Dev Houses: Honest Question

I have a question for devs, indie or otherwise, based on the stuff going on in this recent thread on Bottlerocket:

Seriously. If this kind of thing is possible slash common, what’s going on? I mean, it seems to me that some new ideas need to be implemented in terms of business plans. What is the business motivation to setting up a dev house and putting it under contracts that can quite easily close the business’s dorrs at the whims of another party? Shouldn’t development contracts include terms concerning what happens if the publisher pulls the plug early?

I know that devs can only rarely self-fund. Fine, I get that. You’re under contract and a pub fronts the operational money. OK, but how do you get into a contract where the pub can pull out without any real consequences? I mean, if you’re a dev house and you only have one customer, what do you do when that customer pulls out for any reason; or rather, what led you to operate under such a business model in the first place?

I’m not talking about first party developers so much, since they have a kind of “wholly owned subsidiary” thing going on. I’m also not talking about just working for asshole publishers: what if your sole working agreement is with a publisher that shuts down projects due to a legitimately shitty economy?

My weird little game ghetto bears little relation to the console game industry, but pretty much every contract I’ve had has some kind of “kill fee” involved.

I’d be pretty shocked if there wasn’t something similar in the industry. Why is everyone so sure there wasn’t one?

It’s also possible that Bottlerocket failed to live up to something in the contract, like due dates. Just because the game was close to being finished doesn’t mean it wasn’t behind schedule in regards to the terms of the original contract.

I can’t speak to Bottlerocket’s situation.

But I don’t really see the development houses having much in the way of power, generally speaking. I may be mistaken for this, but it seems like a buyer’s (publishers) market. Maybe the choice is “shitty money” versus “no money” in some/many/[some other quantity] instances.

The people with the money have all the power, and that brings everything with it.

The more common issue here is dev houses that commit to unrealistic goals knowingly in order to secure the funding, and then just banking (literally) on the publisher not pulling the plug later on when they can’t deliver.

Certainly that was the case at both Bioware and Digital Extremes. Accept something impossible, and then negotiate it out later on.

What we need is something where the developers are the publishers. Like a Developer’s co-op. Or perhaps even a Gathering of Developers.

Does anyone know how Stardock does things?

Stardock is in a unique position though, where they can leverage their game development with their various consistently-selling windows tools. This puts them in a much different position than many other devs, who might have to rely almost exclusively on publisher funds.

They started off by funding the gaming side with a non-gaming app side of the overall business. As such they weren’t dependent on publisher’s money. They’ve had enough success that they probably don’t need to follow that model as much now.

The more developers can self publish through outlets like Xbox Arcade, Steam and Impulse, the healthier the industry in general will be.

Stardock provides their own money, thus controls their own destiny. Possibly they have some outside investors too, it’s easier to get money when you have your own to put up as well.

Some independent game companies run off investors as well, but that’s pretty rare nowadays I think.

Absolutely. But those companies still need start-up capital, which is one of the larger issues. Unless they can afford to do their first games without giving up their day job. But that’s some hard shit.

Troika basically failed to re-negotiate when it needed to is what I’ve always guessed.

Or a well developed/established community of Angels.

I know Brad can chime in, but I remember him saying many times that it’s the non-game software that really pays the bills has allowed them to spend the development time needed on their games. (which BTW, their new Fences is wonderful).

I have no idea what is going on at Bottlerocket, but this sort of situation isn’t uncommon.

An example:
A couple guys are laid off or quit from a big publisher/developer. They worked on a franchise in a genre that another publisher/developer wants to add to their portfolio (ex. publisher has no racing games and these guys do racing).

The publisher/developer doesn’t have complete faith in their ability to deliver so instead of allowing them to set up a new first-party studio they give these guys a deal to make a few games with the option to buy the studio later if the publishers chooses. If these guys can’t deliver, they get dumped. If the game is looking good, the publisher buys them out and it becomes a first-party studio. They are doing a bit of damage control by waiting until the development studio demonstrates they can deliver.

Usually there is a non-compete clause for the guys that lasts around four to five years and they stick around as studio heads.

Most game developers (who are very good at making games) tend to not be particularly great at handling business deals. As mentioned above, many contracts are built with unrealistic expectations, and then when they dev doesn’t meet them things can end poorly. Also, game developers aren’t necessarily great at understanding size of market vs development costs, and often either hire too many employees, or don’t target as large a market as they think they are.

Using money from his non-game areas to fund game development is one reason Stardock does well, but that’s just a side effect of the actual cause: Brad understands the business. Why doesn’t piracy kill Stardock? Because they don’t go after audiences that tend to pirate. They also keep dev costs low by not focusing on graphics and other expensive areas.

From my own personal experience, I know the company I work for (Cryptic Studios, now part of Atari) would be long extinct if it were not for the business skills of our directors. It doesn’t matter how good your games are if your business team isn’t up to the task.

I’m sorry I should have been more specific I actually meant publishing with Stardock, like Demigod and Sins.

I’m wondering how their publishing model compares with the traditional model.

Running an independent game development studio successfully is hard. Surely, this isn’t news? Standard contracts usually contain a kill fee, where the publisher can step away at any time, and it usually amounts to paying the current milestone and 1 or 2 in addition. Considering that milestones are usually 4-8 weeks and landing a new gig often takes 6-12 months, even that isn’t always enough to keep a studio in business. If, for any reason, the developer is in breach of the contract - late milestones, a “key man” clause on someone who left the company, inability to deliver features on time, etc. - the publisher can usually kill on the spot, and then you’re really SOL.

That’s not going to stop people from starting up new independent studios. The upside is creative control, fame, and even possibly riches, plus the satisfaction of having built something you own. For a lot of the creative types who get into games in the first place, being able to work on your own idea, at your own studio, with the possibility of success and acclaim, is a siren song. That doesn’t mean they’re well-qualified to manage a business, or even staff, but that won’t stop them from trying.

It’s a fairly grim, cutthroat environment out there for independent studios; you’re not only competing against all the other independents, you’re also competing against first-party and publisher-owned, as far as development costs and talent. If you want to make big games, you need money. If you don’t have it, you have to go get it from somewhere. That doesn’t mean you have to take horrible terms, and in my experience, good publishers won’t even offer you those, but it does mean that you’re putting your business on the line when you sign the contract. Successful studios develop relationships with multiple publishers, build a hefty cash reserve for the lean times, and constantly seek out new business in case something gets cancelled. But, you have to have success and skill to build on in the first place. Like I said, it ain’t easy.