1. Online vs. Retail Distribution

2. How Developers Get Paid: The Retail Market for Games  Laramée distinguishes between cost-based deals and royalty-based partnership.

3. How Developers Get Paid: The Retail Market for Games  Cost-based deals:  The publisher calls for proposals. E.g the publisher wants a fighting game for PS3 by Q3.  The developer evaluates the cost of the order.  The publisher and developer agrees on a profit margin for the developer.  The developer must create the game for the fixed amount that was agreed upon.

4. How Developers Get Paid: The Retail Market for Games  Royalty model:  The publisher pays a fixed amount in advance.  The publisher is paid back the advance from the initial income from the sales.  If the sales have earned back the advance the developer will begin earning money from royalties.

5. How Developers Get Paid: The Retail Market for Games  Cost-based deals  Is safe for the developer. Risk is on the publisher.  If the game turns out to be a hit only the publisher will benefit.  Royalty model  If the advance does not cover the cost of production the game must be a hit for the developer to earn money.

6. How Developers Get Paid: The Retail Market for Games  Royalty in percentage  If the publisher lowers the price in order to increase sales the game must sell much more for the developer to start receiving money.  Fixed royalty  As the publisher’s price falls the fixed royalty will eat up an increasing share of the revenue. This will lead the publisher to stop marketing the game.

7. Online Business Models: Using the Net for Profit  The direct-to-customer business model bypasses intermediaries and ideally offers the consumers a better value.  In theory the online distribution is good for both developer and customer.

8. Online Business Models: Using the Net for Profit  Online distribution enables the developer to:  Bypass the publisher, distributor and retailer.  Have more creative control over the product.  Make money of smaller and cheaper games.  Increase the availability of the game.

9. Online Business Models: Using the Net for Profit  Types of online distribution:  Direct-to-customer. The developer sells through its own site and pays only the cut to the transaction company.  Online intermediary model. The developer uses a third party site to host and manage distribution of the game.  Combined models. E.g. Steam or Xbox Live.