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Opinion: What Microsoft Needs To Change To Satisfy Indies
Opinion: What Microsoft Needs To Change To Satisfy Indies Exclusive
July 30, 2008 | By Ron Carmel

July 30, 2008 | By Ron Carmel
More: Console/PC, Exclusive

[In this constructive editorial, Ron Carmel of 2D Boy (currently making World of Goo, in development for PC and WiiWare/Wii) takes a look at the developer's perspective on Xbox Live Arcade and Xbox Live Community Games, and calls out for Microsoft to improve on what he sees as unfavorable terms.]

I want to love you, Microsoft!

I really do, and I want to raise a family of little indie games with you, but every time things are starting to feel good between us, you go and do something to spoil it.

Microsoft has so far made three moves that are unfriendly towards independent game developers:

1. Xbox Live Arcade royalties cut by about half
2. De-listing of games from XBLA
3. Xbox Live Community Games terms established

The first two have already been discussed to death and I feel it's too late to do anything about them. I would, however, like to discuss the third item in the hope that good people at Microsoft will take note and reconsider their approach to Community Games before it officially launches this coming holiday season. So if you know someone who is involved with the Community Games initiative, kindly send them a link to this page.

When I first saw the announcement I got pretty excited. On the surface, everything looked good - huge audience, 70 percent royalty rate, and only a peer-review process standing between a game and its audience. Fantastic, I thought! This is certainly Good for Games!

Good For Games

The video game medium has been in a bit of a rut for about a decade. Many truly great games have come out in the last 10 years, but the market is dominated by big-budget photorealistic sequels and movie tie-ins produced by large public companies. Many of these games are the equivalent of second rate airport novels, straight-to-DVD movies, formulaic TV, and synthetic tween pop.

I'm not saying anything new here, and it's clear why this trend exists. Brand recognition reduces risk and creates more sales, sales create profit, and public companies are single-mindedly focused on profit. It is the explicit responsibility of the board of directors and top executives to create these profits for their shareholders.

Design, creativity, innovation, and expression are always secondary considerations in this environment. John Riccitiello recently said: "I don't think the investors give a shit about our quality. They care about our earnings per share."

I find his bluntness refreshing.

One characteristic of independent games is that design often trumps financial considerations. This means that compared to public companies, independent developers tend to:

1. Get a lower return on investment
2. Produce more creative games

Anything that makes it easier for independent developers to earn a living by making games will drive more developers to go indie. As indie developers grow in numbers we will be seeing more creativity and more new kinds of games and the medium will evolve and change and be vital.

A diverse and ever-changing landscape of games is not just more fun and interesting - I think it's essential for long-term health of the game industry.

Problems With Xbox Live Community Games

So what about XBLCG is bad for games? First, it puts a very low cap on the amount developers can charge for their games, but more importantly, Microsoft's promotion gimmick is a wolf in sheep's clothing.

Price Cap

Say I make a game that I'd like to sell for $15. That prices me out of XBLCG, and would force me to go through XBLA with its significantly lower royalty rate and difficult certification process. Why handicap developers instead of letting the free market determine how much they can charge for their games? For an individual developer, this might limit how much time and money can be invested in a game.

On a larger scale, I believe this will promote the making of quick and cheap games, and will tend to drive quality-focused developers away from XBLCG. A price cap is fine if you feel you need one, but cap it at a more reasonable amount like $20 - generally the high end for Xbox Live Arcade.


This one is a much larger problem. Microsoft reserves the right to promote your game with or without your consent and take an extra 10 percent to 30 percent for this "service," dropping the royalty rate to as low as 40 percent for the duration of the promotion.

Microsoft's announcement tries to present this promotion as a great opportunity for developers, and in some cases it might be, but it could actually end up hurting the developer financially.

According to a fellow indie who has a game out on XBLA, sales during the period when the game was promoted by Microsoft were about double than what they were the week following the promotion. Keep in mind that the fall in sales is only partly due to the end of the promotion. It also followed the natural decline that happens with any game over time.

