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Distributors vs Publishers


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#1 Decoy   Members   -  Reputation: 122

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Posted 16 June 2000 - 07:27 AM

How much of the money a distributor collects from games being sold generally goes to the publishers? I''m working with a team that has had offers for a small game we did from both a publisher that uses a separate distributor and a company that does it''s own distribution. The deal from the publisher gives us a much higher percentage, but I don''t know if the total we''d get would be better since their distributor would take their cut before the publisher sees any. I don''t have any experience in the business like this so any info you have would be appreciated? Thanks.

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#2 Tiso   Members   -  Reputation: 122

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Posted 16 June 2000 - 12:06 PM

Say again? What''s your question? I get a little confused sometimes. If you can put it a little bit simpler terms I might be able to help you out.

............
Guardian Angel Interactive

#3 Crystal Interactive CEO   Members   -  Reputation: 122

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Posted 16 June 2000 - 11:02 PM

Dear Decoy,

I''d like to share some information on this particular subject. A publisher is basically the company that puts up the money to design the packaging and mass produce the final product. If you had enough money as a developer, you could probably do this part of the job yourself, but then again it takes a LOT of money to even get started.

Then the publisher markets the game. This is not as simple as you depict it. For example my company does not simply ship 5.000 units to Ingram Micro and then sit back and watch them sell it. Besides the fact that our profit margin would be halved by this distributor we''d also have to wait 9 months for our money. So suffice to say we''re not fond of distributors and only deal with a selected number to get into stores we can''t get into on our own. So in many cases the publisher is also the distributor.

So how do you sell a game into stores? First of all you need to get yourself some good sales representatives. People with inside knowledge of the industry and relationships with buyers. It all sounds like back chamber polictics, and frankly enough: it is. There''s no way you can get a product in nationwide retail if you are "cold calling" a retail chain. They''ll simply ignore you after they''ve stopped laughing at you... In any case you first need to convince your own sales reps that the product you have is good, and that it will sell. Most sales reps and sales rep companies (these are NOT game agents by the way!) work on commission and only have a select clientele amongst the publishers. For example in France we share our sales reps with Cosmi. No other publishers will get their products placed by these people. So if you''re a newby please think twice before you try to attempt something like retail distribution. It''s difficult!

So do stores simply buy your products directly then? Again the answer is no. You have to "buy" a direct account. This can be something in the area of $50.000, just to be "allowed" to sell into Electronics Boutique for example.

So please do not think publishers are just a bunch of leaches who sit on their rear ends and wait for "distributors" to do the work, since you HAVE to sell direct in order to survive in this industry. I personally wouldn''t trust any distributor to sell a single copy of a game... Almost all of these companies loose money on a yearly basis and publishers generally do quite well. Makes you think doesn''t it?

I hope this information is helpful, even though it''s just my experience with distributors. And last but not least I''m quite startled by the general lack of knowledge on how the industry actually works. But then again if nobody tells you, I can''t really blame you for that now can I?

Take care,

Alex de Vries
http://www.crystal-interactive.com

#4 Decoy   Members   -  Reputation: 122

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Posted 17 June 2000 - 04:25 AM

Let me try to confuse this issue a little bit more.

I''ve shown our little game to both Company A and Company B, both specializing in "value games". Both seem to like it and have said their interested in including it on Collections their putting together.

1) Company A is a a publisher/distributor offering us x% of the money they make from the game.

2) Company B is a publisher offering us (5*x)% of the money they make from the game. They use another company (let''s say Company C) to actually distribute their games. (I think) Company C gives y% of what they take from retailers who sell the game and give it to the publisher, Company B, as per their agreement.

What is y%?

We get a significantly higher percentage from Company B but there is an extra guy in that equation taking a cut. (I''m not calling anyone here a leech just describing what I think is going on in this process. Feel free to correct me.)

What I''m looking for is an answer like, "Decoy, Distributors usually give about (25%) of their net profit from a title to the publisher of the game. What a well-phrased and well thought out question". (Mileage on the second part of this faux-reply may vary.)

I think the problem here may be that in my first message I just described Company A as a distributor, but it is both a distributor and a publisher.

