Finding the right publishing deal.
We take a look at the different levels of service and support publishers offer to studios trying to bring their games to market.
The publishing aspect of video games is important as ever. The industry’s landscape isn’t the same as it was two decades ago and both developers and publishers need to adapt to the change in order to stay in the business. New challenges have emerged and sometimes things don’t always play out as planned. That’s why it’s crucial for studios to understand what’s in their publishing deals that they sign into.
The goals for each studio are different, and these not only depend on the developer’s needs but also the specific project being published. In some cases, the most important goal is to secure payment for development fees, as that is often the lifeblood of the studio. Sometimes, it could be to retain the ownership of an intellectual property. This is especially the case for independent developers, such as Q-Games. CEO Dylan Cuthbert says that for his studio, that’s the top priority – but it’s not always possible with games that have larger budget and scopes.
“Years later, it is always a regret when something you made is not available to you anymore -especially as larger companies restructure or even close down,” explains Cuthbert. “I’ve been trying to find a way for years to get The Tomorrow Children back to Q-Games.”
This Minecraft-esque action title was published by Sony in 2016, but its online services were shut down only a year later.
IP ownership is a priority for many smaller developers, but it’s not always the case. A recent example is ‘One More Level’s’ new IP, Ghostrunner, which was bought by publisher 505 Games for $5 million. Sometimes developers might let go of their IPs for various reasons. Dan Adelman of Leadman Games mentions that selling your IP is okay depending on what you’re getting for it.
“If someone is willing to pay you $10 million for your IP, you may be happy with that trade” Adelman explains. “You may be thinking ‘I was only ever going to make one game out of this.’ And if somebody thinks that they can make a whole series out of this, then okay, and they're willing to pay me up front.”
Patrick Sweeney, founding partner of Interactive Entertainment Law Group, says that smaller studios tend to prioritise the financial aspects of a deal and larger more established ones focus on being tied to the franchise they are helping to create.
According to Cuthbert, some form of royalties from day one of the release are important, especially in the age of post-launch support and updates. If a publisher is going to recoup profits before paying the developer royalties, then it’s difficult for the studio to provide updates to the game.
“Obviously the publisher needs to recoup and take a larger share until they break even, but for the health of the game it should be mutually understood that the developer needs to be seeing immediate results too,” Cuthbert says.
The scale of a game is also a big factor in how publishing deals are laid out. Of course, larger publishers such as Electronic Arts tend to be more interested in larger projects with more upside whereas smaller publishers tend to be more focused on overall profit potential. Cuthbert explains that Q-Games definitely tries to match the scope of what the studio is trying to achieve with the publisher involved, while also maintaining the quality and essence of the idea.
“We work with the publisher closely to scope the project properly. The great thing about this process is that when it works, we end up with a better idea of what we need to make than we did going into the negotiation.”
Sweeney also notes that large publishers will look at smaller titles every once in a while. A good example is EA Originals, an initiative by the publisher to support independent games. Even though EA’s usual catalogue has mass appeal, there’s still a part of the market that the company can’t reach, and EA Originals helps target those gaps. Other options for developers include Take-Two’s own independent focused publishing label, ‘Private Division’, and these initiatives are to give the large publishers a chance to scout out future talent.
“[Publishers] are also looking at it as sort of a ‘Let's see who's a really good developer’ and who is going to grow up and maybe make that $100 million game for us a couple years from now,” says Sweeney.
The more money a developer receives from a publisher, the more strings that are attached to it. It usually means that there’s more risk for the publisher because they’re fronting more money, but that funding is sometimes what keeps the studio alive and the team employed. In this case, the publisher would ask for more money on the backend or even ownership of the IP. Sometimes they may ask for more rights to sequels and, in extreme cases, may want to buy your company.
Sweeney explains that, for developers, there’s a line between taking the least amount of money that you need to make the game, but also taking a comfortable amount of money to make sure there are no cost or budget overruns.
There have been cases of zero advance publishing deals, which means that the publisher does not front the developer any money and only has the rights to distribute it. The question then becomes what role the publisher will play in the game’s success and their percentage be when splitting the revenue.
