360 degree deals may be commonplace in the music industry, says Owain Bennallack, but could they prove a valuable source of income for games studios?
The music industry is repositioning its many hungry mouths to generate income without relying on physical media sales. Will the games industry follow?
A 360-degree deal might sound like a skate move from the latest Tony Hawk title to a developer’s ears, but there’s more to it than meets the eye – or the ear. The term is increasingly common in the music industry, from EMI’s £80 million signing of a stake in Robbie Williams’ entire output in 2002 to Madonna’s recent $120 million deal with event and merchandise company Live Nation. It describes a commercial exploitation agreement covering every way of milking a property, from traditional CD publishing and ticket sales through to management, merchandising, and licensing income.
Such deals have been touted as the salvation of the music industry, where, according to a recent BBC report on the business’ future, global recorded music revenues have fallen from $25 billion in 1999 to just under $20 billion in 2006.
Games developers have signed what were effectively 360-degree deals for years without realising what they gave away – or accruing much benefit. And with British independent studios now reportedly already on the endangered species list it’s a bit late to suggest
retaining more ancillary rights to intellectual property.
Nevertheless, it’s interesting to consider parallels between games and other media with respect to alternate income sources.
As everyone knows, music was the first recorded media to fall to widespread piracy on the Internet; even iTunes is only a tiny upbeat note in the slow dying dirge of the death of the old business model.
Movies are succumbing to pirates, too, but are protected somewhat by the ‘event’ of seeing a movie at the cinema, as well as by the sheer amount of data that needs to be downloaded for high fidelity.
As for games, they’ve been vulnerable since the 8-bit home computer days. Indeed, pirates arguably killed platforms like the Amiga – not something IP infringement has yet managed to do to a major music label. What’s more, since the demise of the arcades, games boast no physical ‘event’ destinations where IP holders can recoup their investment safe from the pirate’s reach.
But there are other ways in which games can and have benefited from 360-degree deals, if only to a limited degree.
For instance, we’ve seen toes dipped into making game-based movies, though for every reasonable success like Angelina Jolie’s Tomb Raider there’s been half a dozen dismal outings. More successful have been efforts with merchandising, such as Nintendo’s success in putting a Pokémon on every other lunchbox. There have also been a few books and comics, and in Japan a roaring trade in Final Fantasy costumes.
On the whole though, games companies have faired badly when leveraging their IP to make money from other mediums. Indeed, when people say games are trapped in a narrow ghetto, it’s more true of the properties themselves than the ever-widening audience demographic. Going cross-media isn’t easy.
While licensing to Hollywood et al remains an elusive opportunity for games companies, they’ve their own tricks too – such as the endless new platforms with an appetite for old content, and which are often, at least to begin with, more pirate proof. Mobile phone games are an obvious example.
But it’s online that’s gaming’s richest non-traditional seam to mine – not only with piracy-thwarting monthly memberships, but increasingly in the future with micropayments and competitive battles that steal ideas from low stakes online poker games.
How many Halo deathmatchers would rather play with 50 cents each in the pot? Many, I’d wager. Brainstorm for 20 minutes and you’ll come up with a dozen ways for games companies to make money without selling games directly, despite our lacking pop’s poster boy crowd pullers.
It’s generally games publishers who’ll face these challenges and reap any rewards. And they know it; even die hard Japanese publishers like Capcom have been making noises about more creatively exploiting the cult IPs they create.
But such strategic direction isn’t only of academic interest to those nearly extinct indie game studios, where even earnings from traditional royalties are as rare as visits from the Queen. The pressing question for developers is how to create flexible game properties that can sweat it out across multiple revenue streams.
In the short term, it surely means more furry, fluffy and easily exploited critters getting made into game form on the whim of a producer chanting the mantra ‘merchandising’. Anything less would be a 180-degree U-turn.
Owain Bennallack is executive editor of Develop. He edited the magazine from its launch until its February 2006 issue. He has also worked at MCV and Edge, and has provided consultancy and evaluation services to several leading developers and publishers. He is also chairman of the Develop conference advisory board.