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Nine Things You Might Not Know About the Game Industry

Now that the hubub of GDC has died down, I decided it was time to take a few minutes and share some notes on the behind-the-scenes action at GDC. What a lot of people don’t realize is that behind closed doors, there’s a whole different show going on – one where developers are putting on their best show to publishers, hoping someone will give them the money they need to take the game that’s been their dream to develop, and get it on retail shelves.
Let’s see…about what I learned at GDC…some info comes from the publisher I was helping evaluate titles, along with other publishers I spoke to while there. I even met one AAA publisher’s acquisitions guy (he was sly, would not even tell me if he “saw anything good”, but did share some general overview thoughts)
1. Unreal Engine 3 is going to break the bank for some developers. Every single meeting we had with a developer who said “Unreal Engine 3” typically had the dev tacking $1-2million bucks onto the price of their game, just for licensing UE3. Sure it makes developing an amazing 3D game faster for next-gen, but dang, some of these guys should be able to do their own basic engine before trying to base their first product on a license like that.
Here’s the problem – too many unproven devs were showing their UE3-based games, and asking for budgets starting in the millions. It led to a lot of “Well, you’ve never done a game before, you’re using someone else’s engine, but you want us to fund you for Triple-A grade work?” And I swear, every developer working with UE3 said “We’re going to launch this on Xbox 360, and we expect it to be ‘very easy’ to port to PS3 or PC because of it.” This naievete truly amazed me. They all thought that UE3 was a magical cure for development times, when major development studios are groaning about extra work to port stuff. I even heard promises of “We’ll get it done for 360, and in a month we’ll have the PS3 port ready.”
2. DS seems to be the “it” platform of choice for smaller devs, every company in Europe, and anyone who has a hard time getting budgets. I easily saw 40-50 DS titles in various stages of development, from concept on a napkin to almost finished. But never once did anyone say it would take them more than a year to finish a game. The AAA grade stuff was bigger budget (I heard one hit a milliion bucks, but the rest were around $400-500k), but never more than a year. Newer devs were guessing anywhere from $200-500k for completion of DS titles. A whole lot of PC devs were talking about moving to DS. Most developers said that Nintendo’s very easy to work with once you’ve gotten approved to be a Nintendo publisher (which, in working with one of my clients, we found wasn’t all that hard to do.)
3. Xbox 360, PS3 and PSP pitches were in short supply. There was some XBLA stuff, and let me tell you, if the dev already had one title on XBLA, they asked a premium for their next title. Why? Because it’s HARD AS HELL to get Microsoft to look at your XBLA games now since the service is so popular. Microsoft now gets pretty picky about what they’ll put into the XBLA release queue, so a dev needs to be established, have a helluva game, or have a big publisher behind them to get a game on. It’s not the Indie Games Channel we all thought it would be…not any more. But, once a dev gets published, it’s like they found the golden ticket, because even the stinkiest XBLA titles make their money back. Which means publishers were snapping up XBLA titles the minute they were pitched.
Any PS3 titles I saw were actually Xbox 360 titles that were going to, after release on the 360, get a port to PS3.
I saw one PSP title the whole time, and it was an awesome RTS. They finally nailed the control scheme for handheld RTS’, but alas, the budget was, well, due to NDA I can’t say exactly, but let’s say it was at least a million bucks. And knowing the NPD sales numbers for PSP, and the licensing cost to Sony for that crap UMD media, you won’t make the sales on a new IP to cover the dev cost.
4. While the DS may have a huge user base, there are still only a few hit games, which makes publishers nervous. What we as gamers don’t realize is it’s not dev costs that are expensive on DS, it’s actual production costs. From my understanding, and talking with developers and publishers, Nintendo has three cart sizes: 128 MB, 512MB and 1GB. Each cart comes with a production cost – I forget the exact number, but it started around $6 for the smallest cart, and topped out a little over $10 for the big boy. Also, the 1GB has terrible memory bandwidth, which means devs need to retool the game to compress the data contained on it so the game stays smooth.
Ok, so with those numbers in hand – let’s say you do a 128MB cart, which is probably 80% of all DS games. You as a publisher just lost $6 on each sale. That cost goes straight to Nintendo as “licensing.” And, you have to make that bet early, because Nintendo doesn’t do “onesy twosy” production. You say “we want 500k units”, not “we’ll start with 100k units, and maybe if we sell well, we’ll ask for 400k more”. Tough crap, Nintendo’s got publishers crawling up their butts to ship DS titles, and no time to deal with people who can’t commit. So you have to place big bets before the cards are dealt.
Next, you have marketing costs (anywhere from $40k on a smaller game, to several hundred thousand on a AAA game). If you can’t commit a certain number to the developer, well, they’re going to pass on you as a publisher, because who wants to bust butt on a game, only to find that the publisher’s not going to market or PR it at all?
Don’t forget packaging and distribution! You need a pretty box, which sadly, I learned retailers base a LOT of their “stocking” decisions on, and you have to get that stuff to stores, so knock a few bucks off the game’s possible profits per unit.