If the royalty rate drops from 70 percent to 40 percent for the promotional period, the promotion would barely affect the developer's bottom line, only stuffing Microsoft's pockets. Worse, if sales do not nearly double, developers actually lose money due to the promotion. Nickel and diming developers will not help XBLCG get the best games and is in my opinion a myopic strategy.

Fixing The Promotion Royalties

So what's the alternative? Let's assume that Microsoft will promote five XBLCG games at any given time, probably ones with the highest demo-to-purchase conversion rate. (I chose five based on the number of XBLA titles simultaneously promoted on

A quick calculation based on rough XBLA sales estimates shows that the top five XBLA games account for about 40 percent of the total revenues in a given period. Taking an additional 10 to 30 percent (let's call it 20 percent) from this 40 percent is the equivalent of taking 8 percent across the board. So just lower your royalty rate to 62 percent and drop the sneaky stuff, Microsoft.

It would be a little lower than WiiWare's and PSN's royalty rates, but a more attractive proposition overall, considering that you have the best development tools - and developers won't have to go through a strict approval process or develop on custom hardware (expensive in terms of both time and money). Additionally, developers would actually be grateful when you promote their games.

If you feel you must keep this extra deduction on promoted games, there are still things you can do to make it more palatable. First, there's a huge difference between a 10 percent and 30 percent deduction. Get rid of the sliding scale or set predictable parameters for how the actual deduction rate is determined. Otherwise, developers can only assume that the deduction will always be 30 percent.

Second, allow developers to opt out of this promotion. If you think you're offering a fair deal, something that would actually benefit developers, let them participate of their own free will.

Microsoft's Deeper Problem

I can't help but feel that Microsoft sees small developers more as laborers than long-term partners who are also entitled to turn a profit.

I'd like to illustrate this by walking through how Microsoft calculates royalties for XBLA and XBLCG. First, Microsoft Points are converted into US dollars, and then (if necessary) to the currency in which the developer is paid.

Because of the weak dollar, prices for Microsoft Points are higher outside the US. In Europe, for example, players pay about 50 percent more for a Point than in the US, but this extra revenue never reaches the developer because Microsoft converts all Points directly to dollars. For sales in Europe, a developer might think he is getting a 70 percent royalty rate, but in reality he gets a mere 47 percent of the sale price while Microsoft profiteers off the exchange rate.

I very much doubt that this practice would remain in place if the dollar ever overtakes the Euro. In contrast to Microsoft's underhanded tactics, WiiWare royalties for sales in Europe are paid out in Euros, so if players pay more, the developer gets more as well.

It gets worse. The XBLA distribution agreement allows Microsoft to change the rate at which they convert Points to dollars independently of how much players pay for Points. Initially, these conversion rates lined up, but currently the Points-to-dollars conversion rate is about 3 percent lower than the Dollars-to-Points conversion rate. This means that Microsoft has already sliced 3 percent off the royalty rate for every single XBLA developer.

What good is setting a royalty rate in a contract if Microsoft retains the right to lower it as it sees fit?


The bottom line is that under the current terms I won't consider developing a game for XBLA or XBLCG, and I'm encouraging developers who have other options to stay away from those services as well. There is strength in numbers, and if we sell our games exclusively through the channels that offer the best terms - WiiWare, PSN, Steam, and Greenhouse - we will make those channels more successful and promote higher royalty rates industry-wide.

But even ignoring the bigger picture, I'd rather be working with companies like Nintendo, which not only offer terms that are financially better than Microsoft's but also deal with developers fairly and honestly.

Microsoft has an opportunity to do something Truly Great for Games here and I hold hope that it will. I'd be the first to jump on my soapbox and advocate its services if it does. Good for Games means more developers, better games, more game players, and in the long run more money for everyone - including Microsoft.

