Last week, two stories emerged that cast the traditional relationship between developers and publishers in a negative light. In the first, Red 5 Studios' Mark Kern alleged that major publishers had backed SOPA/PIPA in an effort to reassert control over the tools of distribution, the very tools with which developers like Mojang and Riot Games have built their success.
The second was the story of Quarrel, a hit iOS game from Scottish studio Denki that took two years to find a publisher willing to back a digital console release. The acquisition teams at every major publisher loved the game, but the finance and marketing teams saw no promise and so the product languished, even as the company itself struggled.
The Belgian developer Larian Studios has had enough. After years of navigating the complexities of the developer-publisher relationship - with a great deal of success - its next game, Dragon Commander, will be published, distributed and marketed by an in-house team. In this interview, founder Swen Vincke explains how independent developers can, and should, take control of their own physical retail releases, and what that means for the future of the industry.
A: Larian Studios started in 1997 as a developer, but for your next release, Dragon Commander, is the start of a new era for the company. Why did you decide to start self-publishing now?
Swen Vinke: Because we can, is the obvious answer.
A: So it's more a matter of opportunity than of desperation?
Swen Vinke: Yes. It's something we've been working on for quite some time. As you know, we make large scale RPGs with many hours of gameplay, and they're quite development intensive and also financially intensive to create. Ever since 2002, when we released the first Divinity, we're been trying to get more control over our games, and moving in the direction that we're committing too now.
In 2002 we didn't give out all publishing rights. We had a few territories where we kept control ourselves, and we learned there that it's not that hard to get games into retail. Actually, when we were doing Divinity 2 that was a co-publishing deal, so that was only 50 per cent the publisher and the other 50 per cent was us. Now, we're making the move from 50 per cent to 100 per cent.
I see digital like fuel for setting up a developer so they can go straight towards the consumer, which is what you want to have
A: Do you expect most of your sales to come from physical retail?
Swen Vinke: All I can go on at this point is the performance of our previous titles, so Divinity 2 and Dragon Knight Saga. There, retail was dominant; we did a lot in digital, but retail was still the dominant factor. I expect them to be more or less balanced with each other [when Dragon Commander is released] this year. For sure, in the future I think digital is going to be more important, but if you're an independent developer nowadays and you're ignoring retail, you're ignoring a large part of the market.
A: In the independent sector, the concept of self-publishing is now basically synonymous with digital distribution. I doubt many indies would contemplate handling the distribution of a physical product with publisher support.
Swen Vinke: If you think about it, because of digital, you get an evolution like in the Seventies and Eighties in the music industry, when it was all about the publishers being dominant. Now, it's all about the artist being dominant. And you're seeing the same thing [in the games industry].
The cool thing is you have a lot of small developers that have managed to get into the spotlight through digital distribution, so like Terraria, for instance, is just two guys and they're doing really well. But they don't have experience from retail in the background, so they think, 'Okay, digital gave me this opportunity so that's the only thing there is.' But with a little bit of effort you can actually manage to get your products into retail, and then you see that you have a much wider scope. It's important that independent developers really focus on getting their products into retail.
A: The obvious example of artist empowerment in the music industry is Radiohead, which released its last two albums independently and with innovative price structures. However, they can do that because they're Radiohead, and have a loyal fan-base of millions all over the world. Don't you need the sort of experience Larian has built up to make something like this work?
Swen Vinke: It's funny that you should mention this. We were having a discussion with an independent developer we know who signed away all of his rights to a mid-sized publisher for the retail versions [of his game]. I can't mention who it is because I would be breaching his NDAs, but he sold quite well digitally, and he said, 'Well, I was doing quite well so I gave away the retail rights. I didn't want to bother about it. I'm making so much money with the digital.' And I was going, 'Jesus [laughs]. These properties are pretty hot, and if you just focus a little bit more effort on the retail and you could make so much more revenue. Then you don't need any more publishers at all.'
Ultimately, that's what I see digital to be. It's like fuel for setting up a developer so they can go straight towards the consumer, which is what you want to have. Publishers, other than financing roles, were for the most part gatekeepers towards retail, and there are ways of breaking through that. Even Valve, they're still selling in retail, so that shows it's still a very important market.
A: So do you think the difficulty of taking control of physical distribution is overstated? That's one of the two key areas that developers still believe publishers are necessary for - the other being marketing.
Swen Vinke: There are two aspects to the question. You rightfully hit the note of marketing there. Obviously, developers need to learn publishing. If you're just going to put a box in the store it's not going to sell, and it won't sell that well with digital either if you don't do anything around it. That means you need to position your product, to communicate with your audience, tell them what you product is and why it's cool, why they want to buy it and where they can buy it.
