Publishers: the Money<->Mouth Interface Problem

[princec]

A recurring thread in here is to do with publishers, variously seen as thieves, useless, or wonderful, depending on random experiences of random developers with random products. I've not found any correlation between publisher, developer and product yet...

...except one universal oddity.

When a publisher contacts some indie and tries to squeeze an exclusive distribution deal for a product, invariably the publisher insults the developer with an outrageous contract cleverly loaded to ensure that there is almost no risk for the publisher and almost no money for the developer.

Example:

Some publisher: We'd like to distribute Alien Flux, online and retail, exclusively for the next 3 years.
Puppygames: That'll cost you $50k, all in.
Some publisher: We were thinking more like $1500 up front and
Puppygames: <clik> brrrrrr

It costs at least $50,000 to write a game. Period. You want a $50,000 game? Then pay $50,000. If you don't think you can make $50,000 back publishing it then you're in the wrong business.

Cas

[formfarbeminze]

i think you have the right attitude, but how do you come up with those numbers? how can you calculate the cost of dev for 1 game is > 50k $ ?

[cliffski]

does it cost $50k though? maybe alien flux cost that, but if someone offered me $25k for the total worldwide rights to Planetary Defence I'd take it right away.
Not all games 50k, some cost 1k, some 1,000k. I've only had 1 game retailed standalone so far, but many others on compilations, and for way less than 50k.
I agree that there should be some minimum advance for any retail deal, and I'd put that at $5-10k depending on game quality.

[Jack Norton]

I think price should be based on sales figures of a game. You may have spent even 10 years making a game, but if the game for some unknown reason doesn't sell, you can't ask huge money for it (not referring to princec specific case, of course!!).
So well, if they offered me 25k$ for UBM exclusive worldwide planetary rights for next 3 years... hmmm... no thanks, you need at least 50k$

But if they offered even 10k$ for USM, I'd take them right away!

[Mark Sheeky]

When a publisher contacts some indie and tries to squeeze an exclusive distribution deal for a product, invariably the publisher insults the developer with an outrageous contract cleverly loaded to ensure that there is almost no risk for the publisher and almost no money for the developer.

That sounds logical to me. There are a lot of developers so a publisher can afford to insult one or two (although asking people to sign an unfair deal is not an 'insult'). A naive developer will sign even under terrible conditions, and perhaps an experienced one will say no and offer counter terms. It is exploitative, but when there are squillions of developers (and a good percentage of naive ones) then publishers can get away with offering really poor terms.

People that are willing to accept less than the real cost will always push down the price offered. As long as there are developers who will and do work for nothing then there will be such struggles. $50k? I'm sure I could buy up rights to some games for $500.

Mark
Cornutopia Games
http://www.cornutopia.net

[Jack Norton]

I know someone (who will remain anonymous) that sold his game + full sources + level editor for about 5000$...

[Gilzu]

I know someone (who will remain anonymous) that sold his game + full sources + level editor for about 5000$...

It doesnt really matter in how much you sold your game. It does matter however, in how much your were pleased with what you got for it. If you got what you believe your game is worth (by the time you spent on it, resources you invested/hired or how much you think its worth) then you did yours.

Same applys to selling a copy of your game. Should someone want to buy a copy of your game claiming he's willing to pay 5$ when it worth 20$? and what will happen when someone wants to buy it in 18$? Sure, when its one copy, you might stick to your pricetag, but when you sell your entire game, haggling is fine, as long as you get what you thing your game is worth (or at least close to it).

[Fost]

I think I'm with Princec on this. Indie developers seem to have a low opinion of self worth: I'll use this thread as an example: It cost $50,000 to make a game, are we not entitled to make a profit on top of that too?

Do you think any of the (retail) publishers would even approach you if they thought they couldn't make at least ten times what they are offering? The argument is usually that the publisher is taking all the risk - yes you've taken a massive risk developing a game off your own back, but if it doesn't sell, they'll be out of pocket.
Well, my heart bleeds, - if someone offers you $1000 for a territory, how much money do you think they expect to make back? $10,000? Who would even run a publishing business to make $10,000 per game?? So, yes, I'd agree, publishers are shouldering a risk, but they have been able to pull the wool over everyone's eyes for so long they are getting away with whatever they want.

The whole situation is in a mess and I think the only option is to avoid it and publish yourself online. Last year we talked to a representative of one (if not the) biggest budget publisher in the US - he was actually a really nice guy, and was totally honest with us. They basically don't bother with up front payments, because they have people offering them money to take games. I'm pretty sure he wasn't joking: by this point in the conversation we'd already told him we weren't interested, and were just having a general chat about the state of the industry.

