheaper and faster to develop games for platforms like smartphones and the iPad, there are also many more competitors. For sales. And for employees. Attracting and keeping soughtafter game developers gets harder every day. There are now more than 350 video game companies in Canada employing more than 16,000 people – and the $1.7-billion sector continues to grow.

HB now faces real competitors in Atlantic Canada too, where video game industry salaries, according to one report, are the highest in the country. When HB shut down its Halifax office, in fact, not one of its games developers there followed the company back to Lunenburg. Many were poached by voracious competitors like GoInstant, a Halifax startup that had recently been purchased by a huge American company for $70 million. “Hey employees of @hb_studios,” tweeted GoInstant’s founder as news of HB’s Halifax closure circulated. “We think you have built amazing things and would love to have you as part of the @goinstant team.”

So it’s perhaps not surprising HB employees get well taken care of: Besides on-site daycare staffed by an early childhood educator for children of staff (it’s one of the lures HB uses to attract female employees, who currently make up 22 per cent of the workforce, high by video gaming standards), the Hive boasts its own small gym, a videogaming room and a common lounge with a bar, pool table and big screen TV. Staff can also book the in-house 200-seat theatre to watch movies on the big screen, and the company sponsors all sorts of activities, including a staff team in a local co-ed rec soccer league in the summers and pick-up basketball every week at a gym in Mahone Bay in winters. Not to mention organizing regular scavenger hunts and fantasy hockey leagues. Every summer, the company packs up all its employees and their families and takes them to the nearby White Point Beach Lodge resort for two days of sand-castle building, wine tasting, prize-giving, mussel bakes and fireworks.

While that all fits in neatly with Wellard’s own personal style, of course, there’s also no question HB goes out of its way to entertain, amuse and otherwise keep its staff happy, for another good reason.

Lunenburg.

Lunenburg – named a Canadian national historic site in 1991, designated a UNESCO world heritage centre in 1995, made a Nova Scotia Heritage Conservation District in 2001 – is a postcard perfect Nova Scotia fishing town. But sometimes that postcard picture, usually of the schooner Bluenose, or of the town’s colourful red iconic waterfront buildings, seems to Jeremy Wellard to be frozen in a time that is not now.

That’s not entirely fair. But then again, it is, at least partly…

The town, of course, is home to the official head office of High Liner Foods Inc. High Liner, neé National Sea, started life as a fishermen’s grocery store on the Lunenburg docks at the turn of the 20th century, grew to become one of the world’s largest vertically integrated fishing companies before it collapsed in the late 1980s and reconfigured itself “from production-driven harvester to a consumer-driven branded company.” Today it calls itself “North America’s leading valueadded seafood supplier.” But what those corporate-speak snippets translate into, in Lunenburg’s terms, is that High Liner no longer maintains a Lunenburg-based fishing f leet or processing plant, and most of the company’s employment and economic activity has long since moved elsewhere too.

There are a few other new businesses in town too. Composites Atlantic, an oldnew kid on the Lunenburg business block that began operations in 1988 and is now HB Studios’ next-door neighbour, is in the futuristic aerospace and defence business, and can employ up to 400 people when the contracts are f lowing.

But the reality is that most of its hourlywaged employees, like those at HB Studios, live outside the town. Thanks in no small part to the fact of Lunenburg’s heritage designation and Lunenburg’s growing popularity as a retirement community, most younger buyers have been priced out of the local housing market, according to Melanie Williams, a former High Liner employee who is now HB’s director of operations.

“You could look high and low in this town for a young person,” Wellard says. “Lunenburg is a very old town. With a population in decline.”

Hardly the kind of town where you’d expect to find a video game company. But then again, hardly the kind of place where you’d expect a company, video game or otherwise, employing 85 people in a hot industry to feel like it’s being taken for granted.

But when you ask Wellard about the company’s relationship with the Town of Lunenburg, he shrugs his shoulders. “There isn’t one,” he says simply.

When I email Rachel Bailey, the mayor of Lunenburg, to ask if she thinks Wellard’s assessment of the town is fair, she actually didn’t respond directly to the question. Instead, she simply wrote back, describing HB Studios as “a fantastic success story of a high tech business succeeding in rural Nova Scotia.”

“We consider ourselves very blessed to have a company like this set up in Lunenburg,” chimed in Mike Smith, the president of the Lunenburg Board of Trade. But he added he was “surprised” to read about Wellard’s comments. “The Town of Lunenburg and the Lunenburg Board of Trade work very closely for the betterment of businesses that are here and in trying to attract new business to set up as well,” he pointed out, adding: “The Board of Trade has reached out to HB Studios many times, [including] just earlier this year but never have received a response.”

Wellard tells me he did join the Board of Trade at one point, “but it wasn’t for me.”

Ron Stockton, a local lawyer and losing candidate in last year’s mayoralty election – not to forget a come-from-away himself who moved to the area with his wife in 1993 – is one Lunenburger who believes Jeremy Wellard “nailed it. This is a town that complains about its aging population, but doesn’t do anything for those older residents, and doesn’t do anything to change the demographics,” he told me. “Why would a young person settle here?”

While there are a few pubs and a couple of licensed lounges, “most of the restaurants in Lunenburg are high end and aimed at tourists,” Stockton says. “HB employees go to Bridgewater for entertainment, even lunch.”

Stockton thinks Lunenburg needs to do much more – from developing affordable housing for young people to directly promoting more businesses to settle here – in order to attract “the HBs and smaller companies” that could guarantee the town’s future.

Although he would be the first to agree that “Lunenburg is a small town with a lot to offer” new businesses, the Board of Trade’s Mike Smith is quick to add that, “because of our size we do not have the capacity to promote ourselves and search out economic development opportunities as we may wish to do. We work with our neighbouring municipalities and rely on larger government agencies and other associations to pool our collective strengths and resources for those things.”

Stockton describes that laissez-faire approach as the Lunenburg establishment’s sense of entitlement – “someone else will do the hard work” – and worries it could have dire consequences. “What happens,” he asks, “if HB leaves?”

That isn’t likely to happen any time soon. Although no longer married to Sheppard (Wellard’s partner now is Melanie Williams, the company’s director of operations, with whom he has had three children, including a set of twins), Wellard and Sheppard had a daughter together who is now seven.

Wellard has her 40 per cent of the time, “and I want to be around to watch her grow up.” So he isn’t abandoning Lunenburg anytime soon. And neither is HB Studios. After she grows up? Wellard shrugs noncommittally.

There was – is – no master plan.

Such are the often quirkily personal complications of attracting and keeping businesses in rural Nova Scotia.

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