After reading news about Acclaim's expansion goals and Denki's "ark" you will in no doubt be incredibly surprised that I sat down and analyzed their basic strategy. Of course I am lying – I analyzed the hell out of it.

So, as I crank up my usual obsessiveness, here's my question: is "arking" (expanding in this recession while consolidating other costs to be ready for when the recession ends) a good strategy for game companies?

Of course the first thing is "can the companies" afford to even stay stable at their current rate of employment.  Assuming that we're talking about companies that are stable and can get some cash or get loans/debt to expand, I think arking is a REASONABLY viable strategy.  It's chancey, but it has benefits.

First, the benefits:

• There's the sheer advantage of trying to outride the wave and outrun everyone else.  As we've seen plenty of gaming companies are changing and taking hits, new ones are popping up, etc.  If you can rise above the chaos and stay focused, you've got a better chance for success.
• There's the fact that many reactions to business climates are overreactions – and in this downturn I think a lot of overreaction is occurring.
• There's  morale.  NEVER underestimate the power of good morale at a company.  People will tolerate long hours, pay cuts, and putting out successful games with humiliating themes like "Pony Warriors: Rainbow Paradise City" if they feel like they're part of a team.  Arking emphasizes that.
• There's a chance to get business and talent at fire-sale prices.
• There's publicity.  People are going to remember Acclaim and Denki just for the chutzpah.  I'm certainly going to.
• Gaming is going to take a hit from the downturn and there will be less new titles and, frankly, I believe less interesting IP.  If there's an upcoming reduction in titles, taking advantage of that is good business sense.

So I see validity in the arking strategy.  It may not be as sure as the "hold on to your hat and ride it out" strategy, but it's also not up there with irrational fire-fests and cutting-project panics.  Frankly, it is at least a plan a company can act on so you at least know when you've messed up

As for the downside?

• If you fail, you at LEAST loose a lot of money.
• If you fail and have to make cuts, kiss that morale advantage goodbye and prepare for bitter repercussions.  This can destroy you.
• Failure will be humiliating for you in general.
• If the arking strategy doesn't work you've just set the wrong direction for a long time and may not be able to change in time.
• You had better be ABLE to pull arking off.  If not, then it will fail, so you'd better plan carefully, because even if its viable, the above issues can happen if you do it wrong.

Of course truth be told, you take all but the last risk anyway if you ark or not.  So I'd say the biggest risk in arking is doing it wrong or doing it when it's not appropriate or needed or your company can't handle it.

So is arking a perfect strategy? No.  It's a risky strategy if the economy takes a serious downturn, and the gaming industry always has its risks anyway.  However I'd say it's at least no worse than holding on and staying stable, and probably better than the panic-and-run-around strategies.

- Steve