How Larian ended up self-publishing

I saw some interesting reactions to Why so many developers close their doors, here and on other sites. A fun consequence was that some guys from the Larian team approached me  voicing their concern that if I’ll actually post all the stuff I think on this topic, we’ll never manage to do any business in this industry again.

Figuring this was the perfect opportunity for me to take on my papa smurf look, I tried to calm their fears by lecturing them about our grand going independent strategy, and how it’s rooted in years of experience of talking to the “big publishers”. Read on If you want to figure out how I came to became a rebel, with plenty of reasons to shun the official prostration that goes on twice a year at events like Game Connection.

An image I used when trying to pitch the idea of a Steampunk dragon game - are you bananas was one of the friendlier reactions I got. Yes, it was called Dragon Armada back then :)

For most publishers the business model is tweaked to make large profits on hit titles, with sufficient margin to cover all of their costs and the losses caused by flopped titles. The strategy they use to find hit-titles is that a gate-keeper, typically somebody with the role  ”business development director” on his card, searches the world and his inbox for new hot game pitches.

Preferably these pitches are for games that are already well under way, have a solid team behind them with a good track record and sufficient finances. The game’s topic should also fit whatever marketing fancies is a good idea.

If the bizdev guy can check all those boxes to a sufficient degree, he presents whatever material is available to a green-light committee, people who are rumored to have incredible insights in what we want to play. Normally you find people from sales & marketing in such committees as well as some guys that actually play games like a producer or somebody from quality assurance.

Looking at Larian I always thought we were ok on the checkboxes – my team is solid, we’re in the business for 15 years with several games having a metacritic above 80% and we’re self-sufficient. Our games also have the habbit of selling for a long time.The only thing that could stop us from making it to the walhalla of the green-light committee  therefore would be that committee members just don’t like our games (or me/my studio).

We actually did make it to several green-light committees of top 10 publishers, I even sat in on a few of them to present my games,  but we never managed to sign with any of them, so obviously something went wrong. Other than occasionally having to deal with idiots, the biggest common hurdle I found has always been the marketing department. I’ve learnt that in general these people don’t like RPGs. They just don’t get it.

In general marketeers want a simple USP (unique selling proposition) that differentiates your game from the competition. That’s not rocket science, but it’s  obviously something that’s very hard to define in a game where it’s all about the whole being larger than the sum of the individual features. That a lot of these individual smaller features are different doesn’t matter to them, they want something big, preferably something not done before. They also want stunning visuals & animation, which is again very hard, if only for the freedom and wealth of options you need to offer players in a RPG. One of the consequences of that is that is that you can’t use a whole bunch of the tricks available to FPS developers, and obviously the RPG suffers in visual comparison.

The reason marketeers want a strong USP and plenty of visual polish is obviously that they think that that’s what’s required to make good sales, and unfortunately (or actually fortunately) their imaginations weren’t triggered by the visions I tried to communicate to them.

I’ve tried everything I could think of that by telling them that in a good RPG it’s the detail and the heart that’s put in that counts, and that if they were to sign on, we’d have the budget to put the polish in there that they were looking for, but to no avail. I tried the sales angle, showing them figures for Bioware & Bethesda RPGs, arguing that with our unique take on the genre and the same budgets we could give them stellar sales, but it just didn’t work.

I’m pretty sure I convinced at least some guys around those tables, the guys that got me in those meeting rooms in the first place, but my language, style of communication or just the assets I brought weren’t strong enough to convince marketing. And at most publishers, if you can’t convince marketing, you don’t have a deal.

So after having sat through several of those defining first-impression moments where I saw the marketing guys pick up their blackberries after seeing a couple of minutes of footage of the games we were working on, I came to the conclusion that if the game wouldn’t look and move like a first person shooter at the same stage of development, and didn’t feature a big hook that could be communicated in one phrase, it would never work. The only thing that would work would be if I showed a powerpoint where I say – dude, the previous game sold 3 million units – so even if you don’t get it, there’s a market.

Somewhere in between one of those meetings I made the decision that the only way we could break through would be by doing it ourselves, without the involvement of a large publisher. Given an environment in which record sales require massive polish which in turn requires massive investments, I needed to find a way to get access to that investment, without the shortcut of getting it from a publisher.

So I asked myself, why do you need these people anyway ? Seriously ?

The roles of a publisher are typically banking, pr/marketing and sales/distribution. They usually also offer localization & quality assurance services. On one occasion, I asked an executive producer that had worked on some top titles how many people it would actually take if I wanted to take care of those roles myself,  and his surprising answer was, not that many, if you can manage the funding. Which got me thinking.

