You all hit on good points.

The game industry is very much like the movie industry. Publishers fund say ten games hoping one will be a smash hit and one or two make a little money and the rest tank.

That one success recoups all the losses and makes a profit for the company. They then repeat the process. Many games are not developed in house of publishers originally. Publishers don’t want to risk the overhead of teams that can''t produce ‘guaranteed’ winners. They then will pick up and buy the successful companies often for less than they are worth.

How?

Its really rough being an independent developer. Let me walk you down the life path of an average starting company. First of the new company wont get a good deal from a publisher for a first title period. The only exception is a company started by a person or group with a track record on a previous VERY successful title.

A new company can expect tight deadlines on a schedule that is too short to be realistic. They will get at the most 10% royalties on the project. In addition that 10% is only given to them after they pay back the advances they use to make the game.

That means that if the game cost 1.6 million to make they have to pay all that money back before they see a dime from sales. On top of that you won''t get your money for a good 90-180 days after the games are sold. This is due to accounting delays and the desire for publishers not to want to part with money.

Okay so sign the deal and you start making your dream game. You have your staff and studio all set up. This took more time than you thought it would. You now only have 16 months left on a game you promised in 18 months. The first milestone is due, most likely a design milestone followed by a technical design milestone.

This is where the fun begins. The publisher will now step in and tell you how they would like you to change just a few things to make the game more marketable. If you don’t agree you don''t get paid. This will continue throughout the whole process. To be fair some companies need this reality check in other cases the publisher is just dead wrong. You need to fight you battles on these issues and really listen to what the publisher is asking.

For example you may be asked to make the game that has the most awesome next generation cutting edge graphics on the planet. But at the same time not to exceed the minimum specs of a three year old 8 meg video card.

The publisher wants to sell units. I call them units because they don''t care that they are games. They could be toasters or urinal cakes for all they care. They have to think this way or they go out of business. You need to pray that your producer at the publisher understands your game and believes in it. If you are very lucky they will go to bat for you and let you slip a milestone or fight for additional money without a change to the contract. This will be at great risk of there personal reputation and ultimately there job, so don’t count on it.

Remember the publisher figures the odds are that you are going to fail. They know that. They don''t want to throw away any more money on a loser then they have to, so they keep the schedule tight and the milestones aggressive. Remember that a project can be cancelled at anytime up to the point where you hand over the completed game.

So what the next step in our process? Most likely your late on a milestone.

Why?

Because you agreed to do a 24 month title in 18 months because you REALLY wanted to start your own company and get started living your dream.

Well guess what, if your game is going along pretty well and you still might have a chance to make the publisher money you’ll get and extension. I think the publisher actually expects putting a little more money in since they got a good contract in the beginning. In addition your company is most likely already dead and you don’t know it.

The price of an extension is going to be a lowering of you royalties. This will take your 10% and make it say 5%. We having fun yet? You take the deal figuring you’ll somehow sell 400,000 or 500,000 units. You know that only a handful of games sell that many but you are going to be the exception.

You start going into crunch mode. Everyone works longer hours to make the game done. You start ripping out anything from the game that isn’t critical won''t break it. All the cool and nifty features that would have distinguished your game from the rest of the pack are now gone.

The dust clears.

You hand off your game and realize that you aren’t going to have payroll if you don’t have a new project. Those big royalty checks (yeah right) won''t come rolling in for a while.

Hopefully you figured this out before now, if so you still have a slim chance to survive. Land a deal before the first game ships. If you do you will avoid shopping around for a new deal as your just completed game dies on the shelves and repeat the above process one more time, this time without a safety net. If you fail this time you won''t be able convince another publisher to give you money.

If you fail to make a great selling game…

Game Over. Find a new job. There is another startup starting 3 blocks down with an idea for a game that can’t fail!

Okay lets do the ''Scooby-Doo Ending'' here for a moment and suppose you are successful, it does happen as there are very talented people that create miracles in the world of gaming.

The reason why your company will get bought up by the publisher for less than its worth is that you are short on money during the time you are waiting for royalties. If you didn’t start a new project you won''t live long enough to see royalties, more importantly you won''t even know that before the publisher does, that you have been successful. They get sales figures and analyze them before you do. They will then come at the principals of your company and offer some stock in turn for the ownership of your company. You will get decent salaries and be signed to long term contracts to stay with the company....as long as they are happy with your future games...or they fire you.

