38 Studios, RIP.

[triggercut]

Who would sign a contract where you have to repay the advance? The whole point of an advance is you get to keep it regardless of sales. Well, apparently not in the game industry.

Or in any industry. Not sure who gave you your notion of what an advance is, but you misunderstood the meaning of the term.

"Advance" is short for "advance on revenues or profits expected to be earned." In both the publishing and recording industry, it is money that "comes off the top" to the publisher/record company on sales; in other words, the artist/writer/creator gets no money in royalties or per sales unit until the parent company/publisher/record company recovers the advance. After the advance is recouped, then the artist/writer begins receiving their share of the royalty agreement. If it is not recouped, then the publisher/record company eats the loss, but usually then has a contractual escape clause to terminate the contract and drop the writer/recording artist.

[BleedTheFreak]

You're multiplying $50 x 1.3m, right? That's not how game finances work.

The game /sold/ at an average of $50. That means EA likely gets $35-40 per copy sold, at best.

From that $40, around $15 goes to the console manufacturer right away. So, $25.

$25 * 1.3m is $32.5 million to cover production costs, development costs & marketing. EA is hardly ripping off the developer. EA fronted the development cost so a contract where the developer has to 'earn out' royalties is completely normal business practice, particularly when the developer needs the publisher more than the other way around.

Wasn't the MSRP on all platforms $60 for this one?

[Miramon]

That's the standard in publishing. It's an advance on earnings. If your book doesn't sell enough to cover the advance, the publisher expects it back.

I don't believe that's how it works in publishing. You keep the advance no matter what.

[dogbert]

Wasn't the MSRP on all platforms $60 for this one?

EA doesn't get $60 per copy.

[Miramon]

Or in any industry. Not sure who gave you your notion of what an advance is, but you misunderstood the meaning of the term.

"Advance" is short for "advance on revenues or profits expected to be earned." In both the publishing and recording industry, it is money that "comes off the top" to the publisher/record company on sales; in other words, the artist/writer/creator gets no money in royalties or per sales unit until the parent company/publisher/record company recovers the advance. After the advance is recouped, then the artist/writer begins receiving their share of the royalty agreement. If it is not recouped, then the publisher/record company eats the loss, but usually then has a contractual escape clause to terminate the contract and drop the writer/recording artist.

Indeed, that's what I understand an advance to be.

[Alan Dunkin]

This is not how publishing works unless there's a specific contract to the contrary. An advance is advance payment for work that's yet to be delivered, or structured to advance portions of payment based on completion and other milestones (much like game development) such as editorial, publish, etc.

Because books usually take a long time to go from start-of-contract to publish, advances are generally barely enough to pay for cost of living unless you're a top of the line or in-demand author (or you're doing a ton of contracts, or a long-term multi-book contract). Therefore, advances take care of the front end of work while royalties pay for everything on the back end. To take royalties off the top of the advance would be ludicrous in most cases. Authors would never make any money--you might as well not have royalties at all.

--- Alan

[BleedTheFreak]

EA doesn't get $60 per copy.

No shit. I'm saying your math is flawed from the start because your speculation began with a $50 price per unit.

[Locker K]

No shit. I'm saying your math is flawed from the start because your speculation began with a $50 price per unit.

Except the article quoted above said that each copy sold for an average of $50, which given sales, preorder promotions, etc. is very likely.

[Dave Weinstein]

To take royalties off the top of the advance would be ludicrous in most cases. Authors would never make any money--you might as well not have royalties at all.

For most books, the advance is the only payment, they never earn out.

And yes, in book publishing an advance is "an advance against royalties" (generally non-refundable assuming the writer actually turned in the book).

[triggercut]

This is not how publishing works unless there's a specific contract to the contrary. An advance is advance payment for work that's yet to be delivered, or structured to advance portions of payment based on completion and other milestones (much like game development) such as editorial, publish, etc.

Because books usually take a long time to go from start-of-contract to publish, advances are generally barely enough to pay for cost of living unless you're a top of the line or in-demand author (or you're doing a ton of contracts, or a long-term multi-book contract). Therefore, advances take care of the front end of work while royalties pay for everything on the back end. To take royalties off the top of the advance would be ludicrous in most cases. Authors would never make any money--you might as well not have royalties at all.

--- Alan

That's incorrect. An author does not earn royalties until the amount of the advance has been recouped.

That's also why unless you're a top-earning author you also have another job. EDIT: also why advances are not usually paid to previously-unpublished authors, absent some other form of famous-ness or expertise.

EDIT II: My friend Kristin--who has been in the publishing biz since forever--tells me that certain authors and their contracts also provide for "up front" money, which is not an advance. Up front money just means "You're an author in demand who moves a lot of units (or who we expect to move a lot of units), so here's a stack of cash to let us publish your next 3 books instead of the other publishers."

