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Is fairness the first casualty of business?

Blog posted by JPickford on Tue, 01 May 2012

JPickford

Over the last few weeks I've heard of a business practice amongst indie developers that I found quite shockingly unfair. This lead me to thinking about the concept of fairness in business.

I suppose, along with my brother Ste, I've been a businessman on-and-off for the majority of the last 25 years. We haven't yet become rich but I like to think we've always been fair. Perhaps those two things are related? I don't know.

One thing about the video games business, it doesn't take long to encounter some astonishingly unfair practices.

One of the first contracts we negotiated as a fledgling developer back in the 80's was for the princely sum of £15K (yes, to make the whole game). Well that's what we negotiated but when the final contract was eventually faxed through the fee had been mysteriously reduced to £13K. We’d already started work and needed the contract too much to start a fight at that stage. This was to become a familiar theme.

Many years later a big publisher was so keen on our self-funded original game demo that they signed us up instantly to produce two original titles (one based on the demo, the second on a game design doc). Once we were established, and had recruited the staff they demanded, they immediately cancelled the second original title and offered us a licence game instead, knowing full well we weren't in a position to refuse. Of course they also took IP rights in the original game (although we later got those back).

Often, when a publisher wanted to make significant changes to a project (usually extra work), milestone payments would mysteriously be delayed or completed milestones would be rejected for trivial reasons. The next thing you know they wanted to talk about the game content, knowing we were now on the brink of closure and unable to argue.

On one of the few occasions where we were earning royalties, we noticed that our per-copy royalty was significantly smaller than it should be in certain European countries. This despite the fact we were on a fixed percentage of sales revenue. On querying this we were quietly told that the publisher owned the major distributors in those countries and thus sold its own games to its own distributor at a much lower ‘transfer price’ - neatly squeezing our agreed cut and retaining more revenue internally. I've no idea if that was even legal.

On top of this is the standard 'advance on royalties' deal, which is fundamentally unfair but I guess that's a whole article in itself.

So, with all this stuff being a regular occurrence, why was I so surprised about an indie developer being less than fair? I think that's down to the indie community.

We've been operating as an 'indie' developer and self-publisher for a few years now. We haven't made a lot of cash but the work is incredibly rewarding and we've made ends meet by taking on the occasional paying contract. One of the best things about the indie scene is the real sense of community and co-operation. Whilst theoretically competitors, other developers and studios will regularly help each other out with technical advice, business advice and even promote each others games on Twitter, Facebook etc.

When I was learning to develop for iOS I found I had a number of people within the community I could turn to for help, which was always offered freely. Towards the end developing Magnetic Billiards I was stuck on implementing Game Centre leaderboards. An ex-colleague offered to help and basically implemented the whole thing for me in a couple of days. A little while later, another indie developer was having similar problems and asked me for help. Now, I wasn't much use, and I could hardly hassle my friend again, so the simplest solution was to give the indie developer the full MB source code and let him see how it worked.

It might seem crazy to give a 'rival' developer access to your codebase, but that's the atmosphere within the indie community. Everyone is incredibly supportive of each other.

So what was the practice that bothered me so much?

I've heard several stories of developers being offered contracts by an indie studio where they would be paid via a ‘capped revenue share’. There would be no money up front but the developer would be paid an agreed development fee from any sales revenue that might be generated. Payments would end once the agreed fee was recouped (the ‘cap’).

Capped revenue share isn’t revenue share, it’s exploitation.

The individual developer takes all the risk and the very best they can hope for is to be paid, eventually, if the game does well, but with every chance they won’t get paid at all. There’s no upside.

Working for no money up front is a risk, of course, but with a fair, uncapped revenue share deal, the chance of not being paid at all is balanced against the possibility of earning big should the game go on to be a financial success.

There are no end of young developers who are keen to get into the industry and it seems many would likely sign up to capped revenue shares just for the experience, perhaps not even spotting the unfairness of the deal. But is it right to take advantage?

One could conceivably run an entire studio on this basis (and maybe that's what's happening). Whole teams of developers working for nothing, taking all the risk and being explicitly excluded from any significant rewards.

This is wrong.

The very nature of indie development means that people are likely to be working for no-money up front. In most cases there is no money available, so that's a given. We currently have two projects in co-development with other developers on this basis (Naked War iOS and a Magnetic Billiards spin-off), and in both cases our co-developers are full partners in the project. They will receive a share of the revenue and full (and prominent) credit for their involvement.

