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Irrational Games getting out of the Publisher rut

Posted by souri on Wed, 04/02/04 - 7:12 PM

Here's an article that's kinda locally related which I thought was interesting. In an interview with Ken Levine from Irrational Games (Boston) on Freedom Force vs. The Third Reich, he tells that they're self funding the development of the Freedom Force sequel this time. What's really interesting to know is what he says about the traditional publisher model where..

quote:"a game has to earn out several times (5x+) its cost before the developer starts seeing any royalties.

Wow, that's pretty harsh! I would've thought royalties would come at least after the initial development costs were paid (1x). Hopefully the success of FF vs TTR will give them (including the Australian Studio!) the freedom on future titles, like companies such as id software and Valve enjoy. I'm surprised that the IP of Freedom Force wasn't handed over to the publisher as part of the publishing deal. I bet they're kicking themselves now. [:)]

Article here.

Submitted by JonathanKerr on Wed, 04/02/04 - 8:34 PM Permalink

I personally hope that at some stage in the future, delivering games via downloading will make up a sizeable portion of a companies sales. Even tho' publishers take most of the risk, developers are doing most of the work but seem to get the smallest cut.

Not cool.

However, with download distribution business should cut out the need for high manufacturing costs.

Submitted by Blitz on Wed, 04/02/04 - 10:25 PM Permalink

I would assume (although i could be wrong) that that 5x figure is total revenue, rather than profit.
The developer starts to see money after the profit from each box (after packaging/marketing/whatever costs) pays off the development costs.
Or to put it another way, the developer doesn't see any money until the game is actually making a profit (ALL costs, not just development costs, have been paid off). With the size of marketing budgets etc. these days, it's not that much of a surprise.
CYer, Blitz

Submitted by rodent on Thu, 05/02/04 - 2:06 AM Permalink

The development costs are essentially an advancement on revenue from sales of the game, in other words royalties in advance. So if your royalty is $2 per copy and your dev payment equals $200k then you'll start getting royalty monies after 100k units have been sold. This is pretty much regardless of whether the publisher is making a profit at that point or not, though they usually are. There's a bit more to it than that, but that's how the royalties are generally set up.

Submitted by Blitz on Thu, 05/02/04 - 10:01 AM Permalink

Most publishers will have the contract set up so that they are making profit way before the developer has made enough royalties to cover costs. Unless the developer is in a really strong bargaining position when the contract is written up.
CYer, Blitz

Submitted by JonathanKerr on Thu, 05/02/04 - 11:25 AM Permalink

From what I've heard, many games are self funded. The majority of the development costs are paid for by the studio but it's the marketing, production and distribution that the publishers pay for.

Submitted by Maitrek on Fri, 06/02/04 - 3:37 AM Permalink

Well the developer pays off the publisher's front through the royalties. So if you are getting, say, a ***very*** high 30% royalties - you pay the debt that you owe to the publisher using that percentage of the game's *profit* (the publishers factor in COG (cost of goods) before the royalties are calculated).

So it's not surprising that a game has to make a *lot* of money before the developer gets anything.

The publishers almost *always* make money, on even the crappiest-selling games, but the developers sit around struggling to cope and get shut down eventually.

To get 30% royalties would be fairly optimistic even if you didn't receive any funding help from the publisher (during production)! On top of that it's not uncommon for developers to have no rights to the IP, most of it sticks with the publisher (although not in this particular example)

The whole 'publisher' control over the industry is complete bullshit at the moment...things will change though with the emergence of broadband and independent developers -> publishers will have their shit days too (I hope). The more flexible and fair publishers will probably come out unscathed, but alot of the dodgy bastards will struggle to find developers.

Submitted by DaMunkee on Sat, 07/02/04 - 1:48 PM Permalink

Hello Everyone. I thought I'd throw out my 2 cents about various cost from my expeirence at Westwood Studios/EA Pacific.

For C&C Generals our packaging costs were $2.40 USD a box. This is actually pretty high due to the raised surface of the box and the number of colors we went with. Additionally, we had a lot of inserts in with the package that added to the cost.

