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bit64

Idea for a new type of publisher

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Publishing, it seems to me, is the bottleneck of the game development world. Thousands of people are out there who would love to make a good game, have the talents and the drive to make that game, but no funding or organization. Enter the Indie game publisher. We have a few existing Indie publishers, but they don't offer money to potential developers as EA or other large publishers do. Fair enough since Indie developers would be considered a very high risk. But what if an Indie publishing company existed that would fund the independant developers? Would you sign a deal with a publlishing company that was willing to loan you 100,000 dollars to get your game done? The company could sit down with the developer and discuss their idea, and if the idea was doable, and fun, then they could work out a milestone deal. Let's say that they worked out 8 milestones over the period of two years. Every 3 months if the Indie met their milestones, the publisher would loan them another 12.5k dollars. If the Indie failed to meet two milestones, the publisher would have the option to stop funding, and the Indie would have to begin repaying the loan (at a reasonable interest rate). Of course, if all milestones are met, the Indie would still be responsible for paying off the loan, but the publisher could then pull the payments from the proceeds of the game, perhaps even withholding royalties until the loan was paid in full. Upon repayment, the Indie would again retain rights to their game. I would think that most Indie's could get a team constructed and work on a game for 20k/year (assuming 5 employees, or a smaller number of employees and buying their resources from a third party). The publisher would not be risking too much, since its dishing out only 4k/month with the option to pull out at the first milestone if the developers seem inept. Would you be willing to do this if you were an Indie? Of course, your games would probably never see the shelf at Wal-mart, because printing, distributing and advertising costs are outrageous. They would probably have to be sold online, and that markets not enourmous, so there would be a risk that you would have a partial loan to payback, even after a succesful distribution. But because you would retain rights to the game upon repayment of that loan, you would be free to sell it to EA/Vivendi/whoever in hopes of larger revenue. This would simply be a way to get a team organized and have food on your table while you are able to put a game together. Any feedback?

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Ok here are my comments/opinions on this [smile].

Quote:
Original post by bit64
Publishing, it seems to me, is the bottleneck of the game development world. Thousands of people are out there who would love to make a good game, have the talents and the drive to make that game, but no funding or organization.


I agree and disagree with this statement. It is true that there are lots of people out there with the talents you have described - but they should not need the funding or organization handed to them to get something accompished. I think that those people should be able to make a game with 0 funding and have to manage the organization themsevles. Now I say this because I truly feel that there are enough free resources and tutorials online now that making a decent game is very realistic and possible. Being able to start with nothing and create something so grand is what separates the boys from the men in game programming. (err something like that [wink]). Once you can do it like that from nothing - doing it with something is a lot easier. The orginization I feel is also programmer/developer responsibility. They should be able to handle it all themsevles.

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Enter the Indie game publisher. We have a few existing Indie publishers, but they don't offer money to potential developers as EA or other large publishers do. Fair enough since Indie developers would be considered a very high risk.


Agreed!

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But what if an Indie publishing company existed that would fund the independant developers? Would you sign a deal with a publlishing company that was willing to loan you 100,000 dollars to get your game done?


I like your idea - but from that so far, let's think about it. 100k is a heck of a lot of money. I pay about 4k a semester for college right now - and every penny will (Lord willing) be earned back with my knowledge learned. But this idea of giving out this kind of money on something such as this does not seem that feasible. This idea would be rather used for some research based application - imagine a new way to do something or find a better way. This will be continue in the next paragraph.

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The company could sit down with the developer and discuss their idea, and if the idea was doable, and fun, then they could work out a milestone deal.
Let's say that they worked out 8 milestones over the period of two years. Every 3 months if the Indie met their milestones, the publisher would loan them another 12.5k dollars. If the Indie failed to meet two milestones, the publisher would have the option to stop funding, and the Indie would have to begin repaying the loan (at a reasonable interest rate).


Oh man! I think this could be very devestating. Here's why. If I were to start making a game now - and extended it for 2 years - it will probabally be outdated and 'old' when and if it was finished. I think you have a great idea though about the limited funding per milestone. However, I said this was devestating because imagine if the first milestone was missed. The indie's are out 12.5k in which the must repay. In all honesty - if they could afford this, why would they choose funding. I think this system would have to have some other means of monetary managment - but I do not have a solution at the moment.

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Of course, if all milestones are met, the Indie would still be responsible for paying off the loan, but the publisher could then pull the payments from the proceeds of the game, perhaps even withholding royalties until the loan was paid in full. Upon repayment, the Indie would again retain rights to their game.


