Video Game Publishers are like all other publishers in their respected industries, they do market research, manufacturing, advertising, and are the ones usually funding new projects, either from contracted external developers or internal studios. The biggest players in the industry also distribute the games they publish. Smaller Publishers turn to distributors (a middle man) when they can’t afford to pay for warehouse space and operations. This helps the smaller publisher to focus on the marketing of the game and release on schedule, this is usually the only way smaller publishers can get their product on retailers shelves. There are a few independent development studios who develop and publish their own games, but with game design becoming more complicated and development cost rising it’s become a smart business move to leave the marketing and distribution in the hands of those who specialize in these areas.
Publishers are mainly the ones financing the development and taking most, if not all the risk involved, to minimize these risks they set up a staff of producers and or project leads to maintain the creative vision of the video games development and ensure the development team is to set out to build a high quality game on time and within budget. Game publishers who contract external developers fund the project by advancing money throughout the development process of the game. Don’t mistake this for a loan, think of it as advancing money to a contractor so he can buy the materials for construction. likewise the publisher advances money to the developer to begin their work.
Insider Break Down: Advances aren’t debt owned back to the publisher, if for some reason a publisher doesn’t publish the game at all the devs don’t have to pay back any of the advances back. In a similar situation, if the game does sub-par financially and doesn’t recoup back all the advances from sales the developer doesn’t have to pay back the difference lost.
Advances aren’t all paid in one go, but rather spread out throughout the projects development. these advances will be payed once the developer reaches a certain stage of the development, Which are called milestones, These are days where certain features of a game must be already implemented. This is one of the most sensitive areas in publisher to Dev contracts. publisher and Devs can disagree if a feature is actually implemented correctly or not, if the publisher doesn’t agree then they can withhold advances until they are satisfied, This however can potentially kill a developer if they are dependent on the money. Some publishers still continue advance since they can’t afford to lose their investment or let the developer go out of business.
Royalties is another major part of a contract between publishers and developers, The contracted developer will get royalties from the wholesales of the product, don’t get this confused with retailer to consumer sales, this is a percent of the money the publisher makes from selling to retailers. this can vary wildly depending on a variety of factors, it can range from low 8 to 10 percent to a more common range 12 to 20 percent, to rare high of 30 to 40 percent.
Insider Break Down: One major factor affecting the percent if the track record of the developer, if one developer has a few heavy hitters under their belt then they can negotiate a higher percentage in return.
Publishers won’t start to pay outright from the first sales of the game, since they funded the project they need to recoup their advances first. The publisher will keep all money the from the games sales until the amount of royalties earned matches the advanced they funded the developers. Once this happens, developers will start to receive royalty payments.
Insider Break Down: Most projects never recoup their advances and developers don’t see any royalty payments at all. There are quite a few devs who survive year to year on contracts but don’t see any royalty payments at all.
Top Video Game Publishers of 2011
Top video game publishers ranked by their best to worst games released in 2011, by Metacritic.
- Square Enix
- Namco Bandai
We all love to play games but do you know how much effort it takes to make one? Check out our other articles on video game design, game programming and video game tester.