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Mobile Game Development News

Game startup raising $150M

Thomas Tull, executive producer of the new blockbuster movie "300," and dot-com pioneer Bert Ellis are near closing a mega $150 million round of private equity in a video game startup with ties to Atlanta and Hollywood.

The startup, Brash Entertainment LLC, is developing games that will be licensed with major movie, book and music titles. Potentially in the works is a license agreement to produce a PC video game for "300," which posted a record-smashing second weekend March 17 and 18.

Ellis says the Atlanta-Los Angeles startup is working on five other major titles and plans on producing 60 to 100 over the next five years.

"They'll all be brands you'll know," Ellis said.

Ellis is the former CEO of Atlanta Web consulting firm iXL Enterprises Inc. and an owner of Orange County, Calif.-based Anaheim Ducks broadcaster KDOC-TV. He also is an investor in Atlanta-based record label Brash Music, which has signed a number of high-profile Christian musicians.

Brash Entertainment has Ellis on its board and Atlantan Jim Altenbach, an attorney at Greenberg Traurig LLP, as an officer. In addition, Brash Music CEO Mike McQuary, a former EarthLink Inc. executive, is an investor in the company. Executive leadership, meanwhile, is in New York and Los Angeles.

Tull, CEO of Legendary Pictures, has produced several other major films, including "Superman Returns" and "We Are Marshall." He also produced soon-to-be released feature films "Warcraft," a movie based on the popular video game franchise "World of Warcraft," "Kung Fu" and "Where the Wild Things Are."

Tull and Ellis first met when they were investors in former Atlanta dot-com WebMD Inc., a provider of health information. The pair also invested in Massive Inc., a New York-based provider of dynamic advertising in video games. Microsoft Corp. (Nasdaq: MSFT) bought the company in May 2006.

For Ellis, Brash Entertainment is one of his biggest moves since iXL was liquidated in 2001, a highly publicized meltdown that led to hundreds of layoffs in Atlanta. At iXL's height in 1999, the company employed more than 2,000 people and was trading at $50 a share. By 2001, the company's employee base had dwindled to a few hundred and its stock was worth 21 cents a share.

Ellis re-emerged last year, when he closed a $150 million deal to buy KDOC-TV. The station is in the biggest TV market in the world revenue-wise -- Los Angeles. He calls the station a "diamond in the rough."

Brash is outsourcing game development across the world. The possibility exists, Ellis says, to outsource some work to Atlanta. Ellis says the company can be as big as game studios Activision Inc. (Nasdaq: ATVI) and Midway Games Inc. (NYSE: MWY).

"We're a 20-person startup with big visions," Ellis said. "All of us are a little more prudent than in 2000. But we're still optimists nonetheless."

Altenbach has represented Ellis since the late 1980s, when the entrepreneur had a venture called Act III Communications, which owned eight TV stations across the country. Altenbach also represents Legendary Pictures.

"We hope to be one of the biggest game studios in the country," Altenbach said.

The video game industry is huge. Americans in 2005 bought $10.5 billion worth of games, according to industry tracker NPD Group Inc. But it's also a risky business, as game development can cost $20 million or more. One bomb can be a disaster.

But Ellis says video games that are co-branded or licensed with major movies are a much safer investment. Even a bad video game, paired with a good movie, can be very profitable, he says.

"The safest, most lucrative way to sell a video game is in tandem with some kind of movie that is already heavily marketed," Ellis said. "Your downside is protected by the co-marketing."

Marcus Matthews, CEO of Atlanta-based Blue Heat Games Inc., says grabbing a major license would be a major coup for any company, let alone a startup. He says licensing video games with popular franchises are becoming increasingly more popular, as consumers already have a familiarity with the brand. For Blue Heat, which develops games for cell phones and other mobile devices -- including the popular "Snoop Dog Boxing" --

70 percent of its titles are licensed.

Brash Entertainment in the future plans to co-release video games with movie titles.

Ellis is particularly excited about the possibility of a "300" video game, which is being negotiated. In what Ellis calls a "perfect movie for a video game," "300" stages the epic Battle of Thermopylae that pitted a few hundred Spartans against the massive Persian army in 480 B.C. The movie, characterized by stylish cinematography and violent battle scenes, raked in

$71 million over its opening weekend.

Brash Entertainment has already closed on a $6 million round from Ellis, Tull and other investors.

Brash Entertainment has a term sheet for the $150 million round from a major media technology investor and others, Ellis said, and the deal should be complete -- if all goes well -- by the first week of April.

? 2007 Atlanta Business Chronicle

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