Secrets of the Game Business (Game Development Series)

Before touting your development skills, it is important to understand the different deal and product types on offer.

Deal Types

• Work for hire. The most straightforward of contracts, this "cash for content" deal generally sees developers pitching for the right to work on one of the publishers own IPs or acquired licenses. Publishers are looking for emphasis on professional production techniques, stability, and a proven team or track record. "Work for hire" teams rarely secure more than a basic royalty rate, although many such deals involve working on franchised or licensed products, which tend to have a greater potential of realizing royalties for the developer.

• Prototyping deal. As publishers look to minimize their long-term development risks, many are starting to offer prototyping deals. Here, the publisher pays the developers' costs, or "burn rate" for a short period of time (usually three to six months) to allow them to produce a more detailed "proof of concept" demo to evaluate before making the final decision on a product. Some publishers also use external development teams to create prototypes of games they intend to develop internally rather than tie up their own teams, in which case the developer will factor a larger percentage profit margin into their burn rate.

• Development deal. The most common deal type, where the publisher funds a new product through a royalty advance, a set number of milestone payments to cover development overheads, and an agreed royalty rate once the publisher has recouped the advance.

• Publishing deal. Effectively a marketing and distribution deal, here the developer approaches the publisher with a finished or near-finished product, negating the publishers' risk as much as possible and maximizing the opportunity for the developer to negotiate a substantial advance and higher-than-average royalty rates. With the massive budgets and protracted development cycles of modern AAA titles (publishers grade products internally according to its quality and sales potential, with AAA at the top of the scale), the straight publishing deal is now the Holy Grail for all but the biggest and best developers.

Product Types

It is important to consider that the parameters of any potential deal will also be dictated to an extent by the type of product in question.

• Original IP. A developer approaching a publisher with a totally new, untested IP needs the sharpest of pitches in order to convince publishers of its merits. Publishers regard new IPs as the biggest risk, as they are an untested and therefore unknown quantity. The risk factor is exacerbated if the product is devoid of a compelling character, environment, storyline, or gameplay "hook" for the marketing department to work with, which is why it is increasingly important for developers to consider such factors from inception.

• Third-party IP. Usually a work for hire deal using one of the publishers own IPs, the developer must be able to deliver a quality product according to rigid schedule and budget guidelines.

• Third-party license. Licenses are still very hit and miss within the games industry, and the pitching process for licensed products generally reflects that, as the developer often has to please both the publisher and the licensor. The majority of licensors also have little or no knowledge of the game industry or development process. Therefore, where some licensors will require a creative solution, requiring the developer to re-work the subject matter for a gaming audience, others will demand that the IP remains untouched. Many simply don't know what they want. Fortunately, most publishers are now securing more control over licenses before commissioning them for games, and some licensors are even securing a developer and creative brief before approaching the publishers.