In our last post, we outlined the two types of deals generally available for pre-launch games: equity financing and publisher deals. In this post, we talk about two additional deal types that become available once your game is complete and ready for launch.
A distribution deal is when a publisher takes a game that is complete, (or very close) and provides marketing and distribution support. They will provide all of the post-launch services from a traditional publishing deal, but didn’t make a commitment on the funding required to build the game. This allows them to see a game that’s fully built and assess it’s chances for success.
Distribution deals usually revolve around the marketing commitment that the publisher will provide. While PR and advice are important, it’s often impossible to distinguish publisher’s quality in these areas before launch. In our experience, the critical factors in a distribution deal come down to:
- App store relationships: In the US, this is a question of whether the game will be featured by Apple or Google, in which relationships play a big role. Internationally, payment relationships with the various app stores becomes critical.
- Owned-distribution: Some publishers have unique distribution that they can offer. Tango, for example, touts its ability to distribute games to users of the Tango messenger app. For the right type of app, this can be a major distribution plus, eliminating the marketing costs in #3 that play a huge role in today’s gaming environment.
- Marketing commitment: Almost all of the top grossing games are supported by massive marketing budgets, so the publisher’s marketing commitment will play a critical role in the success of your game. Publishers will typically evaluate whether the expected lifetime value of the game exceeds the cost of acquiring a new player through marketing. This is one reason that Scouting Reports are helpful to both developers and publishers, as they can provide insight into whether the game can be marketed successfully.
Marking financing deals, or royalty-based financing deals, are designed for post-launch games that are looking to grow quickly through paid marketing. This growth tends to be expensive, because the cost to acquire a new player is high, and getting near the top of the top grossing games chart requires millions of players. Marketing financing provides funding that is designed to help the company fund this growth without diluting themselves via equity or committing to a publishing deal.
Marketing financing deals typically see the funding partner paying for acquisition marketing. They are then entitled to all revenue until they have been paid back for their marketing outlay. After that has been recouped, the parties split revenue. Typically developers receive a higher percentage of the revenue than in a publishing deal, and the developer remains responsible for marketing, launch, customer service, et al.
This can be highly attractive growth financing, but is only available to launched games that can profitably acquire new users. Scouting Reports can be very helpful in determining whether your game qualifies and we can connect you to appropriate partners.