Readers’ Choice: Big Publishers, Small Buyouts

“Your thoughts on when has a big developer/publisher buying up a small one been a good thing for the gamer in the medium/long term?” – Frawd. Generally, when a big publisher/developer buys out a small one instead of negotiates a publishing deal, it’s often because the small one has to be bought out. If there’s no buyout, the company is probably gone completely. So, I’d generally say in the medium and long term, things are better for the gamer because the small company gets to exist. Whether the bigger company is at fault when the small company’s game ends up below expectations is up for debate, but at least they get to put out any product at all.

Want me to comment on something here at Nerfbat? Ask/provoke me in the Readers’ Choice post.

5 Responses to "Readers’ Choice: Big Publishers, Small Buyouts"

  1. Generally, when a big publisher/developer buys out a small one instead of negotiates a publishing deal, it’s often because the small one has to be bought out. If there’s no buyout, the company is probably gone completely.

    Not necessarily. Many publishing agreements have a provision that allows the publisher to buy the developer for a bargain price should the project prove to be a runaway success. In Business & Legal Primer for Game Development, one chapter goes through a “typical” publishing agreement. On page 434 it talks about the “Option to Purchase”. The benefit for the publisher is that they don’t have to put any money down initially in case the project turns out to be a dud.

    So, this is a case where the developer may not need to be bailed out by an acquisition by a large publisher, but they get bought cheap at the beginning of their ascent into glory only to be cut up and parceled out piecemeal by a publisher.

  2. Right, but an agreement that has a buyout provision is only agreed to by the little guy when it’s necessary for them to agree to it to get a publishing deal. They’re at risk of closure without accepting the buyout provision because they can’t get a better publishing deal.

  3. It’s hard to get a “better publishing deal” when a buyout clause has become more and more common. The publisher only buys out a developer in this case if they have a significant success. Without the buyout at that point, the developer could have managed that success well and possibly gone on to become the next ID or Blizzard. Instead they become the chattel of the publisher and no longer have the freedom they did before. I don’t think that fits with your “good thing” above, because at that point the small company probably wasn’t in danger of going out of business.

  4. Yeah, it does suck. I wish small developers could do better in the market today and didn’t have to resort to accepting buyout clauses to continue development.

  5. Is not the symptom you both describe here a consequence of the rapid growth of the industry?

    Since we are growing fast there is insufficient time to consolidate reliable development teams which leaves the publishers needing to hedge their bets and exploit whatever few opportunities they can get from their portfolios. Practically this would over time increase the reliability of the publishers own organisations at the cost of high fail rate for indie developers.

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