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Opinion: The Lion's Gate - Majors And Indie Publishing
Opinion: The Lion's Gate - Majors And Indie Publishing
November 11, 2009 | By James Portnow

November 11, 2009 | By James Portnow
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[In this opinion column, designer and Divide By Zero founder James Portnow lays out why major publishers need an indie arm, addressing the major factors that make it both a necessary and feasible model.]

I hear a lot of bitching that innovation is dead in America. That’s a lie. The problem is that we have two industries at odds, neither of which is really equipped to present innovations to the masses.

First off, we have the indie community, which bewails its unrecognized genius and occasionally screams “sellout!” whenever someone in the community actually manages to make a hit.

Then we have the AAA industry, which often claims that it can’t take the kind of risks that innovation requires, given how expensive it is to make a AAA game -- and yet manages to make multi-million dollar flops all the time anyway.

There, nothing like an introduction which pisses off everybody! Guess you’re probably listening, though, which means we can talk.

Every other entertainment industry has found an answer to this dilemma in the “indie arm” of major publishers –- Fox has it’s Searchlight Pictures, Sony Music has it’s RED distribution arm, for example -– so why isn’t there an EA-Indie, or an Activision Independent Publishing Group?

Part the First: Rehashing the Past

Before we answer those questions I’d like to take a short look at the industry as it stands now. To give you some context, I began writing this because of an argument I witnessed recently between two friends at AGDC. It went something like this:

Too Cool For School Indie Dev (henceforth referred to as "2C4S"): Just saw your latest title, WTF’s up with desaturated shooters?

Corporate Friend (henceforth referred to as Suit): They sell?

2C4S: Yeah, like a shit-covered brick, I saw the sales numbers on that one.

Suit: You mean the numbers which said it out sold your whole catalogue by a factor of, I don’t know, 1000 to 1?

2C4S: Whatev, at least we’re doing something new, and we do it on a 20th of the budget.

Suit: Yeah, and if you ever get the budget, you’ll be building FPSs like the rest of us.

I’ll leave the conversation there (though it went on through more drinks, a near fist fight, then hugs and reconciliation). The important thing about this conversation is that some permutation of it is not at all uncommon in our industry and, though hyperbolic, parts of it are rooted in truth.

Part the Second: The Awful Truth

The truth is that the indie scene doesn’t have a great track record as far as sales go, and whenever something sells, at least a certain segment of the indie community does go into clone overdrive (see social/casual games, or just go visit the App Store and Kongregate).

The indie community is also often as driven to innovate by its lack of resources as much as by any particular urge towards innovation. The constraints are greater for most indie games, so doing something within those constraints requires more ingenuity.

This is by no means a bad thing -- in fact, it leads to wonderful advances. It just means that those advances are often not as polished or apparent as they might otherwise be.

On the flip side, the major publishers and AAA studios are often more concerned with guaranteeing “good”, rather than aiming for “great”. If a AAA title is good, it will return positively, and we’re talking about big numbers, so even a small percentage positive return is by no means insignificant. And, when games bomb they really bomb, so a miss means a lot of money (or, more charitably, a lot of jobs).

This means it’s the “responsibility” of most AAA studios to mitigate risk. One way to mitigate risk is simply to emulate things which are popular. We see it in every industry with big single-product investment: from automotive manufacture to film, copying what’s already popular helps keeps the books in the black.

Part the Third: A Silver Lining

On the other hand, many members of the indie community are genuinely interested in moving the medium forward, and even those that aren’t tend to come up with some novel games due to the constraints they face.

The indie community is also rugged. They get more done in less time on a smaller budget than any other group of developers I’ve seen, inside the games industry or out.

Now, as for the AAA? Well, some great works simply require a big budget. The Sistine Chapel wasn’t cheap; neither were the Taj Mahal, the Pyramids or even the Godfather movies (because clearly they belong in that list). Without the AAA industry and the budgets it can command we wouldn’t have our Final Fantasies or Fallouts, our Grand Thefts or our Call of Duties. Not having these titles (as much as some would argue otherwise) would be a profound loss to our medium.

