It's Just Not Right: Independent Developer Edition

The numbers are killing the independent game developers.  Not the numbers in the budgets, the numbers in the titles. Take a look at the top selling games for last year, each title ended with a number. This year's most anticipated titles end with 4s and higher. Like the film business, rising costs and expense management mentality moved the game business from one of innovation to one of risk mitigation. The problem is exacerbated by the influx of soda and soap sellers into positions of power.

When presented with a product, the first thing a publisher does is look for a benchmark. What does this product look like? If it looks like something good, we can build a plan around the budget and then give it to the sales guys. The sales guys can go out into the market and ask the buyers if two years from now they would be willing to buy something that looks like the thing that sold really well last christmas. Sounds pretty efficient. . . . if you are selling a new brand of tampon.

Another model, as articulated by Robin Kaminsky of Activision at DICE, is to identify a hole in the market. For example, they noticed racing is popular, but there weren't enough racing games out there. They could buy Bizarre Creations and enter the category in a meaningful way. This can in fact work out, if you don't want to disturb the status quo. When Take 2 took over Bioshock, was it because they identified the market need for an Ayn Rand inspired shooter in a distopic future? How about Namco, did they identify an unmet demand for a big sticky thing rolling through piles of garbage? And Activision themselves, they definitely saw the demand for people who were tired of playing air guitar empty handed - after the market spoke and bought a ton of product Harmonix spent 9 years trying to make. 

Trip Hawkins did not make Madden Football because there was a "hole in the market" for football simulation. He made it because it was going to be fun to play with his friends. Eidos did not need a focus group to figure out men may like to watch Lara Croft's backside for 30 hours. Sam Houser did not do a marketing study to see whether gamers would want to live on the wild side in an open world. These are some of our biggest franchises and their titles are known today as the thing that comes before the number.  They were made when people built on gut. None would make it through a marketing group today, and each would need some type of running demo, funded by the developer.  In case you are not tracking, the developer is the guy without money.  I am sure these risk mitigation techniques make sense to the legions of MBA's who are doing their best to commoditize a once creatively driven business, but how long is the consumer going to hang in there?

When I got into the business the deal cycle between games was a couple of weeks. A developer finished a game, lifted their heads from work and went out for the next deal. Now the cycle can take 6 months or more. If the developer lets the team go after a game, the publishers won't sign because the team is not ready to go.   That means burn rate without revenue.  Moreover, publishers want to see working demos, proofs of concept. More burn rate without revenue or commitment.  They ask for these further risk mitigating elements because they enter into every negotiation, and every deal like they are committing to build the fucking pyramids. The reality is, they are not.

First risk mitigator: A developer who has completed one or more hit games, building on the same or largely the same technology is highly likely to finish the game. Additionally, the likelihood of a hit is high.  I understand publishers shying away from new technology.  They should, and no developer should be stupid enough to walk into a publisher saying they are going to build a new PS3 engine at the same time they are building a game.  But if they already built it. . .

Second risk mitigator:  Publishers always put a provision in their agreements allowing termination for convenience.  The payments upon termination vary, but generally run from payment of current milestone to payment of a few milestones in the future.  They do not need a reason to terminate.  They can terminate because they don't like the lead designers socks - don't laugh, I saw it happen.   So if they sign a $20 million game, they are not signing a $20 million game.  They are signing a month to month deal to keep track on the games progress and see if they want to keep building it.  If they think it takes a wrong turn, they can cancel it and give it back to the developer.  Worst case, they write off development, best case, the developer reimburses them.  I have seen both happen.   I am not advocating buying every opportunity or reducing the scope of developer due diligence.  I am saying to mr. experienced product guy, if your gut tells you this game will be fun and the developer has a track record, fuck the sales dude and go with your gut.   Start a long and lean pre production process.  For a relatively small amount of money you can see if the game comes together.  If it looks good, staff up and build.  If it does not, you are not out very much money. 

There are many things to avoid from Hollywood, there are however some lessons to be learned. Hollywood will pay a nominal amount of money for an option  to purchase a lot of properties. They will then invest money into what we would call pre production, they call development, to see if the property goes somewhere.  If it does, they invest heavily and build.  If it does not, they let it revert or sell it off.  Not rocket science, but it is a great response to escalating production costs.  There is no reason we cannot apply this model.

If we continue in this stasis and only give lip service to original IP, not only will we make boring games, but we will stifle the industry's growth.  The publishers are also unwittingly giving rise to a competitive market.  The same market forces that drove the independent film business and related financing are at work in the game business.  Independent financing is starting to come together and will create an opportunity for original IP.  But it is slow coming.   Once it is established, new franchises will be built, and will cater to the familiar publisher refrain "let someone else be successful and I will buy it at a premium.  It is worth the premium to not lose money on development."   Sound business practice. . . for tampons. 

In the mean time, I am afraid we may see more pairing of press releases, like these: 

Iron Lore Entertainment won the award for Best New Studio at the Game Developers Conference (GDC) 2007.

The New Studio award recognizes the outstanding achievement of a "new" game development studio and the obstacles it overcame in releasing its first publicly available game in the year 2006.

and the second, which came about a year later:

It is with great regret that we must announce that as of the close of business Tuesday, February 19, 2008 Iron Lore Entertainment has ceased active game development.  Several unrelated events occurred which resulted in Iron Lore being unable to secure funding for its next project.