Video game publisher

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Video game publishers are companies that publish video games that they have either developed internally or have had developed by a video game developer. Most video game publishers also produce and publish computer games, but the term "video game publisher" is often used generically to refer to companies that publish interactive games regardless of the target platform.

Contents

1 Overview
2 Business risks
3 Investor interest
4 Selected video game publishers
5 Notable former publishers
6 See also

Overview

As with book publishers or publishers of DVD movies, video game publishers are responsible for their product's manufacturing and marketing, including market research and all aspects of advertising. They usually finance the game development, sometimes by paying a video game developer (the publisher calls this external development) and sometimes by paying an internal staff of developers called a studio. The large video game publishers also distribute the games they publish, while some smaller publishers instead hire distribution companies (or larger video game publishers) to distribute the games they publish. Other functions usually performed by the publisher include deciding on and paying for any license that the game may utilize; paying for localization; layout, printing, and possibly the writing of the user manual; and the creation of graphic design elements such as the box design. Large publishers may also attempt to boost efficiency across all internal and external development teams by providing services such as sound design and code packages for commonly needed functionality.

Because the publisher usually finances development, it usually tries to manage development risk with a staff of producers or project managers to monitor the progress of the developer, critique ongoing development, and assist as necessary. Most video games created by an external video game developer are paid for with periodic advances on royalties. These advances are paid when the developer reaches certain stages of development, called milestones.

Business risks

As businesses go, video game publishing is risky:

The Christmas selling season accounts for about half of the industry's yearly sales of video and computer games, leading to a concentrated glut of high-quality competition every year in every game category, all in the fourth quarter of the year.

Product slippage is very common due to the uncertain schedules of software development. Every publisher has suffered a "false launch", in which the development staff assures the company that game development will be completed by a certain date, and a marketing launch is planned around that date, including advertising commitments, and then after all the advertising is paid for, the development staff announces that the game will "slip", and will actually be ready several months later than originally intended. When the game finally appears, the effects among consumers of the marketing launch—excitement and "buzz" over the release of the game and an intent to purchase—have dissipated, and lackluster interest leads to weak sales. These problems are compounded if the game is supposed to ship for the Christmas selling season, but actually slips into the subsequent year.

There is a consensus in the industry that it has increasingly become more "hit driven" over the past decade, with masses of consumers buying the game that is best in quality and best-marketed in each game genre, and, by comparison, very few buying any other games in that genre. This has led to much larger game development budgets, as every game publisher tries to ensure that its game is #1 in its category.

Games are becoming more expensive to produce. The "next generation" of consoles, led by the Xbox 360 and PlayStation 3, have incredible graphic ability, but taking advantage of that ability requires a larger team size than games on earlier, simpler consoles. In order to compete with the best games on "next generation" consoles, there are more characters to animate; all characters must be modeled with a higher level of detail; more textures must be created; the entire art pipeline must be made more complex to allow the creation of normal maps and more complex programming code is required to simulate physics in the game world, and to render everything as precisely and quickly as possible. With next-generation console games commonly understood to require budgets of US$15 million to US$20 million, every game financed is an extremely large gamble, and pressure to succeed is unprecedented in video game history.

When publishing for game consoles, game publishers take on the burden of a great deal of inventory risk. All significant console manufacturers since Nintendo with its NES (1985) have monopolized the manufacture of every game made for their console, and have required all publishers to pay a royalty for every game so manufactured. This royalty must be paid at the time of manufacturing, as opposed to royalty payments in almost all other industries, where royalties are paid upon actual sales of the product—and, importantly, are not payable for games that did not sell to a consumer. So, if a game publisher orders one million copies of its game, but half of them do not sell, the publisher has already paid the full console manufacturer royalty on one million copies of the game, and has to eat that cost.

Investor interest

Numerous video game publishers are traded publicly on stock markets. As a group, they have had mixed performance. At present, Electronic Arts is the only third-party publisher present in the S&P 500 diversified list of large U.S. corporations.

Hype over video game publisher stocks has been breathless at two points:

In the early 1990s when the introduction of CD-ROM computer drives caused hype about a multimedia revolution that would bring interactive entertainment to the masses. All Hollywood movie studios formed "interactive" divisions to profit in this allegedly booming new media. Most of these divisions later folded after expensively producing several games that were heavy in "full-motion video" content, but light in the quality of gameplay.

In the United States, revenue from the sales of video and computer games exceeded revenue from film box-office receipts for the first time in the dot-com days of the late 1990s, when technology companies in general were surrounded by hype. The video game publishers did not, however, experience the same level of rise in stock prices that many dot-com companies saw. This was probably because video game publishing was seen as a more mature industry whose prospects were fairly well understood, as opposed to the typical exciting dot-com business model with unknown but possibly sky-high prospects. While many technology stocks were eventually destroyed in the dot-com crash in the early 2000's, the stock prices of the video game publishers recovered as a group; several of the larger publishers such as E.A. and Take2 achieved historical highs in the mid-2000's.

Selected video game publishers

Below are the top 20 video game publishers, ranked by Game Developer Magazine in September 2005, in order of overall score in six factors: annual turnover, number of releases, average review score, quality of producers, reliability of milestone payments and the quality of staff pay and perks. Note that this is not a ranking by revenue, but of the quality of experience of working with the publishers according to staff, and some video game development companies.

Notable former publishers

3DO (console manufacturer) (defunct)
Acclaim Entertainment
Accolade (gobbled up by Atari née Infogrames)
Atari (console manufacturer) (acquired by Infogrames, which then renamed itself Atari)
Coleco (console manufacturer) (defunct)
Crystal Dynamics
Enix (merged with Squaresoft as Square Enix)
Epyx
Gathering of Developers (GOD) (Bought by Take-Two Interactive)
Gremlin Interactive
GT Interactive
Hasbro Interactive (acquired by Infogrames)
Iguana Entertainment
Imagic
Infocom (acquired by Activision)
Interceptor Micros
Mattel Electronics (console manufacturer)
Mattel (computer software)
Melbourne House (computer games and books)
Microprose (acquired by Hasbro Interactive)
Mindscape, Inc.
MUSE Software
Origin Systems (acquired by Electronic Arts)
Penguin Software
Psygnosis
Spectrum Holobyte (acquired by Hasbro Interactive)
Square Electronic Arts L.L.C. (Owned by Square and Electronic Arts. Folded back into Square Soft, Inc. and changed to Square Enix, Inc.)
Strategic Simulations, Inc. ("SSI")
Technos Japan Corporation (defunct) (assets acquired by Atlus)
Taxan
US Gold (acquired by Eidos Interactive)
Virgin Interactive Entertainment

Some of these publishers went out of business; others were purchased or merged with a larger company, and no longer do business under this name, or they exist in name only as a brand.