Note: This is the second post in a series. If you’re new, start with the intro post.
Error No.2: Bet everything on licensing
Finally, in 2005, Telltale announced the development of a series of graphic adventure games based on Jeff Smith’s comic Bone. They would have serialized and released each episode at a certain distance from each other. The first episode, Bone: Out From Boneville, came out in September 2005, followed by Bone: The Great Cow Race in April 2006.
The idea of episodes is good because it had the scope to create over time a group of players very fond and devoted to the game. Therefore, inclined to be brand-loyal in their purchase of subsequent episodes.
Unfortunately, the choice of publishing games under licence is not.
The subject of licencing is quite complicated, and we would need an entire book to explain it. However, I’ll try to simplify things to make more understandable why publishing games under licence can work in the short term, but not in the long run.
Briefly, licencing works like this:
The party ceding the licence (the licensor) and the party that manages it (licensee) agree that profits are paid via a fee, which could be either fixed or variable.
This way, the licensor has the right to use and profit from the licenced product (1).
Why is developing games under licence a mistake? For three reasons.
Reason No.1: You lose control
The first rule of business must be “If we don’t make it, we don’t sell it.”
When you buy a licence from another brand, you are selling and advertising a brand which is not yours. Therefore, the owner of the brand can decide to not renew the licence, or to sever the contract because you have violated one or more of the clauses or sub-clauses.
In the case of Bone and Telltale, Jeff Smith could have decided that he was no longer satisfied with royalties and produce the graphic adventures based on Bone by himself (or use another software house which charges less).
Furthermore, the licensor will do everything not to run into problems of image that might ruin their brand. Therefore, he could put their trotters into all stylistic and game-play choices made during the development of the game.
Let me give you a concrete example.
In January 2019 Kingdom Hearts III came out, developed by Disney and Square Enix. Disney isn’t exactly famous for its “laissez-faire” approach towards its IP portfolio.
For instance, when Square Enix began negotiations with Disney for the use of the Pixar brands (Toy Story, Monster Inc., etc.) it took many years to have consent to use the story and the characters (2).
Moreover, when Square Enix began sending models and game scenes for the world of Monster Inc. to Disney, the reply was “Oh, to be honest, there are no Monsters with that colour”, and “our Monsters would never use that type of language”.
In the end, the development of the game took more than six years.
Six years is a very long period of time in development terms. Only a multinational has the luxury of staying put for this amount of time while the world around them continues to change rapidly.
Is buying a licence always wrong? It depends.
It could be a good tactic, but only if developed within a broader strategy.
For example, you can use external brands as bait to hook new players onto your own games.
If Telltale had begun developing graphic adventure games creating their own brands, over the long-term they could have paired the sales of licenced games with some of their own games.
Perhaps with offers like: “Buy the latest episode of Monkey Island and get the first episode of our new graphic adventure game Johnny Toothpick FREE!” [or super discounted].
This way Telltale could have started to make players become attached to their own brand, and over time could have become ever less reliant on other brands.
In summary, developing games under licence can help you, but it is not a good idea if you base your business only on licencing.
If you can, create new brands. This is what Ubisoft did with Prince of Persia. Assassin’s Creed is the direct evolution of Prince of Persia. Ubisoft took the brand and adapted it to new technological and cultural conditions. Therefore they created a completely new brand.
Reason No.2: You help strengthen the brand of the licensor, but not your own
Let’s go back to the example of Kingdom Heart III.
Do you know what Kingdom Heart III is for Disney? It is an enormous advertising campaign for its IPs.
It acts only to reinforce Disney’s brands: Winnie the Pooh, Big Hero 6, Pirates of the Caribbean, Frozen, Toy Story, Monster Inc. and Corona.
They are all Disney brands.
In a few years, players will not remember Square Enix, but they will remember Disney. They will remember Mickey Mouse, Goofy, Donald Duck and all the other Disney brands.
Kingdom Heart III is a masterful advertisement for Disney
When you develop a video game, always ask yourself: “Will people buy my game because I made it, or because they like the brand? Is the brand mine or someone else’s?”
Buying a video game is always an emotive choice. Therefore only with difficulty do players become affectionate towards the company that develops it.
If Jeff Smith had decided to publish the graphic adventures of Bone using another software house, the players would have continued to buy his games, and Telltale would have lost all of their turnover for that product in a stroke, without being able to do anything.