In the end, if the game doesn’t hit it big (300k + units sold, and trust me, most DS games never hit that number), you lost money. Your only hope is that now you have an established rep as a good dev/publisher, and an IP license that will continue to interest people for your second game. Otherwise, you’re hating life.
Also, if the sheer number of games shown by devs at GDC is any indication, the next 12 months are going to see a flood of DS games. Know what that means? Even harder competition for shelf space, because retailers won’t expand their shelves if they don’t have to. So, publishers will have to crank up the marketing budget to get big public buzz going, which then attracts the attention of the retailers.
Retailers..ugh, that leads me to lesson #5
5. Retailers make the rules, not publishers. So next time you complain about “no original games out there”, go thank Wal Mart, Target and other big retailers, because they make it that way.
Basically, retailers don’t want to take chances. So, they will only stock titles from publishers they know, and franchises they know will sell. Thus, publishers, unless they are someone like Capcom, Microsoft, Sony, etc, don’t have the muscle to push original IP to retailers. A good example – if Katamari Damacy wasn’t a Namco product, it would’ve NEVER seen a retail shelf in North America. I saw so many amazing and original games this past week, and felt like weeping every time I heard “This is so amazing, but you know, the retailers will never pick it up because it’s a risk. If we were Sony, sure, we’d have the clout to pick it up and push it into retail, but we don’t have that kind of muscle.” And with the big publishers knowing they can move a lot of units by just shipping sequels and shooters to retailers and make a killing, well, this original stuff just never finds a home. I’m honestly going to try and track how many of the dozens of DS titles I saw ever get a publisher in the next year, and I’ll revisit this feature as a follow up.
Retailing..that brings me to…Digital Distribution
6. I can’t count how many guys we met with who were offering different digital download services. They can smell the blood in the water for the PC market, and well, they are capitalizing on the loss of shelf space. PC publishers are lapping it up, which actually will be good for gamers, as they’ll be able to find those weird PC games (like Adventures in Infinite Sapce) that would never get in a box or on a shelf.
There’s actually talk of PSP Digital Distro, at least one dev said “if we can get Sony to approve it, we’ll be able to make at least demos available from our site that you can dump to your PSP memory stick and play.” You can do that now, but it’s scattershot, and it’ll be great if someone can figure out a way to make a centrailzed and inexpensive service to do it. I doubt Nintendo will be interested, because they have plenty of creative DS games, and won’t want to give up that per-cartridge licensing fee.
7. Interesting varieties of “publishing.”
Typically, we all think of publishing (for those of us who bother to think about it) as someone giving a developer money to finish a game, and providing them with the logistical support, such as marketing, PR, sales, packaging and distribution. As I learned at GDC, there are a lot of other models out there. This is sort of a game economy 101 class, so feel free to skip it.
Beyond the usual “here’s $1 million, now finish your game”, here’s two others I saw, and I saw various variations of these also –
– “We’ll pick up your game when it’s almost done, give you a few hundred thousand bucks, and handle the logistical crap. We know you didn’t get the millions you’re hoping for, but we’ll cut you a HUGE royalty (like 30+%) on each unit sold once we get this out the door”
– “We’ll give you $x hundred thousand for the ability to own the rights to publish your game. We likely won’t publish it, but we’ll shop it around and find a publisher for you for each territory.” In this case, the “rights buyer” might pay $500k, but end up getting millions by reselling those rights on a country-by-country basis. The Europeans seem to like this deal. They call it being a “production” house or being the game’s “Producer.” It seems to work, as we picked up one title from a production house just for North America, and while the rights weren’t expensive, I can bet the dev might see 1/2 of that money. Plus, the producer was shopping it to 3-4 territories, so they had some bank coming if they did a good job selling those rights. If they didn’t, well, then they lost some serious coinage.
8. Some PR is really braindead
With GDC being very popular now, you’d expect companies to be jumping on the bandwagon and blowing their wads here. Nope, many didn’t bother to show anything, or show crap that’s available in retail. There was even one publisher’s PR team who hurried up to call editors once they got to the show and say “we didn’t expect media to actually be here, so now that we see so many editors, we’re trying to put together a showing of our upcoming game, will you come?” Seriously..was this amateur hour? Yeah, I know that GDC has traditionally been about the developers, but now that E3’s basically gone for smaller publishers, it seems they’d catch the hint that there is now a media presence at the show.
9. European games don’t suck and more than games from most other places – it’s just that US retailers don’t want them or know what to do with them. European games have always taken flack for either their subject matter or final quality. And in some ways, they deserve it – after all, Europeans are incredibly forgiving of buggy games, with publishers shipping stuff that would be considered a late Alpha in the US as retail in Europe. But I saw a whole lot of good Euro-games, but for some reason, no matter how good it is, retailers shy away from them saying “it’s too european.” That makes sense for some obvious titles (like WWII RTS’, Napoleonic RTS’, Touring Car racing games, etc.) but there’s a lot of good stuff there that gets overlooked for this one stupid reason. Maybe that’s why a lot of the European publishers I chatted up were excited to get on STEAM and other digital services.
That’s it for this year’s GDC summary. I hope you enjoyed a little behind-the-scenes that you typically don’t hear about.
– Cal

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