[Scorpio]

Just because a game cost $50k to develop does not make it "worth" $50k (it could be worth more...it could be worth less). If you decided to pay $10k to have custom music tracks added...does that make the game suddenly worth $60k? If you had paid yourself double would that make the game worth $100k? Of course not...the value of a game to a publisher is not directly related to the development cost.

Plus, the cost of development is now a sunk cost. The publisher is looking at it from a money making perspective. 10% of the games make 90% of the money so the majority of games are not going to make much money...so the publisher needs to manage their risks (just like any other business).

Cas, would you pay $50k for AF? If you would, then you're saying you know for sure you will make that money back and more. However, you know (as does any publisher that does their homework) that there's a big chance the game won't make $50k in profit based on it's internet performance.

I'm not trying to defend the publishers but it's not reasonble to expect them to pay upfront money to cover the development costs of a game. Everyone's goal is to maximize their profits so their going to start with a low offer...this is just a starting point for negotiations. Now it's up to the developer to negotiate more up-front money and/or non-exclusive rights, higher royalties...or whatever they're looking to get out of the deal.

I do agree that many first drafts of contracts from publishers have clauses and wording that no developer should agree too. I agree that this is bad.

Just my two cents...
-Scorpio

[Mrs MiCo Games]

I can see Cas point but I'm not sure that I agree to 100%. First I don't think you should be offended by a low offer, be pleased that they are interested! That they are taking the time to even make you an offer... I'm sure they see a lot of games that they won't even consider!

Then... of course they need to make an offer that is lower than what they expect selling because they need to get the cash from somewhere to cover taxes, marketing, salary etc. That said, you shouldn't accept an offer that you're not happy with.

I agree with Gilzu ... that as long as you are happy with the deal then who can say that it's not a good one?

[goodsol]

It costs at least $50,000 to write a game. Period. You want a $50,000 game? Then pay $50,000. If you don't think you can make $50,000 back publishing it then you're in the wrong business.

Someone buying a game doesn't care how much it cost to write. They only care whether they could make more than what they are paying for it.

If I were looking to buy Alien Flux and you said $50,000, I would simply say no thanks and move on. There would be no way I could make money at that price. This isn't to say that some other company wouldn't be willing to pay that amount as it is possible that there is some company out there that focuses on that kind of game and could make the determination that they could sell more than $50,000 worth of copies of the game, in which case it would be worth it to them.

If you are looking to sell your game, you have to remember that any potential buyer doesn't care what you think the game is worth. They only care what they think the game is worth, which is based on what they could make off of it. That number will vary dramatically from buyer to buyer.

It's not like real estate, where any buyer could probably turn around and sell to someone else if the price is near a generally accepted market price. There aren't people in the business of flipping games (buying games and then selling them to someone else). There are very few buyers and any buyer will realize that there is no one else they could sell it to, they have to make back whatever they pay themselves.

When I go around looking for games to buy, what I would be willing to pay is based on what I think I could make back with my company. Some types of games would be worth a lot more to me than others and there are a lot of games that might be really great games and valuable to others but wouldn't be worth very much to me at all. It all depends on the type of game, the quality of the game and the price. If the price gets low enough, then almost any game would become attractive as the risk of buying it is low. The higher the price, the greater the risk being assumed and the more the game would have to be of a certain type and quality before I would be interested.

[DavidRM]

Other people have already commented on the fallacy of game being "worth" what it cost to develop, so I'll skip past that.

Lawyer: "Are we negotiating?"
Devil: "Always!"

Learn to negotiate.

The First Rule of Negotiation is: Know what you want to get out of the deal. If you don't know what you really want, you can't make plans to get it or protect it.

The Second Rule of Negotiation is: Know what *they* want to get out of the deal. If you don't know what they want, you can't help them see how they can achieve it through helping you get what you want.

The Third Rule: Be creative.

There are a lot of ways to arrive at a lump sum. The whole amount need not be handed over all at once. Why not a monthly amount over the duration of the contract? And if you're only getting $500/month from the game on your own, wouldn't upping that even $600/month or $1000/month or more be useful? Even if the total doesn't equal your development costs (yet)? Even at the $600/month level, that's a 20% increase in revenue with very little work on your part.

On their side, exclusivity can be limited by regional market (like North American vs Europe). And with a limited license period, you reach the end of it with a bigger market and more revenue than you might have.

Yes, you might want to be very careful with any company that attempts to lowball you like that at the very beginning. On the other hand, that's the way many otherwise trustworthy and successful businesses are run. And its possible they had not considered an option you can suggest that will make both of you more money, with more appropriately shared risks.

So think beyond the simple lump sum and self-centered justifications. See what the publisher can do for you, and what you can do for them, to get both of you what you want.

Of course, never forget the Final Rule of Negotiation: Be willing to walk away. Don't get so emotionally attached to a deal that you accept a bad deal when no deal would have served you better. Just don't jump to the "walking away" part before you've really thought it through.