Are we confused even more yet? Good, my job here is done.

I appreciate your replies.

#5 Akura   Members   -  Reputation: 130

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Posted 17 June 2000 - 07:04 AM

maybe im wrong but lets imagine


a) distributer

your games is oging to be sold at $10

u get 5% ence $0.5


b) publisher

your games is going to be solst at $10

distrivbuter gives %50 to publisher
publisher = $5

publisher gives u 25% ence $1.25

but this is distribute gives 50% (which i doubt it, lets take a 10%)

publisher = $1 where gives u 25% ence $0.25



now, the problem is how publisher gets from the distributer they use !

i think its about 10 to 15 but im not sure !

#6 Crystal Interactive CEO   Members   -  Reputation: 122

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Posted 17 June 2000 - 07:34 AM

Hi,

I''m sorry my friends but I guess you''re both a little confused to what is actually a distributor and a publisher, as well as what they do. How the industry works is best explained by going through a publishing process step by step.

1) Development
2) Beta Testing
3) Publishing (this comprises of several things)
- Design of packaging
- Duplicating the CDs
- Insertion of CDs in packaging
- Storage of finished products
- Advertising/Publicity
4) Distribution and Marketing
- Getting purchase orders from buyers at retail chains
- Shipping of the product into retail
- Taking care of returns
- Accounting of sales

Okay, so the first 2 stages you can quite easily do yourself if you''re a one guy/girl development outfit. Stage 3 can be done by yourself also if you plan on low profile internet/mail order sales or if you''re a millionaire with money to burn. Stage 4 is where you guys assume a publisher hires a distributor to take care of business. In some cases this can be correct but these companies generally don''t last very long if you know what I mean... So almost all publishers are in fact also their own distributors. There are only a couple of specialised distributors in the U.S. who struggle to stay in business. Namely Ingram Micro, Merisel and ASHD. Any decent publisher tries to avoid these companies like the plague since they work extremely slow and generally don''t pay up. Either not in time, or not at all!

So when you say you have a company who has to use a distributor in order to get products to market I''m inclined to think you''re talking to a game agent rather then a publisher. A company like Xtreme Games for example offers developers 50% royalties. This is however a sub-licensing fee for a contract they have with another company which takes care of the actual publishing process from stage 3 onwards. Still there''s nothing wrong with using a game agent as a company like Xtreme Games can pitch your product to the right people in a relatively short period of time. You simply have to figure out for yourself if it''s worth 50% of your proceeds.

Now comes the part where I get to mention figures. Unfortunately the simple solution Mr. Akura gave isn''t the way it actually works.

If you are going to market a product in retail you have to set a retail price. Let''s assume a retail chain will sell your game for $10 to the consumer. The profit margin for these guys usually is a few dollars. Let''s put it at $5. This actually means that they''ll buy a game from the publisher for $5. If you would have to go to another distributor like Ingram Micro first you''d have to account for another party taking a profit margin, leaving you with less then $5. These are actual figures for direct distribution. Retail chains are quite powerful and most publishers are at their mercy with regards to what they''re allowed to sell into their stores, at what price and what their margin is.

With regards to finally answering Mr. Decoy''s question I can only say that you''re probably not talking to a publisher but rather to a game agent. The other one, being the "publisher/distributor" please simply describe as "publisher" from now on. It''s obvious that they distribute also. We sell direct in almost every retail chain except for 3 which are controlled by GT Interactive. So do most of the other publishers I presume.

I hope it''s cleared up a few things and answered your question

Take care,

Alex de Vries
http://www.crystal-interactive.com

#7 INVERSED   Members   -  Reputation: 172

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Posted 17 June 2000 - 07:51 AM

Thanx CI CEO, I feel a little more knowledgeable already.

Dare To Think Outside The Box
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http://www.inversestudios.com

#8 Anonymous Poster_Anonymous Poster_*   Guests   -  Reputation:

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Posted 17 June 2000 - 08:25 AM

Ok Decoy here is I think what you want:

* YOUR ANSWER: there is no y%


* 1st, let me state that this is for Quality Titles and not valueware games packaged on a single CD, but the concept should be the same.


