From two-person team to Activision workhorse: the rise and rise of Vicarious Visions

How a couple of ill-fated indie games led the Bala brothers and Vicarious Visions to mainstream success.
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If you want to question the romantic idea of independent video games versus big publishers, of the Little Guys versus The Man, I recommend a visit to Albany.

In two decades, brothers Karthik and Guha Bala have nurtured their indie game-making hobby and transformed it into an Activision-owned video game factory. Now in their 30s, both brothers are married with kids. Both sport lengthy job titles; Karthik is CEO of Vicarious Visions and CTO of Activision Mobile, while Guha is president of Vicarious Visions and senior vice president of Activision Publishing. Together they run a company that releases upwards of a dozen games a year.

I'm here to see one of those games: Skylanders: Swap Force, the latest in a children's game series that has sold more than 100 million toys and made more than $1 billion.

The brothers are self-made millionaires now. But their "creative DNA," Karthik tells me, hasn't changed since their days building computers in their parents' basement. Sitting in Vicarious Visions' massive office — a renovated factory just outside of Albany, NY — it's a struggle to imagine the company's humble beginnings.

Why don't you just make a game?

There was nothing to do in Rochester, N.Y. Upstate New York. It was 1991, and the Bala family had just moved to town.

Mind you, upstate New York in the '90s was rough. More people were moving out than were moving in. And nearly 30 percent of new residents were prisoners — the area was home to a sizable influx of inmates, families of prisoners and prison employees. The people who stayed were getting older and more segregated. The area, once home to factories, shipping and tourism, was on the downward slope.

The Bala parents moved to the area for their medical residencies. This latest home — following stints in Florida, Britain and India — wasn't any more welcoming than the last, but at least the teenaged Karthik and Guha had each other. The boys were into science and technology, so with few friends and plenty of free time, they decided to build a computer.

Before the internet and big box electronics stores, building a powerful computer required a considerable investment of time, research and compulsive nerdiness. The two boys wanted to find a sound card, one of the latest technological miracles. Instead they found someone who made sound cards.

Paul Travers had left his job at Kodak to design sound cards in his basement. In the Balas he saw kindred spirits.

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Karthik Bala

"[Travers] asked me what I was interested in," says Karthik, "and I said I wanted to make games. He said 'Why don't you go do it?' And I said, 'I can't, I'm just a kid.' And he was like, 'So what's stopping you?' He gave me a book on Z88 assembler and a book on C, and he was like, 'Go learn it.' And that was that."

After a few months, they had a pitch for their first game. Neither could drive yet, so Travers drove the brothers to their first meeting with a publisher. In the car, the mentor turned and asked what they called themselves.

Karthik blurted out, "Vicarious Visions." "I must have learned the word in English class like a week before," he says. And that was that. High schoolers by day. Game makers by night.

The first game would take years to create, but in the interim the kids discovered a shared knack for creative coding tricks.

"I set up a studio down in my parents' basement," says Guha. "I set up a blue screen stage, borrowed video cameras from the school. We went to a hardware store and got set up with lights. We were shooting video down there. I wrote some tools — I mean this was pre-CD ROM. I was setting up my PC to capture still frames fast enough onto a RAM disc to be able to do full-motion video. This was back in '91, '92. The technology seems really primitive compared to now. We didn't know how to do these things, so we were just making them up."

By 1994, the duo known as Vicarious Visions was helping Travers with the VFX1, a virtual reality headset. The product would ultimately fail, but the development process introduced the brothers to designers at studios like id, Looking Glass, Parallax Software and other top-level studios interested in supporting the hardware.

For the first time, the brothers saw up close that video games could be a legitimate business.

The old college try

For college, elder brother Karthik chose Rensselaer Polytechnic Institute (RPI). The school had a business incubator where the brothers could set up an office. A number of classmates came on board, and the budding company took advantage of the established entrepreneurs that volunteered support.

That year, Vicarious Visions incorporated and signed its first official deal with a publisher. A year later, Guha went to Harvard and, despite the distance, things ran smoothly.

Then in 1996, the small team at Vicarious Visions completed its first game, Synnergist, and submitted the code to its publisher in the UK. The publisher never returned the phone calls. It was a scam.

The brothers were in trouble.

"I had a lot of credit card debt," says Karthik, "because credit card companies love to give college kids credit cards, right? So I ran up a huge amount of debt. And I called up my dad. It was Christmas 1996. I said I was in trouble and he said how much trouble and I told him the number and he gave me the best piece of advice ever. It was dead silence on the phone. And then he said, 'You know, I don't have that kind of money. You got yourself into this mess. Get yourself out.' Then he hung up on me. And that was Christmas. So it was pretty tough."

