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New developer models: It's risk vs reward

New publishing models open up new finance routes - but developers can't expect to take all, says expert panel

As relationships between developers and publishers change, there are more routes to financing for the creators of games than there has even been - but while many studios are keen to take a bigger slice of the profits, it's still down to the level of risk a company is willing to take.

That's according to Crytek's Nick Button-Brown, speaking as part of a panel session at GDC Europe entitled Alternative Finance and New Development Business Models.

Button-Brown, who previously spent nine years at Electronic Arts but recently switched to the independent developer behind the original Far Cry and Crysis, explained that the traditional business models favoured the publisher for a very good reason.

"It's all about who's taking the risk," he said. "Because whoever takes the risk, will take the reward. The bigger risk you take, the bigger reward."

Among the new models discussed were specific project developments, with external companies, and slate funding - but one of the most talked about was completion bonding, which is an insurance scheme that works to keep a production on time and on budget, and a method much-used by independent film productions companies in Hollywood.

"Each production is like its own business model," explained Risa Cohen, a consultant for RC Productions and somebody who's worked on the completion bond model with games companies for the past few years. Typically, she said, the bond would cost about 5 per cent of the total production budget, but it will give the publisher its money back if something goes wrong, as well as adding some security for developers - thereby mitigating some risk.

However, it's not a silver bullet solution, going back to Button-Brown's original point: "If you set off a chunk to a completion bond to offset some of the risk, then the completion bond company will take a slice of the reward," he said. "But that's good - completion bonds are a good way of getting rid of some risk."

One thing that completion bonds won't protect you from is the cancellation of a project - although the chances of that happening are lessened, explained Cohen. "It doesn't protect you from a publisher killing a project, but they have to pay a kill fee which you've negotiated. But a publisher isn't usually motivated to kill a completion bonded project, because it's put the money in up front."

"There are developers now that go into the completion bond system, and they'll like it at the end - but they certainly don't like it at the beginning."

And self-publishing? "Difficult," said Peter Kirsch, senior consultant from Attaction. "Most of the deals we've seen were not self-publishing, but co-publishing. A developer can step up to be more equal to the publisher, but it requires a lot - energy, effort and resources.

I'm talking about bigger games here - not having an iPhone game out on the App Store. It can be done, but if you think that game development is tough, this is even tougher. Are you prepared? If you can do it, the rewards are even bigger."

"To be honest there isn't really a model that allows a developer to self-publish," added Button-Brown.

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