Publishers

If developers are the artistic brain behind videogames, publishers are the muscle and nerve that coordinate all aspects of bringing a game to a consumer. The publisher's role is so extensive and influential that publishers have taken on the aura of medieval fiefdoms, where money flows in mysterious directions and decisions are cloaked in secrecy. Acting as the "suits" to developer "geeks," publishers make up the second half of the classic "art versus commerce" conflict that inspires hyperbolic excesses on game industry message boards. If we step back from the rhetoric, we see wide variation within the category: global conglomerates with multiple regional divisions covering internal and external development, marketing and sales, quality assurance, finance and licensing for any viable delivery platform; smaller companies specializing in marketing and sales of certain genres for certain territories; groups specializing in specific platforms such as PC or mobile phones; entities focusing on discovering gems in one territory for distribution in another; and Web sites offering pay-per-pay downloads. To choose the best partner, developers must extensively research prospective publishers' strategic priorities, business model, and execution strengths and weaknesses— much of which can be inferred from publicly available information. Mismatched expectations on any of these fronts can doom the best-executed game to the bargain bin before its time.

Console and PC Publishers

For brevity, and because the vast majority of packaged games wind up in consumers' hands through this model, we will focus on "traditional" console/PC publishers such as Electronic Arts, Activision, THQ, Infogrames, and Sega. We examine the role of publishers who also control a hardware platform (such as Sony or Nintendo) in a later section. Finally, since we reviewed game development previously, for this overview we will set aside that function of a publisher's role.

Traditional publishers sit in the conceptual center of the videogame industry, primarily because they bear the executional and financial burden of every process between code creation and game purchase. Responsibilities and accountabilities include:

• Management of the game development process. Publishers are involved in everything from time-to-market scheduling to creative input. The foundation of a publisher's relationship with retail partners is a good product shipped on time in the right quantities.

• Debugging, playtesting, and other quality assurance. Publishers are legally liable for the game's quality to both consumers and the platform holder.

• Securing all necessary licenses. These include in-game music; creative properties, trademarks or technologies controlled by other companies; athletic leagues and players; and the right to publish on controlled platforms (consoles). Experienced developers obtain an indemnity from the publisher against any licensing omissions the publisher might make.

• Manufacturing and shipping the finished game. This responsibility includes writing and printing the manual, designing the cover, buying the case, placing orders with media manufacturers, assembling all the elements into a game package, and shipping it to the channel. Aside from the QA implications of an unstable assembly process, lackluster packaging encourages consumers to look elsewhere on the store shelf.

• Maintaining good relationships with retailers via cooperative channel inventory management. More than just the "schmooze" of golf and expensive dinners, publishers' sales efforts must include in-store merchandising programs, funding for product placement in retail circulars ("white space"), joint assessment of a title's sales potential, and markdowns or returns at publisher cost if the title does not perform as expected.

• Communicating title features and availability to the consumer. Whether via "meta-channels" such as press events for game industry media, or direct communication with gamers via television, print, demo opportunities, Web site, or internet/direct mail, publishers are responsible for letting the public know what's out there.

• Housekeeping. This responsibility includes all the human resource, tax and finance, investor relations, and legal services issues involved in running the company.

Industry voices frequently criticize publishers for "unfairly" sharing revenue with their developer, without whose creativity there would be nothing to sell. Since revenue sharing is established at contract, a knowledgeable and firm negotiating stance goes far in ensuring fairness for the developer; the many factors that can strengthen a developer's negotiating position are covered elsewhere in this book. In pure financial terms, however, the market law of risk versus reward explains why publishers keep the lions' share of revenue, if not of profit. Table 1.2.1 answers the gamer's frequent question: "Where does my $50 go?"

Table 1.2.1: Generalized Breakdown of Revenue from a $50 Console Game

Amount	Purpose	Paid By	Paid To
$3	Cost of goods	Publisher	Media manufacturer
$7	Publishing license royalty	Publisher	Platform holder
$13	Retailer profit	Consumer	Retailer
$3	Markdown reserve	Publisher	Retailer
$8	Development cost	Publisher	Developer
$10	Operating cost	Publisher	Internal (overhead, freight, co-op, bad debt)
$6	Marketing	Publisher	Ad agencies and media
Items in bold can be converted to profit through careful publisher cost management.

Quality Assurance Service Provider

Occasionally, a publisher will decide not to maintain quality assurance as an internal core competency. Companies such as Absolute Quality or Beta Breakers provide complete debugging and gameplay evaluation to such publishers on a contract basis. The clear advantage is peace of mind about product quality without the necessity of managing the significant human-resource issues and financial overhead of an in-house test team.

Contracted QA has a long history of success with PC publishers, who bear the unique burden of ensuring that their latest release works within a range of hardware specifications. Depending on the publisher's defined compatibility set, the contract QA house can be asked to test hundreds of variants on PC game software + operating system software + hardware + peripherals, as well as projecting results for configurations not tested. Such companies can recoup the significant investment in equipment representing the current gaming market (the "test bed") over multiple projects.

Console publishers are gradually warming up to the idea of contract testing. One obstacle to date has been the expense and proprietary nature of development and debugging systems for controlled platforms. If the publisher provides such equipment to its external QA partner, the platform holder holds the publisher responsible for proper security and authorized use. Another more emotional than factual objection is the perceived risk of code leaks from sources beyond the publisher's own walls; if a game is to be pirated, better to control the leak internally than pursue legal remedies against a partner. During the most recent console transition, contract QA houses made great strides in accommodating these issues, and have since worked closely with both publishers and platform holders to ensure that the figurative firewall includes rather than excludes their services.

Public-Relations Firms, Advertising Agencies, and Merchandising Teams

Although marketing departments at some publishers look as populated as E3 on opening day, few heads of marketing deny the efficiencies of contracting external firms for public relations, advertising generation, and in-store merchandising assistance. Much more than additional heads and hands, such companies combine effectiveness through relationships, the creativity that comes from time to brainstorm, and a reach that falls just short of handing a game directly to the consumer.

Publishers occasionally learn to their dismay that some brand-name PR firms specializing in national media such as USA Today and Newsweek can fail miserably at communicating their message to videogame industry media such as Electronic Game Monthly and Edge. The best game industry communications managers successfully pitch the latest role-playing game to a sophisticated news outlet while, on the other phone line, explaining this year's business plan to the local game journalist. The publisher gives the PR firm complete access to its game's development, while the PR firm coaches the publisher on speaking skillfully and consistently to all of its constituencies.

Similarly, a lack of alignment between publisher and ad agency on the creative vision for the marketing plan directly impacts sales. Many top-shelf ad agencies approach the videogame industry as a creative soul mate, believing that innovative interactive entertainment requires bleeding-edge advertising. Experienced game industry marketing executives, on the other hand, know that their audience wants to see in-game footage. (Such creative tension results in either a memorable commercial or a new ad agency.) Agency partnerships range from a fully retained relationship covering all software releases, to different agencies retained for distinct product lines, to per-title arrangements.

In-store merchandising assistance is a luxury best afforded by platform holders. With anywhere from 4 to 24 linear feet devoted to its hardware and software in key retailers, for example, Nintendo is legendary for its merchandising team's deep relationships with store managers, enabling them to update signage, straighten displays, restock empty shelf slots, and chat up the electronics section manager on upcoming releases. Publishers whose key releases are integral to a platform holder's lineup can obtain preferential placement and subsequent coddling of their titles by the platform holder's in-store team. Publishers have been known to maintain merchandising teams for shorter or longer periods, but the justification for such cost begins with shelf space; sending staff to straighten up just a few facings is desirable in principle but questionable in financial practice.