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Guha and Karthik Bala at Vicarious Visions

"What became so evident," says Guha, "was, first, you can't make games just for yourself. Even though it's important to be really passionate about what you're doing. But an even bigger point is this: To be able to have the ability to do something creatively, you also have to be able to think of it as somewhat of a business. And be able to structure it in a way where you're thinking about your customers, your gamers, how do you bring talent together, how do you fund it in a manner that's profitable so you can reinvest in it."

At RPI's incubator, the brothers met with then-CEO of MapInfo, Mike Marvin. The executive was a star in the region, having led a company that made millions of dollars in revenue — a number that seemed impossibly large to the brothers at the time.

Marvin liked the Balas and saw potential in a video game business. He agreed to work with them on one condition: they keep the business near Albany.

A video game developer in Albany? Albany lacked both a talent pool and a customer base, and it wasn't an area anyone would associate with video games. But at that point, what other option did they have? Besides, the city had grown on them.

They agreed to Marvin's deal.

Why not do the thing that makes money?

After college, the Balas got a real office and filled it with real employees. Karthik convinced his brother not to pursue pre-med at Harvard, and to instead join him in the far less stable business of independent video game development.

"Often people who are not indie, they look at it and they have a very romanticized view of it," says Karthik. "[But it's] really hard work and no budget and no money."

Vicarious Visions' first major game, following the publishing debacle during college, was a space combat RPG called Terminus.

"We ended up getting a personal bank loan for a million dollars. We knew if we didn't figure this out and make it work, we'd be screwed for the rest of our lives."

"We did some crazy stuff," says Karthik. "We had PC, Mac, Linux cross-platform communication. Persistent world servers. And this was in 1997. We wanted to do voice chat and communication between players. The Department of Defense had recently declassified an audio compression algorithm that we ended up using and writing Voice over IP within our game at the time. We did some really cool stuff primarily because it hadn't been done."

Terminus won awards for programming and audio at the first Independent Games Festival Awards. But publishers were reluctant to take on the project. When Vatival Entertainment finally shipped the game in 2000, it hardly sold.

To keep the power on, the brothers turned to contract work. The Game Boy Color was about to be released, and the big video game publishers were hungry for games based on family friendly intelligent properties. From 1999 to 2000, Vicarious Visions released nine Game Boy Color titles, featuring everything from Barbie to Vigilante 8.

To maintain creative enthusiasm, the brothers and the other employees embraced a culture of tinkering, trying to push the limited mobile technology behind what were otherwise straightforward cash grabs.

Take the Game Boy Color's sound, for example.

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Skylanders on display at Vicarious Visions

"It was a two megahertz processor that couldn't multiply or divide," says Karthik, who has a habit of talking about computer parts the way some people talk about athletes — a blur of jargon and numbers. "It was Z80 assembly. Audio capabilities were a couple pulse waves and white noise. We were able to do four-bit playbook by modulating those channels with roughly 5 percent of the CPU usage."

What does that mean?

"All of a sudden the Game Boy could talk. It really got the attention of Nintendo."

But a funny thing happened on the way to indie development success: The brothers realized that customers wanted to play the mobile games the company developed for easy money, not the high-minded, hybrid PC RPG the Balas dreamed of using that money to pursue.

At the same time, the studio was once again in financial straits. One of its publishing partners closed, nullifying a number of contracts. The brothers had to meet payroll, so the two went, hat in hand, to every bank in the area.

"We ended up getting a personal bank loan for a million dollars. We knew if we didn't figure this out and make it work, we'd be screwed for the rest of our lives. So we personally signed and got a million dollar bank loan […] Look, [we were] staring into the abyss. You've come this far and you're signing away the rest of your life here, but you have people to take care of. We had 40 some people on the payroll. Some of them having families. This is real. And we really had to do it."

Tony Hawk loves complex math

The company had received early Game Boy Advance hardware from Nintendo, who was impressed by the audio trickery with the Game Boy Color. The Balas saw the hardware as the right opportunity at the right moment.

The company had just finished its first project for Activision: Spider-Man on Game Boy Color. The brothers enjoyed working with Activision, and believed a big Game Boy Advance contract would help to stabilize their wobbling company.

"At the time," Karthik says, "[Activision's] crown jewel IP was Tony Hawk's Pro Skater."

During that year's E3, Guha spotted Tony Hawk at Activision's booth. The brothers immediately phoned the team in Albany and told them to help create a pitch for Tony Hawk's Pro Skater 2 on Game Boy Advance.