Now, EA Turns around and for initial release, sells each box to the stores for $40.00 USD (Sorry, all these stats are in US dollars as that's where we developed the game). The stores turn around and sell the games for $50. Right away, you can see EA is pulling in $37.60 a box that sells. (EA owns/contracts with their own Manufacturing/distribution channels so costs are kept down).

Granted, Generals is a real AAA title, meaning it sells > 1 million copies worldwide. In this case, it's forcasted to sell 4 to 6 million, lifetime. Factor in the War last year and it sold really well. But I digress.

To develop the game, our studio was given $10 Million development budget. We had 50 employees working 1.5 years on it factor in all the dinners/lunches/snacks for our 7 day a week, 100+ hour workweeks and you can see how we surpased the 10 Mil number by a couple million. Anyway to keep it easy, we will say development costs were 10 mil. In order to cover costs we would have had to sell >265,000 copies. We easily spent an additional 10 mil for marketing although the war was the biggest help. So, now were looking at ~550,000 copies to start to see a profit.

Of course, Generals sold extremely well and they easily recouped their cost. EA is one of those companies that feels your "Bonus" is working for them, so, our project completion bonus was around 1 to 4k USD for those that actually stayed with the company after the game shipped. (For that project, we had about a 70% turnover rate for staff, with literally 2-3 artists staying).

Everyone of our design decisions were "And if we do this, we'll sell 100k more copies in korea" Instead of how all of us developers felt, We would rather make a great game like RA2 and sell a half as much then sacrifice on quality. Wouldn't the gaming world be different if Teams were actually allowed to make the game they want instead of having to bend to the will of Marketers.

Well, that kind of turned into a rant... sorry...

Submitted by Daemin on Mon, 09/02/04 - 1:22 AM Permalink

(OT) DaMunkee: To your quote above, two words: Total Annihilation.

Submitted by souri on Mon, 09/02/04 - 8:19 AM Permalink

Westwood Studios - did you work on Bladerunner by anychance?

Submitted by DaMunkee on Wed, 11/02/04 - 2:19 PM Permalink

quote:Originally posted by Daemin
(OT) DaMunkee: To your quote above, two words: Total Annihilation.

Total Annihilation was a fantastic game, but it did not have to be 3D to be fantastic :) (Although it did make it that much better that it was and it was made how long ago?!? Now why can't modern RTSs be that good with 3D?)

quote:Originally posted by Souri
Westwood Studios - did you work on Bladerunner by anychance?

Unfortunately no Souri, I worked at Westwood Pacific(Nox, RA2, Yuri's, Generals) and I only started there in 2001. My first title was Yuri's (Yay Voxels).

Here's an interesting tidbit of information. The Dune2 engine was used for every single Command and Conquer game through to Yuri's. If you look at the original Dune2 and compare it to RA2, yeah, you can imagine how hacked that code was :) Heh, useless trivia for the next time you're on Millionaire [:D]

Submitted by shiva on Wed, 11/02/04 - 7:19 PM Permalink

what about homeworld? i cant really see that working too well in 2d

Submitted by TheBigJ (not verified) on Fri, 13/02/04 - 10:45 PM Permalink

Great article. It would be a lot better if more developer's could fund themselves. The main advantage of course would be flexibility and not having to curve to publisher's view/ideas on certain areas of the game. However, as budget's increase it seems less likely that this is possible. We just need a developer with the financial backing equivalent to some of the large publisher's.

Thanks for the info on your development of Generals. What area of programming were you involved in for the project?

Submitted by Doord on Sat, 14/02/04 - 1:20 AM Permalink

An Publisher has a set amount money they wish to make from a game, they are not making games because they like them they are making games to make money nothing else (even if on a personal level they like them, that is not the goal.)

quote: From what I've heard, many games are self funded. The majority of the development costs are paid for by the studio but it's the marketing, production and distribution that the publishers pay for.

Jono: most games are self funded, but most games do not make it to market or are even finished. I would guess about 95% of games which do get released are by an Publisher. The publisher is paying for a game to be developed for them to make money, that is how the publisher is able to change the game anyway they wish, by stopping payment of milestones. Therefore the developer has no income and then they die or have to stop working on the game because they can't pay wages.