My personal experiences with mid-sized publishers had shown me that all the pr/marketing tasks on a game were usually done by only a few people who then hired a whole bunch of services from dedicated firms. The same went for localization and quality assurance. If you have the funding, it was clear that you don’t need to care about the banking, which publishers are anyway bad at, so that left sales and distribution.

Crack that, I told myself, and you don’t need them.

Followed some very interesting times in which I managed to guide the studio to actually make money from its games. The games were inherently not the way I wanted them to be because I lacked the budget, and the money collected wasn’t as much as it could’ve been since I still went through publishers , but it was good enough to set us up for the next stage of the plan.

That stage is the self-publishing adventure we now find ourselves in.  We recently started staffing up our in-house publishing team to the extent that we’ll be able to offer more publishing attention to our games than they would actually get at most publishers, and we’re now happily making our games without anybody interfering.

All I need to do now is get the games in the stores, because even if digital sales make up for a lot of revenue, retail still matters very much. And that’s the one thing we can’t do ourselves. We can make the boxes, we can ship them, but we don’t have the sales network required to put it in the stores.

That means I still need to go through publishers, which is what concerns my team :)

I’m way over my self-imposed word-count limit here, so I’ll leave the “getting it to retail” thoughts for another time, but the final point I wanted to make is that the above story is not unique to Larian, a lot of developers that can are going the same route, and eventually it’s going to be the thing that will shake up the games industry as we know it significantly.

There’s a lot talk about the indie thing, but typically that’s about smaller garage teams looking for the big break. Larian is a larger established team, with all the stuff that comes with that, but we’re making a move that if copied by other similar-sized developers, will shake up the publishing world by its roots.

The creativity of independent teams together with access to the revenue their games generate, and the ability to bring their own games to market, will forcefully put publishers in a position where they need to question their reasons for being.

But obviously, we first need to learn how to publish our games, which isn’t that simple either ;)

  • Myrthos

    You probably will spent an other blog on it, but I am curious to know what exactly would limit you to get physical copies of your game in the hands of the gamer?
    I understand that shelf space is expensive and that it would be somewhat problematic for a developer to get their game on those shelves if they do not have (the right) network, but does that also apply to online shops? They do not have shelf space. Your reliability as a supplier might be relevant though.

    • http://www.lar.net/ Swen Vincke

      You’re right – it’s worth an article on its own ;) The short of it is that access to retail is quite complex –  we’re working on trying to get our stuff in some key chains directly, bypassing the entire supply line, but it requires quite some effort and you need to bring sufficient volume/the promise of return for the retailer. Digitally, you’re seeing the same trend. The more popular digital distribution becomes, the harder it is to get prime real estate on the portals.   

  • daniel

    We live in exciting times, getting big games out without the intervention of publishers can only mean great things in respects to originality. Really looking forward to this.

    • http://www.facebook.com/Dragonseekers Sergei Klimov

      Yup.

      It’s important, though, to separate publishers from publishing, i.e. sex from prostitution ;)

      Publishing in general is something every game needs: from feedback during the production, review from a user’s standpoint, to making trailers that people understand, and presenting the game to the world in a way that’s clear and honest.

      Unfortunately, historically “publishing” grew into some sort of black magic that was only known to the corporate few. When you think of it, the large “review meetings” that I attended at the biggest publishers there are, were not different in nature from the review meetings we have at Larian to look at Dragon Commander.

      The only difference is external. We sit in jeans and T-shirts and we drink coffee, sometimes beer if it’s afternoon. At the office of big publishers, people sit in crisp white shirts, play with their blackberries, and sip mineral water. but for all the pretense of knowledge, and magic, they very often don’t know their sh*t, unfortunately.

      • Jack Tour

        IMO what you call “publishing” can be just as easily called “marketing” in its broader sense. Which takes away the “black publisher’s magic” and brings us to reality of everyday business — like any other industry… The thing is only that it takes a lot of many to market a game — much more than it takes to market FMCG…

  • Anonymous

    I’m curious how well electronic distribution (like steam) works for a developer house such as yours (i.e, profit cut/sales # and such) ?

    • http://www.facebook.com/Dragonseekers Sergei Klimov

      Most digital platforms work on the same terms (PC, Mac, whatever) where 70% goes to the rights-owner, and 30% to the platform. This is after taxes. But all the other costs like hosting and such, are covered by the platform. It seems to be the model that works for both parties: the platform makes a nice cut, the developer/owner makes a healthy margin.

      Interestingly, in the 90s the usual royalty rate of going out through traditional publishers was the reverse, 30% to the developer and 70% to the publisher. The implied logic was that the publisher (1) funds (2) markets (3) sells. However, the practice was that publishers deducted the hell of everything before sharing a dime.

