When you are looking for a publisher to work with, it is important to understand how they are likely to conduct their business. Computer game publishers are like butterflies; they have a two-stage life cycle – they start as a caterpillar, eat and grow, eat and grow; before reaching a size where they may transform into a butterfly.
The caterpillar – When they are first born computer game publishers usually focus on one territory (Europe, US or Asia). They most often operate by licensing finished games from other game publishers that operate in different territories and republishing those titles in their own territory. Due to their small size and limited financial resources these publishers are usually unable to fund game development. This makes them unsuitable business partners for a computer game developer looking for publisher funding. It is also sometimes the case that they have to commit a large percentage of their financial resources to their latest title. That can leave them short of money until the product has shipped and invoices are paid, which in turn can cause delays in making other payments. This can be a problem for small game developers that need payments to be made promptly. Like the caterpillar on a juicy leaf these publishers tend to eat up unwary developers (slow payment, back ended deals, poor communication etc can often cause serious problems for a new game developer without the financial resources of its own to cope with the publisher’s unstable cash-flow).
In addition to potential instability there is the issue of sub-licensing. A developer who signs their title to a small publisher (that operates only in their local territory) needs to be aware that such publishers usually don’t have the resources to publish games outside that territory. Most likely these companies will sub-license the game to another publisher which operate in the territories they don’t cover. This has a significant impact on the money a developer will earn. The reason for this is the nature of sub-licensing deals.
The computer game developer signs their game to publisher A. The game is published in North America and the developer usually receives a royalty of X% of the money the publisher earns (after various deductions). However when publisher A sub-licenses the game to publisher C for publication in Europe, publisher A often only receives X% of the money that publisher C earns. As the original developers deal means that they earn X% of the money that publisher A earns they end up with a much smaller amount (X% of X%) for sales in Europe. For this reason developers need to be careful when agreeing to sub-licensing clauses in contracts and/or limit a game publishers rights so that they may only publish in their home territory – the developer is then free to seek a separate publishing deal in other territories.
The butterfly – Due to the nature of the business it takes a lot of luck and hard work for a game publisher to get to the next level. They need a solid hit or ten to generate the cash necessary to metamorphose from caterpillar into butterfly (a publisher with the financial strength necessary to fund titles). Once they do so they become a more stable business partner, able to assume more of the risk. However this new butterfly has its own unique benefits and negatives. While it is a more financially secure partner and is less likely to eat an unwary developer they often have greater demands in other areas. In exchange for funding a deal they usually require greater ownership of intellectual property rights, which is where the long term value of a game lies.
Conclusion
It is important to research the various publishers you are intending to deal with to find out if they publish worldwide or only in their local territory (while sub-licensing in others). You also need to know if they are likely to be in a position to fund development before spending time and money submitting to a company that may not be interested in such a deal. Caterpillar game publishers are not necessarily unsafe to work with (although they are often less safe to work with) but they offer other benefits. As a hungry caterpillar they are eager for success and are likely to work hard on titles that they are publishing. They also publish a smaller number of titles so yours is less likely to be lost in the massed ranks of their release schedule. As with any business it is important to understand who your partners are, what form their business takes and what they can offer you.