-David

[Coyote]

I guess I'm only echoing what everyone else is saying here.

But the value isn't what you put into it --- it's what you get out of it. You aren't entitled to anything in this world, no matter how much you struggle. It's just the way life works.

You have to divorce your own emotions about your product from the cold, hard business sense involved. If it's going to take you another 80 hours of your valuable time to market and sell a game that's only going to bring in another, say, $5000 --- well, then, that game is worth only $5000 to you *IF* you have nothing more productive to do with those 80 hours. On the other hand, if you could actually do something worth more than minimum wage with those 80 hours, then you have an opportunity cost you'll have to pay to get that $5000 on your own, which means your game is worth something less than that.

Granted, if your goal is purely money, you should not be in this business to begin with. So the equation shouldn't come down to strictly dollars (or pounds, or euros, or whatever your local currency - this is a very international group here). But still --- you need to examine your priorities and base your decision not on what you put into it, but what you can get out of it.

[svero]

Someone buying a game doesn't care how much it cost to write. They only care whether they could make more than what they are paying for it.

I'm with Tom on this one. A buyer really doesn't care what it cost you to develop the game. They only care whether they can make a profit on it.

There's more than one way to skin a cat too. If you make a game that costs you ~5k to develop and then license it to 10 budget developers in different territories for 1-2k each you've made a profit. People doing this sort of thing may very well be the people you're competing with to sell your game.

[princec]

It took me, Chaz, and Charlotte 6 months to develop the game, and £10k before tax each barely covers 6 months living in the UK these days, let alone enough to invest. It is a business, after all.

Cas

[princec]

Were I a publisher, and therefore my primary business was to sell, market and distribute games, I'd be thinking, yes, I'd have AF for $50k. Even I expect to eventually make most of that back just selling steadily away on my own, without the huge marketing resources that publishers allegedly have.

I think I might have said this before, but if a publisher were to say, right, we need game X to fill some market segment we've identified, let's get it developed - if they seriously thought they could get such a game developed for $2k then why the hell don't they just hire a couple of inhouse developers and pay them monthly to churn out games? Could it be because... it costs a damn sight more than that to develop a game, perhaps?

Cas

[Jack Norton]

Hehe come on, you can't determine a game value depending on the time you spend making it
Otherwise Half-life 2 should be worth 100 millions $
So since I made UBM in 2 months all alone it should be worth not much? I don't think so...

[princec]

be pleased that they are interested! .... I agree with Gilzu ... that as long as you are happy with the deal then who can say that it's not a good one?

It's this persistent low-self esteem and undervaluation of your own business that lets publishers get away with the way we generally perceive them to behave. Be insulted! Don't grovel for scraps.

Cas

[princec]

On their side, exclusivity can be limited by regional market (like North American vs Europe). And with a limited license period, you reach the end of it with a bigger market and more revenue than you might have.

In this day and age and in particular with digitally delivered media I think it is basically impossible to regionally limit sales of software, or even to limit the license period. ISTR some very interesting spat between Blitz and Idigicon on this particular topic (which has now been resolved but to be honest I'm surprised it didn't turn nastier).

Cas

[princec]

Granted, if your goal is purely money, you should not be in this business to begin with.

I would like to bring this particular point to the fore. My business goal is purely money. I don't run a business as a hobby (though it can feel like it!) When we're talking about the difference between businesses and hobbies, I can quite see that it's totally acceptable to flog your game to the first weasel that spots it for a grand. If it were just a hobby, that'd make sound sense.

I have no emotions over the financial cost of developing my games at all. It costs a lot of time to produce proper high-quality games and during that time I need a specific amount of money to survive. It's a cold, hard figure. 6 months of Puppygames costs $50k minimum. Of course we are adjusting our techniques now to produce difference kinds of games now - we can't afford to spend $50k of time on a product again. Super Elvis is a 3-month effort, and the next one will be a 1 month effort. That's where the cold logic of financial reality tunes the business goals. Hobby wise, nothing's changed

Cas

[princec]

I should have been a little clearer, but I was specifically referring to exclusive deals. The thread doesn't make sense at all for non-exclusive deals.

Cas

[princec]

I think you're confusing "asset value" (the potential value the asset is worth) with "cost of development". Half-life is a $100m game. If you wanted to buy the exclusive rights to distribute HL2 you'd basically end up with a contract that ensured Valve ended up with their $100m+whatever else they wanted to make on it.

Cas

[Mark Sheeky]

I have also learned that a 1 month game is 6 or 12 times better than a 6 or 12 months game in terms of financial returns. Unfortunately it's hard to make a good game in a very short time. Thus the indie market is full of simple shallow games. Almost all indie games that I play or review seem to play and look like they took one or two months to make because they lack depth. If they are attractive enough though (I'm talking pure graphics here) a publisher will buy them, but try-before-you-buy gamers will not because in general, a game that is made in a month will play badly because depth makes playability and things like level design takes time.