      Just recently I got involved with a dev team that needed to clear their “bizdev stables”, so to speak. We got Katya, our Head of Legal, to look into their contracts with the publishers, and what I found was, deductions – deductions – deductions. For example, their publisher would throw an event in Los Angeles, get the press together, show the products… and then charge the cost of everything to the developers whose products were shown there, to the dollar.

      This kind of model, where publishers exploit developers just because the creative types don’t know much about how things work in the business, is something I’m very furious about. The sure sign is when a developer is not aware of his products’s sales because his publisher is applying extra pressure by controlling such data. The moment you meet such cases, your team should file for divorce.

      • Anonymous

        Thanks for the details; that seems like a more favorable deal for developers; though the developer still has to advertise. On the other hand 30% seems a bit high unless the electronic publisher is doing a bit of work for the developer (accounting? advertising?) – i guess with the current state of things  it is win win since it is cheaper than traditional methods and good money for the publisher.

        • http://www.lar.net/ Swen Vincke

          30% is actually the fairest I’ve seen – several of these portals charge 40% to 50% with the worst one charging 70% (in the casual space)

          • Anonymous

            How much does steam charge ? (I asked about steam because it seems like the dominant player)

          • http://www.lar.net/ Swen Vincke

            Sorry, I can’t give any specifics as that falls under the scope of non disclosure agreements.

          • Anonymous

            Ok. Thanks. Hopefully sales have gone well and will continue well. I thought DKS was pretty good and look forward to see what dragon commander entails.

          • http://www.facebook.com/Dragonseekers Sergei Klimov

            if you read my original post you may find a clue “)

        • http://www.facebook.com/Dragonseekers Sergei Klimov

          I’ve heard people say that 30% is high, in the context of – we grossed $3M, and we give to the platform a whopping $900K – for what?? – which is one way to look at things. It’s valid when you are, for example, a star dev team whose product people will seek out anyway, whether you’re on this platform or not.

          I’ve also heard people say that Steam does 90% of their digital sales (look at The Witcher 2 – 200.000 versus 50.000 elsewhere) and from this point, if not for Steam – they would never make their 70% at all, so they should be happy to pay 30% to someone who builds the market and the community to support the market.

          Normally, 30% of the platform covers payment costs (2-3% incl. chargebacks?), hosting, security, and whatever else is there. The good thing about digital platforms is also that they pay each month, and not quarterly, like regular publishers. Finally, Steam has impeccable payment record, and knowing how many other publishers/platforms screw up in that department, I would say this alone makes Steam’s commission worthy ;)

          My own thoughts would be that Valve deserves their share for Steam. Some other platforms don’t, and wouldn’t. And most likely, it’s precisely because it’s proportioned in this way, that it keeps Steam growing, allows them to experiment, etc. etc. etc. I don’t really think that Gabe is in the game for money, and better Gabe than a public corporate stock-traded devil.

      • Guest867

        I’m not sure I follow correctly. Would you rather that a publisher simply not hold any launch events with press? If they cannot deduct these types of costs, how would they properly promote the title? 

        • http://www.facebook.com/Dragonseekers Sergei Klimov

          Well, here how the normal business logic works in the games industry -

          - we’re a developer, we have this great game

          - OK, we’re a publisher, we can a) market b) distribute your game.

          - how about we split 50/50? we took the risk of development, put up out own hard money; you’ll take the risk of promoting the game – and will put up your own hard money.

          - sounds fair! let’s sign…

          ***AND SO THEY SIGN***

          - here’s our launch event, we’d like to invite you to a snow trip over Iceland

          - cool! you guys are doing a fantastic job, promoting out game. you spare no expense!

          - well, this is what we – publishers – do, we help you, developers

          ***EXPENSIVE EVENT IN ICELAND HAPPENS***

          - John, here’s a royalty report from our publisher….

          - …and?

          - they deducted $338.250 for something called “launch event in Iceland” from our revenue

          ***AAAAAAAAAAARGHHHHHHHHHHHH!!!!!***

          Does this clarify my position?

          I.e. if a publisher gets 50% of the revenue, they have zero grounds to then deduct their costs of launch events. Since developer already took the risk, and funded the game, and there’s no reason why a publisher, who books 1/2 of the profits, should not follow suit.

        • http://www.lar.net/ Swen Vincke

          It’s not the principle of the deduction of costs I have issues with, it’s the manner in which it’s usually done, and it’s the fact that in the large majority of the cases, the developer is the dupe.

