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February
2001
In
this issue Jay Powell of Octagon Entertainment answers
questions on funding and approaching companies. Take it
away, Jay...
 Q:
Hello. You
guys have a great site. I have just recently
gotten into the development biz and was wondering if you
guy's have any resource information on funding? My
company has a completed design document with a demo
trailer (not running on hardware but to platform specs);
and all the legal issues have been addressed. Is
there a database of venture capitalists out there?
Are there publishing houses that will fund startup
studios? Will the "big guns" such as Nintendo,
Sony, etc. help startups with funding and staff if a
sound game idea and investment opportunity is presented?
Thanks for listening and great articles.
JR
A: Venture Capital is certainly one way to go. The European
VC market is much more responsive to development studios than the US
market though. Here are some good starting points though.
You can order a book from Securities
Data Publishing entitled Pratt's
Guide to Venture Capital Sources.
You can also find information on the web. Here are a few resources
along that route as well:
http://www.internetvcwatch.com/
http://www.vfinance.com/
http://www.v-capital.com/vcdirectory.htm
http://www.nfsn.com/VC.htm
http://www.findingmoney.com/dirov.html
Publishers and the console manufacturers can be a tough sell. The recent
problems with Sony's install base and the impending release of the X-Box
have caused a lot of uncertainty. The publishing community sank a lot of
time and money into games for a console that no one can find. To secure
a publishing deal you really need to have a playable demo of the game.
It is easier to do this if your team has a great track record, and past
experience with that publisher is even better.
Make certain you hit all of your options and don't limit yourself to
publishers in the US. There are many solid publishers in Europe as well.
With a great initial presentation you can peak publishers' interest and
they may finance the demo themselves in exchange for the first shot at
signing it. Phase funding is great as you have the security of an
interested publisher, but even if they back out, you now have a demo to
sell to others.
Good luck to you,
Jay
Q:
Hello, Good work on the web-site, great research information.
I was wondering if you have any
editorials, tips or suggestions for approaching game companies. How
do you approach a company once you have a game demo running? What are
the "dos and don'ts" regarding presentations? Where can one get specific
research information regarding costs, royalties and profits that a game
could produce. In other words, understanding that there are many ways to
make deals, how could a company go by predicting sales returns in order
to budget a production? Or another way to word it, if a game sells for
(approx) $45, how does this money get distributed? What are possible, or
most likely scenarios, regarding how much retailers, publishers, license
fee and developers gain or lose.
I understand that
business wears many masks. Any light shared on this subject would be of
help. Thank you.
VM
A: Approaching companies will be one of the time
consuming tasks in the entire sales process. To begin
with, identify the companies who you would like to work
with and have experience and reputation you desire.
Contact those companies and locate the person
responsible for acquisitions. Start by sending this
person a package containing a demo of the game and all
necessary documentation. Once they've received the
title, simply follow up with them and see if they are
interested.
The package is your first presentation. Make sure that
you have everything the company will need in order to
review your game thoroughly. You cannot assume that they
will know anything about your game or how to play it.
Also, make sure that you specifically outline the unique
selling points of your game. This package must prove to
them why they should acquire the rights to your game
over others that are similar?
The harsh reality of the gaming industry is that only a
tiny percentage of the games that are released turn a
profit, but you are correct in your statement that there
are many ways to do deals. As a general rule, make
sure that all of your development costs are covered by
the advance from the publisher. Royalties are great, but
do not count on them. Breakdowns will differ from
country to country, but in the US you can see a royalty
rate of anywhere from $3 to $6 per box, although you are
more likely to be offered the lower end of this scale.
However, it is rarely done in this manner, and it is
usually stated as a percentage of net receipts. Your net
receipts will vary from contract to contract and you may
want to have a lawyer or agent take a look at it.
Pitching products and negotiating the deal can be
handled in many, many different ways. I hope this can
get you started in the right direction.
Best,
Jay
You
can learn more about Jay and Octagon Entertainment at their website www.octagon1.com
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