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How To Build A Profitable Gaming Company: Kenny Rosenblatt, CEO of Arkadium (Part 4)

Posted on Sunday, Dec 11th 2011

Sramana: By this time you were a full year into bootstrapping the company, you had already had a complete development cycle failure, and now you have to give away the only game you have been able to bring to market because people don’t want to pay for it. How did you survive?

Kenny Rosenblatt: We built websites on the side. There were a bunch of ridiculous small websites that we built for 5,000 dollars apiece. Jessica was doing the HTML work and the designer was putting out basic designs. We were just bootstrapping and living on rice and beans while we figured out our business.

Sramana: How long did you have to do that type of work?

Kenny Rosenblatt: We did that for two years.

Sramana: At what point did the game platform that you built turn into a revenue generating business?

Kenny Rosenblatt: It never did. The site was not making any money, we were struggling to survive and then one magical day the phone rings. I pick it up and I hear “Hi, my name is Jeff from R.J. Reynolds Tabacco Company. I want some Casino games, do you have any?” I said “Yes sir, we do!”

He asked me to create a proposal for him to create a poker game that he could have on his website. At that point Jessica and I took several days and wrote a proposal which we priced at 25,000 dollars. We asked one of our advisors and mentors what he thought before we sent the proposal back. Our mentor blasted us for sending R.J. Reynolds Tabacco Company a 25,000 dollar proposal and told us to add a zero to that figure. We thought he was crazy but we did it anyways. The accepted the proposal and all of a sudden we had 250,000 dollars in play.

Sramana: Did you have a poker game at the time?

Kenny Rosenblatt: We did not.

Sramana: Was your plan to use the same Ukrainian development team and have them build the product for you?

Kenny Rosenblatt: Correct. We built an amazing poker game for them and they gave us more and more business.

Sramana: How much money did you spend building the game?

Kenny Rosenblatt: About 50,000 dollars. We had a 200,000 dollar margin but we still did not take salaries for ourselves. We remained working out of my apartment and we did not have a real business functioning at the time.

Sramana: I am sure it was still a struggle but at least 200,000 dollars was able to provide some level of comfort.

Kenny Rosenblatt: It gave us some flexibility and we did withdraw some money to pay bills. The big thing was the additional business we received. We had R.J. Reynolds call us back for more work and then TV Guide called us and asked us to build a trivia game for them. We sent them a proposal for 89,000 dollars in December. My contact at TV Guide called me back and told me that it was the end of the year and he had extra in his budget. He also told me that if he did not use it that he would not be able to use it the following year and offered to pay me 150,000 for the trivia game plus some other smaller games.

We took that deal which gave us more projects and additional revenue coming in from additional parties. That is when we realized that the business of creating games for other people was a profitable endeavor. We were still spending most of our time with our website that was not generating any money. That is when we made our shift from B2C and moved to be a B2B company. That allowed us to go after companies that had users and budgets.

This segment is part 4 in the series : How To Build A Profitable Gaming Company: Kenny Rosenblatt, CEO of Arkadium
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