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November 4, 2005

Is This the Death of Publisher Funded Original IP?

Filed under: Thoughts and Rants — Tom B @ 3:50 pm

The recent announcement of the formation of BioWare/Pandemic Studios, an alliance between BioWare, Pandemic and Elevation Partners, raises a serious question…Is traditional publisher funding of original IP dead? I suspect the answer to that question is a resounding YES! It is difficult to think of a major publisher that is investing or even interested in original IP. And then only if it is coming out of one of the top independent studios or a spinoff of top tier developers. Publishers are more comfortable with licensed properties and sequels, and rightly so. Even a bad sequel will sell through to an existing fan base. But no matter how cool you know your original IP is, there is no way for the marketing monkeys at the publishers to get a retail commitment to an initial order for a game that no one in the Wal Mart buyer’s office has ever heard of.

Fortunately, publishers have been charging a heavy premium for their funding, often requiring as much as 35% of the net receipts be allocated to the up front funding of the development and taking the IP in the process as well., just to justify the advances. However, if you look at the actually value of the money it really only represents 20% or so of the risk model. The other 15%, as well as the IP rights, are in effect a bonus to the publisher because no one else is willing to fund the development costs. So while a 50/50 marketing and distribution deal is no problem with a fully funded game, a 20% for a publisher funded game is out of the question, even with the IP. I smell an opportunity.

Seamus Blackley has been pitching this sort of model for years. Let publishers do what they do best…market and distribute games. And let those who understand finance fund the development. Well it looks to me like that’s a big part of the Bioware/Pandemic super. studio model and certainly the reason why it was facilitated by the capital group that has $300M to put into the pot. It will sure be interesting to see how things work out as both of these studios understand the value of retained IP and have a talent for repeated hit on original games. A very sweet combination!

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