In terms of getting the product in stores, the easiest route is to go to the territorial distributors. The publisher employee distributors, and there's a list, which is not very hard to get. You just go and talk to them, and usually they are very happy to talk to the developer directly. If you have something that they think is going to sell, they'll happily put it in their stores. Okay, it takes work, but it's not impossible.
We have an entire publishing team now. We hired marketing guys, we hired business development guys, so you have to do it properly, but you can do that because you have the fuel of more direct revenue through digital distribution.
A: Can you talk in a bit more detail about assembling a publishing team? I know you bought in Sergei Klimov from 1C.
Swen Vinke: We actually started out completely wrong. The first thing we did was focus on distribution, and thought that the marketing was going to happen automatically. That works to a certain extent because we had the Divinity brand and community, but we weren't maximising the potential of what we had... We really needed to be in control of the messaging of the game and of the series.
One of the key things we did was indeed hire Sergei, who has enormous publishing experience. He was business development director of 1C, which is one of the largest publishers in Europe. We then hired dedicated PRs in different territories...and we realised we needed to feed these people; that means we hired in-house guys to make trailers, to make videos, which we're working on now. We hired website designers, so people are working on that also.
And then we're doing the business development also, sending people out to meet the distributors and talk to them, and actually the retail chains to see if we can get a direct relationship with them. Everything you would do if you were a publisher.
A: Yes, it's all quite conventional practice, but at least it's yours to get wrong now. Have publishers mis-managed Larian's products in the past?
Swen Vinke: That's actually one of my favourite points [laughs].
So, what happens in a classic deal? You have a committee at a publisher that is going to give you a greenlight and assign you a producer for it. The producer then becomes the channel between the developer and all of the requirements of the publisher, which means he's going to have to talk to somebody in marketing, who's then going to talk to his marketing assistant, who's then going to talk to a product manager, or whatever [sighs]. Now all this stuff goes to the producer at the developer who sends the information down [to the developer], and it's like, 'We need a screenshot, we need a video trailer, we need this, we need that.'
The acquisition guys are in love with your product, and they want to do it. But then you go to the marketing room, and then the questions start
So if you look at the chain involved with putting all these things in place, there's enormous waste, and there's enormous effort and energy that needs to be put into communication. And as a boss it frustrated the hell out of me, because I could see all this money, and this money is what the developer is paying because, again, it is deducted as marketing costs. It doesn't make sense, because, ultimately, who was creating all these assets? The developer, but by the time it gets down to them there are 5 or 10 people involved.
By bringing it internally...you save on a lot of costs. Plus you also don't have the problem of different agendas; the publishing agenda can be very different from the developer agenda.
A: The power over positioning and communicating with the audience is significant. When you look at a lot of good games that didn't sell, that's often where the mistakes were made.
Swen Vinke: Yes, for sure. The other thing that has been frustrating in the past is that our games have the tendency, because usually we are late with development, to come out too soon. For instance, take Dragon Knight Saga versus Ego Draconis - Ego Draconis had a Metacritic average of 72, whereas Dragon Knight Saga had a Metacritic of 82. The difference between the two games is that there were improvements that we always wanted to do, and it was finished the way we wanted it to be finished. That's very important also.
A: And that 10-point Metacritic difference has an impact on sales, then?
Swen Vinke: For sure. I mean, we did good sales, so we're pretty happy - otherwise we wouldn't have been able to do all this. On Steam we were number one several times, we outsold Dragon Age 2 in Russia, for instance. But I think if we'd done just Dragon Knight Saga and not Ego Draconis first, we would have had a much, much better release from day one.
In the UK and the US people expect much more polish than in other territories. Our intention was to put all the polish there, but when you have to force release it you get a situation where you are unhappy, actually, you're frustrated because you've been working on something for so many years, and you don't get the satisfaction of finishing the job.
A: The managing director of a Scottish company called Denki just blogged about the difficulties his company has faced finding a publisher for its iOS game, Quarrel. He said that it got turned down by every major publisher, but never by their acquisition teams - always finance and marketing teams.
Swen Vinke: I have blogged, and I write extensively, about that particular part. I've seen that. Typically, when you make it to the greenlight committee, as they're called, the acquisition guys are in love with your product, and they want to do it. But then you go to the marketing room, and they put sales in there, they put people who don't play games in there, they put the acquisition team in there also. And then the questions start.
