The Tip.It Times

Issue 18099gp

All That Glitters...

Written by and edited by Kaida23 & RussetAlpha

There's been a lot of confusion lately. The Squeal of Fortune update caused once again much controversy about the impact that the group of investors have had on the game. So I decided to find out more.

The current major investors in Jagex are Insight Venture Partners (55.45%), Spectrum Equity (17.84%), and the Raine Group (14.75%). The rest is owned by Paul Gower, Constant Tedder, and Ian Gower. Each of these investment companies has two seats on Jagex's board of directors. That puts the total amount on seven people when we've added Jagex's CEO, Mark Gerhard (who has no shares at all).

  • Alex C. Crisses, vice-president of Insight Ventures
  • Jeffrey J. Horing, managing director at Insight Ventures
  • Chris T. Mitchell, managing director at Spectrum Equity
  • James J. Quagliaroli, managing director at Spectrum Equity
  • Brandon Gardner, COO and partner at The Raine Group
  • John Salter, partner at The Raine Group
  • Mark Gerhard

I did a little digging in the background of these "other six", because that is what you're interested in. It turns out that they all have more than one job. In fact you're not going to find anyone on that list that doesn't sit on the board of directors of at least FIVE other companies.

So what possible conclusion can you draw from that? Either these people can split themselves up into multiple parts, or they have little to do with the day-to-day running of the company.

Now, that may come as a relief. After all, it lets the running of RuneScape to the people that actually know what they're doing.

Or, we can look at some of their other investments and see what happened there. Insight Ventures has owned a majority share in Nexon, the company that runs MapleStory. They (the players) too felt that things went downhill from that moment, with increasingly common schemes such as our Squeal of Fortune. Coincidence? Maybe. But it might be worth a second look of what has become of MapleStory these days.

And yet, Insight Ventures takes its orders from someone else too. The ties with Goldman Sachs and Citigroup are quite apparent when you look at Insight Venture's wiki page. And who are they?

Well it says: The firm’s Executive Advisory Board includes Robert Rubin (Chairman of Citigroup and 70th Secretary of the Treasury) and Steve Friedman (Chairman of the United States President's Foreign Intelligence Advisory Board and former Chairman of Goldman Sachs).

Wow, the U.S. government. That sounds like some powerful people are ultimately pulling the strings at Jagex. Wait what? The U.S. government is invested in Jagex? That doesn't seem right.

It isn't. Michael Moore has it portrayed beautifully in his movie, Capitalism: a love story. As it turns out that people from especially Goldman Sachs move almost freely between government legislative positions, government executive positions, and the companies that would benefit from having such legislation enacted.

If a two hour movie is too long, the facts are summed up here. I do advise you however, to watch it as it paints a shocking picture of the financial and economic crisis of 2008 that still plagues many parts of the world today, and how Goldman Sachs and Citigroup fit into it all.

But this doesn't have much to do with Jagex does it? Perhaps not, but it does show you what kind of people end up making the decisions. It's the same kind of people that have no issue working for the companies that own games that rival RuneScape.

Take John Salter for example, he worked at many gaming companies, including Activision, Blizzard, Giant Interactive, Infogrames/Atari, Lionhead, Shanda Interactive, Square Enix and THQ, among others. You might say that there is something of a conflict of interest here.

I wish I was an expert in economics, so I could answer the one question that burns into your mind right now: "How does this affect us?"

I can, however, make an educated guess.

These companies are very likely to not bat even an eyelash at liquidating (ruining) Jagex if such an action makes them money. Don't forget that Jagex is now a U.S. based company, and the de-regulation of the financial sector has not yet been restored (and it doesn't look like it will be). This means that you can still insure yourself even against self-induced bankruptcy.

Suppose Goldman Sachs and Citigroup are indeed betting for Jagex to fail. They'd have a different company or companies "invest" in Jagex, and get them to enact policies that will be profitable in the short-term, but utterly destructive in the long-term.

Insight Ventures and the Raine Group (totalling over 70% of shares, as well as a majority on the board of directors) are both quite heavily connected with Goldman Sachs and Citigroup (they don't even make a secret of it). So those would be the perfect candidates to enact such policies.

We would probably not notice it until it is too late. There might be hints, but those are often dismissed or reasoned away. Hints such as small changes in policy, like the reversal of previously deemed essential measures.

So is it a coincidence that a few days after Andrew Gower, Paul Gower, and Constant Tedder were "replaced" on Jagex's board of directors by the people from Spectrum and Raine, we saw the Wilderness/Free Trade reversal shoved down our throats?

The massive feedback was obviously not what they expected, and the mistake of the referendum was quickly replaced by that of the "actual vote".

Since then they've been more careful with implementing new policies, as every wise leader knows that societies can only adjust to one major change at a time. So the Katana was first as a harmless attachment to a membership card. Then the Loyalty Programme arrived, giving you ever-so-slightly-bigger advantages for continued membership. Referring a Friend to get 10% bonus XP for a week still didn't seem much of a benefit, but by then, the XP-for-cash scheme had already begun.

So all it took then were some changes in the rules to allow for things that would normally be considered hypocritical. In my article from last week I pointed out how Jagex's hypocrisy should not go unnoticed, and fortunately it didn't.

I've gotten some good feedback on that article, and numbers show that it has been passed on to far more people to read it than usual. But other than being aware of what is going to happen, there is little you can do.

Every single major fansite, including the official forums have calls to sign a petition, but that will not help. You can print out pages of replies, or even go on a personal visit to Insight Venture's HQ, but nothing will change their mind.

Unless they can be made to see that their policies that put RuneScape hurtling down the slippery slope towards a fully buy-able game are actually going to cost more money in the end than it will raise, nothing will change. Judging by the amount of people that were willing to buy gold and botting programs, I'm actually surprised it took this long for someone to capitalise on that.

It isn't all bad news. Insight Ventures has also invested in a company named Newegg, which seems to have greatly benefitted from it. Jagex also has other projects with a lot of potential, most notably (and therefore most profitably) the Transformers game they are working on.

The money gained from the additional spins bought far outweighs the amount of money lost from people that will cancel their subscription over this (score one for capitalism). This probably means that we will see more of such schemes that I warned about last week. So at least RuneScape will probably survive, but I doubt that you'll be able to recognize it as the game you love.

Do you have any thoughts or comments about this week's articles? Want to discuss these articles with your fellow RuneScapers? We invite you to discuss them in this forum topic.

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