Additionally, not all art is about innovation. The AAA community are masters of polish. They take diamonds in the rough and reveal their true potential. Without the attentive eye of designers/artists/programmers in the AAA industry many great ideas would be left to languish in a half finished state -- but thanks to their commitment to polish, consumers have gotten to experience numerous mechanics, styles and programming innovations that would have otherwise fallen off the popular map.

Part the Fourth: Where I Actually Get to My Thesis

Okay, so now that we’ve covered the pros and cons of both sides of the industry the question becomes how to bring them together in the way that’s most profitable for the industry and best for the consumer.

The answer, as I see it, lays in major labels creating publishing divisions to put out independent games.

Why? Because it solves three major problems: It provides indie developers with the marketing and distribution/support they need; it allows major publishers to test the viability of innovations cheaply, and itt provides the consumer with more access to a variety of experiences -- which I believe increases market share and reflects positively on both AAA and independent gaming.

Let’s walk through those problems in a little bit more extended fashion.

Support

Indie development, as a rule, lacks support; this is one of its biggest drawbacks. It’s amazing what some indie developers accomplish on the resources they have available, but in general, indie developers lack the strong marketing arm and distribution channels to get their products in front of a large audience.

Indie development teams also often lack the funding and the oversight required to really put out a polished product. Many indie teams are either newcomers to the industry or segments of former teams that haven’t functioned outside the structure of a larger entity before – which means that having the organizational system and quality control groups inherent in a major publisher can be a huge boon.

Innovations to Go

Having an indie publishing arm would allow AAA developers to play the field as far as innovation goes, and only commit large investments toward innovations that have a proven amount of traction. This sort of arm allows the publisher to make a thousand $20k bets -- or, if we’re aiming for larger XBLA projects or the like, 100 $200k bets -- for the same price as a mid-grade major release.

This means they can safely test the waters and capitalize on hits by using their in house development capacity to refine and polish the best ideas.

Better for the Consumer

More, better titles are clearly better for the consumer, but is that better for us as an industry? From the indie perspective I would say, “Yes, indubitably,” but from the AAA side things get a little muddier. Major marketing pushes already make conflicting release dates a nightmare, and as projects get bigger and marketing campaigns get longer, the problem just becomes exacerbated.

While the marketing efforts put forth for these indie projects, even as an aggregate, would probably never rival the marketing spend for AAA titles, and, even though they may be focused on different marketing channels, this conflict raises the question of why, from a marketing perspective at least, a AAA publisher would want to spread its resources in this manner.

The reason’s simple: it’s because what’s better for the consumer is, in the end, better for us.

Besides the “cred” the publisher would get for putting out innovative games, an indie publishing arm would provide titles to fill the post-holiday doldrums. Much like any other section of the business, a publisher could easily play up its successes while letting the failures get buried under a different tradename -- much how Fox played up its discovery of Slumdog Millionaire and Juno, but let Phat Girlz quietly slide into the Searchlight catalogue.

Part the Fifth: Execution

The last question before us is how something of this nature might be enacted. I could write a whole article on exactly how this should be done, but for brevity’s sake, I’ll just try and go through some of the key points:

Total Ownership: The most important part of making this a viable business is making sure that the publisher gets total ownership of the IP (and really every part of the games) for anything they publish. This allows the indie arm to hand off successful IPs to the AAA arm in order to fully leverage the value of those IPs.

This may make many indie developers groan, but you can’t get something for nothing, so unless you can self-fund, if you want the capital to do your project right, you’re going to have to sacrifice something along the way.

On the other hand, a smart AAA publisher will work with the indie developer to grow and branch their IP, eventually picking up the company and bringing the employees on board.

Oversight: The publishing arm is going to have to be filled with strong, small-team producers. What’s more is that these producers can’t be seen as “the enemy” as producers from corporate often are at AAA publishers’ internal development houses. This means that you really need people who are willing to leave their own ideas behind them and work as facilitators to help teams accomplish their goals. Someday I’ll rant about producers who secretly don’t want to be producers, but for right now, just make sure your people are interested in growing products, regardless of what they are – otherwise you squash the spark that you brought the indies in for.

Talent Assessment: AAA publishers are notorious for not always making the best hiring choices. This is one of the reasons that raw experience has become such an important credential in our industry. Unfortunately that methodology is not viable when handing money over to indies.

