Why Publishers Flourish and Developers Wither

Why do publishers seem to thrive while developers fall by the wayside? Perhaps it is because publishers are obsessively focussed upon what is required for their own survival, while developers generally just want to make games.

Although I am not well versed in economics, it seems to me that all business is about purchasing lottery tickets. These tickets vary as to their price (the cost of investment), the chance of winning (the risk) and the payout (the return on investment). In broad strokes, the dominant strategy is therefore to minimise risk and maximise payout. Unfortunately, it transpires that every project has a certain risk attached, and this can never be eliminated, nor accurately predicted. The payout is similarly difficult to ascertain in advance. Once this is realised, the dominant strategy shifts: buy as many (low risk) lottery tickets as you can find.

Indeed, it has been demonstrated that the safest form of gambling is the stock market. Buying a diverse portfolio of shares is akin to buying many mid to low risk lottery tickets.

Publishers flourish (generally) because they work on the basis of portfolios of games (or in other media, of books, films, TV shows etc.) Since the risk and payout of individual projects cannot be known in advance, having a handful of lottery tickets is the safest approach. Several will fail, but if you have balanced your portfolio well enough, sufficient numbers will succeed to allow for an overall profit. The more steps the publisher takes to minimise risk (for example, by purchasing a license - sports, film, celebrity, TV etc.), the better the chance that the portfolio will show significant profit and the publisher will survive.

Developers wither (generally) because they tend to lack the resources to work on multiple game projects. They usually work on single game projects. They believe that this will work, because they know the game they are making is "good", by which it should be understood that they are making a game they want to play. In effect, developers expend great time and effort to manufacture a single lottery ticket - often one with high risk and low payout. Some get lucky. Most fail.

In the indie community, the situation is slightly better in that the cost of building a new lottery ticket is lower. Also, because the price of the tickets is lower, the returns can be much lower and still imply a profit - which is in effect a means of minimising risk. But still, the indie developers that succeed are those which either manage to get a portfolio together (PopCap I salute you!) or those that happen upon a "golden ticket". These latter souls often still fail in the end, because very few individuals are ever fortunate enough to find multiple "golden tickets".

The number of game designers who have founded multiple successful franchises can be counted on the fingers of one hand - even if you lost a few fingers in a farming accident.

Against this backdrop, I find myself reluctant to make games that cost more than a fairly modest amount to make, and I find myself constantly looking for new business models that might be applied to development to increase the chances of survival. But as development costs rise, the situation for developers becomes gradually worse unless they give up on making their own games and begin manufacturing products tailored for publishers (not an appealing prospect for many people). Intuitively, alliances could mitigate risks, but alliances between developers seem difficult to broker. Developers want to make the games they want to make. All other matters are secondary. Even their own survival.

I doubt this situation is going to change any time soon.

Comments

[Patrick]

Occasionally a developer will find a golden ticket (Warcraft 2) and then diversify. Once you make enough on a game to reinvest in two, or even 1.5 projects, you've "broken through" and stand a chance of thriving as an independant company. Some companies like Turbine achieved this, but not really, since massice VC funding has shown them through. Other than Blizzard and Id, there aren't a lot of good examples.

However, there are several folks, like the guys behind Dofus and Runescape, that have done well by catering passionately to a niche audience, and there's something nice about the existence of such developers. I once saw a townie kid in the library playing Runescape, I couldn't believe it.

[Donald Gay]

he he he, I just got back from a madatory 401K meeting on investing 5 minutes before I read this. I'm glad that even the most unoriginal cop-out games are more entertaining than a presentation on retirement funds : )

I just found the Maya 7 personal learning edition online, and downloaded it. I also found a nifty little 1000 page book on the ins and outs of Maya for $5... Aside from that, a friend is teaching me how to use 3DS Max, and I saw that free Blender thing online too. Most people agree that Blender is not the best place to start, but I don't know where to go from there. I want to make low-poly for game design, but I've got a LONG ways to go to learn all of this stuff. Does anyone have any suggestions that will help me in my quest to develop my 3D modeling foundation?

[Chris]

Don: I can't help you with 3D modeling, I'm afraid - game artists are magicians as far as I'm concerned! :) Other regulars to this blog might be able to help, but there's no way of knowing if they'll read your comment, of course. Good luck all the same!

Patrick: you make some very pertinent points here. It's certainly the case that a developer that uses its "golden ticket" wisely has a better chance of survival - it's somewhat like the parable of the talents! And like you, I'm heartened when I find people thriving on delivering to a niche audience. I do wonder what kind of a living these people make...

Thanks for the comments!

[Peter Crowther]

Chris, you might wish to read Eric Beinhocker's "The Origin of Wealth" (Random House, June 2006) for a fascinating overview of evolutionary theory as applied to economics, in terms of what Beinhocker terms Physical Technologies (ways of making things), Social Technologies (ways of organising people) and Business Plans (ways of combining Physical and Social technologies to make money). It's a comprehensive survey, and seems like a decent place to start if you're picking up a (slightly biased view of) modern economics.

And, yes, a portfolio of risks will be overall less risky than betting everything on one horse.

[Chris]

Peter: thanks for this tip! You correctly intuit that I am interested in reading up on economic theory, and this looks like an interesting option. I may have to read Castranova's 'Synthetic Worlds: The Business and Culture of Online Gamers' first, if only because it's been on my shopping list for months now; my reading list grows faster than I can clear it. :) Best wishes!

[Denver Starkey]

I have a few examples of developers that escaped death with multiple sucesses.
1. Valve the makers of half life
2. Bioware (who out lived their first publisher actually {that being black isle})
bioware is famous for the baldur's gate series as well as neverwinter nights and the knights of the old republic
3. the already mentioned Blizzard
4.Bethesda the makers of the elder scrolls seriesj
5. ID Sotfware (if you don't know who this company is, you probably don't belong here :P)
6. Majesco (who despite floping on nocturne and the blair witch games they still managed to get gains making Blood rayne and blood rayne 2)
7.Lion Head Studios the makers of blacka nd white and black and white 2

So there you have it more than a handful of Developer companies that did not bite the bullet so your comment of "less than a handful" is not true :P not most of all these guys are more than one hit wonders

[Denver Starkey]

Donald , you should look into what i am doing (that being online college for game art design) I'm currently attending the art institue online for game art desgin and guess what 3ds Max is the exact same software I will be using in that part of my studies , best thing is is that the art institue online is a shot cheaper than a physical college (but still expensive) jsut look into it it can change your life :P also can see about getting finacial aid for it , if youa re still in high school i suggest you take some extra math classes and do real good in school who knows you might even get ascholar ship

[Chris]

Denver: I was talking about *game designers* who have founded multiple successful franchises (that is, who have created multiple successful IPs where each IP has produced several commercially successful titles). There are very few of these, and certainly less than a handful.

Other than Wil Wright (Sim City series and The Sims) and Shigeru Miyamoto (Mario, Zelda etc), who else has formed *multiple* successful videogame franchises?

Thanks for your comment!

In binary, you can count to 7 on three fingers. Just sayin'.