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Kuju: Poor developer royalties "scandalous and wrong"

Kuju: Poor developer royalties "scandalous and wrong"

Wed 17 Oct 2012 9:05am GMT / 5:05am EDT / 2:05am PDT
PublishingDevelopment

The UK developer is creating its own console IP, but it refuses to shake hands over exploitative publishing deals

Kuju Entertainment

Kuju Entertainment is one of the leading independent game development companies. Operating six studios...

kuju.com

You'll know Kuju for its steady output on multiple work-for-hire titles for Nintendo (Battalion Wars), Sega (House of the Dead: Overkill) and Microsoft (Geometry Wars: Galaxies) and most recently casual hits Art Academy and Zumba Fitness 2. But earlier this year the group - Headstrong Games and Zoe Mode - received a shake-up with new management duo Gary Bracey and Dominic Wheatley, old hands in the UK games scene from Ocean Software and Domark, respectively.

While Kuju has always been a solid business under its previously management, Bracey and Wheatley are adopting a much more proactive mindset, not only taking on the traditional work for hire business, but also pitching new, Kuju-owned IP to publishers for the next round of home consoles. Console development might not be the cool thing to do in a world of tablets and smartphones, but Kuju sees plenty of opportunity in a dedicated consumer market whether this generation or next.

In this exclusive interview with GamesIndustry International the two execs explain their bullish approach to work, why developers shouldn't look to the next-gen at the cost of the current install base, how it hopes to work with smaller indie studios, and why it won't be shaking hands over any "morally wrong" royalty deals.

"Publishers have tried very hard not to give any upside. It's morally wrong and it's not good business. We're not prepared to carry on and do that and we've made that clear"

Q: Kuju has been a work-for-hire studio for a long, long time. It would be foolish to give that up, but what are your interests in creating new IP?

Gary Bracey: One of the areas we're being a little bit more proactive with is developing our own IP. Headstrong created and conceived Art Academy, for instance. With the transition period the industry is going through we obviously have half an eye on the next generation and we're looking at some long term projects there. We're putting pitches together and publishers are genuinely showing a lot of interest. There's a small shift in what we want to achieve and what we want to do. The rule book has changed, the face of the industry has changed.

What we're not doing is iOS, tablet or mobile in isolation. Because it's not financially viable for our studio system. It's very difficult for us to compete with two guys in a bedroom.

Q: So what is financially viable to Kuju? Console development seems the opposite to where the majority of games developers are heading…

Gary Bracey: Look at the size of the user base and the forthcoming generation of consoles. And the focus on digital console opportunities. What we're keen to explore is the overlap with cross-controllers. We'll be working with mobile devices with games that we're designing for console. We're really keen on smart glass and trying to find a way to genuinely integrate that kind of technology. The new generation of technology allows us to be more adventurous and creative and perhaps do things that haven't been achieved before. The console market is thriving, the user base is so huge. The current generation of users aren't going to disappear overnight.

Q: The problem is that console hardware and software is expensive and you're asking consumers to pay out a lot of money up front, in a world where they're now used to getting games for free, or cheap, and hardware like smartphones on a monthly contract. And are you not put off by the cost of development for consoles especially with a new generation around the corner?

Gary Bracey: It will be more expensive but there's still a market and we've got to keep innovating. You are getting a lot of derivative products, everyone is developing reactively. What we've got to do is keep feeding innovation.

Dominic Wheatley: We're in the thrall of publishers. If they want to spend the money, we're there for them. We're not making that call but we're going after that sort of business. With every new generation of console, and as the market expands and progresses, you get bigger and bigger budgets and blockbusters. Everyone says every year that there's just a handful of games at the top and everything else doesn't sell. They've said that since the Commodore 64. We hear it's $200 million for Call of Duty, $70 million for Assassin's Creed. It's only going to get bigger.

"The PS2 took a while to get going and by the time the install base was big enough games were gathering dust on the shelves. You can go too early"

Dominic Wheatley

Q: So surely the publishers you're pitching to are being more cautious. They only have a finite amount of money to invest in that space. As you're pitching to these publishers, what feelings are you getting from them?

Gary Bracey: You have to bare in mind Kuju's a well established company, these people aren't dealing with a start-up that they might be unsure about. It's not insignificant to have a trusted pair of hands. If you have a significant budget you want to know a developer is going to be around in 12 months time and they're well-managed.

Publishers are looking for content that will blow people away. Something different and commercially viable. Everyone was caught off guard by things like free-to-play, everyone has been uncertain about which way the market will go. They want to hedge their bets and they don't want to over commit on budget. But they will be interested in new projects because after all they are games publishers.

Q: What kind of resources are you dedicating to the next generation of consoles?

Gary Bracey: It's difficult to say because we're creating ideas and we're at the behest of publishers. It's still in the early stages because Dominic and myself haven't been with the company too long. Our view was to focus on the existing user base because it's not going to go away overnight. And people tend to neglect the old when the new emerges.

But we are getting enquiries about what we're doing for next gen, and next gen in a digital capacity. It's not just the big scale games but something perhaps episodic. The whole mentality of creating and publishing games is changing on consoles. XBLA and PSN started that off and it's going to change because it's reactive to what's happening in the mobile space.