The best answer for vetting indie developers is simply seeing what they can get done. Make them come to you with a prototype. If it’s fun and you can see where it’s going: demand that they hit a milestone that you think is difficult but achievable in the next 2-3 months before you hand over a cent. If they do so without cutting too many corners, publish their game.

Budget: Anyone trying to do this will need to set aside at least ten million dollars for the indie publishing arm. A third of that should be allocated solely to marketing. Capex should be pretty low as the existing corporate structure probably has spare workspace/computers/licenses etc. (even though it’s not at all, I’m going to say call starting capex to be nominal).

In the beginning, the staff should be pretty minimal. Figure an office of 20 to 25, with ten producers, five specialists to answer questions and help vet things like art and code, two or three superior Test Leads that can handle a scalable team, one “talent scout” to be actively looking for viable projects, one great marketing guy, and a handful of staff to help administrate and organize the publishing group itself.

After taxes and benefits let’s assume the staff costs you 2.5 million a year. Figure we leave another million in reserve to cover the capex, travel hiring of temps and all the other unexpected expenditures that are bound to come up: that leaves your group with a little over three million dollars to play with.

But the great thing about these indie projects is that many of them can be completed within the same year that they’re capitalized, which means that the division will be turning revenue within its first fiscal year…which means you’ll know if the experiment worked well before the initial capital is gone.

Could you run a “trial” division cheaper than this? Absolutely. If anyone reading this is actually considering putting together an indie arm for a major I highly recommend the full ten million dollar division, but my calculations estimate that, given less releases per year, it’s viable on two million dollars with the right people (especially if you are willing to give them a rev share percentage to offset lower salaries).

Keep project budgets aggressive and tight. Let these guys pay themselves no more than half of what their AAA counterparts are making. You want them lean and aggressive, working hard for the big payout when they see their percentage.

You want to make sure you disburse in small increment and make continued funding milestone based. Your internal producer, who knows the team and knows the project, should be setting these milestones. They shouldn’t seem slave driving but they shouldn’t be lax.

If you think you’ve got a winner, you should be willing to allocate additional funds for extra time and extra polish.

Never announce a release date until the project is complete. You want to have the freedom to let these projects slip. You’d rather hold onto a completed project than release too earlier or miss a release date you’ve spent marketing money on.

(This last suggestions may not actually be possible, just understand that with these teams you’re going to slip, and you’ve got to be okay with that)

Marketing: As mentioned before, you’ll need at least one marketing person embedded in the division (they should be hired as soon as possible, even before you have products so they can start formulating overall strategy).

Marketing these games is a different animal than marketing AAA games, there are different channels and different audiences and even vastly different budget constraints to work with. This means that you’ll need someone who knows how to market these particular types of game and can work with your AAA marketing department to make the best use of the already incredible marketing division that probably exists in your parent publisher.

Creative Freedom: Last, but by no means least, you must give the teams total creative freedom. These are their projects, not yours. The reason they’re going to be willing to give up the rights to their IP is to get the chance to bring their vision to life.

This may mean that you have to write down projects that simply go astray or release projects that end up going in a creative direction you don’t agree with (though guidelines stated from the outset, such as “no underage nudity”, are fine). This may seem counter-intuitive to a brand manager, but this is how you manage your brand with the segment that matters most, your development community.

Most independent developers are in it for the chance to do something they want to do with the medium. They’ll take a lower wage and work longer hours for that chance, but if you take that away, they’ll hate you forever.

Of course this doesn’t mean you can’t make suggestions, you can and should – in fact your relationship with your developers should be such that your suggestions are sought after and welcomed – but the final decision always has to rest with the developer.

Conclusion: Innovation is something that our industry needs, but isn’t something our industry is prepared to deliver, at least not on a mass scale. Bringing the two sides of the industry together by forming the same indie-major publishing arms we see in other industries would allow us to leverage the virtues of both the AAA world and the indie world, and reap the rewards presented by both.


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Comments


Joe Tringali
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Great article! But it’s missing an idea on how to handle product cost... Outside of Digital Distribution, there are big expenses associated with printing discs / carts, boxes, warehouse, sales, shipping, point of sale promotion, etc. If you think publishers are risk averse, retailers are worse. If a box product isn't available in major retailers, especially if it's on a platform that requires retail (DS, Wii), never going to make any money, or justify the marketing spend. There are also significant upfront costs for a developer in order to create a professional game (software, hardware), and most first parties are restrictive on who is able to purchase dev hardware. Generally, as an indie without a track record you're limited to PC, iPhone or Xbox via XNA. This idea would need to skew more towards an incubation model to provide devs enough resources to get started.



