Microsoft, XLA royalties and delusions of granduer

So this week indie devs negotiating at GDC with Microsoft to pitch them games for the Xbox Live Arcade distribution network were met with a nasty surprise. Instead of the 70/30 split that had previously been the royalty rate, a new rate, that of 35% going up to 45% based on sales has been put in place.

Note, this is only for indies going direct to MS – publishers still get the 70/30 split.

You still get to own your IP.

See this post at Kotaku for more details.

This went along with the announcement of a peer reviewed upload / download distribution scheme for XNA built games – basically anyone who pays the $100 to buy the XNA builders SDK can now make games that run on the XBox 360 and can upload them to the MS Xbox Live XNA distribution group, who will do some cert on them. After that, peers can review the game to see if the descriptions you put in place are correct, at which point it is made available for anyone to download.

So what does this mean?

Well the effect of the royalty rate change effectively ends XLA as a business destination for indie developers because now most of them who could just about break even cannot.
Bearing in mind publishers still get the 70/30 split MS is obviously attempting to steer indies to publishers, because then their certification requirements are considerably less (in so far as a publisher will do pre-cert to make sure you only need one certification submission, not many), and publishers deal with the indies instead of MS having to.

Sure, as an Indie I could go to a publisher – but I don’t get the 70/30 split any more, nor will I freely be allowed to own the IP any more since publishers are well aware that IP is what is most valuable and they want to own it instead of you. Basically you become a publishers bitch, especially if they are funding anything – something that most indies want to completely avoid – that’s the whole point of self funding as an indie, to not be at a publishers beck and call.

So given this – and this is something that MS cannot have failed to understand – why are they doing this?

There are several reasons. The first is that indie development on XLA has sucked up a lot of MS developer resources. Publishers are throwing their weight around and want more of that, and MS needs to keep them sweet for their AAA publishing efforts.

Also, it’s fair to say that there’s been a lot of crap on XLA of late. ScrewJumper was not exactly high quality and there’s a LOT of revamped old 80′s IP being redone. Not enough new stuff.

Pushing the quality job to publishers is MS’s way of clearing the decks of dross and attempting to set the published bar higher. Microsoft totally missed the fact that in order to control quality on your distribution system you need to look and judge the quality incoming, not push it out to other people to make that judgement for you.

What MS singularly fail to realise that seems patently obvious to everyone else is that it’s the publishers who are responsible for providing remake of frogger after remake of defender in the crappiest way possible. It’s publishers who are flooding the channel with god awful basic ports in order to reuse their back catalogs and not have to pay anyone for IP rights. Pushing the requirement for quality onto them is missing the point in the first place. You’ve now put the subjective judgment of cool new game mechanics onto people who won’t/can’t take the risk on new stuff (or in most cases even recognize how innovative a new mechanic is in the first place). It’s just such a dumb decision I honestly don’t know how these people tie their own shoelaces.

Add into that the XNA distribution system and MS is obviously hoping to get new student and burgeoning developers to build their games using .NET and C# – something that is MS owned and not cross platform. Effectively every game made for using XNA is an MS exclusive – Sony / Nintendo get nothing (that’s not strictly true since you can write the game again for the PS3 / WII, but you _do_ actually have to do that since *all* the code is platform specific).
They are obviously fondly imagining that they’ll capture the next generation of game developers, and grab lots of innovative new game idea’s in the process.

So whats the practical result going to be?
Well firstly we are going to see mountains of crap in this new XNA distribution channel. I liken this to the Web 1.0 Geocities web pages and AOL stuff of the early 90′s. Lots of people doing real rubbish and pushing it out there fondly imagining that Frogger with one new feature will be the next big thing.
Sure, there _will_ be one or two very clever new idea’s – but compared to the absolute solar systems worth of absolute garbage that most will be it’s like finding a nugget of gold in a garbage dump. In the dark. With shades on. And your eyes closed.

Secondly, a lot of people are going to be disabused that making games is easy. It’s not – and XNA is no picnic either since it’s not a mature games making system yet (it might be in a couple of years but it’s not now) – and that’s why there’s a dearth of quality on XLA now. Making polished fun games is hard, as anyone who’s ever shipped something will tell you.

Thirdly, seasoned devs won’t be making stuff on XNA unless they have already made it big elsewhere, because they can’t even begin to make a business out of making XNA games and selling them because of MicroSoft’s fingers in their pockets, nor will they go the traditional route of XLA since MS just made it almost impossible to make a profit first time out.

So it’s either go to a publisher and have to fight hugely to own your own IP, or take what little MS have and pray to god that you make enough to break even and fund the next game, not something particularly attractive to a small indie.

Whats really going to happen is that anyone who can create a decent product is going to run straight to Sony to do it, and have it released on their PlayStation Network instead. If they self fund they can retain the IP and the royalty rates are higher and best of all there are no publishers involved.

It’s a staggering own goal by MicroSoft – one that as a fledgeling indie developer makes me instantly want to say “well, it was a nice dream, goodbye XLA you aren’t worth my time any more”. It’s almost like MS has said “well, Indies, we don’t want you so please, get lost”.

What’s actually going to happen is that Microsoft is going to have the exclusive on mountains of crap churned out by people who have no clue what they are doing, and Sony will get all the devs who do.

Microsoft just lost the war with Sony over online arcade games and they didn’t even get beaten by a superior product – they defeated themselves.

Watch and see.

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