Dominic Wheatley: Don't forget that with the next generation of consoles from all three manufacturers it will be at least two or three years before there's a proper install base. When the PlayStation 2 came out developers were madly excited and rushed into development for it thinking it would sell as well as the PlayStation One did in a few months. It didn't and a lot of them got caught out because they published too many games and didn't sell very many units. The PS2 took a while to get going and by the time the install base was big enough their games were gathering dust on the shelves. You can go too early.

Q: But there also seems to be a frustration from some that there's not a new generation out there yet, consumers who are ready to buy into console gaming once again, and developers who want to push new systems.

Dominic Wheatley: On a new generation of consoles you get the chance to develop new IP. You're essentially addressing a very, very core market. At the tail end it's the opposite, there's nothing in the top 40 you don't recognise. No one is successfully producing brand new IP for Xbox or PlayStation 3. If you want to get the volume you need to cover the expense you've got to have recognisable titles on the shelves. The opportunity for developers creating their own IP and flogging it to publishers is on the next generation of consoles.

"The console market is thriving, the user base is so huge. The current generation of users aren't going to disappear overnight"

Gary Bracey

One project we're working on for a major hardware manufacturer has been so well received that they're thinking they should move it to a next generation platform.

One of the things I noticed when we got to Kuju and we started having a good look around was that publishers are not overly generous when it comes to the upside. In the past, we and many other developers, have settled for "cost plus" and then very little on the upside. I mean pennies. I've been rather appalled by that. We're not prepared to do that anymore. We're negotiating with publishers who are willing to give it if you argue the case. If you don't ask you don't get.

Q: If you let them get away with it, they will try again.

Dominic Wheatley: I was in publishing for 10-12 years and we always tried to make sure the developers were very well motivated by a good royalty. Whatever the advance is you're going to eat it up and then you start sharing royalties. As a publisher I had no difficulty letting a developer take 10, 15, 20 per cent of the success because we were happy to share when it all went well. When it didn't go well it didn't matter anyway. What I've found is publishers have tried very hard not to give any upside. It's morally wrong and it's not good business. We're not prepared to carry on and do that with certain people and we've made that clear. I'm pleased to say the very first major deal with we've done we've got a very nice royalty on it. But in the past we've had multi-million unit selling products and we've received paltry royalties, and that's scandalous and wrong.

Q: Of the new IP, how many of those project are actually in development?

Gary Bracey: We've got three products that we've created from the ground up that we're currently pitching. It takes time to get the publishers to commit. It's long-winded, with pitches, demonstrations, videos… and then we get a semi-commitment to work up to a full prototype. Obviously everyone wants to create the next Assassin's Creed and I think we've got at least one of these that has the potential to create a franchise. But it's a big budget and no one is going to make an impulsive decision. And there are certain elements of the games that really need to be on next-gen consoles.

These upstart casual games have come along and really fragmented the industry and that's a really good thing. They've changed attitudes. There is going to be more crossover and I would like to think in the near future there are going to be premium games on tablets, maybe more than phones, that people are going to be paying proper money for. 20 for a really good game.

Q: You've also started a partnership programme, to work closely with other developers. What can you tell us about the thinking behind that?

"These upstart casual games have come along and really fragmented the industry and that's a really good thing. They've changed attitudes"

Gary Bracey

Dominic Wheatley: There are a lot of independent studios and wannabe studios with people sitting behind their desks, longing for the day they can break away and do their own thing. With Kuju Partners we thought we should offer a two-fold service with start-ups or independent studios who don't have the resources, the biz dev, sales and marketing, finance and some production skills. They can come to us and we will advise them, critique their ideas, help them form their studio and help them pitch to publishers. And we take some of the upside if it all goes well. And maybe in the future there's acquisition potential if these studios do marvellously well and we love each other they could join the Kuju family.

Q: How far do you follow that project through from the initial stages and pitching?

Gary Bracey: We follow it all the way. The idea is that we monitor them all the way, including production so they're not late, they don't miss milestones. We hope to bring discipline to that with a professional infrastructure. And it means they don't have to have a sales guy on the pay roll. We can get them in front of the top guys at Activision or Microsoft or whoever. Yes, we want to share in their success. But it's also a way of seeding small developers who may come to Kuju in the future. They keep their IP too.

1 Comment

Martin Fedor
Programmer

4 1 0.3
Interesting reading about Kuju economics -- insolvency documents for Vatra Games studio which Kuju owned and managed. It's a public document available for eveyone to read. Both in czech and english language.
http://tinyurl.com/8c3thhv
Page 45 contains money which Vatra owes Kuju (for "managament sevices"...). Page 54 contains a list of advance payments (for...I don't know. Salaries?) during 2012 which Kuju wants back.
Page 55 contains money Kuju owes Vatra ("Vyvoj hry" means "Game development"...).
http://tinyurl.com/9pr6zdj is the full list of insolvency documents
When Vatra was shut in July 20th, approx.40 employees were left with no salary for July and for next two months. They were left in a vacuum as no end of contract was signed with them (of course because that would have required a redundancy payment). Contractors got nothing. At the end, Vatra owes Kuju money.

Posted:A year ago

#1

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