As a follow-up to my previous post on the Value of Publishing, I wanted to type up some quick follow-on thoughts on potential disruptions in publishing, and current barriers-to-entry for would-be ‘disrupters’.
While my last post focused on book publishing, I’m going to focus my thinking on another form of publishing: video game publishing. While the end-product and investment required to produce a video game is very different than a book, I think there are concepts-in-common that are interesting to explore.
Historically, game developers worked with game publishers for access to their product manufacturing capabilities and large physical distribution network. Publishers leveraged their economies of scale to produce the the discs/cartridges and game packaging, and then sell these games into stores like (once upon a time) Micro Center, CompUSA, etc. in the PC gaming world, and Wal-Mart, Target, ToysR’Us, and Gamestop/EB Games for consoles.
For a long time, this warped the power dynamics in the gaming industry – the folks who managed the relationships with the big-box retailers had significant leverage over the developers, who could make the greatest game known to man, but have limited impact without access to the consumers to play these games.
When Valve’s Steam unintentionally created a digital distribution platform, it began a process of shifting the power dynamics of the PC gaming industry away from publishers and into the hands of developers, who now could leverage the power of Steam to directly deliver their games into the hands of content-starved gamers in exchange for a 30% royalty paid out to Steam. Suddenly ‘indie’ games like Super Meat Boy and Braid (both featured prominently in the documentary Indie Game: The Movie) became a phenomena, creating thousands of aspiring indie game developers and massive windfalls for the (successful) developers and Steam.
Despite Steam’s first agreement with third-party publishers in 2005, the rise of crowdfunding platforms like Kickstarter and Patreon, and the growing successes of indie games like Shovel Knight, Stardew Valley, Undertale, and others, game publishers remain a powerful player in the ecosystem.
Using these successes as ‘case studies’ provides a glimpse into the continued relevance of publishers and the value they provide:
As seen in the examples above, aspiring developers oftentimes pursue their own games as a labor of love, either as a part-time project or after splitting from a more established publisher in pursuit of indie dreams.
Unlike writing, which oftentimes requires little more than time and access to a word processor and your local library, game development is a massive undertaking which oftentimes requires funds to finance the game’s art and design, animation, music, and polish / quality control. While a single superhuman or a small, dedicated team could produce a game over a 2-3 year span, developers oftentimes farm out some portions of the development process to contractors or freelancers, who are highly in demand, and command compensation.
The most successful Kickstarters, such the recently-released Shenmue 3 or Cyan’s Obduction rely on the loyalty of a rabid fanbase familiar with previous games created by the team. Without an established audience, normally borne of a track record of successful past games, using crowdfunding like Kickstarter to finance a relatively expensive game that may take excess of 3 years to reach the funder’s hands seems like an unlikely strategy.
And while there are plenty of examples of developers bootstrapping their own games until they reach a level of polish suitable for players, these games still required expensive “ports” or “localizations” to consoles (Nintendo / Playstation / XBox) to reach the broader gamer audience, many of whom preferred the comfort of their couch and controller to desk and mouse/keyboard.
The need for capital to sustainably finance game’s development is the first (and major) hurdle in disrupting the game publishing space.
The recent entrance of Epic (buoyed by cash flows from their megahit Fortnite) adds another interesting option to the funding picture, both through their Epic MegaGrants (which offers royalty-free access to their Unreal game development engine and funding for games in exchange for a period-defined distribution exclusivity), as well as their eponymous Epic Store, which offers game developers a 88% cut of their games, enticing game developers to eschew Steam’s massive player audience for a larger margin share.
Another interesting new player is Discord, a deceptively simple chat, messaging, and community management app that has created a way for game developers to sell their games within the application to their established communities.
Increasingly however, first-party platforms like Playstation’s Sony Interactive Studios and Microsoft’s XBox Game Studios have become hyper acquisitive of small, medium, and large developers, most famously acquiring Minecraft for $2.5B in 2014, and even more recently continuing to snap up smaller publishers like Microsoft’s recent acquisition of Obsidian. In addition, third-party publishers continue to partner with game developers to produce and distribute both small budget and more ambitious games. Take-Two’s Private Division imprint provides a glimpse into the potential future of game publishers as incubators of talent.
Other considerations for foregoing publishing beyond mere capital draw other parallels to book publishing – the expertise and economies of scale that come from specialization in other game production-related processes like art & design, animation, tracking bugs and broader quality control, and the previously mentioned “localization” process. In each of these respective areas, game publishers boast access to experienced talent who will work across their portfolio of games in exchange for a fixed salary. And while it is possible to find contractors/freelancers who can partner with you on these aspects of the process, the talented ones are likely to be highly in demand, and certainly not cheap.
Lastly (for now), another aspect of the game publisher process that continues to drive value for developers is marketing & publicity. This past weekend, I attended my first PAX gaming convention, PAX East 2020. There, and in satellite events related to PAX, hundreds of booths of game developers were vying for the limited attention of the gaming public through showy booths, free merchandise and giveaways, and polished demos of their games.
The vast power of the more established publishers was on display, most notably via Private Division’s massive booth at PAX East for its primer upcoming title, Disintegration (developed by V1 Interactive, a studio founded by the co-creator of the Halo universe).
It is certainly possible to build a grassroots movement around a game, but in the crowded current landscape this increasingly means actively promoting your game and cultivating communities across platforms like Twitch, Discord, YouTube, Twitter, blogs, and game journalists, all at once. One example is a game called Midnight Ghost Hunt, which was prominently featured in the Discord Game Booth at PAX after catalyzing an impressive audience for their game on Discord and drawing the attention of the management there.
However, this more often requires access to game industry veterans with established connections to the communities and catalyzers that drive game success, which (again) don’t come cheaply, if for a price at all.
All of the above creates a difficult environment for unknown game developers to go at it (completely) alone, especially without access to capital and industry connections.