Crackdown broke even

[Procrastinato]

mibuokami said:

Procrastinato said:

JaggedSac said:

Procrastinato said:

@Squill: thanks ;)

@others:

Note the part where the contract states:

"Royalty Split of Net Receipts (Calculated after cost of goods (Cogs) are

reimbursed): 60% - Take 2; 40% - Interplay. Subject to recoupment of any

advances, royalties will be due sixty (60) days after the month end in which

such units of a Product are shipped."

 

Key word: "advances"... i.e. dev costs.

 

Do they consider the gaurantee an advance?  I think that means that any money over the 2 million will be paid back in this manner.  The gaurantee would be for development costs.  Am I interpretting this wrong?

 

You'd think that would be more "fair" (from the dev perspective), but that's not how it works.

Sadly (for devs), the development budget is considered their part of the investment, and the money to pay off this "advance" all comes from their eventual portion of the proceeds -- the publisher doesn't pay themselves back with their own portion.

Many reknowned dev houses get decent cuts (like 60/40, etc.), but they are still required to pay back the dev costs before they see a dime of royalties (its just a load easier to do).  The lower-cost houses, which thrive mostly on license titles, minor games (casual and downloadables... not something you would often see on the shelf at a retailer), and ports, get really screwed with this system... typically their cut is about 25%, although 20% is not uncommon, and I've seen some contracts which exclude the developer from royalties altogether (usually on ports), or are really low (like 10%).

Recently, some publishers of digital software have been pretty generous to devs, in this regard.  50/50 is not uncommon, and proceeds from small self-published downloadable titles are sometimes even higher.  Sony recently announced that, if you use their own game engine tech (PhyreEngine?) to build you game, and have it be exclusive to PSN, they do something like foregoing half of their own portion of the proceeds, until the extra income recieved, from that, has paid for the developer's costs, which is downright fantastic.

If that is the case then the how does an independ development house stay afloat? I don't see many of them many making even a small profit if this is a common practice, they'll essentially be living on their ability to produce a future game that meet a quota set by the publisher, one mistake and bam goes the company. No wonder so many small time developers are going wonder this gen... When a publisher close its door, they're dead in the water!

 

The publisher pays the entire development budget in advance, in partial payments.  A dev can stay afloat eternally in such a manner, without any royalties whatsoever.  Many do just that.

Back to the OP: The developer claiming "we broke even" and the publisher claiming "we broke even" are two different statements.  The publisher is stating the traditional definition.  Developers are often talking about the break even point in their publishing contract, where they actual begin receiving royalties.  They already got paid the development costs, and there's no "breaking even" from an investment standpoint as a developer, in that regard.  They are talking about their royalty break even point, with their publisher, or they are guessing (publishers don't often share the details of their financials with hired gun developers... why would they?) as to whether or not their publisher broke even.  Most likely he's not talking out-his-behind about his publisher, and is, in fact, talking about his contract and royalty break-even point.

I hope that's more clear.

And yes, developers live and die by their contracts with their publishers.  Many dev houses that go under do so because their publisher holds off on making payments, folds, cans the project early, etc.  Any development studio small enough, or foolish enough, to put all their "eggs in one basket" is risking going out of business, dependant on their publisher relationship.

One of the worst facets of that part of the games industry, is that publishers absolutely hate it when you are working, as a 3rd party dev, with any other publisher(s).  Since studios assign staff internally, publishers are always upset that their project may not be staffed properly, and that their money is being utilized for projects that aren't theirs.  Most 3rd party devs just deal with the eggs-in-one-basket situation to avoid uncomfortable relationships with multiple publishers, or they open (or purchase) a completely different studio, specifically to do business with a second (third, etc) publisher.

Opening a traditional dev studio is an extremely risky venture, and always has been.  At the developer level, the games industry is frighteningly cutthroat, until the house proves itself, and can manage several projects at once.