The game industry

Dullgarian · October 2007

<div class="IPBDescription">How it works ?</div>Hi guys!

I'm quite interested by the game industry and how everything actually works in game developement. I was wondering how (and how much) a game publisher can pay a game developer to make a video game. I've read some informations on internet about the 'milestones" and "royalties" or something around that but I'm a little bit confused with all these terms... Where exactly a game developer get their money to finance the game they are creating ? Where their paychecks come from ?

Anyone could explain me more on the subject ? I would be thankful ! <img src="style_emoticons/<#EMO_DIR#>/biggrin-fix.gif" style="vertical-align:middle" emoid=":D" border="0" alt="biggrin-fix.gif" />

TychoCelchuuu · October 2007

It's different for every developer. Sometimes the developer will make a lot of the game themselves, then team up with a publisher who distributes the game. They then split the money. Other times a developer will pitch a game to a publisher, which then finances the game. How each publisher finances each game varies: the "milestones" you hear about are various goals that developers have to meet in order to get funding from a publisher. Think of them like deadlines: if you miss the deadline (milestone) your funding is delayed or reduced. What the milestones are also varies; it might be a working demo of the game for E3, or it might be an implementation of the AI, or something like that.

The Wikipedia articles on <a href="http://en.wikipedia.org/wiki/Game_development" target="_blank">game development</a> and <a href="http://en.wikipedia.org/wiki/Video_game_publishing" target="_blank">game publishers</a> aren't so hot but they're a start. <a href="http://gamasutra.com/" target="_blank">Gamasutra</a> is often a good place for stuff like this.

enf0rcer · October 2007

well, I'm no expert. I think the ns Friday podcasts have given me most of my insight. It seems that for new development studios it's more along the line of - make a functional prototype of a game you think a publisher would pay to be fully produced; the first level of the game, a convincing mock up, something along those lines. If they like it you get a budget and possibly a time frame to get the work done. If it turns out your idea sucked then you wasted your time and you probably won't be compensated. For current big development studios like Epic, they have their breakthrough titles and often they can afford to either self finance future projects or use revenue to make the prototypes that they then pitch to other publishers. I'm not sure but I think due to valves success they've become basically developer and publisher in one. Of course they still need cd manufacture, box art, logistics and stuff but financially they are relatively independent. That and they have the bonus of owning steam which I think is an amazing platform that I hope to see more of.

DiscoZombie · October 2007

I thought this article on <a href="http://www.ttlg.com/articles/lgsclosing1.asp" target="_blank">what killed Looking Glass Studios</a> was an interesting read on the subject...

Crispy · October 2007

I think it usually it works one of two ways:

<b>1.</b>
<b>Game Designer</b> has idea for a game > pitches idea to the <b>Game Development Studio</b> where he/she works

<b>Game Development Studio</b> evaluate idea > if it's good they might begin brief conceptualisation and work on a design doc. Once they get a good overview of the basic design they will need money to hire the staff for the duration of the project's 'development cycle', so they need to talk to a <b>Publisher</b> or <b>Producers/Investors</b> for funding.

<b>Publisher/Producers/Investors</b> evaluate basic game concept > if they like it they will agree to a certain amount of money to create a portion of the game, called a 'proof of concept'. The proof of concept is a demo that demonstrates some of the gameplay and technology that the final product would have. The Studio will take this to a Publisher who can fund the whole development cycle and liaise with the console makers from Nintendo, PlayStation 3 and XBox360 to see about porting the game or negotiating exclusivity (if the game is really good).

<b>Game Development Studio</b> finishes the proof of concept and shows it to different <b>Publishers</b>.

A <b>Publisher</b> hopefully approves the proof of concept and puts up the money for completion of the project. Traditionally, this usually involves an obscene agreement where the people with lots of money (the Publisher) agree to take a bigger cut of the profits than the people who do all the work (the Developer), usually a ratio of around 80% to 20%. One thing the Publisher does take care of is the distribution of the game (copying the game onto discs, making the box artwork and getting it into shops) and the advertising. However, more recently, through digital distribution (which costs a lot less than box distribution), companies like Valve Software will offer a more fair cut to the developer because they can publish much cheaper and still make a profit, increasing the Developer's profits to around 40-50%.

So that's one way a game can get into the shops or onto your PC.

<b>2.</b>
<b>Publisher</b> has existing idea or IP (intellectual property) that they want to expand, e.g. a game sequel > tells lots of <b>game development studios</b> that they need someone for the project.

<b>Game Development Studio</b> pitches their services to the publisher > if they do a good pitch the publisher chooses their studio to go ahead with initial production, which will be like a demo. The Game Development Studio finish the demo and show it to the Publisher.

<b>Publisher</b> approves demo and continues funding for the completion of the project if they like it. If they don't like it they will either cancel the project or give it to a different studio.