Sweeney says: “I worked with a developer client that took less of an advance and put their own money into a game. The game has been a huge hit and the developer ultimately went public. But that’s not the normal outcome.”
Publishers also provide useful expertise outside of game development, including marketing and quality assurance. Adelman notes that developers should figure out what services they need and whether they can receive them a la carte. If a developer simply needs financing on a project, then there are non-publisher investors out there who just do project finance. If you just need marketing, there are public relations firms.
“There's a bunch of things that you may or may not need and so depending on what your needs actually are that can dictate who you decide to work with,” explains Adelman.
Alternatively, developers can self-publish their games. The obvious advantages here is that doing so provides more creative freedom and the studio gets to keep all of the revenue. The potential upside can be absolutely life-changing – but it’s not that simple. When self publishing, developers control every single aspect of bringing their games to market. Without the support of a publisher, they may not have the specific expertise to execute on aspects like marketing, localisation, collections, and more.
It’s a great way for developers to learn these skills but it can be a distraction from their core competency of making games. Cuthbert also says that this takes up time and resources that are quite often, for a small company, better spent on making the games themselves.
“Most people who try marketing or business development for the first time, don't do it very well,” Adelman explains. “And so they can sign themselves up for a bad deal that's going to hamstring them.”
Developers might struggle to get the word out about their games, and so the game may never get any traction. Sure, they’re keeping 100% of the revenue, but the revenues are smaller than they could have been had there been an experienced publisher marketing the game. There’s also the financial risk that publishers assume too; a self-funded title that doesn’t find its audience or recoup its cost can lead to a disaster.
Sweeney says: “That can be the death of a self-publishing studio. It’s not as simple as ‘Should I take a publisher’s money or should I just self-publish?’”
Developers can’t always assume that a publishing deal or the game development process will go smoothly either. The mindset between developers and publishers of “Don’t worry, that’ll never happen and if it doesn’t, we can figure it out then” is a dangerous one. It’s much better to talk through this at the beginning because waiting until an issue arises could mean it’s too late to fix it.
“That’s what the contract is for in the first place – to tell you what happens when things go south,” explains Sweeney. “So assume the worst and figure out what happens when A, B and C don’t go according to plan.”
Additionally, some developers don’t push back in general terms and protect their best interests. Young developers are sometimes too afraid to question the terms of a publishing deal in fear of losing out on it. You can’t always assume that it is non-negotiable, or that it protects the developer’s interests as well, since they are skewed in the drafting party’s favor by design.
Back in December, independent publisher ‘Raw Fury’ tried to raise awareness of the aspects covered by such agreements by posting a simplified version of its publishing deal to its website. As well as inviting developers to explore the document, it also called on other publishers to share the terms of their own deals – something another indie publisher, ‘WhiteThorn Digital’, did just a few days later.
Publishers can also inadvertently promise deals that they end up not delivering too. Make sure that things that were actually said end up in the contract as well so they can’t be reneged later on. Cuthbert recalls that this happened to Q-Games by platform holder, which told the studio that royalties to developers were getting cut by 50% because its newly-released platform hadn’t enjoyed as strong a launch as hoped.
“We were forced over a barrel because it wasn’t in the contract – and then of course a few years later that platform had hit 100 million units,” says Cuthbert. “Had our royalty rate been restored to its original spoken promise? No, of course not, and we had no recourse.”
Adelman clarifies that another aspect to consider is the publisher’s reputation. It’s a very easy process to look up the publisher’s name and check their website for games they’ve published. It’s also worth reaching out to developers to find out if they were satisfied with working with a certain publisher and what they would have done differently. A bad reputation might make developers hesitant to go to that publisher.
“I think with just a little bit of legwork, you can find out what some of the landmines are,” he says.
That said, there are rarely publishing deals that developers should avoid outright. Even in cases when it comes to IP ownership, sometimes signing it away can be a good thing depending on the situation and the deal developers get for it. A publishing deal isn’t something to be won, but a groundwork for a relationship. It’s only the beginning so developers should set themselves up for success by getting the best deal under the current circumstances.
Cuthbert concludes: “Always try to put yourself in a position where you don’t need funding desperately, and build up a small runway and be frugal until you have achieved that.”