My initial reaction was that there needs to some sort of code of conduct amongst indie developers. A kind of 'fair trade' agreement perhaps backed by a logo we could use to help promote our games; 'No developer was ripped off during the making of this game'.

Whenever I talk about stuff like this it's generally only a matter of seconds before someone points that business is business and I'm being hopelessly naive.

Perhaps they are right but I'd rather sleep at night, and I’d hope other indies would as well.

 

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Comments

John,

In some (almost) thirty years in the business I have witnessed some shocking publishing practices. As well as some developers securing advances with no intention of delivering on the process they were being paid for as they worked away on new ideas to sell to other publishers whilst they were being financed by the original schmuck. (not of course that this was ever with the” Brothers Billiards” who have always played with a straight bat)

For many the “greed is good” philosophy has paved the way for them to stamp upon other people’s lives and families. Abuse can be both a publishing - and (to a much lesser extent) and a developer failing.

Your recent example of an “iffy” practice is logically wrong as well as morally wrong. Like anything the argument could be defended but “decent” people will see through that nonsense. The only credit I would give to these guys is that at least they told you what the terms were upfront, rather than the other option of making vague statements and then delivering the bad news at the 11th hour.

I guess a lot of this depends not only on your world view but on what you view as fair, even on a somewhat libertarian view of a “specific calculus” the greatest good of the greatest number can be subverted if I would rather take 1,000 units of good, where others only receive 100 units. So a lot of the debate is subjective and down to opinion.

As ever in life all that it needs for this evil to prosper is for good people to do nothing. Trade Unions arose for a reason mainly to protect vulnerable people from exploitation. Most in the games industry are far from vulnerable but they should really consider who they enter into relationships with as the company you keep can define your outlook on life as well as your potential opportunities.

Simple agendas get “confused” when the large amounts of cash that can be generated enter into any relationship. Luckily in my time in publishing I have made some money and better still made it without having to make it at anyone’s expense. Not all business deals go well and I have learned that the true measure of a man is how they cope with these adversities and how they deal with resolution of the issues created.

Like Game Group there can be sensible reasons for continuing to employ people that involve the sacrifice of certain principles for the greater good of the staff. Those who choose to pre-pack and then appear next day insensitive to the losses of their creditors can frustrate a belief in the goodness of human nature.

In the same way I sometimes have to bite my lip when game creators welcome the independence of certain platforms as they can now “publish,” I do sometimes worry that artistic types are not best placed to run their own commercial matters. The publishing skills of discovery, assembly, marketing, distribution, accountancy, etc are not dark arts but they are best served (IMHO) by people who gravitate towards those topics.

For me relationships like Miles and the guys at Sports Interactive worked best as creativity and business were harnessed successfully together. Sadly there are too few examples of where this has worked out as the old greed is good stock market takeover models used to crush or absorb all the decent companies in their path.

What I do like about the “new” publishing is that it delivers a lot of new business models and new ways to co-operate that are both interesting and exciting. Some of the new rules invented will be fairer than others. The cap suggested in your example does not fit the standard “rules” of risk and reward that I would see as fair. Generally, I just prefer to comment upon what Mastertronic deliver, as the policies of other publishers are not really my concern.

I have enjoyed at least three new business areas and different ways of publishing by co-operating with developers over the last year, and working on these refreshing new models has been most enjoyable. Not always as “rewarding” as you would hope, but I think that as long as you are trying to work within principles of profit sharing then the road is at least visible if not always totally clear.

I know that my business partner Andy is trying to “invent” new ways of working with his Appy Nation outings. I also know that despite the fact that we have to be a profit making venture we would both hope to be judged as people that delivered what they promised by our publishing partners rather than a fantastically profitable business machine. Our reputation is important to us, and not a commodity for sale.

There are times when all you have is your word, for the developer finding people in publishing who do as they say can be frustrating.

We may not always deliver as planned but at Mastertronic our aim is to become the voice of independent game makers, we may not get there straight away but at least we know where we aim to travel.

It is not really our place to say if we are delivering, all we can hope is that the people that we are working with like Charles Cecil, Mark Cochrane, Harry Miller and others would say that we deliver on what we promise them. John you are right to highlight unfairness and tilt at the windmills of anything that is less than an equitable relationship.

Keep up the good work….There is a better way of working – we just need to invent it, and now is the bit where you throw in how I didn’t deliver on Wetrix – for comedy effect!

 

JPickford

Cheers for the response Garry. I was half expecting to be laughed at for even suggesting that fairness is a valid concept in business. I do strongly believe its possible to operate fairly and honourably AND successfully in business. The names you mention are great examples of that.

