most of the time, publishers pay developers to develop a game. usually, the upfront payment does not cover the cost of development, and they developer gets a cut of the revenue as compensation. this cut could be anywhere from 0% (no cut, full upfront payment), to really just about anything. it's really the PUBLISHER the bears most of the risk. some small developers would of course, first develop a game and then pitch it to a publisher to have it published, and those deals would be structured differently.
if a game retails for $60, a good rule of thumb is the publisher/developer gets back about $30 . so if a game costs 15 mln, it'll need to sell about 500,000 just to break even.
EDIT: most publishers have in-house development studios.
the Wii is an epidemic.