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Benjamin Quintero
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youch! This articles seemed to get more and more heated as it progressed. It felt like he wrote it in one sitting and just got more pissed off as he realized how badly he was getting screwed =). I did really like the article though; it's why I haven't considered those services myself. It's clear that Microsoft has a chain of command right now that just does not work for indie developers. Their drive to putting indie games on their box all has merit with a slightly uneasy feeling; like if Trump was hosting an underground rave. I'm sure the music would be just right but something about it would make you want to say, "this is just all wrong".

Alex Amsel
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There have definitely been some inconsistencies in thinking going on. It feels like someone wants XBLA for big publishers and indies on XNA for the short-term PR. Saying that, XBLA can still work and XNA is a very interesting proposition.

A few tweaks in the right places and all would be well. Whether that will happen...

Caliban Darklock
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You know what hacks me off? Internships. Where the hell do people get off with these job offers for interns? They don't pay any money, the job duties are demeaning, and on top of it all they're temporary!

I don't have time for that kind of thing. I've been in this industry almost twenty years, and I can't afford to go work somewhere for free, especially if the work isn't challenging or interesting; I need to put food on my table. And the whole temporary thing! I can't deal with that kind of uncertainty - I've got a wife, and kids, and a mortgage, I need stability. Why, these positions don't even have health insurance.

What we REALLY need is some sort of program where people like ME can get the things that people like ME want! What are people doing wasting their time with all this intern nonsense?! I don't want to be an intern! Make programs for ME! Not programs for other people, just ME! I don't care if your program is good for high school students and college undergrads! I don't give a flying leap how helpful all your interns think the experience was! That's not about ME! Honestly, don't you get it?! It's all about ME, ME, ME!

And what's that word Microsoft keep using, "community"? What does that mean? Is it even English? It sounds like it might be French.

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Outside of the dollar/euro/MSpoints conversion thing, I think Ron's problem is one of expectations. What he says is right, but I don't think XBLCG is meant as a venue for developers to earn a living.

I personally see it as a route for people to develop and publish amateur/hobby games on a console, games that would typically be freeware on PC. Therefore, the part of XBLCG that irks me is the minimum price (no freeware XBLCG games), not the maximum. :)

I'm sure MS is still experimenting with this, and like with GFWL, they'll back off if some of their ideas don't work out. As soon as some XBLCG games start selling more $$ than some XBLA games (and you know it WILL happen), the whole system will receive a massive shakeup.

Chris Pelling
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> I don't think XBLCG is meant as a venue for developers to earn a living.

In which case why put in prices at all? If there are any skewed expectations here then it's entirely Microsoft's fault. By throwing around shouts of "money, money, get your dev money here, fantastic royalty rates" Microsoft are setting up expectations of, well, MONEY. To add in all this slimy small print is dishonourable and bad for business.

If it's supposed to be a hobbyist thing, allow freeware games. If it's supposed to be an ACTUAL PLATFORM, allow developers to make decent money from it. As it stands, Microsoft appears to want it both ways; i.e. they want to profit from other people's good will and hard work and give peanuts in return. They're painting a picture that tells developers it views them as expendable nuisances to be stomped on once they've served their limited purpose. This is not an equitable and ethical business model. Bad for developers, bad for customers, and ultimately bad for Microsoft.

Yannick Boucher
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Chris has a good point. But oh well, the 360 is going down starting these Holidays anyways... :) Better focus on Wii/PS3... ;)

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"In which case why put in prices at all?"

I assume because they are scared to death of "free content" eating up the sales of commercial games (XBLA or retail). There's already A LOT of hours of fun and free gameplay to be had with XBLA demos for any new 360 owners.

Which is why ultimately the PC is the best platform for freeware games: nobody can prevent them from happening. :)

Ryan Schaefer
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I think you're missing the point that making XNA games is still BY FAR the easiest and cheapest way for indie developers to start making games. You don't even need an actual dev kit to get started.

The royalty rates are high, but considering that Microsoft is giving you everything you need to start making games, it is understandable. MS is also MUCH better to work with than Sony who offers almost no support to even professional developers, why would they help indies? Also, despite what sony's e3 press conference may have us believe, the PS3 is still a nightmare to work with.