In your opinion, who had more to gain with the graphic adventure Bone? Telltale, or Cartoon Books, Jeff Smith’s company?
Who makes more out of the release of Kingdom Hearts III? Disney, who gets brand fortification, or Square Enix who has developed the game?
Reason No.3: Your turnover will suffer
Your turnover will suffer and your profits will feel the pinch.
When you use a license, you have to pay a fee, which can be fixed or variable. A fixed fee implies that you must pay a certain amount of money to the licensor, even if the game sucks and nobody buys it.
The use of a licence has the advantage that you are implicitly buying a certain number of players affectionate towards the brand, and that you can have a minimum number of sales.
But sales are not guaranteed, and there are too many external variables that can be influential.
If the licence includes a fixed fee which must be paid in advance (in full or in part), your cash flow will start to feel it immediately.
Royalty payments should be the preferred choice.
If you don’t sell, you don’t pay royalties. But even in this case, you are adding a cost to your game which could easily be avoided by setting up your own brand.
Production costs (wages, premises rental, etc.), publishers’ and distributors’ percentages already erode profits. Therefore adding extra costs that can be avoided doesn’t have any sense.
Consider also that in an industry with such strong competition such as the video game one, neither are you free to decide your pricing in order to influence your profit margin. Indeed, if you choose to lower your price, having royalties to pay does not permit you to lower it that much, otherwise, you risk to be operating at a loss.
A Price War is, in most cases, a mistake and should not be undertaken. It can be avoided by developing correct positioning, so as to have complete control over your brand.
Error No.3: No proprietary brand
In 2005 the future was glowing for Telltale.
In November Ubisoft announced they were going to develop a video game with Telltale based on the TV series CSI: Crime Scene Investigation.
LucasArts decided not to renew their rights and licence for Sam & Max, so the creator, Steve Purcell, gave the licence for the new games to Telltale.
Sam & Max: Save The World was announced in the same year, followed by another five episodes released monthly. The series received positive reviews from gamers and a number of editor’s choice awards. Sam & Max was the first Telltale success, and they had demonstrated to the world that they were able to release new episodes on a monthly basis.
From 2006 to 2011 Telltale published about 55 new episodes based on 8 licences: CSI, Sam & Max, Homestar Runner, Wallace & Gromit, Monkey Island, Back To The Future, Jurassic Park and Law and Order.
No proprietary brand.
All of the Telltale games released were based exclusively on licences. As you have no doubt realised, this choice will come to undermine the company in the long-term.
The decision not to give importance to the creation of new brands is the main reason for the failure of Telltale. Brands are assets, while licences are liabilities. Licences have an initial cost and in the long-term erode profit margins.
Telltale opted for this choice because they only looked at the short-term.
Leaning on an already-existing franchise allows you to speed up the production of new content and to take advantage of the popularity of a brand. It looks like easy money.
The creation of a new company must instead always be projected over the longer-term. It takes time. The hurry that Telltale had to grow turned out to be a two-sided sword. The acquisition of licences gave them easy money but required hiring quickly new employees for the unceasing production of new content.
Error No.4: Categories don’t converge, they diverge
In February 2015 Telltale finally announced the development of their own brand: Super Show.
During an interview on Entertainment Weekly, Kevin Bruner said:
“A Super Show episode combines one part of interactive playable content with one part of scripted television style content. Both pieces, when combined together, are what make an actual Super Show episode. As we’ve been developing the series, we’re using both mediums in concert to deliver our story. Developing both aspects simultaneously is key to utilizing this new medium. Both parts are first-class citizens during the writing and design process. It’s not an interactive series with a show or a TV show with a game, but a story integrated in a way that only Telltale can do. For us, it’s a very natural evolution of the interactive storytelling expertise we’ve pioneered.
That said, television and game content are actually produced in different ways and on different schedules. Live action scripted content is shot and produced quickly on a tight schedule, while games require more iteration and flexibility. Integrating these two radically different production styles is a huge challenge, but we’ve been producing games episodically for over 10 years and have brought a lot of television production techniques to our game studio.
Super Show episodes will also contain a lot of content, much more than a standard hour-long television episode. With this in mind, the release cadence will be more predictable like TV scheduling, but still a further apart like our games [are released] to allow newer audiences time to consume and discuss both aspects of the show across their game consoles, tablets, mobile phones and computers…Our objective is to create products that have a legitimate chance of winning both a Golden Globe and a Game of the Year. This means both aspects of the production must be first class work.”