Let's just say that all are met and the game is neat - but do you think, on average it could ever generate enough revenue to cover the 100k or X amount spent? Then the indie's would be in debt after they had spent all that time making and game and end of having to pay for working on something.

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I would think that most Indie's could get a team constructed and work on a game for 20k/year (assuming 5 employees, or a smaller number of employees and buying their resources from a third party). The publisher would not be risking too much, since its dishing out only 4k/month with the option to pull out at the first milestone if the developers seem inept.


While this once again sounds good - how could a company be willing to do this? We're not talking about 1 group - but many - and 4k a month multiplied by anything is a lot of risk - especially with the odds of "hitting it big" with a title.

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Would you be willing to do this if you were an Indie? Of course, your games would probably never see the shelf at Wal-mart, because printing, distributing and advertising costs are outrageous. They would probably have to be sold online, and that markets not enourmous, so there would be a risk that you would have a partial loan to payback, even after a succesful distribution. But because you would retain rights to the game upon repayment of that loan, you would be free to sell it to EA/Vivendi/whoever in hopes of larger revenue.


If someone came to me and gave me this kind of proposition, I would honestly decline. The main matter of fact is that when you are dealing with this kind of money - and the associated risks - it just isn't worth it. I mean worse case: you make a game on time and sell it, but it generates such little revenuse that you end up having to pay back a huge loan. Not only are you out of work - having worked so hard for 2 years - but you are actually in debt! As for selling it to someone in hopes of larger revenuse - likely but I do not think it is very probabale.

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This would simply be a way to get a team organized and have food on your table while you are able to put a game together.

Any feedback?


While having food on the table during the game is great - I think the bigger issue is wheter or not there will be food on the table after tha game, and that's what I think it all comes down to.

I think you have a great idea. I mean it'd be nice to see somthing like this pop up. I hope I have not came across at bashing, insulting, or anything with what you have said. I just think there are a few kinks that would have to be improved in this theorey and its application in modern times. Feel free to tell me what you think about what I have said - good/bad/agree/disagree/etc... I think you have a great way of thinking. Great work [smile]

- Drew

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I hope I have not came across at bashing, insulting, or anything with what you have said.


Not at all! This is great feedback.
I am currently at a point in my life where I would like to start a little side business, and I am trying to find a creative way to make Indie game development a little easier for people, and I have the funding available to do this sort of thing. It's late and I'm tired, so there are definately some things that I need to iron out a little more. I guess the way I am seeing it, is an alternative to living off of a high interest rate credit card or a lowpaying job for the time that it takes to develop a game, while getting some industry direction and a guaranteed publishing agreement (albeit, an internet release). But you bring up some excellent points. Much work would need to be done to determine what kind of sales a good internet released game could rake in, everything would then have to be based from that.

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Oh man! I think this could be very devestating. Here's why. If I were to start making a game now - and extended it for 2 years - it will probabally be outdated and 'old' when and if it was finished.


Absolutely, but this holds true with published games as well. The solution is to make sure that the developers are targeting technologies that are two years out, it is hard to do, but certainly much easier today than it was 5 years ago. It would be the publisher's responsibility to forsee the value of the game 2 years down the road and accept or reject (or refine) the proposal based on that.


Related thought:
With the dawn of networked console gaming, I think that there is a huge oppurtunity open to sell games over the internet. I feel that the average Joe who owns an <your fav console> would gladly pay 20 dollars to download a new game directly onto his console if he didn't have to get out of his recliner. :) Even if it is from a developer/publisher he is unfamiliar with. Granted, this is not possible with the current generation of consoles (space limitations) but should become more feasible with the next generation.

Thanks again for your excellent response.

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I agree with Drew on that a first organized game project of larger scale should be done with no funding. It might not be the easiest way (by far) but probably the most rewarding afterwards. If you manage to pull it through, you would have:

- A thight group of people that literally can perform miracles.
- A product which you can show to future publishers when negotiating for funding about which you can say "Look what we managed to make with two empty hands, then imagine what we could do with a little funding." A very good position for negotiation.
- Probably a very cost effective organization, being less dependent upon funds, which is never a bad thing, whatever business you are in.

Apart from all that you would have a selfesteem and belief in your abilities that would be hard to come by otherwise.

This doesn't say you cannot apply your ideas on later projects. They seem very promising.

Good luck
-
Staffan Einarsson
Sala, Sweden

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Guest Anonymous Poster
1. I found my limited liability company (becuase only people who are utterly insane do a game company without being a company)
2. I take your loan
3. I default, and ... you get nothing. I walk away from a company that went into insolvency. As long as I didn't defraud you, I haven't done anything wrong.

