Publishers and IP ownership

Finally another Game Dev blog post.

I apologize for not updating recently – I’ve been all over the world in the last month – NY, SF, Korea, Seattle and finding the time to do anything other than get on and off planes and sleep has been hard.

Anyway, back now so time for some updates.

So IP ownership. For the unwashed, IP is Intellectual Property. It’s the ‘What this is” part of a game (or movie, or book or music etc). So Doom is an IP, Pixel Junk is an IP, Mortal Kombat is an IP. Some IP’s are designed to be transmedia (where it appears in more than one medium – Harry Potter is transmedia since it’s a book AND Movie, Max Payne is transmedia since it’s a movie AND a game) and some IP’s are just natural fits for transmedia (lots are not though. How would you make a Tetris book?).

Anyway, most video game companies are valued based on the IP they create and own. When a publisher contracts with a game developer, it’s usually based on a pitch the developer has for a new game and IP. Lets take a hypothetical case called Morgans Mind. The game is loosely based on the Meet Dave movie, you are a bunch of little people running a body, directing it in response to external stimulus.

So you pitch this idea to a publisher. They love it and want you to make the game, and they will finance you. Now the real value at the end of the day – besides games sales – is the IP itself. The publisher – because it’s funding this and taking a risk – wants return on it’s investment. It wants a big cut of the final payout AND they want to own the IP. If there are going to movies or spin offs, the publisher wants to be in on that, and can direct the IP onto other platforms without having to either allow the developer direction, or pay them anything.

IP ownership is by far the hardest of the battles between Dev’s and Publishers. When a publisher (or anyone else) buys a dev, they do so for two reasons. One is their ability to generate hit new IP and the other is for the portfolio of IP the developer already owns. That’s why publishers pay huge amounts of Bungies, Biowares and Ravens of this world.

Developers know this, and so do Publishers. Start ups these days are very hit by publishers wanting to own IP. So in the case of Morgans Mind, if the publisher is funding development and taking the financial risk, then they will want to own the idea’s behind Morgans Mind.

But here’s how it breaks down. As a developer, I know what is of value and I want to own it. I came up with, I made it a hit, all you did is provide the money – you could have done that anywhere, but only I can create what I create. The moment you attempt to own that my reasoning to want to do this in the first place is lost. Sony is doing this with PSN development right now for example. They know where the real value lies and they want it all. If they fund a PSN game, they get to own the IP. So if you want to be on the PSN network, unless you can self fund, you are stuffed ownership wise.

There are some developers who will take this deal simply to ‘be masters of their own destiny’ but it rankles quite frankly. I’m not getting into this simply to make Sony rich (which is what they want), I’m doing it make *everyone* rich, not just Sony (which is the practical upshot of this).

With distributed product (ie games in boxes on shelves) the publisher takes a massive cut anyway – you as a developer get nothing until you’ve completely recouped your advances you took to pay for development, all marketing, all publisher costs AND that only comes out of the bit you would have got as your cut. What that means is that if you split the money earned from a game 50/50 – the publisher gets 50% and you get 50%, only your 50% is going towards your advances, paying off publisher costs and so on. So basically the publisher is getting his 50% from day 1 as pure profit, where as you only get $ when you’ve paid off all of your advances out of your bit.

In the case of Morgans Mind, if it cost $10m to make, each games profits are $20, then it would have to sell a million copies to even hit brake even point from the developer point of view, while the publisher has already made $10m of clear profit.

This is needless to say extremely unfair, but that’s the way the deals are structured. Publishers would counter “we are taking a huge financial risk with this, because most games don’t even break even”. And that’s a fair comment – most developers sure don’t make a profit over advances. However what is not being taken into account here is that developing this (or any) game is a Huge Risk for the developer too – particularly if they are a start up. It’s not like they can just fold their tents and vanish if something fails – closing down a company is a huge undertaking, there are usually personal guarantees put in place and almost certainly the principles of the company is going to loose his house. The risk is not just on the part of the publisher.

And then they want to own the IP as well?

There’s just rampant greed right now on the part of publishers to get as much as they can for as little as they can – particularly with start ups – and as a developer it makes me a bit sick and certainly weary of entering into a deal unless I have full independent funding behind me so I am in a position to negotiate ownership of the IP. I want to own something to make the whole thing worth while.

Just food for thought there.

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