“The traditional model of games development has begun to show its age, and new methods of production must be embraced in order to take advantage of new opportunities.”

Introduction

Due to the astronomical costs involved in creating games, massive sales must be achieved. This sole factor is rendering the traditional model inefficient. In contrast to the actual amount of money that publishers make, the creators make significantly less. The traditional model consists of large companies hiring many employees primarily working on the same project. Some of the work maybe outsourced, utilising the cheaper developing countries. Millions of pounds are spent on development before any revenue has been generated. Considerable sums of money will then be spent on marketing and retail distribution. The publishers make considerably more money in comparison to the developers. In many cases, if the project fails, the company closes down. On the other hand, if the game is successful, the company undertakes a new project and the cycle begins again. As a medium, games are generally released after a novel or film. This model is results orientated and many companies do not take risks. Consequently, this impacts on innovation in new games as mainly tried and tested formulas are adhered to. Utilising this model stifles creativity in many cases.

“The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift.”

Albert Einstein

Alternative models have been created. Some of these benefit the publisher whilst others benefit the developer. Most of these are implemented worldwide.

In Game Advertising

Also known as advergaming, advertising in games is only in its infancy. It is an untapped resource which may be off use to new or struggling companies. It could provide lifelines allowing companies to pursue more innovative and risky ideas. In some respects it can add more realism to a game, an advert for coke is more realistic than an advert for an imaginary drink. They can however become obtrusive which would hinder playability and so one might argue that it would be more of a hindrance. The cost of creating a game is only going to increase and so this seems like a viable step in meeting those costs. What must not happen is to allow these companies a controlling say in the design of the game.

One of the largest examples is Massive, a subsidiary of Microsoft, who offer companies the opportunity to advertise in affiliated games. Their list is impressive. [ 1 ]

“Doing business without advertising is like winking at a girl in the dark. You know what you are doing, but nobody else does.”

Steuart Henderson Britt

Work for Hire Model

This has also be coined as the Hollywood Model, it employs talent on a contractual basis thus only employing when work is available. This allows the publishers to save on capital in between projects. This model primarily benefits the employer but it does have its advantages for the contractor.

Contractors can focus on their strongest areas rather than being adept in a few subjects. This is susceptible to isolating some employees. Talent can gain exposure at many companies, allowing for them to work on more games than the traditional model. By constantly moving between companies, a common code of practise would be created, thus protecting more employees. Currently the industry is ruthless showing little regard for the future of their employees. This system also entitles the developer to overtime payments in contrast to steady salary based employment.

For the publisher there are many advantages. This includes saving capital during down times, hand picking teams and reducing employee tax. Even independent developers could create their own teams and be hired as a group. In 2006, a group of developers advertised their services for ninety days on Ebay for $200,000. [ 2 ] One notable item is that the publisher owns the intellectual property (IP). This could potentially benefit the developer as the publisher would be better suited to localisation and distribution, more access to capital and many marketing possibilities. They would have other business structures in place such as testing, quality assurance, research and collaboration with other departments.

There are some risks associated with this model but all can be avoided if an adequate contract is negotiated. From the publishers’ side, a developer may produce inadequate work which cannot be published or a publisher may cancel a project at any time. It requires the skill sets from both sides to be maximised in order to be successful. [ 12 ]

Another trend occurring is outsourcing to developing countries. The wages that these developers demand are a fraction of western pay packets. Publishers do not have to provide equipment or any other related fees. A small highly talented team creates a demo which is then pitched. If successful, the rest of the work is outsourced and the team begins a new project.

IP Rights

“Innovation is not the product of logical thought, although the result is tied to logical structure.”

Albert Einstein

Innovative IP can hold a significant value if sold or licensed regardless of completion. Payment is generally upfront or in part if incomplete. The revenue generated can be used to fund future projects and it gives developers increased financial stability. The developer funds this and so is not at risk to some of the issues of the previous model such as a project cancellation. Creative control lies with the developer and so this promotes innovation. Generally the publisher owns all right to the sequels and all associated assets so the developer must consider these trade off’s when considering a contract. Another approach that could be considered is Segmented Right Licensing. The IP is segmented and sold separately to different parties or some parts may remain with the developer [ 12 ].

