Independent Development Q&A

GameSpot’s latest “Spot On” feature offers commentary from several independent game developers, including Flagship’s Bill Roper and Obsidian’s Feargus Urquhart, about the difficulties of starting a new game development studio – especially with all of the recent buyouts in the industry. Here’s a little something to get you started:

GameSpot: Many industry vets say the advance-against-return formula is dead (from the POV of the developer). Reason: Costs to create competitive products are too great. What’s your opinion?

Bill Roper: The costs for creating what we all think of as (AAA titles) are certainly large, and you have to be thinking in terms of selling at least 500,000 copies for the advance-against-royalty structure to make sense. The sliders that developers can push in their favor, in this regard, are finding ways to spend less on the game (so you have less to pay back) and trying to have a more favorable payback schedule, often expressed in a higher royalty rate from the publisher. The biggest factors that publishers look at are total project cost, how many units they have to sell to make back the investment, and the possibility of the game being a top-seller. Obviously, some of these factors are easier to determine (budget) than others (gamer tastes), and this is where a solid track record from the independent developer can be exceptionally important. I also think this is why a lot of the publishers look to grow internal teams that they can compensate and bill in different ways than external studios. Advance-against-royalty is a model that we may see change over the next few years, perhaps going more toward joint ventures or cofunding with more successful independent developers, but as of today, its how the majority of third-party games see funding.

Feargus Urquhart: That is my opinion as well. However, it’s not cheap to publish games, and a publisher should have the right to make back all of the costs that are associated with putting the product on the shelf (development budget, marketing, PR, MDF, COGs, etc.) before the developer starts making money. In other words, I think a system should be developed where the developer and the publisher both start making a profit/royalty at the same point in time. As for how much the developer should make at that point, and off of which definition of net receipts (or gross–we can always hope), that’s all based on negotiations.