selling the business on to another private investor within a couple of years. These investors may measure growth not in terms of profit but the size of the user base. An extreme example of this mindset could be Twitter, bought recently for $44bn despite losses of $1.3bn in the past two years. It may then be in the best interests of
the publisher to spend all the revenue a game generates on more marketing to attract more downloads. Hence no profit and no royalty for the developer, even for a hit game generating millions of installs. Have a look at recent press releases of your publishing partner. You may well find they boast of fast growth in game downloads or installs, but don’t mention profit at all. Even if your game does earn positive
net revenues, the publisher will deduct any advances from your share before paying you anything. While that is fair enough, make sure your contract terms are specific to the individual game. Otherwise, any advances on games currently in development as well on past games that were not a commercial success, will eat up your royalties and your cashflow! By way of example, a hyper-casual game we developed
last year for a big-name publisher has had 15 million downloads in its first eight months, and has generated a seven-figure sum in revenues. Our share of this success? Not a cent, and there is no realistic chance that we will ever receive any profit share. At the same time, from the publisher’s perspective, the
hit rate for new game prototypes is low, particularly in the increasingly crowded hyper-casual market, and so it is not economical to fund the costs of prototypes that are very likely
to fail, unless you are exceptionally good at spotting “winners” early. Very few are.
LESSONS FOR THE SMALL DEVELOPMENT STUDIO Ask if your publisher is looking to maximise profits from your game, or are they motivated by growing the installed base? The contract is very unlikely to include a commitment from the publisher to maximise profits and so you will have to use your judgement, but be sure to explore this issue with your potential partner. A smaller percentage of gross revenues may well be a better deal than a higher percentage of net revenues. Also, if possible, keep your contracts with publishers
specific to an individual game to avoid the ‘claw back’ clauses that can spoil the champagne celebration when you find a “winner”! For the publisher, the cost of providing advances to
developers in the hyper-casual sector has become too costly as the stores have become saturated with games and the failure rate for prototypes has soared. This puts the initial risk back on to the developer. As many studios are very small with tight
cash flow, the loss of publisher advances may cause problems, but the upside is significant. If they are lucky enough to have the funding to cover their overheads, developers can develop their own ideas without the pressure from publishers for quantity and fast delivery over quality. They can also carry out their own initial testing and then approach a publisher in a much stronger position to negotiate a fair contract. As a result, publishers will get fewer but higher quality prototypes to test. So, as the industry adjusts, we have a potential win/win.
July 2023 MCV/DEVELOP | 41
Amuzo’s latest game Rival Pirates is available to download for free on the App Store and Google Play, exclusive to Netflix subscribers.
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