Developers Model

MMOG’s and MMORPG’s are expanding a rapid rate. In comparison to a general release, the content costs a fraction and revenues are generated constantly. The main costs incurred are during the initial planning and implementation phase. Funding must be secured through investors which may include venture capitalists or Business Angels. Once the title has been released, the majority of the team can be released. The remaining skeleton team is all that is required to update the content. Players only need broadband and a hard-disk and the capital to meet the subscription fees.

Consoles are beginning to incorporate this feature. Users of the Xbox 360 are able to download new content via the Xbox 360 marketplace. [ 3 ] Nintendo recently announced that their next generation console, Revolution, will feature downloadable content.

Retail distribution costs are eliminated. In the traditional model, the game must be formatted to be put on CD or DVD. All materials can be downloaded including manuals and updates. There are less licensing implications to consider. Based on various aspects, policies regarding use are set, which are combined with the package via a specific licensing technology. These technologies range from encoding on the physical device, activation codes to online registration. Internet based games are easier to license as the user typically has to login. Some downloadable games do not require a user to login and these are susceptible to improper use. Several DRM technologies are available but none today can offer 100% protection.

The specific launch date can be controlled worldwide. In the traditional model, games have to pass through a variety middlemen and distributors before it reaches the shop shelves. This has many costs associated with it due to the logistics. Depending on the arrangement, the channel that is responsible for selling the game collects the revenue and compensates the company. This may be in the form of pre-sale or post sale payments. With the internet this could all be concluded electronically, thus slashing the timescales involved. Downloadable games eliminate all of these layers. Steam [ 23 ] is one company which specialises in downloading games for users and they been extremely successful. They have hundreds of titles available for download covering all genres.

There is one major risk with this type of model. As the initial investment is very high, the first episode must be successful. If it is not, players will not purchase any other instalments. Large scale examples of these MMOG’s include LOTR [ 6 ], Second Life [ 7 ] and Ultima [ 8 ] which was first launched in 1998.

Independent Distribution

This is hardest route for any developer to follow. However as there are no constraints from the publisher, time scales can be altered and the developers own all rights. Combining all of these factors creates a model that promotes innovation. The first project would be difficult as funding would be hard to secure but if it is a success, all capital generated would finance future titles. Once the game is developed, it can be made available online, the process is identical to the developer’s model. There are communities available that promote indie development and allow creators to advertise their content. Manifesto Games [ 4 ] and the Independent Games Festival [ 5 ] are examples of such.

Public Broadcasters

Another model that has been mentioned is the role that public broadcasters could perform in game development. David Rejeski has championed this model. [ 9 ] A Corporation for Public Gaming (CPG) should be established which would provide grants to create games for public consumption. This would model its broadcasting counterpart and create games that will “inform, enlighten and enrich the public.” [ 10 ] Portions of the funding would go towards education which would aim to improve on the content and review the social impact of the game. Another suggestion is for the current CPB to include games in their model. These projects would be able to take more risks as they would be able to afford to, and any mistakes would be documented allowing others to gain from such experiences. In the 1980’s, the BBC launched the BBC Micro [ 11 ], an educational tool which was successful. The ended the project in the late 80’s as a result of increased competition.

Government Intervention

Throughout history governments have offered benefits to all types of industries. There are a few incentives in place which benefit the developer. Research and Development tax credits can be awarded to developers freeing up more capital. Throughout Europe, regional production investments are available to meet the costs of setting up an office. Governments offer these investments as they create jobs in the locality. The Isle of Man is currently offering grants of up to 40% towards the costs of relocating and setup.

The film industry currently enjoys significant tax breaks as it is considered a cultural benefit. Novelists receive other benefits. If governments can provide such backing to these forms of entertainment, surely the same should be said about games. [ 13 ]

“Never before in history has innovation offered promise of so much to so many in so short a time.”

Bill Gates

Conclusion

“Creative thinking may mean simply the realization that there’s no particular virtue in doing things the way they always have been done”

Rudolf Flesch

All models contain positives and can be successful if implemented correctly. The traditional model is in many ways the least efficient of all methodologies. There is a significant downtime in between projects. Companies should change this to include an intrapreneurship approach. During downtimes, teams can concentrate on inventing new concepts and ideas.