* For both a Publisher who have its own distribution AND a publisher who uses Distributers, the publishers GET THE SAME AMOUT OF MONEY.

SO WHAT DOES THAT MEAN:

For a game that cost $10 (just for example, I assume thats the retail value of a valueware CD pack)

--- case 1: Publisher with Distribution, would sell the Game
--- directly to retailers for about 65% of that price (i.e: $6.5)
--- and then gives you x% of that amout ($6.5)
--- Retailer would then sell it for $10 making %35($3.5 on it)

--- case 2: Publisher WITHOUT Distribution. THE DISTRIBUTER
--- would BUY the game from the publisher for %65 of its retail
--- price($6.5) and then sell it to retailers for ONLY %10(it
--- could go to %14) of its price($1) and then retailers would
--- sell it for %25 (instead of the %35) in CASE 1


* So basically Publishers always get same amount no matter what.

* Distributers NEVER SELL THE GAME TO RETAILERS AND GIVE y% to PUBLISHERS. They BUY IT FROM the publisher for a fixed amount and then sell it to retailers. (SO MAYBE YOUR y% HERE IS %10)

* Distributers make the least amount per package than anyone else (BUT THEY HAVE LOTS OF PACKAGES FROM MULTIPLE SOURCES).



* And if one of those publishers quote you a big amount like %50
royalty and that the distributer would take y%, that would be bullshit as Mr. Alex previously said, he might be an Agent and would give you %50 of the %10-%15 the publisher gives him.


Take care.

#9 Crystal Interactive CEO   Members   -  Reputation: 122

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Posted 18 June 2000 - 12:43 AM

I totally agree with Mr. Anonymous, except for the fact of course that distributors do not actually ''buy'' products from publishers. Well, technically speaking they do, but in general they expect you to ship huge amounts of finished products and do a "sale or return" deal with you. This means you only get paid when (better say ''if'' here...) they sell something. And even then you can wait upto 9 months for your first pay-check. We used Ingram Micro and Merisel in the past and they still owe us money from products that were sold in January 1999... Suffice to say that a sound minded publisher will not subject himself too much to the likes of Ingram Micro and Merisel. The bigger publishers that do get in financial trouble in the end.

Take care,

Alex de Vries
http://www.crystal-interactive.com

P.S.: One more thing... You also used fictional percentages. Just stating it so everyone knows. Thanks for sharing your view with me by the way Very interesting!

#10 Anonymous Poster_Anonymous Poster_*   Guests   -  Reputation:

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Posted 18 June 2000 - 05:10 AM

Dear Mr. Alex,

Are you working now with Ingram and Merisel.
I don''t think I will work with a company when they don''t do the job on the right and fair way. Like not paying.




#11 Crystal Interactive CEO   Members   -  Reputation: 122

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Posted 18 June 2000 - 05:35 AM

We try to use these 2 companies as little as possible. Currently there are no products of ours being distributed through them. I agree with your opinion on not working with a company that has a bad track record, but this particular decision is not entirely mine in our company. Ingram and Merisel pay up after a long time. ASHD never pays up.

Take care,

Alex

#12 Darkor   Members   -  Reputation: 133

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Posted 18 June 2000 - 05:42 AM

I love the way Mr. Crystal Interactive CEO calls people with the Mr. in front. I love it so much, I'm gonna do it myself.

Edited by - Darkor on June 18, 2000 12:43:14 PM

#13 Akura   Members   -  Reputation: 130

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Posted 18 June 2000 - 09:15 AM

ARGHHHHHH AND I HATE IT!!!!!!!!!!!!!!1

''Mr.'' Alex, ialreayd asked you in some post not to call me mister, I HATE IT ))))))))))

and i said i was not sue bout that, it was just what i got from conversation to fellow workers

well back to reality

#14 Anonymous Poster_Anonymous Poster_*   Guests   -  Reputation:

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Posted 19 June 2000 - 12:58 AM

>i said i was not sue bout that

Yeah, well, I''m not so sue about it my self.

#15 Decoy   Members   -  Reputation: 122

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Posted 20 June 2000 - 08:14 AM


Thanks to everyone who responded. Your answers were very helpful and informative.





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