The team created a few fake screenshots, which they overnighted to Los Angeles. As they imagined it, Tony Hawk Pro Skater 2 would be playable from an isometric view like the classic 720 degree skateboarding game.

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Activision loved the pitch. Tony really loved the pitch. By the end of the show, the Balas had a handshake deal.

"So we came back," says Karthik, "and said to the guys, 'You won't believe this, we got the deal, we're going to do Tony Hawk on GBA.' And the lead engineer said, 'I got some bad news for you. We did the math and storing the frames of the skater and all the angles — we don't have a cartridge large enough to fit all the sprites. It would take up 10 cartridges just to fit all the sprites of the skater.'"

Then came an idea: do real-time 3-D rendering on a 2-D system. At the time, 3-D hadn't been done on the GBA. In fact, hardly anything had been done on the GBA. And even if they could render the skater in 3-D, it would need to interact with a 2-D world in a believable way.

Over the following weeks, every environment was drawn out on graph paper with rulers. Then that information was conceptualized into comically long mathematical equations that the team could store in a Game Boy Advance cartridge's memory, which was all the space they had.

Essentially, they were going to create a game in which a 3-D character slid over a 2-D background, creating the illusion that the two existed in the same plane. The skater wouldn't be colliding against a half-pipe or a ramp. He would be colliding against complex math.

Meanwhile, in Colorado

In 2001, Jan-Erik Steel, then a bank software engineer out of Boulder, Colorado, was strolling through a local store when he saw a copy of Tony Hawk's Pro Skater 2 for GBA. Curious, he bought it.

"It was this incredible thing," says Steel. "Really, it shouldn't have been able to do that on the hardware it was on. I reached out to Vicarious Visions and went through an arduous process to be interviewed, and luckily they agreed to take me on."

Steel moved to Albany for the job. He tells me he knew after a few years with the company it would be easy to move around the industry, but the creative freedom has kept him onboard with the Balas.

Creative freedom, I tell him, isn't what I associate with a company that for two decades has produced games almost entirely based off of known intelligent property like SpongeBob and the Marvel superheroes.

Steel thinks about that, then tells me a story about designing a Spider-Man game for the Nintendo DS. This was before the iPhone. Steel was fascinated by the idea of creating an action game entirely controlled by touch commands. But he knew he wouldn't have time to take that sort of risk on a contracted project.

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Jan-Erik Steel

The brothers gave him three months to work on the idea for a future game. Kids came in and tested it. He worked on engineering and brought on an artist to help with the tech demo.

"Coming out of that process," says Steel, "I had a lot of conversations with Karthik about what it might mean to have a group of people given a space and a little time free of worries about failure. [You don't have to worry] about endangering a product's schedule. I thought it was important a game lab be a separate entity."

Vicarious Visions has had what it calls an Innovation Lab ever since. Between the Lab and the other tinkerers at the company, Steel tells me, the studio went on to try a variety of goofy, creative and sometimes incredibly successful ideas.

Some didn't work, like the rumored six-string guitar for the canceled Guitar Hero 7.

But others were creative and financial achievements for the company. One team found a way to use an SD memory card for the DLC on Guitar Hero for Wii, helping it become one of the most successful third-party games on the system. Another team created a device that turned the Nintendo DS's cartridge slot into a controller, allowing for a mobile Guitar Hero.

Selling out or buying in

In 2005, the company sold to Activision. At the time, Vicarious Visions was tremendously successful for an independent studio, having just moved into the large, remodeled space in Albany, generating millions of dollars in revenue.

But the brothers say they saw a bleak future. As they put it, fewer and fewer publishers could afford contracts for well-made games.

Vicarious Visions had a long history with Activision, and the brothers liked how the publisher allowed its studios to maintain their own independent cultures. They would be free, for the most part, to set their own terms. So they signed on the dotted line.

The brothers no longer have money woes.

"At that point," Guha says, "my job was to make sure this was a great acquisition and to keep our employees happy."

The brothers no longer have money woes. And so I ask them: Is now their chance to go back to making the passion projects of their childhood? What's keeping them here?

They both brush off those questions. They have so much to do in Albany.

The normal life of very successful people

The brothers are busy, balancing time between work, family and MIT, where they're both about to receive MBAs from the Sloan Business School. Every two to three weeks they make the weekend commute — what Guha calls a "Thursday Friday deal." And every six months they spend a full week on campus. Plus there's the homework in between.

"I never thought I'd go back to school," says Karthik. 'To be honest with you, when I was in undergrad, my main objective was to finish and get out."