Subtle in-game advertising can add depth and realism as after all we are surrounded by advertising in our daily lives. Generating revenue by including an improvement is a technique that all models should adopt. If developers can find employment, the work-for-hire model is suitable. Developers and publishers do what they do best but it does not really promote innovation as the publisher dictates content.

Episodic and downloadable content is a relatively recent avenue and while it may never replace stores, it provides a large audience for indie developers. Public broadcasters and governments could provide the greatest stability. There is a large support base in the event of any setbacks. Gaming should be considered as to be of cultural benefit. Many struggling writers and film makers have only able to survive due to financial backing from their respective governments. If such support was made available many folded companies could still be in business today. With strong support, innovation can thrive and the unknown can be explored.

“Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human change, improvement and progress”

Ted Levitt

Bibliography

[ A ] Secrets of the Game Business, Francois Dominic Laramee, ISBN: 1584502827 Charles River Media, 2003

References

[ 1 ] http://www.massiveincorporated.com/index.html ( Date Accessed 09/12/07 )

[ 2 ] http://cgi.ebay.com/Video-Game-Development-Team_W0QQitemZ8278223283QQ categoryZ62053QQrdZ1QQcmdZViewItem ( Date Accessed 09/12/07 )

[ 3 ] http://www.xbox.com/en-GB/live/marketplace/ ( Date Accessed 09/12/07 )

[ 4 ] http://www.manifestogames.com/ ( Date Accessed 09/12/07 )

[ 5 ] http://www.igf.com/ ( Date Accessed 09/12/07 )

[ 6 ] http://www.lotro.com/ ( Date Accessed 09/12/07 )

[ 7 ] http://secondlife.com/ ( Date Accessed 09/12/07 )

[ 8 ] http://www.uoherald.com/ ( Date Accessed 09/12/07 )

[ 9 ] http://www.wilsoncenter.org/docs/staff/Rejeski_corppublicgaming.pdf

( Date Accessed 09/12/07 )

[ 10 ] http://blogs.guardian.co.uk/games/archives/2006/05/03/alternative_funding_ models _ part_2.html ( Date Accessed 09/12/07)

[ 11 ] http://en.wikipedia.org/wiki/BBC_Micro ( Date Accessed 09/12/07)

[ 12 ] http://www.igda.org/casual/IGDA_CasualGames_Whitepaper_2005.pdf

( Date Accessed 09/12/07 )

[ 13 ] http://www.igda.org/articles/tbarnes_govsupport.php ( Date Accessed 11/12/07 )

[ 14 ] http://blogs.guardian.co.uk/games/archives/2006/05/02/alternative_funding_models_pa rt_1.html ( Date Accessed 11/12/07 )

[ 15 ] http://www.guardian.co.uk/technology/2007/aug/30/guardianweeklytechnology sectio n.it ( Date Accessed 11/12/07 )

[ 16 ] http://elianealhadeff.blogspot.com/2007_06_01_archive.html ( Date Accessed11/12/07)

[ 17 ] http://www.fathom.com/course/21701761/index.html ( Date Accessed 11/12/07 )

[ 18 ] http://en.wikipedia.org/wiki/Computer_and_video_game_industry ( Date Accessed 11/12/07 )

[ 19 ] https://mollyrocket.com/forums/viewtopic.php?p=379 ( Date Accessed 11/12/07 )

[ 20 ] http://blogs.guardian.co.uk/games/archives/2005/10/19/they_want_to_get_into_your_ head. html ( Date Accessed 11/12/07 )

[ 21 ] http://www.joystiq.com/2006/04/16/the-life-of-a-lapsed-game-developer/ ( Date Accessed 11/12/07 )

[ 22 ] http://stuckincustoms.com/2007/05/10/recent-venture-capital-deals-in-the-games- industry/ ( Date Accessed 11/12/07 )

[ 23 ] http://www.steampowered.com/v/index.php ( Date Accessed 11/12/07 )

Acronyms

CPB : Corporation for Public Broadcasts

MMOG : Massively Multiplayer Online Game

MMORPG : Massively Multiplayer Online Role Playing Game

DRM : Digital Rights Management

LOTR : Lord of the Rings

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