Zoo Digital: Ian Stewart
He sold Gremlin Interactive for £24m but is back with a new business
Ian Stewart suffered a heart attack at the top of a mountain – and survived.
To make matters even more dramatic it happened in the midst of a snow storm, with only his young daughter for company. With the weather worsening, the 52-year-old technology entrepreneur heroically accompanied his daughter down the slopes to the nearest chair lifts, which would carry them back up to their hotel – and to safety.
Within seconds of completing this Herculian task Stewart collapsed. A few hours later he was having a quadruple bypass, care of the best heart surgeons in Salt Lake City.
“Something just took over,” he explains. “My daughter wasn’t a strong skier and I needed to get her to safety. By the time I realised I was having an attack it was too late. I guess instinct took over. Still, it meant I got my first and only ride on Concorde. It was the quickest way back home once I’d been given the ‘all clear’ to fly.”
What he fails to add is that this was just three weeks after surgery. For many people, having major heart surgery would have led to an early retirement filled with sunshine, sangria (in moderation of course) and more gentle pursuits.
But within a year, Stewart was back in business. Nearly five years on, AIM-listed ZOO Digital Publishing Group has become one of the UK’s leading digital entertainment publishing houses. Employing 120 staff, the business boasts a turnover of £11m – and, tantalisingly, he claims a groundbreaking deal for the DVD market is about to be announced.
Stoic practicality is a persistent theme throughout Stewart’s career. Obstacles become opportunities through a combination of strategy, optimism and honesty, as demonstrated by his first – and second career choice.
Splitting his formative years between Surrey and Sussex, Stewart readily admits he was not a natural student. As such he left school at 15 to follow in his father’s footsteps as an engineer. He started a five-year apprenticeship with a tool making firm but was soon drawn to an advert for a trainee sales manager at hi-fi retailer Laskeys.
Twelve months later he was a manager and considered someone who could get things done. “As a result I was offered the opportunity to open a new store in Sheffield, so I jumped at the chance,” he explains, presumably giving him a taste for being an entrepreneur.
Stewart was subseqently headhunted by rival hi-fi retailer Hardman Radio. His defection however became a little complex when Hardman acquired his former employers a few months later. “It was a little unexpected, but Hardman was expanding aggressively. I’d left on good terms – but the whole experience taught me the value of maintaining good relations,” he laughs.
When computers arrived on the shop floor his life changed. Excited by the new technology, games fired his imagination and when the Sinclair Spectrum was launched Stewart began to see a wealth of opportunity. “It was very much focused towards entertainment,” he recalls.
“It was then I started to see just how computer games could take off, especially as at the time there really wasn’t much software available. So I gave up my job, downsized the house and opened a shop entirely devoted to games software.”
Just Micro quickly became an institution among teenage boys – so much so that Stewart was forced to throw them out during school hours. However, with a constant line of equally enthusiastic programmers it didn’t take long for him to realise the potential in designing and publishing the games himself. In 1983 Gremlin Interactive was formed by Stewart and three others, with each taking an equal shareholding.
Titles like Potty Pigeon and Suicide Express proved instant hits, but it was Monty Mole that earned Gremlin nationwide fame. “It was at the time of the miner’s strike,” laughs Stewart. “To play the game you had to collect as many ballot papers as possible for an Arthur Scargill type character. It even made Trevor McDonald’s famous ‘and finally’ slot. It was then I realised the value of using the media to get product exposure.”
Monty’s popularity helped to grow the business at an even greater pace, but things were not rosy in the boardroom and Stewart maintains the management team should have listened to the company’s advisers more. Instead, after a power struggle, a majority shareholder emerged from the four co-founders and Gremlin was relocated to Birmingham. The direction the company was taking made Stewart push for a management buy-out to regain control. Its completion saw the business move back to Sheffield, with the creation of several satellite offices thereafter to meet demand. With the move business continued to boom – as did the level of consumer expectation.