[Cold Blooded]

Also...

The company's Baltimore subsidiary, formerly Big Huge Games, was working on other projects in addition to "Reckoning," including a handheld game based on its previous release "Rise of Nations" that was about 90% finished at the time of the bankruptcy filing, Thomas said.

Thought this incident couldn't get any more tragic or infuriating, but here we are.

If true, loss of a portable Rise of Nations is a real heartbreaker.

Hoping against hope someone, somehow gets some version of the game on Kickstarter, even if game has to be renamed/rebranded to avoid intellectual property/copyright restrictions.

[Alan Dunkin]

That's incorrect. An author does not earn royalties until the amount of the advance has been recouped.

That's also why unless you're a top-earning author you also have another job. EDIT: also why advances are not usually paid to previously-unpublished authors, absent some other form of famous-ness or expertise.

EDIT II: My friend Kristin--who has been in the publishing biz since forever--tells me that certain authors and their contracts also provide for "up front" money, which is not an advance. Up front money just means "You're an author in demand who moves a lot of units (or who we expect to move a lot of units), so here's a stack of cash to let us publish your next 3 books instead of the other publishers."

Actually yeah I think you're right. After I read this, I was trying to think of the different contract situations I've been in and think it's probably a lot more common (and standard) than I'm used to.

But yeah, I've done book contracts and they've never included royalty clauses against advance.

--- Alan

[BleedTheFreak]

Except the article quoted above said that each copy sold for an average of $50, which given sales, preorder promotions, etc. is very likely.

Then I suggest the article is full of shit - it's $60 right now in Steam, and I highly doubt the price went up, or that the PC version is the more expensive version. /shrug

[triggercut]

Then I suggest the article is full of shit - it's $60 right now in Steam, and I highly doubt the price went up, or that the PC version is the more expensive version. /shrug

$60 is the US price right now. It has been on sale a couple of times on Steam, and I believe that--especially in Eastern Europe--the prices are in the $40-50 range for the game.

Also realize that the Steam version is wholly-distributed by 38 Studios and so now is unlikely to go on sale until someone besides a bankruptcy trustee owns it. The other online version available via EA and Origin is EA's baby, and they've put it on sale multiple times as well.

If you look at "average price paid per unit shipped" I think $50 is right in the ballpark. My own estimate was about $47-48 per unit.

[BleedTheFreak]

$60 is the US price right now. It has been on sale a couple of times on Steam, and I believe that--especially in Eastern Europe--the prices are in the $40-50 range for the game.

Also realize that the Steam version is wholly-distributed by 38 Studios and so now is unlikely to go on sale until someone besides a bankruptcy trustee owns it. The other online version available via EA and Origin is EA's baby, and they've put it on sale multiple times as well.

If you look at "average price paid per unit shipped" I think $50 is right in the ballpark. My own estimate was about $47-48 per unit.

That makes sense, though I was hoping it would eventually go on sale, as I would like to play it, but not $60 like to play it. Ah well.

[Omniscia]

For what it's worth, Jim Hightower did a commentary on this on June 28th.

Here's a taste:

In sports, a "gamer" is someone who's always eager to play. However, in such pursuits as business and politics, a "gamer" is one who games the system.

So, meet a real gamer in both senses of the word: Curt Schilling. A superb pitcher and three time World Series champion for three different teams, he's rightly famous for his competitiveness, even gutting it up to pitch while hurt. But now he's also infamous as a gamer of the corporate welfare system, causing great pain to the taxpayers of Rhode Island.

[dogbert]

Then I suggest the article is full of shit - it's $60 right now in Steam, and I highly doubt the price went up, or that the PC version is the more expensive version. /shrug

The console versions have had a price drop to $40 at US retail.

Regardless, a $60 retail console game gives EA around $40. I can't see how you can argue against that. It may be a few dollars less, it might be a few dollars more (though I doubt that). $40 is a good baseline figure to work from for how much income EA has made on this game (and other console games as it happens).

[BleedTheFreak]

The console versions have had a price drop to $40 at US retail.

Regardless, a $60 retail console game gives EA around $40. I can't see how you can argue against that.

I'm not, and I never was?

[triggercut]

For what it's worth, Jim Hightower did a commentary on this on June 28th.

Here's a taste:

Is the whole thing as full of cliches and well-trod-upon ground as the part you pasted?

[Alan Dunkin]

Kinda but it's just mostly useless vitriol with a thin veneer of hate against corporate welfare.

--- Alan

[Omniscia]

I have no particular wish to see Jim Hightower dead, but I still find it unjustly cruel that Molly Ivins went first.

[Telefrog]

Boston Magazine: End Game.