This isn’t the worse thing that can happen but its not as good as if you could have held on and kept the company in good health.

Well that’s my take on the industry. Your mileage may vary.

So why would anyone want to get involved in this crazy and cutthroat industry? Because it’s the must fun and exciting thing you can imagine being involved in! Have fun!

I can share my ideas on what I think it takes to avoid these pitfalls if anyone is interested I’ll follow this with another post.

Joshua Morris


















Game Designer/Producer -(unannounced project)
Former Designer and Producer of Starfleet Command II and Orion Pirates

I am interested.. wow man.. i never knew all these went behind the scenes !!! pretty interesting.. hmmm

Slow and steady wins the race.

quote: Original post by Jinxx
A new company can expect tight deadlines on a schedule that is too short to be realistic. They will get at the most 10% royalties on the project.

One way to get higher royalties is for it to increase the better the game sells. There are 2 senarios:

1) game doesn't sell well, so you don't get high royalties (10%), so publisher is not worried about it. (the royalties part anyway)

2) game sells very well (1M copies). You get high royalties (30%?), but you sell 1M copies, so publisher is all smiles.

PS. Well said Jinxx


[edited by - Thrump on April 26, 2002 12:04:19 PM]

30% royalty rate is unrealistic. iD barely sees that much.
$30 profit on a game is highly unrealistic. it''s more like $15.

I''m interested!

On a $50 game.

Distributor gets about $15.

This leaves about $35 for the publisher''s net. Then...

Publisher pays $3 for COGS.
Publisher pays $3 for marketing.
Publisher may pay up to $12 for licensing fees (both content and platform, particularly for console titles).

That leaves anywhere between $17-29 for the publisher.

A well known developer might get 15-20% royalties. If they had a good contract negotiator, their royalties will be calculated based on the publisher''s net (% of $35). If they had a bad contract negotiator, their royalties will be calculated based on how much the publisher makes after all their expenses (% of $17-29).

The average developer is more likely to get about 8-12% royalties.

Now, keep in mind that the developer makes no extra money until AFTER their advance has been paid out to the publisher. That means that the first $3-5 million the publisher takes in (either before or after their expenses, again, depending on how the deal was negotiated), the developer doesn''t see a cent of royalties from.

So, using the example of a game with a $4 million budget, the game has to sell about 200,000 copies (figuring on $20 per unit after publisher expenses) before the developer will see anything in excess of their original advance.

That''s why they always say a developer should never count on an advance. How many games do you think sell more than 200,000 copies? I''ll tell you, not many.

And even the sure-fire deals, such as the XBox launch titles, are not guaranteed hits. I know that at least one of the XBox launch titles sold well under 50,000 units. And I mean *well* under.

R.

quote: Original post by Tacit
I know that at least one of the XBox launch titles sold well under 50,000 units. And I mean *well* under.

Care to say which game. While I cant say I''ve been keeping up with any of the statistics, I dont recall any launch titles that I would expect to sell that poorly.

quote: Original post by Jinxx
You all hit on good points.

The game industry is very much like the movie industry.....

.....

..... I’ll follow this with another post.

Joshua Morris


Game Designer/Producer -(unannounced project)
Former Designer and Producer of Starfleet Command II and Orion Pirates

There you have it. Straight from the horses mouth.

BTW. Do I sense bitterness in this post?

D.V.

Carpe Diem


[edited by - DeltaVee on April 26, 2002 1:55:20 PM]

No bitterness at all. Just trying to share with other people so they know what they are in for if they decide to give it a try. This industry is a business like any other and you need to be seriuos and know that just because your dealing with a fun project, business is still business.

As I stated in my post I love the industry, and I have no intention on leaving it. =)

Josh



Game Designer/Producer -(unannounced project)
Former Designer and Producer of Starfleet Command II and Orion Pirates

I''ve always heard that sharewear is also a good possibility. Common, the graphics don''t have to be good, the sound doesn''t have to be good, but if you have a truly fun game, it should sell. And you can work from home. You''ll get much more royalties (because no one is taking them from you (except maybe a credit card processing company)), but you won''t make as much. That sounds like a little more stable type of thing.