Also, if the publisher assumes the IP rights, they have de-facto control, and all developer freedom comes from good faith. I think either leave the IP with the dev, or with a publisher option to purchase the IP should it be successful. I think we’re seeing the start of a real, commercial indie model, but instead of a label, it’s more of a platform change, with first parties testing the waters in the digital distribution space (so not incurring product cost), and hopefully publishers to follow at some point.

Bart Stewart
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Great analysis, reasonable conclusion.



Some thoughts:



1. Need to address the console/PC divide. a) PC development is easier/cheaper for indies, but that may not be the publisher's target market. b) Who pays for vetting of indie games on consoles, and how does the speed of indie development fit with the delays caused by requiring hardware manufacturer signoffs? c) Will the publisher supply the console hardware as well as a capital expense?



2. Talent scouts: I would strongly recommend having more than one. Two would be better; three would be best. That way you don't have one person's personal preferences controlling the supply of indie innovation.



3. "... you really need people who are willing to leave their own ideas behind them and work as facilitators to help teams accomplish their goals." This is a crucial point, as the "old" EA claims to have learned. Some amount of stable schedule/budget process is a Good Thing, but too much risks destroying the team culture that was able to produce the games you thought were interesting enough to fund.



4. "Someday I’ll rant about producers who secretly don’t want to be producers". Yes, please. Bearing in mind that some overlap is inevitable, producers should stick to production and leave design to the designers. That's true generally, I think, but it's particularly important when "design creativity" is part of what you're buying when you fund indie developers.



5. So let's say a publisher gets the point and fires up an indie arm. What's the next step? How should that investment be leveraged to make more successful AAA products?



6. How does this fit with the similar (but different) concept of a "Skunkworks" division for exploring high-concept game design possibilities? For example, what might be the interactions between Will Wright's "Stupid Fun Club" which will supply EA with crazy new ideas and an indie publishing arm?

Kevin Reilly
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I think the idea of creating "indie" publishing has merit, but I don't think that the traditional large 3rd party publishers will adopt this model for one very important reason: Shareholders. They see games like MW2 and only want more. EA just slashed 1500 developer heads and dozens of projects. You can bet that the games getting axed were all acclaimed for "innovation", but the tried and true "iteration" is what feeds the beast (Madden, FIFA, etc.). Looking at Gamasutra's estimated XBLA/PSN sales I don't think other publishers will be enticed to invest in speculative indie projects and canabilize their own title, but I could certainly see many acting as "distributors" providing mimimal marketing and taking a fee.



Sony, MSFT and Nintendo though would benefit from more competition from the indie space and would be the better fit for energizing indie development as they can offer higher marketing visibility and tech support on their platforms. Sony is offering the Pub Fund which works pretty much like a negative pickup deal (you get paid after delivery of the game), but the game still needs to be approved by Sony, financed by a 3rd party and then is exclusive to the platform for a period of time (up to 3 years I am told). Google could do a lot to support Android by funding development for the platform which if it migrates from mobile to PCs/Netbooks would open another distribution channel.

Jorge Hebrard
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I hope EA doesn't read this article.

Kumar Daryanani
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A great article. I've always been a proponent of publishers starting new IPs out small, with games to be released on any of the digital distribution channels, and then measuring the relative success of the game to flesh out the IP and invest more money on future games in that line. Thankyou for putting these thoughts to paper in such an eloquent manner!

James Hofmann
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Music's shift in the last decade can help inform us of the possibilities. What that industry has now is a sliding scale of backing vs. ownership tradeoffs - you can go 100% indie and DIY everything, you can sign to a small label and retain a sizable stake, and you can go to a major label and get the full star treatment (and a corresponding loss of control).



A full sliding scale for games isn't in place yet, but something along those lines is emerging, as with music, via digital distribution and promotion methods. The bottleneck we have right now comes from a huge gap in scale and accessibility between the digital distribution market and the retail one, one which is obviously narrowing with time.


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