Asked about 38 Studios’ failure, Schilling says his management team suffered from “significant dysfunction” and that his video-game developers worked too slowly. Those problems, he allows, are his fault. “As the chairman and founder,” he says, “who’s above me?”

Schilling put his wife, Shonda, on the board of directors. Shonda’s father received a job in IT (by all accounts, he performed admirably), and her mother was given the title “philanthropy and charity manager.” Meanwhile, Shonda’s uncle, William Thomas, became COO. Though a seasoned businessman, Thomas had no experience with video games, much less MMOs. Schilling took to calling him “Uncle Bill” around the office, and even in meetings with outsiders. According to the case study, Thomas told Schilling it was making them look bad and to stop. The nickname caught on with the staff, anyway.

Most troublesome of all was the unique profit-sharing plan Schilling devised for his first employees. Wasserman, Bussgang, and Gordon write that, since Schilling was bank-rolling the company by himself, he was hesitant to give up equity in it. So instead of luring early prospective hires with stock options, he promised to share all profits 50-50 with them. Upon arriving as CEO, Close recognized that “investors’ heads would explode” when they saw the model, since they’d be bearing all the risk but reaping only half the reward. Close eventually convinced Schilling to scrap the policy and replace it with stock options.

So as the company moved south in April 2011, it embarked on a hiring binge. In its midst, Schilling seemed to be handing out important titles to anybody who asked nicely for one. “It became a joke,” one employee says. “Oh, you are a VP of lunch? Oh yeah, I’m a VP of doughnuts.” Infighting inevitably resulted, with execs often giving conflicting directives to staffers. “They didn’t work well together,” Schilling says of his bloated management team. “I was amazed at the turf-building and protecting that went on.”

Deadlines were frequently missed, something for which staffers say Schilling rarely held anyone accountable. The ex-pitcher had a bigger concern. “The game wasn’t fun,” he says, unprompted, beside the softball field. “It was my biggest gripe for probably the past eight to 12 months.” Visually, Copernicus was stunning, but the actual things you could do in the game weren’t engaging enough. The combat aspects especially lagged. Schilling — who never wavered in his belief that the game would be great — says the MMO was improving, but after six years, it still wasn’t there. When Schilling walked around during lunch hour, he says, nobody was playing Copernicus’s internal demos. They were all on some other game.

A whole lot more at the link. Great article.

[triggercut]

Wow. Damning stuff.

Thanks for sharing that.

[Telefrog]

I know people get invested in their work and their employer, but I found this ridiculous:

Meanwhile, as the media swarmed outside the 38 Studios office, employees inside began to realize that the company could be done for. Wanting the world to see their work, a few grabbed an old Copernicus trailer and began to brush it up. As they worked, colleagues crammed into a small set of cubicles, packing in 50 to 60 deep. When the video was ready, someone hit play and “Project Copernicus” came up in gold lettering on the screen, followed by a shot of a foreign-looking world. With haunting music in the background, the camera zoomed in, whooshing through a series of distinct, beautifully rendered landscapes — a forest of trees decorated with ornate hanging lamps; a castle with a base of finely detailed sculptures; a palace topped with golden griffin statues. When the two-minute trailer ended, people lost it. “We’re all leaning on each other,” says Jesse Smith, the designer. “A lot of us were crying, a lot of us were happy. And after it happened, there was just an uproar of applause.”

The only way I'd have been pleased with that trailer is if I was going to use it on my resume.

[Alan Dunkin]

I think a lot of us thought that was the point (when it happened).

--- Alan

[tempus67]

Wow. Damning stuff.

Thanks for sharing that.

Yeah, thanks for sharing this. Really interesting. Surprised he was as candid as he was - it seems like he's offered the lawyers fodder for the lawsuits in a few of his remarks. Maybe he figures he's screwed anyway, or maybe it's just a reflection of his lack of experience in this realm.

[mostlytigerproof]

I'm sick and tired of people belittling the VP of Doughnuts role. A job so demanding, so crucial and yet so unappreciated.

[Mark Asher]

I know management bungled things but I'm not even sure if management had been better they would have had enough money to finish the game. Schilling wanted something that would be best of breed. That wasn't going to happen with the money he had.

Astute management would have said we can't do this. We need to aim lower. Thing is the MMO landscape changed dramatically between when 38 started and when they failed. If EA had had a crystal ball they probably wouldn't have pumped the money into SWTOR that they did.

[triggercut]

I think we can now fully retire the "Governor Chaffee killed this studio" line of reasoning as well.

[Ed Solomon]

I'm sick and tired of people belittling the VP of Doughnuts role. A job so demanding, so crucial and yet so unappreciated.

We have got to get you hooked up with Notatiger. I think you two kids would be great together.