 

I agree with all the points made, unfortunately until indie developers actually get a voice they will always be exploited. Big publishers out there are harvesting the indie scene and making some big bucks off of small groups that just want to get noticed and make some money out of it.

I remember Feud very fondly having come from the ZX81 era, its that time that computers and programming was in the golden era these days its all about money and who can clone a good idea the fastest.

 

John & Garry,

Being an indie, having run Steel Penny Games for almost 6 years now, and growing from just me up to 8+ people is a testament that indie development is a sustainable business. But it is a business. My background as a programmer did not prepare me for the business side of game development, but working with other, larger, companies has--quickly.

One thing that I decided when taking on my first employee was that I would not exploit (in the negative sense) as had been done to me at previous companies. The decision to drive an ethical company and handcuff my own actions as a founder was not taken lightly, and has definitely impacted my company's ability to work my people to exhaustion. What did I do? Pay everyone hourly, except company owners who are on salary. Why? It puts a financial brake on the actions of the company regarding overtime and weekend work, while also compensating employees for their efforts at the time they have earned said compensation. Promises of royalties, promises of bonuses--they're almost always empty, even when they are promises given with the best intentions. Internally, I strive to run an ethical company. Externally, we do too. But even as I write this, we're having to make a tough decision that will impact one contract or another. In the end, it's still a business, and the best you can hope for is to burn the fewest bridges along the way, and seize only the opportunities that allow you to sleep at night.

JH

 

Jason,

If it were easy then everyone would do it. Top Marks for not compromising your principles.

I think most people are understanding, if you are honest open and do your best there are times when people are willing to share the pain. In it together means for both good and bad (and usually a lot of the latter before you get to the first).

You can’t please everyone (so don’t try) and as long as you don’t get caught up in your own self-belief (whole graveyards exist full of “irreplaceable” people) things will come good. I don’t think you should ever apologise for your Ethics, few people have them and for the rest of us..”The only way…(really..) is Ethics.”

The trick I guess is to get as many of those likeminded people around you as possible – sounds like you have some good workers on board. You can fail, but to me the real crime is not trying.

If you believe that life is ugly brutish and short, then that may colour the responses you receive. Stay positive the times they are a changing, I can only offer support in the frame of my limited experience, and suggest that with a positive attitude things do tend to work themselves out OK.

Your outlook above seems pretty solid to me, it is nice occasionally in business to pause and smell the flowers – I have seen my own company mission statements (a good place to set out your stall) change over time to include phrase about ethical, caring, profitable…etc

Fairly happy now, with this basic outline.

• working with developers, publishers, gamers and media partners to curate and promote the sort of games and simulations we would like to own ourselves

At least we are not making phlange valves for the sprocket market; we are (hopefully) having fun in an entertainment market, in an industry many people would chop their arms off to get into.

So all power to you Jason, keep on keeping on, and remember your ethics are cool – there are many people like the Pickford brothers pushing for a fairer way of working so keep the faith. After all you are Steel Penny Games, not stealing a penny games - so you can sleep well at nights.

Garry

 

Your story with publishers matches with my experience when I worked in the industry - basically the contract the company I worked for (Awesome back then) had signed with their publisher was worth something only to the publisher - it explicitly said no external demos for instance and demos were requested as soon as there was something demoable.

I think the indie community is great and great games, with the right launch should do alright - nobody can predict the next angry birds of course. So it's odd to be paid in the way you describe, but I can sort of see how, if the cap were high, then that might make sense, if be being greedy - the cap is there to basically ensure that the product owner gets fat and that the extent to which the 'peons' can get fat is limited. If the contract says, you'll be paid not more than £250K for your efforts, then *maybe* that's fair, if it says £25K, it's probably not so fair.

The reality, of course, is that if you have the problem that your having to pay a bunch of devs 10% of a huge pile of cash, then your probably should spend the time looking at your huge pile of cash and forgetting about that 10%, even if it were to stack up to a million - frankly, by the time it's become a problem, you're signing the contract on your small island purchase and wondering which of the 365 pairs of bermudas you've bought you ought to slip into, while you - presumably - do a couple of hours coding on the 'deck' before lounging about the beach for the rest of the day...

 

Try signing a contract for milestones and missing the small print which says they can cancel before final delivery. This meant they did not pay ever, and cancelled it at the end, then developed the same game in-house and released it.

Would finish a lesser man right there, moral of the story is - yes - publishers are strictly business.

 

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