How sure are we that if we invest in this it is going to pay off? And then typically the safest thing to say is that we're not sure. I've seen it happen quite a few times with my games. I actually had someone from a famous publisher tell me that I should stop making games because I was never going to sell a single unit. To thank him for that I put him in my game; his name is in there, so people from the industry will recognise him.
A: As come-backs go, that's pretty good. How are you funding Dragon Commander?
Swen Vinke: Larian has always made other games also, which are not as well known. Like in the UK we made games for the BBC and CBBC - we have properties with different broadcasters in different territories. We also have a great series of educational games called Monkey Tales, which is coming to the UK soon. We won the MEDEA award for the best educational product of the year. That all earns us money.
And since we were co-publishing on our previous games that meant we had revenue-share deals, which means we weren't depending on advance-versus-royalty deals. So we actually see money from our sales, which is very important.
Thirdly, for the publishing unit, we used investment money from VCs, so we don't have any venture capital inside the company, but for each project we set up a different company in which VCs fund part of it.
A: There seems to be a lack of games like that, which can turn a healthy profit on a million or two unit sales. Right now, the divide between AAA and everything else seems vast, so almost everything costs either £40 or less then £10.
Swen Vinke: What we're seeing disappear is the mid-size publishers, so developers who haven't set up their own financing and their own publishing cannot benefit from their presence anymore. However, the developers that embrace self-publishing and are capable of funding their own projects...they can become big independent developers, and I don't think it's going to take that much time before you're going to see AAA productions from independent developers pop up.
If I was a console manufacturer, I would be asking myself a lot of questions of what I'm doing now, with the market still being so heavily controlled, and asking if that's really such a good idea
There's a reason why Activision and EA have a monopoly on AAA development. As a matter of fact, I think they are actually making it a lot more expensive than it should be, because there's so much waste going on. I hope it's going to be us , it might be some other guys who are doing the same thing that we are doing, but we just need one great, true hit that doesn't even have to sell that many units and we can start competing with the AAA productions out there.
There's an enormous difference between the revenue being made on a game if you do it direct, versus what you get as a developer on a royalty. But if you can get access to the straight revenue that is being made per unit on a game that sells at £39 or £49, and you sell a million units, you have sufficient money to make a AAA game.
A: Is that harder to accomplish on consoles? On PC or Mac, you have relatively open platforms like Steam, which have a much broader variety of game-types and price-points. On consoles, there are £40 games and £10 games, with little scope between for products of different sizes and prices.
Swen Vinke: The key thing to remember is that the games industry is very large. It makes an enormous amount of revenue, and only a very, very tiny fraction of that makes it to the developers. And if developers can make more of that revenue they should be able to tackle any platform. Take Dragon Commander; it runs on all machines, right, so it's purely a business decision. If we see it's going to be successful [on PC and Mac] and we get good feedback, I don't think it's going to be hard to raise the cash and whatever is necessary to put it on the console.
A: There's a lot of talk around the next generation of consoles at the moment, but I'm less interested in hardware than I am in how the platform-holders will respond to the business needs of developers. So they can make a free-to-play game, or a polished RPG that sells at £25. Do you think Sony and Microsoft are thinking about that when it comes to the new hardware?
Swen Vinke: I think that if they don't, they're dead. Simply, they don't stand a chance of survival if they can't adapt as fast as the other platforms can. Imagine the moment where you have an iPad streaming to your TV and it's as powerful as a console. What's the USP of an actual console at that point? If you think of OnLive, and they solve all of their logistical problems, why do I need a console?
If I was a console manufacturer, and luckily I'm not, I would be asking myself a lot of questions of what I'm doing now, with the market still being so heavily controlled, and asking if that's really such a good idea. If you put the console growth curve next to the growth curve of what's happening at Mac, for instance, I know which side of the battle I want to be.
A: So what is the role of publishers in the future going to be like? If a recall correctly, the idea behind EA Partners is that it's a range of services that developers can choose from to structure a deal. Would that be a more sustainable model for publishers in general?
Swen Vinke: I think that's spot-on. That's also how I see it. There is a range of services you need if you make content: you need marketing, you need PR, and you need distribution, and the rightful model would be that you could employ these services. If I need PR, I go to a PR firm. If I need marketing, I go to a marketing firm.
The big shift, and it's actually already happening, is that instead of the revenue being kept in a bank called 'the publishers' the revenue is now going directly to the developer, who is going to employ all of these. So it's a radical power shift that's going on, and I think it's a very good thing for our industry.