Speaking at GDC 2010, 2D Boy's Ron Carmel discussed the game industry's typical publishing model, why it doesn't work for independent developers, and how the newly established Indie Fund will fix it. According to Carmel, publishers offer too much money to indie developers and take too much in return, relegating developers to the role of "tenant farmers," forced into a constant shift between seeking funding and development "until something goes wrong and you can't find funding and you go out of business."
Still, Carmel recognizes that publishers are taking the financial risk on projects, so it makes sense that they would see most of the profits. However, even with the advent of digital distribution, which removes a great deal of risk for publishers, developers still see traditional publishing deals -- along with the minimal royalties that come with them.
Asked Carmel, "How do we do for funding what Valve did for distribution?" The answer, according to Carmel, is Indie Fund, which will essentially turn the traditional publishing deal on its head. The Indie Fund aims to differ from traditional publishing deals in a few significant ways. The Indie Fund will offer a transparent submission process, make its standard contract details publicly available and provide a flexible development schedule.
Perhaps the biggest bullet point of all, however, is that Indie Fund doesn't seek to own developer IPs or exert any editorial control over the IPs it funds. It's also worth noting that Indie Fund won't actually publish or market the projects it funds. Those tasks are left up to developers, though Carmel noted that the members of Indie Fund would be happy to share their experience in securing distribution deals with services like Steam.
Indie Fund's contract details aren't yet available, though the stated goal is for developers to see a much bigger return on projects than they would through normal publishing channels. According to Carmel, the Indie Fund seeks only to recoup investment costs and receive a slice of profits "much, much, much smaller" than traditional publishing deals.