Ask Mary-Margaret:
Staying in the Black

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Methods of Financing Profit Margins Funding Late Projects

"I'm concerned about what'll happen to my development studio's finances if our "Dev and Pub" project runs late. How do developers with schedule overruns continue to fund their projects?" -Bean Counting in Boston

I hate to say it, but this situation isn't uncommon for most publishers and developers. In an ideal world, you can feel like you can be honest with your publisher, explain how the overrun occurred, and see if they'll be reasonable and increase your budget. Be prepared for some fast talking, though, and I'd have a LOT of documentation on hand to support your claims, particularly if the reason for the cost overrun was due to a lot of undocumented change orders (requests for modifications in the product) from the publisher. If that's the case, and the producer was the reason for the change orders, he or she may not really be your best ally in this situation. You may need to go above that person to someone with more authority, who wasn't directly responsible for the changes. A business agent is invaluable in these kinds of negotiations.

A technique that works sometimes is the developer trading royalty points for cash. But the publisher will be hesitant to do this, since it takes away from the developer's long-term incentive to make a profitable product. It's worth trying, though.

Your most likely solution will be to get the publisher to scale back their expectations. You'll deliver less of a product for the same budget. This is almost always what happens in this situation.

Obviously, none of these solutions are going to be easy to implement. The easiest way to deal with this problem is not to get into budgetary trouble in the first place. The main thing to make sure is that your initial budget and schedule are accurate from the start. I also recommend structuring your project schedule with priorities and "wish lists" so that you know where to cut when the time comes. One of our industry friends refers to this as "drawing the dotted lines"! Get the critical work done early in the schedule, and add the extra evil minions and their unique special effects weapons last.

My suggestions for avoiding this situation…

• Don't accept bad deals, ever. If you don't have enough money to do the project at the beginning, it's not going to get better later.
  
  
• Make sure your schedule has adequate room for minor publisher revisions, and contingency money for when things go wrong (and they will.)
  
  
• Be very wary of change requests. Don't do major change requests without formal renegotiation with the publisher. If the changes are undocumented, you'll have an uphill battle later to prove that the change requests were the reason for the schedule overrun. You basically can't over-document something like this! This is another reason why I'm a big fan of completion bonding, because it requires formal review and the bonding company's approval for change requests that will increase the budget.
  
  
• Work with competent, ethical people and stable publishing companies if at all possible.
  
  
• Write the contract as though the wonderful, talented, incredibly competent producer you've known for years is about to quit and be replaced by the Antichrist. It's a sad fact of this business that producers change jobs, and you need to prepare for that. A good contract is your only protection against a bad producer.

Ellen likes to say that "Ideas are easy, production is hard." I'm going to change that to "Ideas are easy, production is hard, and balancing the finances of a development studio is really, really hard!" It can be done, but it isn't easy.

Mary Margaret Ipser is one of the leading recruiters in the game business, with successful placements ranging from entry level to Vice Presidents, and is the founder of Mary-Margaret.Com.

Ellen Guon Beeman designed and/or produced over thirty titles for top game companies including Microsoft and Electronic Arts, prior to joining Mary-Margaret.Com as a recruiter.

Got a game industry-related question for "Ask Mary-Margaret"? Send it to AskMMC@Mary-Margaret.Com!

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