I agree with the idea of creating a proprietor brand, but what Telltale wants to do with Super Show is unnatural.
Categories diverge, they don’t converge
They diverge to create new sub-categories
The trap of convergence is the one in which companies fall thinking that a TV with a built-in Blu-ray player (once we would have said VCR) is a good thing. Or that a printer with a built-in scanner is a good thing and so on…
Television has not merged with another medium. It diverged. Once we had television and today we have normal TV, satellite TV, digital terrestrial TV, Pay per view TV, etc.
The same goes for the video game industry. Today there is a massive explosion of genres.
Take for example the category of mobile casual games.
Five major categories divide the Casual one: Puzzle Games, Arcade Games, Simulation Games, Lifestyle games and Location Base Games.
- Puzzle Games can be divided into Match & Blast, Action, Word, Trivia, Board and other subgenres that are not yet well defined.
- Customization, Music and Band and Interactive Stories are subcategories of Lifestyle Games,
- Simulation Games can be Adventure, Time Management, Breeding, SandBox, Tycoon and Crafting.
- Arcade Games are divided into Hyper Casual, Shoot ’em Up, Platform, Idler and other subgenres not yet well defined.
- Finally, the Location Base category is recent and therefore has not yet branched out.
The same happens in all other categories, for example, Hard Core games on console or PC.
There are countless examples of convergence attempts throughout history and they never really worked. Categories, like branches of a family tree, tend to diverge, not converge.
If Telltale’s intention was to create a successful brand, they first needed to understand the concept of divergence.
Charles Darwin discovered that the environment creates conditions which cause divergence of species (3). In business, the development of new technology, along with cultural change, create the conditions that generate the divergence of categories.
What Telltale wanted to do instead, was to blend the “TV Series” category with the “Narrative Video games” category. Which is actually quite different from creating a sub-category called “Interactive TV Series”, since Kevin Bruner explicitly said in an interview that he wanted to blend the two worlds. Also, this so-called new sub-category “Interactive TV series” is purely a mental elucubration, that is, it’s not going anywhere.
I’ll say it again. The conditions that generate divergence of categories are two:
- The development of a new technology,
- Changes on a cultural level.
The new category “Interactive TV Series” satisfies the first point, but not the second. It’s true that with current technology the spectator can choose the way to continue the series in real-time. However, TV series (and TV in general) have a “passive” mode of functioning, whereas video games have an “active” one.
Most of the time people watch TV usually when they are tired and want to “shut down the brain”. They play video games when they are active and want to have fun.
A similar experiment had already been carried out last century, and it failed. Do you remember gamebooks? They were books in which the reader could choose the continuation of the story by choosing a different page from the book.
What are gamebooks if not a blend of two distinctive categories, “book” and “role-play” games? The golden age of gamebooks was around the Seventies-Eighties, mainly in English-speaking countries. Gamebooks were simply a trend that gradually faded. Thanks also to the introduction of new technologies.
In his interviews, Kevin Bruner adds:
“Interactivity allows us to move past the “one size fits all” stories you’re used to seeing and empowers great storytellers to tailor the story to each person. Imagine your favorite author or movie director writing a book or making a movie just for you. That’s ultimately how we’re using new technologies to empower storytellers, just like sound did for film or cable networks did for television. In the right hands, interactivity is as significant as any of those tools. It’s an amazing time to tell stories in this new frontier.”
Here we find another cultural aspect that doesn’t work.
People like to share experiences and talk about things they have in common.
If each person had their own personalised version of a story (for example, in one story the main character dies and in another’s doesn’t), at the end they would not have much to talk about it. Because they are two different experiences.
When people watch a movie, they tend to discuss it (“Did you like the ending?”, “I hated the main character.”, “I would have preferred it ended differently.”, “I’d chose this because of that”, and so on).
One story generates communication, generates discussion. If the stories are different, exchange is less likely. It will never work.
Back to the Future. How to correctly position Telltale and save it from failure
Imagine we have a DeLorean and we can go back to 2004 to change the future of Telltale.
What should Telltale have done to become a successful and prosperous company in the long term?
We’ll see it in the third and last part of this series of articles.
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To the success of your video game.
- In the video game industry, we generally use the term brand, but a licence could include a logo, processing technology, products or intellectual property of the licensee,
- You can find the complete interview in Edge Magazine, Number 328,
- See “The Origin of Species”, Charles Darwin.