So.. you'd have to get special things put upon the company directors, PERSONAL things, which is starting to get real nasty.

Shrug. Why is it that when there is *already* a viable and intelligent business model for "solving" this "problem" in existence that everyone is still ignoring it? Go and look at F4G. Copy them! They're making decent (not huge, but decent) profits...so steal the business model.

If...and this is a very very big "if"...you can get enough investors to back your fund. Or a crazy-enough multimillionaire to do it on their own.

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Normal publishing advances are "fully recoupable but non-refundable". That means the publisher can reclaim the advance from royalties but if the game does not earn enough royalties (or never gets finished) then they can not get a refund. That is why publishing is risky.

If you change the advance so that it is refundable then you change the basis of the publisher developer relationship and the business model for both companies. If you loan money you need to ensure the company you loan it too is capable of repaying. Unless you are a millionaire and can afford to just lend money to anyone, your bank/investors will look at your business plan and see that these advances are refundable (and that the developer is liable for this debt). Before your bank/investors lend you the money to lend to the developer they will expect you to ensure the developer is financially stable enough to repay the debt - that basically means that the developer would most likely have to offer some sort of security (their home) against the loan. If they can't or wont do that your investors would be unlikely to allow you to make an advance.

There is also the issue that if the developer could afford to pay back the loan they wouldn't need to borrow the money from you. They could borrow it from the bank instead and thus get a better deal on the project once it was finished. Most developers (especially indies) are not in a position to borrow that sort of money and repay to either the bank or the publisher.

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Quote:
Original post by Anonymous Poster
Shrug. Why is it that when there is *already* a viable and intelligent business model for "solving" this "problem" in existence that everyone is still ignoring it? Go and look at F4G. Copy them! They're making decent (not huge, but decent) profits...so steal the business model.

The reason is that F4G, like almost all investors, will only invest in established, financially stable developers who already have a publishing agreement in place. In other words they work with those who least need the help.

There are some funds available in the UK and Europe for new start-up/indie developers, in the form of arts related grants. These are now being rolled out to cover game development. The trouble is that they are almost always local (meaning they are limited to companies based in a specific area). In addition they are actually match funded loans, which means that to get the money you must find an equal amount of money first. You also need to have a good business plan and your project needs to pass their evaluation process and be considered likely to actually make it to market. All in all the process can take anywhere from six months to a year.

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I planned on funding this myself, not through a bank loan.
Anyway, good feedback thanks.

Quote:
Shrug. Why is it that when there is *already* a viable and intelligent business model for "solving" this "problem" in existence that everyone is still ignoring it? Go and look at F4G. Copy them! They're making decent (not huge, but decent) profits...so steal the business model.


Then why ever do anything original? :)


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There is also the issue that if the developer could afford to pay back the loan they wouldn't need to borrow the money from you. They could borrow it from the bank instead and thus get a better deal on the project once it was finished.


Most banks that I know wouldn't loan money (except a personal loan) to indie developers. It's not your traditional business model.

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Most developers (especially indies) are not in a position to borrow that sort of money and repay to either the bank or the publisher.


They could always borrow less! It would ultimately be my responsibility to match loans against my knowledge of sales and the probability that their title would generate that much. Lending more money that I believe I could recoup would be irresponsible.


Thanks again.

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Most publishers wont fund indie/budget titles because
a) indies are generally less experienced and as such much higher risk.
b) the rewards from even a successful indie game are quite low compared to those of standard retail/full price software.

Given that developers are high risk anyway you are targeting the highest risk area of a high risk area without the prospect of big rewards. Having said that, if you have the money to spare then get to it.

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Quote:
Original post by bit64
They could always borrow less! It would ultimately be my responsibility to match loans against my knowledge of sales and the probability that their title would generate that much. Lending more money that I believe I could recoup would be irresponsible.


You dont understand.If an indie needs x amount of money for development,he needs more than x+ worth of immovables to be able to pay it back.Because when you apply for a loan, your mortgaged properties will worth lesser than their real value.So in any circumstances, you need funds to get funds.That's not only the rules of game development, it is also the rules of finance.You can only borrow money from your friends if your both hands are empty.Legal establishments will look for recompensation by mortgaging your real estate, car etc.

If you are thinking of getting loan from any establishment without providing a guarantee, it is sad but you are just dreaming.Firms would financially be in big trouble not only from games that fail, also a lot of people would try to exploit this opportunity to ripp the firms and run away with the money.

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