Stewart decided it was time to float the business – but things didn’t quite go to plan. The London Stock Exchange flotation raised £8m instead of the anticipated £12m, leaving Gremlin short of cash after an acquisition of the creators of Grand Theft Auto, Dundee-based DMA. Worse still, the acquisition did not include the rights to the now-internationally renowned Grand Theft Auto, which had already been sold to German-based Bertelsmann. “We didn’t miss out on the rights in negotiations though,” explains Stewart. “We wanted the GTA rights but they’d already sold them. It wasn’t an issue in the acquisition, we wanted to buy DMA anyway.”
In a fragile financial position, Gremlin itself became a prime acquisition target and it was an approach from Infogrames SA (now known as Atari) that finally made it to the table. “With a high level of uncertainty in the market, and the effects of the flotation, we decided it would be better to be part of a bigger group,” says Stewart. “So we sold for £24m. The original plan was for me to play a key role in the merger. But then I went and had a heart attack on the top of a mountain.”
Divorced for a second time, and still recovering from surgery, Stewart returned to Infogrames to discover that the merger was far from harmonious. “It was so sad, it had changed so much. It really wasn’t my business anymore, so I left with the understanding that I was going to start another business.”
In 1999, Stewart’s gut instinct about the internet’s future role in business and entertainment led to the creation of ZOO Media Communications. A specialist in designing and maintaining interactive websites, its client portfolio included some of the world’s biggest names such as Motorola and Michelin. But as Stewart quickly points out, post the dot com bust no-one wanted to pay the going rate. “I was starting to get to the bottom of my pocket,” he admits. “It was obvious we couldn’t build a business like this so we decided to change strategy.”
Growth by acquisition
In 2000, a chance conversation with Andersen Consulting led to the acquisition and subsequent reverse takeover of Kazoo 3D to achieve the company’s AIM listing. The move furnished ZOO with the technology and skills to open up a new market. Kazoo’s software enables users to create and manipulate images into 3D and it’s this that ultimately led to the creation of DVD-Extra Studio, an award-winning technology that the company claims enables DVD authors to add new interactive functionality faster and cheaper than other technologies on the market.
Using the value of AIM paper, Stewart made further acquisitions to strengthen the business. This included the purchase of fledgling games publisher Digital Worldwide, which offered access to significant rights to major GameBoy Advance titles. And in March 2004 ZOO acquired Bristolbased Hothouse Creations, which produced Pop Idol and American Idol for PS2. The strategy enabled ZOO to establish itself in the entertainment sector and in particular gain a reputation for innovation in a fast-evolving area.
“We noted the number of DVD players being sold and realised there was untapped potential in DVDs,” explained Stewart. “DVD-Extra Studio provides the only means to unlock interactive capabilities. Such was the potential we created a separate business with ZOOtech to house these services.”
ZOO later approached Celador, owners of the Who Wants to be a Millionaire? rights with the idea of an interactive DVD game. The company had tried and failed to develop such a concept. ZOO Digital Publishing showed the company how it could create a fully-interactive game and a deal was agreed. In 2003, ZOO signed two deals with Universal Pictures to publish three further titles using DVD-Extra. And in amongst this, Stewart was able to buy back the rights to former Gremlin games from Atari, which had shut the company down. “It did give me some satisfaction, but at the same time it was sad that Gremlin was truly buried,” he says.
Although Stewart believes a canny eye for an opportunity as well as an understanding for what makes good entertainment is vital, he identifies finding and recruiting talent as fundamental reason for his success. “I don’t have a philosophy as such,” he says. “But one lesson I’ve learned is the value of surrounding yourself with talent and leaving on a good note.”
He puts his impressive track record in making acquisitions down to not underestimating the time, effort and money you have to put into it. “If I could highlight one thing it would be to spend time speaking to the key people,” he says.
Having just married for the third time, Stewart has ambitious plans for ZOO, all the while acknowledging the increasingly difficult technology climate. “There’s a strategic plan to grow ZOOtech quickly and the best way to do that is to find a strategic partner. That way we’ll get to market a lot quicker and to a bigger market. We’re not a multi-national business and need someone not only with global reach but with people on the ground internationally. We’re exploring it now.”
Asked what he’s done differently second time around Stewart says he’s been able to select his own team, and identify the right people and skillsets. He adds that smart companies will continue to grow and innovate. “Others will disappear. It’s the nature of business.”