Game Matters

The IP Game -- Part One

Pull up a good seat and listen a spell, for a tale of IP there is to tell.

What follows is part one of a two-part series of columns (part two comes next week) written in Develop magazine by William Latham, CEO of Games Audit, a project management and audit operation for the games industry and finance companies. Last week I read Latham's column in the August issue and immediately contacted him asking for permission to reprint, which he kindly granted, along with permission from Develop's editor, Owain Bennallack. For developers who may not be aware of Develop magazine, it's the UK's top publication for game developers, and IMO the best such publication in the world.

On with the tale...

Modern game development

Desperate developers are selling the crown jewels, warns William Latham...

Intellectual property is an interesting one to ponder. When it's right,
it absolutely hits the mark, as with Eidos's Thief and Hitman games.
When it fails, it fails like a lead carrot, such as in the case of
Malice and many others.

Given that there are only a certain number of brands that have the
appropriate 'star quality' across games, books and films, it's perhaps
not surprising how little good IP there is left to exploit. There
cannot be much left in the treasure chest - everything is nearly used
up: Stephen King, Spider Man, Alice in Wonderland, Winnie the Poo,
Catwoman, Tom Clancy, Boadicea and so on. What's left? Slipknot: The
Game?

What's clear is that AAA original IP has a huge value and forms the
very foundations of the various entertainment industries. These assets
collectively are worth billions of dollars. It seems odd to me then
that even though IP is very valuable, independent developers invariably
just hand over their original IP to the games publishers. How does this
happen, and what are the implications?

For a moment, let's look at the wider the picture. The dilemma that
publishers are starting to have is that their biggest selling brands
are getting well into high sequel numbers (Driv3r, Metal Gear Solid 3,
Splinter Cell 2, GTA (San Andreas) 4) and, following the most recent
Tomb Raider's sudden demise, they are realizing that there may well
come a point where those games licenses just dies on its feet.

A further issue is that Hollywood appears to be getting a bit grouchy
with the games publishers - for example, Warner Bros has set up its own
games division (again) and is getting tough on the quality of games
that exploit its IP. The prices of movie licenses are also going up,
and furthermore Hollywood never gives enough time for the game to be
made (a bit unfair when they want great review scores). In short, the
honeymoon is over, the marital rows have begun.

So having bought a handful of expensive Hollywood licenses with a lot
of hassle, where else can the publishers go to get more IP? Well, the
big publishers then look to their big internal studios, and they
invariably discover that they have created expensive factories, not
dynamic innovative teams that come up with original and wacky IP.
Walking round these studios is now like visiting IBM or Logica with
smooth production but a little sterile - and if anyone has a highly
original idea, they are going to it for their sabbatical or for when
they are fired.

Where is left for the big publisher to get their IP? The independent
developers of course. But before meeting with the developer, the
publisher makes it known that it will only sign games with full demos.
The developer has to have a 'Vertical Slice' (as coined by EA) to show
to the publisher. (For Vertical Slice, think of a thick slice of black
forest gateaux with cherries and thick cream oozing out the sides. One
bite and you know how the rest of the gateaux will taste.)

The most widely heralded example of a Vertical Slice was the Medal of
Honor Demo that showed a full D-Day landing. In that moment you could
see, hear and understand the complete vision of the game. Of course,
the typical Vertical Slice costs the developer several hundred thousand
dollars. The cost to the publisher is typically around zero dollars.

As a result of prolonged and publisher-controlled negotiations over
several months - with a full development team of 25-plus on standby at
the studio (as required by the publisher's due diligence) that the
developer is funding (unlike the film world which requires only a
skeleton crew) - the developer's negotiation position is badly weakened.

So much so that they hand over the IP to 'get the damn thing signed'
and they also sign over moral rights for good measure.

Next month: it gets worse.

Again, I'll post part two of Latham's series next week.

Adventures in game economics

Designer Ron Gilbert, best known for the Monkey Island series, Maniac Mansion and co-founding Humongous Entertainment (best known for releasing Total Annihilation), has a blog-like website I just discovered, and yesterday he posted an excellent article, The Economics of a 2D Adventure in Today's Market.

After running through a bunch of assumptions and number crunching, he comes up with a figure of $950,000 to develop a 2D adventure game in a 12-month period. He admits to keeping things lean, and this amount would be hard pressed to do the job, IMO. But Ron is obviously far more experienced than I in this genre. Anyway, this is an informative article that I highly recommend.

Quick aside: I remember talking to Ron just prior to the release of Total Annihilation: Kingdoms, telling him I thought the name was a marketing mismatch, because Total Annihilation was already perfectly branded as a futuristic RTS, and sticking "Kingdoms" on the end of it for an unrelated fantasy RTS didn't make a lick of sense, and would muddy the overall brand. He didn't hesitate in agreeing, and said that the name was the work of the publisher's marketing department. Total Annihilation: Kingdoms is a classic line extension mistake, much like Coke C2, which I heard this morning on the news has flopped horribly. I sure hope no one at the Coca Cola Co. was surprised.

Who's left who can design their own game?

While reading an article in October 2004 issue of Game Developer magazine, "The New Studio Model," a question occurred to me: How many major independent studios remain who can design an original game of their own choosing?

Top of my noggin, I can list Id, Epic, Lionhead, Bioware, Valve and 3D Realms.

Who'd I miss?

And if this list doesn't grow much longer, what's that say about our industry?

BTW, I'm not sure studios like Blizzard and Bungie have this freedom anymore, as they're both owned by major publishers who undoubtedly have final say over what projects get the funding.

Blockbuster busts our bottom(line)

Excuses: Been out of the country for four weeks in the last two months. And been very busy dealing with pressing business matters of the most annoying legal variety. Wish I could say more.

Anyway, I have a few quick comments referring to Greg's comment about Jamie's comment about an issue that's generated literally 100's of red hot opinions within the restricted walls of developer-only message forums. That topic is game rentals.

Generally, rentals were once viewed by developers as no big deal. That's because they acted as demos, and probably generated additional sales of the commercial game. But, in the last several years that opinion has changed, and it's tough to find a professional developer, educated on the subject, who doesn't think that game rentals are doing more harm than good to the bottom-line of overall game sales.

What's changed is that games are much shorter than they used to be. This means that games are being rented, and FINISHED within the short rental period. Who needs to buy a game they've finished? This single, simple fact, in the estimation of most developers I've seen pontificate on this subject (hundreds of them), has undoubtedly hurt overall game sales for short -- under 15 hour -- games. (Yes, for the longer games, this still isn't an issue, but the overwhelming trend is that games are getting shorter.)

Most reasoned developers, of whom I'd like to include myself, wish our rental strategy was more like the Hollywood system. They wisely release their movies to rental stores months after the theatrical release. This allows them to make hay while they can at the box office, and then get a new bump in revenues when their movies are released on DVDs and in Blockbuster.

By comparison, the game industry releases new games to store shelves AND rental stores on the same day. This is where we shoot ourselves in the foot! It would be far, far wiser to hold off on the rental release for at least two or three months, then treat the rental release as a new marketing push, giving the game an extra bump of exposure and life, exactly as Hollywood does it.

The only question is whether it's legal to disallow rental stores from buying games from Best Buy and then renting them without the copyright holder's permission. I do not know the answer. But, the game industry is now powerful, and can push for legal protection in this area if it wanted to. But first, it needs to be smart enough to pursue this path.

My guess is that we'll not see this happen soon. As an entertainment branch that knows how to maximize revenues, Hollywood is still smarter than us, and I don't see that changing anytime soon.