They have also used their wealth to serve as philanthropists.

"We always felt the community made a big investment in us," says Guha. "We were just a couple college kids at the time. The business communities asked what were things they could do. Honestly, I didn't even know what a performance appraisal was when I was in college. What is that? Do we really need to do that? And payroll? Can I just write you a paycheck? I had a degree in chemistry. We always felt when it was our turn we'd want to pay it forward as well."

Guha tells me their motives are twofold:

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Vicarious Visions Guitar Hero add-on

One, he believes kids no longer have something like the space program to inspire an exciting and direct line from science class to the real world. They've aligned with STEM, bringing kids in for tours, participating in summer camps, giving lectures at schools.

He gives an example of a group of kids who received guidance from Vicarious Visions employees.

The previous year, a group of local students came away from the regional robotics competition empty-handed. Hoping to re-energize the students, a mutual colleague introduced them to Vicarious Vision employees. The employees, who shared a love for robotics, showed their newfound pupils practical examples and helped them with the more complex math. At the next competition, the students had the top entry in the region for robotics.

Which brings him to his second point.

"When we get our people involved in the community," says Guha. "It makes them put roots in the community. They get a stake in the community; it makes them feel good and not want to leave."

What's in a word

Walking through the foyer and down the front hall in Vicarious Visions, it's hard not to be a little cynical and skeptical of the whole operation. And it certainly makes you rethink the current perception of indie video game development.

The catalogue ranges from beloved childhood favorites to dead celebrities' Hollywood flops: Transformers, Madagascar, Finding Nemo, Bruce Lee, Over the Hedge, Bee Movie, Crash Bandicoot, Frogger. The list goes on. Vicarious Visions has released at least 90 unique games since 2000 — that's not including alternate SKUs for various platforms.

There exists a romantic idea of indie games as daring art and indie designers as scholars and bold thinkers. And it's equally tempting to think of IP games as cash grabs and publisher-owned developers as slaves of product testing.

Or further reduced: mainstream, bad; indie, good.

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But Vicarious Visions is a tough nut to chew on. None of their games are mentally challenging, nor are they, on the surface, revolutionizing the idea of the medium. However, the Balas exude earnestness and creative gusto. And they're providing a clear good for a city and region that truly needs all the help it can get.

On top of that, they appear to genuinely love what they do: make games about toys and cartoons and comic books. "We're all pop culture junkies," says Karthik. Guha points to Nintendo not creating new IP every year, but building good games off of known franchises. "One of the attractions for talent at VV," Guha says, "is knowing you can do cool creative work and millions of people are going to play it."

The latest million-dollar intellectual property

Members of Vicarious Visions have been working on Skylanders: Swap Force for over a year now. In that time, the studio also produced three mobile Skylanders games. It creates, it releases, it moves forward, with employees occasionally breaking free to test some wild idea.

Karthik shows me the tinker rooms. I see what looks like a ransacked Radio Shack, filled with wires and gizmos. There are wooden sculptures with electronic legs and clay statues that look like ancient pagan relics. These are prototypes for Swap Force. They snap apart not just at the waist, like a Swap Force toy, but at multiple points, as if the designer couldn't figure out which parts of the body were the most fun to tear asunder.

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Skylanders: Swap Force prototypes in the Vicarious Visions lab

"We started very basic. The connector technology we had initially was headphone jacks. And Silly Putty we used to sculpt with. Anything we could just build rapid prototypes to prove or disprove the concepts, to see how physical objects could be combined and have data and power technologies work together."

At the Vicarious Visions office, no one takes credit for the idea, but when I talk with Guha, he shares this anecdote.

"I was in the Museum of Natural History with my daughter about a year and a bit ago. We bought a big bag of magnets. Really strong ones. People are just buying bags of magnets. We started playing with them. And I was like, how can we make this work? I asked [one of our employees] to put some magnets together and cut some Skylanders up. Just make it as strong as you can. And see what it sounds like. That's how it started."

There's always money in the lemonade stand

"It's a little known fact," Karthik says. "I think all of our games over the years, the total is closing in on $3 billion retail sales. Which is not too bad."

But mostly, the brothers are happy to have a game they can share with kids. Karthik has a 4-year-old daughter who will play with Portal while he steers. Guha has a 7-year-old and they play together. They love games, Karthik tells me, but he's not sure that's their number one passion just yet.

"Our two oldest daughters," Karthik says, "last summer they started their first lemonade stand. I said, 'Aha! I'm taking a picture of that! They're going into business with each other!'" Babykayak

[Photography: Tom Connors]
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