The wii is a good avenue to go as well, but overall, the Xbox 360 and XNA is still the best way to get a game out there.

raigan burns
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> I don't think XBLCG is meant as a venue for developers to earn a living.

Well, the thing is that MS have purposefully pushed small non-publisher-backed teams off of XBLA and onto XBLCG, so it is indeed meant as such a venue.

>making XNA games is still BY FAR the easiest and cheapest way for indie developers to start making games

Uh.. no. There are far better (easier, cheaper) solutions for people looking to make games, such as GameMaker, Unity, or really any home-rolled PC/Mac development. Plus as a bonus, if you avoid XNA your game will actually run on other people's computers!

>The wii is a good avenue to go as well, but overall, the Xbox 360

>and XNA is still the best way to get a game out there.

But not necessarily the best way to have a sustainable business with actual income.

Alex Amsel
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Ryan, what you mean is that console-wise XNA is a good place to start. I wrote about each of the platforms on my blog this month. although I need to do an XNA-lead update.

Raigan is spot on. If you want freedom or inexpensive development then PC/Mac/Linux without XNA is the way to go. Even if you want to dev on console, if you worked in XNA initially then you've got quite a porting job on your hands for Wii/PS3. If you don't need to do something high tech, PS3 doesn't need to be a problem (in fact Wii can be trickier).

Microsoft's policies do seem to give with one hand while taking with the other. They have a split personality over this whole indie scene, and even digital distribution generally.

Also, I think it's important to read some of the comments that resulted after the (incorrect) price point announcements for Braid and Castle Crashers. There are definitely gamers out there who see digital as a poor relation, and who don't trust DRM systems. And they still like their boxes.

Given that MS want XBLA to be different from XNA, they have some educating to do if they want the 1200/1600 price point to be standard.

They should also address the territory points value differential and developer per point royalty calculations. Neither make sense and can only be seen in a bad light by gamers, developers and publishers. When it's bad for all three, something isn't right.

Matthew Tuxworth
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This article seems rather alarmist and jumping the gun on a few things.

His first bit about the royalty rates: from my understanding, it's not across the board, it's only those games where Microsoft steps in to help out with stuff like localisations, things the devs would normally have to find funding for themselves.

Now, his community games issues:

Price Cap: From what I got out of Boyd Multerer's interview is that this is focussed on smaller games and the cream of the crop will likely get picked up for funding and promoted to XBLA (or wherever). If you feel your game deserves to be sold for more, release a smaller more incomplete version first to drum up the interest.

Promotion: We do not know at what rate the promotion drops. Implying that we'll be getting 40% at double normal sales could be very wrong, for all we know it could only be a 10% drop there and you need 6x normal sales before it gets down to the 40% mark.

I'll agree the royalty conversion method does seem quite wrong.

Overall I'll be looking at this as a very good opportunity to get the experience and exposure for my team, as well as hopefully getting a bit of a bonus in the form of some income. I'm not expecting to make it rich, I think the fact they're charging for games is largely as an incentive for the developers.

Aubrey Hesselgren
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XBLA got me very excited in its early days. I was expecting it to be "The Cannes Film Festival of Games" as peter moore said. Except for a few notable exceptions, XBLA isn't currently attracting that kind of creative. They remain relatively untapped, which is probably more the creatives' loss than Microsoft's (let's not underestimate the time and effort that has gone into XBLA, and how many indie studios the promise of XBLA managed to create).

And if I think about it, it's to be expected. Indie development tends to exist in between the cracks, despite any form of organization. The simple act of trying to fit it into some kind of box denies it its versatility.

Bottom line, there's an indie scene with or without someone trying to tap it. It was great that XBLA and others tried to do so, and gave hope for a lot of people who couldn't otherwise afford to develop their very personal ideas. But it's like the Art world - only the top artists seem to make anything more than a scrabbled together living.

It does seem like a fixable thing... just not cheap.