          I have a lot to say about this one, so I’ll probably dedicate multiple entries to some of the more creative cost-deduction mechanics I’ve witnessed, but in general, this is the problem, taking the case of the PR event:

          a) At the end of the day, it’s the developer that pays for every single cost associated with the press event, and a lot of publishers will manage to take profit on this using some creative accounting (I’m trying to organize an interview with an auditor here, and you’ll then understand that a lot of them, including some of the big ones, are very good at creative accounting).

          b) Despite being the one paying, in general the developer will have no say whatsoever in how the money is spent. Since it’s the developer paying at the end of the day, the money is often spent liberally. I’ll give some particular obnoxious examples of this when I write about it.

  • Peter

    It’s interesting how you state your previous games aren’t the way you wanted them to be, considering how good they are. I wonder how different they would be if Larian had a BioWare/Bethesda size budget for their games.

    • http://www.lar.net/ Swen Vincke

      You have no idea ;) My personal rating of Divine Divinity was 70% and you don’t want to know what I rated Ego Draconis like. It’s probably because all I could see was all the stuff that  didn’t make it instead of the stuff that made it. 

       Despite that, I always got mad when somebody criticized any of my games. 

  • Arthurkelly

    Gee man, id just like ta play the damn thing!!! Been waitin almost forever here!! Im 56, dont have frikin forever!! :)

  • Illusive Man

    Interesting indeed. I now understand with Larian Studios is both developer and publisher of the Divinity games on GOG.com
    I thought it was a mistake but apparently it’s part of the Plan !

    When you say that marketing don’t like RPG, it depends of who makes it i think.
    Obsidian earned a strong ( good or bad ) reputation for making RPG sequels and Feargus Urquhart used to say publishers sometimes pitched them some weird franchise RPG-isation.

    But he also talked about the difficulty they have to fund their own new franchises and how publishers can vampirize them ( i.e. Alpha Protocol ), and that makes some echoes with your blog entries.

    • http://www.lar.net/ Swen Vincke

      We’ve actually been doing already a fair amount of co-publishing and even publishing in the past. If we hadn’t, we’d have ended up like these poor guys - http://www.gamesindustry.biz/articles/2012-01-10-monumental-games-goes-into-administration

      Sadly, there’s 100s of similar examples. Any developer who lets his fate be decided by a publisher is playing with fire.  

  • Illusive Man

    I assume “retail” is including 360′s DVD and PS3′s Blu-ray.
    Should consoles players worry about Dragon Commander becoming a PC-Only digital game ?

    • http://www.lar.net/ Swen Vincke

      Last time I checked there was this  arcane rule that you need to have at least three products coming out yearly before you reach publisher status. So the trick used to be that you worked with a publisher of record i.e. you say, let me use your name, you take a small% of the revenue, and all you need to do is handle the submission to the console manufacturer. It works to bypass a typical publisher construct, but it’s uncool. 

      As for what platforms Dragon Commander is coming out on, here’s what sure: It’s going to be available on PC, both digitally and in retail. It’s likely to come out on another platforms too, but nothing is confirmed there.

      • Illusive Man

        Ok, thanks. We ( consoles players) will still hope / keep faith then.

  • Bart Kerckx

    Seems Double Fine Studios (from Tim schafer and later Ron Gilbert) also is looking for a different way to get their game published. They are going to try it through public funding on kickstarter. And it seems they are very getting their required funding.
    http://www.kickstarter.com/projects/66710809/double-fine-adventure

    “ To finance the production, promotion, and distribution of these massive
    undertakings, companies like Double Fine have to rely on external
    sources like publishers, investment firms, or loans.  And while they
    fulfill an important role in the process, their involvement also comes
    with significant strings attached that can pull the game in the wrong
    directions or even cancel its production altogether.  Thankfully, viable
    alternatives have emerged and gained momentum in recent years. ”

    Think you should read their kickstarter page, its an interesting read and seems to be on the same level as you are saying here.

    • Lar

      The time for developers is now, and it’s in their best interest to grab the opportunities presented with both hands. If they don’t, they’ll soon find that it’ll be business as usual again, begging for money to make the games they want to make. And while some can manage that, most don’t.

  • Bart Kerckx

    oops, double post, I’m sorry. :(

  • Anonymous

    With thanks to Steam,Kickstarter etc that small and big studios can do more then the evil publishers. Also i played on of the first game Larian studios brought out in the 90′s. L.E.D Wars such a fantastic game. I was proud that yes you are our neighbours i am dutch ;) made a game that was very succefull in belgium and holland. But i hope to see more larian games on Steam with Steamworks because Valve is great and Gabe is just awesome who knows PC gaming.

  • Matticca

    Great article, really love how you handled the issue and went to publish your own games. Now, almost 2 years after writing this, you still think retail is important enough to put the needed effort into it?