Video game publisher

A video game publisher is a company that publishes video games that they have either developed internally or have had developed by a video game developer.

As with book publishers or publishers of DVD movies, video game publishers are responsible for their product's manufacturing and marketing, including market research and all aspects of advertising. They usually finance the development, sometimes by paying a video game developer (the publisher calls this external development) and sometimes by paying an internal staff of developers called a studio. The large video game publishers also distribute the games they publish, while some smaller publishers instead hire distribution companies (or larger video game publishers) to distribute the games they publish. Other functions usually performed by the publisher include deciding on and paying for any license that the game may utilize; paying for localization; layout, printing, and possibly the writing of the user manual; and the creation of graphic design elements such as the box design. Large publishers may also attempt to boost efficiency across all internal and external development teams by providing services such as sound design and code packages for commonly needed functionality.

Because the publisher usually finances development, it usually tries to manage development risk with a staff of producers or project managers to monitor the progress of the developer, critique ongoing development, and assist as necessary. Most video games created by an external video game developer are paid for with periodic advances on royalties. These advances are paid when the developer reaches certain stages of development, called milestones.

Business risks

As businesses go, video game publishing is associated with high risk:

• The Christmas selling season accounts for about half of the industry's yearly sales of video and computer games, leading to a concentrated glut of high-quality competition every year in every game category, all in the fourth quarter of the year.

• Product slippage is very common due to the uncertain schedules of software development. Most publishers have suffered a "false launch", in which the development staff assures the company that game development will be completed by a certain date, and a marketing launch is planned around that date, including advertising commitments, and then after all the advertising is paid for, the development staff announces that the game will "slip", and will actually be ready several months later than originally intended. When the game finally appears, the effects among consumers of the marketing launch—excitement and "buzz" over the release of the game and an intent to purchase— have dissipated, and lackluster interest leads to weak sales. An example of this is the PSP version of Spider-Man 3. These problems are compounded if the game is supposed to ship for the Christmas selling season, but actually slips into the subsequent year. Some developers (notably id and Epic) have alleviated this problem by simply saying that a given game will be released "when it's done", only announcing a definite date once the game is released to manufacturing.

• There is a consensus in the industry that it has increasingly become more "hit driven" over the past decade. Consumers buy the game that's best-marketed and of the highest quality, therefore buying fewer other games in that genre. This has led to much larger game development budgets, as every game publisher tries to ensure that its game is #1 in its category.

• Games are becoming more expensive to produce. The "next generation" of consoles, particularly the PlayStation 3 and Xbox 360, have more advanced graphic ability than previous consoles, but taking advantage of that ability requires a larger team size than games on earlier, simpler consoles. In order to compete with the best games on these consoles, there are more characters to animate; all characters must be modeled with a higher level of detail; more textures must be created; the entire art pipeline must be made more complex to allow the creation of normal maps and more complex programming code is required to simulate physics in the game world, and to render everything as precisely and quickly as possible. On this generation of consoles, games commonly require budgets of US$15 million to $20 million. Activision's Spider-Man 3, for example, cost US$35 million to develop, not counting the cost of marketing and sales. Every game financed is, then, a large gamble, and pressure to succeed is high.

• Contrasting with the increased expense of "front-line" AAA console games is the casual game market, in which smaller, simpler games are published for PCs and as downloadable console games. Also, Nintendo's Wii console, though debuting in the same generation as the Playstation 3 and the Xbox 360, requires a smaller development budget, as innovation on the Wii is centered around the use of the Wii Remote and not around the graphics pipeline.

• When publishing for game consoles, game publishers take on the burden of a great deal of inventory risk. All significant console manufacturers since Nintendo with its NES (1985) have monopolized the manufacture of every game made for their console, and have required all publishers to pay a royalty for every game so manufactured. This royalty must be paid at the time of manufacturing, as opposed to royalty payments in almost all other industries, where royalties are paid upon actual sales of the product—and, importantly, are payable for games that did not sell to a consumer. So, if a game publisher orders one million copies of its game, but half of them do not sell, the publisher has already paid the full console manufacturer royalty on one million copies of the game, and has to absorb that cost.

Investor interest

Numerous video game publishers are traded publicly on stock markets. As a group, they have had mixed performance. At present, Electronic Arts is the only third-party publisher present in the S&P 500 diversified list of large U.S. corporations; in April 2010, it entered the Fortune 500 for the first time.

Hype over video game publisher stocks has been breathless at two points:

• In the early 1990s, the introduction of CD-ROM computer drives caused hype about a multimedia revolution that would bring interactive entertainment to the masses. Several Hollywood movie studios formed "interactive" divisions to profit in this allegedly booming new media. Most of these divisions later folded after expensively producing several games that were heavy in "full-motion video" content, but light in the quality of gameplay.

• In the United States, revenue from the sales of video and computer games exceeded revenue from film box-office receipts for the first time in the dot-com days of the late 1990s, when technology companies in general were surrounded by hype. The video game publishers did not, however, experience the same level of rise in stock prices that many dot-com companies saw. This was probably because video game publishing was seen as a more mature industry whose prospects were fairly well understood, as opposed to the typical exciting dot-com business model with unknown but possibly sky-high prospects. While many technology stocks were eventually destroyed in the dot-com crash in the early 2000's, the stock prices of the video game publishers recovered as a group; several of the larger publishers such as EA and Take2 achieved historical highs in the mid-2000's.

Selected video game publishers

Below are the top 20 video game publishers, ranked by Game Developer in October 2009, in order of overall score in six factors: annual turnover, number of releases, average review score, quality of producers, reliability of milestone payments and the quality of staff pay and perks. Note that this is not a ranking by revenue, but of the quality of experience of working with the publishers according to staff, and some video game development companies. Atari and Atlus have returned to the list, bumping Codemasters and NCSoft off the list. Eidos Interactive which is now only a label after being acquired by Square Enix is also no longer on the list. Bankrupt company Midway Games was eliminated from the list and the company that bought most of its assets, Warner Bros. Interactive is on the list for the first time. Bethesda Softworks and MTV Games are also brand new to the list.

2009 Position	Name of Publisher	2008 Position
1	Nintendo	1
2	Electronic Arts	2
3	Activision Blizzard	3
4	Ubisoft	4
5	Take-Two Interactive	6
6	Sony Computer Entertainment	5
7	Bethesda Softworks	999n/a (new entry)
8	THQ	8
9	Square Enix	10
10	Microsoft	9
11	Konami	11
12	Sega	7
13	Capcom	14
14	MTV Games	999n/a (new entry)
15	Namco Bandai	13
16	Warner Bros. Interactive	999n/a (new entry)
17	Disney Interactive	16
18	Atari	999n/a (new entry)
19	Atlus	999n/a (new entry)
20	LucasArts	17

See also

• Console manufacturer
• Independent game development
• List of video game publishers