I think that's how it works from my understanding.

Max · October 2007

Generally a publisher will finance the development of a game which can cost anywhere from $1 million to $100 million. The publisher doesn't just give this money to the developer at the start of the project though. There's generally a payment plan where every couple of months the publisher writes a check. Sometimes these payments are tied to milestones. Milestones which are points in the schedule where a new build of the game (or other related material) is supposed to be delivered to the publisher for evaluation. If the developer misses the milestone, the publisher can potentially withhold payment or do other nasty things like decrease the royalty rate the developer makes on the game.

Royalties are the portion of the profit on the game that the developer earns. I'm not exactly sure what's typical, but I believe this is generally a small piece of the pie, say 10-20%. The money that the publisher gave to the developer is actually treated as a loan, and the developer pays that back out of their royalties. So it's quite possible that if a game isn't a hit, the developer may not ever make any money off it.

This isn't the only way it can work, but I think it's the most common for a 3rd party developer. Some companies like id or Valve are able to finance the development themselves, which puts them in a much better negotiating position with publishers. A lot of games now-a-days are made by the publisher's internal studios which changes things quite a bit as well.

efektz · October 2007

just want to put my 2cents in.

What are you exactly looking for? Developing games? or being in the gaming scene. I was once looking at joining the CPL and working for Angel Munoz. I was soo big into CS and wanted to just be a part of the community by helping set up, meeting the "pro" players, getting free stuff etc. Depends on what you want to do really.

If you think you can create a program or a game, you should look up at starting an LLC. From there, compose your "team" to get it published. As far as royalties, think of it as windows XP/vista. Each computer in the world that "legally" has that OS in their comps. Microsoft gets "$".

Skyrage · October 2007

<div class='quotetop'>QUOTE(Max @ Oct 9 2007, 09:21 PM) <a href="index.php?act=findpost&pid=1654981"><{POST_SNAPBACK}></a></div><div class='quotemain'>Generally a publisher will finance the development of a game which can cost anywhere from $1 million to $100 million. The publisher doesn't just give this money to the developer at the start of the project though. There's generally a payment plan where every couple of months the publisher writes a check. Sometimes these payments are tied to milestones. Milestones which are points in the schedule where a new build of the game (or other related material) is supposed to be delivered to the publisher for evaluation. If the developer misses the milestone, the publisher can potentially withhold payment or do other nasty things like decrease the royalty rate the developer makes on the game.

Royalties are the portion of the profit on the game that the developer earns. I'm not exactly sure what's typical, but I believe this is generally a small piece of the pie, say 10-20%. The money that the publisher gave to the developer is actually treated as a loan, and the developer pays that back out of their royalties. So it's quite possible that if a game isn't a hit, the developer may not ever make any money off it.

This isn't the only way it can work, but I think it's the most common for a 3rd party developer. Some companies like id or Valve are able to finance the development themselves, which puts them in a much better negotiating position with publishers. A lot of games now-a-days are made by the publisher's internal studios which changes things quite a bit as well.</div>

Good insight on why the gaming industry in general sucks so much these days.

TychoCelchuuu · October 2007

<div class='quotetop'>QUOTE(Skyrage @ Oct 10 2007, 10:28 AM) <a href="index.php?act=findpost&pid=1655120"><{POST_SNAPBACK}></a></div><div class='quotemain'>Good insight on why the gaming industry in general sucks so much these days.</div>

I don't see how you can make the jump from "publishers pay people to make games" to "gaming industry sucks so much."

Crispy · October 2007

Basically the reason it sucks is because gamers won't settle for good games, they need ludicrously good graphics. They are a victim of their own demand, since stupendous visuals require lots of man hours, which pushes up production and makes the industry incredibly risky.

Hopefully the indy developers -like the clever film directors in their early films- will find ways to not require massive budgets to complete a really solid game.

efektz · October 2007

<div class='quotetop'>QUOTE(Crispy @ Oct 10 2007, 06:07 PM) <a href="index.php?act=findpost&pid=1655208"><{POST_SNAPBACK}></a></div><div class='quotemain'>Basically the reason it sucks is because gamers won't settle for good games, they need ludicrously good graphics. They are a victim of their own demand, since stupendous visuals require lots of man hours, which pushes up production and makes the industry incredibly risky.

Hopefully the indy developers -like the clever film directors in their early films- will find ways to not require massive budgets to complete a really solid game.</div>

well said. the demand for HD graphics is at large.

Testament · October 2007

Sometimes I wonder if I'm the only gamer who actually thinks modern games don't look very good. Stuff like Stranglehold looks like plastic dolls in a way. It's not realistic, but it's not fake. It's just not very impressive. I like games to look fantastic, but fantastic being something not-of-this-world.

The game industry

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