A little more than a year ago, developer n-Space faced near-closure after massive layoffs. Even though 2010 was a record-breaking year for the Florida-based studio with seven shipped titles -- including Call of Duty: Black Ops for DS and TRON: Evolution - Battle Grids for Wii -- the turbulent nature of the games industry reared its ugly head.

Several titles wrapped up in August 2010 and future deals kept slipping through the cracks for n-Space, most famously known for the Nintendo-published Geist. Not only that, two of the studio's primary partners, Activision and Disney Interactive Studios, were going through massive restructuring, according to n-Space president and co-founder Dan O'Leary.

And it certainly didn't help that Nintendo's two platforms, Wii and DS, were facing serious problems for third-party developers such as n-Space, which has primarily focused on Nintendo's hardware.

"You know, the Wii has struggled from the beginning for third-party but really has had a hard time since 2008, 2009. And it's just gotten worse," O'Leary said in an interview conducted last year.

"The DS, the piracy problems just became so rampant, and given the size of the ROMs that we make for the DS -- 64 megs -- it's not hard to find and download the ROMs in an instant. That's a real problem."

O'Leary hoped to find interest in development for the more buzz-worthy 3DS. The president said the company's "expertise on 3DS was clear, but most [publishers] weren't ready to bite back then."

It seemed as if the writing was on the wall, but n-Space managed to do something many others developers couldn't: bounce back.

The Revenue Stream

Developers don't own the revenue stream, according to Carey Chico, former executive art director and producer at the now-defunct Pandemic Studios. He noted that developers want to make a great product and think they will be rewarded with cash. However, publishers own not only the revenue stream, but the users as well.

That's not the only problem, either. Even with a fantastic idea, fewer and fewer publishers are willing to take a risk.

"If you don't have a win [like Call of Duty], will a publisher take a $30-million risk on you?" Chico asked? After Pandemic's closure, he co-founded Globex Studios LA, which creates and publishes a range of online games and MMORPGs.

Chico explained that if a studio or team doesn't have a previous high-grossing product under its belt (something like Call of Duty), the risk to the publisher is much greater. In the current climate, Chico noted, publishers won't take a chance on a studio without a huge past success, which wasn't a problem a few years ago.

"[Publishers] can't see past their noses half of the time," said O'Leary.

This low-risk, high-cost environment spells many troubles for independent developers as well as second-party studios, like Pandemic, which Electronic Arts closed in 2009. Chico said the developer, known for open-world action games like Mercenaries, was expected to sell more than 8 million copies of its games before it was shuttered.

Independent developers must plan accordingly and be versatile to survive. Developer BottleRocket found this out the hard way and never recovered after its fallout with publisher Namco Bandai over Splatterhouse, according to former Namco Bandai America producer Michael Boccieri, who now works for Backbone Entertainment. He worked with several members of the ex-BottleRocket team during the subsequent development of Splatterhouse internally at Namco Bandai.

"As a developer who has worked within the work-for-hire side of the industry, I can say that often times a studio has a lot riding on the successful continuation and completion of a development contract with their publisher(s)," Boccieri said in an email interview. "It seems that without the revenue generated from the Splatterhouse project, BottleRocket was unable to make payroll and ultimately was forced to close shop."

"Work-for-hire studios often can find themselves in this sort of situation, particularly with large contracts that leverage a significant percentage of studio resources."

And planning isn't easy in the games industry, in which the wind can change direction at almost any moment.

"There's only so much you can do as an independent developer when you have to be very reactive about your planning," O'Leary noted. "You can only plan out 18 months, or in Wii and DS world, maybe nine to 12 months in advance. Unless you get multi-title deals, which are pretty rare these days, you just have to plan for that nine-month window."

The only answer for independent and mid-sized developers, like n-Space, becomes very clear with all this in mind: self-funded and self-published games in different markets.

"You have to have a plan to make money which can't rely on the hopes and well wishes of publishers," said Chico.