There is more to the value of a game that the money it makes. A financially poor distribution deal could create new leads for other products, and also generate publicity. In my opinion steady long term growth is more important than trying to squeeze ones first game for every penny.

However, if you want to make money, a developer should work for a AAA company. Judging by adverts in Develop and on the likes of aadvark swift, there is quite a shortage of qualified people and all are well paid. Indie's often sacrifice pay to have the control of making their own games and the freedom to keep any/all of the profits and copyrights. Are there -any- indie developer millionaires? If money is the only reward you desire, you should not make indie games.

I spent the first year of indie-ship working on a massive title that failed to sell or make any money. I no longer consder that time wasted (I did back then but my outlook has changed since that time). It was an investment and all businesses need one.

Mark
Cornutopia Games
http://www.cornutopia.net

[BongPig]

It's this persistent low-self esteem and undervaluation of your own business that lets publishers get away with the way we generally perceive them to behave. Be insulted! Don't grovel for scraps.

Cas

All im seeing here is over-valuation. To assume that indie devs are undervalued is silly. Most over-value themselves by quite a margin.

[cliffski]

well its a difficult one. I have to admit that most indie games I see are total crap that I would not pay $1 for. As a publisher, I might pay $50 for the rights to bung them on a compilation CD, maybe $100 if they are really good.
HOWEVER
games like Alien Flux, Mutant Storm and (I hope ) Starship Tycoon. are not your typical casual shareware efforts. These are good games, well designed, with good production values and are a cut above the rest. Would I let egames put Starship Tycoon on a "50 great games for windows!" compilation CD?
No.
In fact I held out from when i first made the game (as starlines INC) in 1998 right up until 2004 before signing a retail deal for that game, because it was hard to find a publisher prepared to pay the fair price for it.
OTOH, a crap game of mine (like space battle or rocky racers) I am more than happy to bung on any compilation CD you want if you give me a hundred bucks .
So it all depends on quality. Not all games are equal, some of us are making superb games (esp mutant storm) some of us are making middling games, some of us are making unsellable crap When princec tells us not to fight for scraps, he is absolutely right, good games like AF shouldnt be 'undersold', and when bongpig says most shareware is overvalued he is right too, because most shareware games are rubbish.

[BongPig]

Im with cliffski 100%. Much better written as well!

I didnt want to suggest that Alien Flux or any other particular title is crap. Heaven forbid. ( Very sorry if thats how it sounded )

However I do feel that the indie scene is generally way over rated by the indies within it. The concern is this huge over expectation just because a few select games do very well.

I actually agree with cas, in that, with the right marketing and efforts a game like Alien Flux could well make over $50k. The worry is other devs assuming the same counts for them, even though thier product is not very good.

[princec]

The four-game plan does seem to be a break-even point for the indie going it alone, give or take a few exceptions. It's pretty much my plan to the letter - get four out in the minimum time and then spend the time marketing them so that the impact is 4x as great as it would have been with just the one on the site.

Cas

[princec]

Last year I think we predicted a "fork" in the indie games development path didn't we? One lot of indies would strive for direct competition with retail titles with excellent production quality and polish; and this leaves the market wide open, still, for the indies that want to do stuff on their own in their bedrooms in the evenings.

When you're striving for direct competition with retail, you have to spend as much effort developing retail (but smartly) as retail developers do. And so any publisher which is in retail should really understand that they're not buying match-the-three-colours games from a student programming living with his parents. It's just so painfully obvious which games are slick and which ones aren't that I can't figure out why they try and offer the same crappy deals for everyone.

Cas

[princec]

Salary rates are a bit of a joke for a games programmer still in the UK. £30k for a wizened senior programmer with more skills than the Head Ninja? I was earning that after just 1 year of graduation at the tender age of 22. By the time I was 26 I was earning £80k doing 9-5. It really doesn't sound very attractive to work as a studio games developer!

Cas

[Mark Sheeky]

It's just so painfully obvious which games are slick and which ones aren't that I can't figure out why they try and offer the same crappy deals for everyone.

You almost sound like retail publishers actually play, or know anything about, the games The box and the screenshots are the only thing that matters in retail. Even in indie this can matter a lot. After playing Nightmare Castle, a great game with poor graphics, I couldn't help but feel sorry for it when poor games with great graphics are (I'm sure) more successful.

Game programmer salaries can vary a lot. I suppose the job does too. Perhaps, as part of a team of 250, all you do is work away on one tiny bit of pathing code for 8 months. Well maybe

Good luck with the plan Cas.

Mark
Cornutopia Games
http://www.cornutopia.net