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Counting Rupees: Royalty Screwed
Each week Jeff Engel and Geoff Brooks alternate in contributing Counting Rupees, a column on the business behind gaming: Gamers were outraged in recent weeks by a rumor that Xbox Live Arcade royalties were being cut in half for developers; in fact, some developers were reportedly considering moving development from XBLA to the PlayStation Network because of the cuts. It was less clear why Microsoft would do something like this: At first glance, it appears to stifle independent game development and reduce the overall quality of XBLA as a platform. Clearly, Microsoft is just being greedy, right?Perhaps, but it's certainly not as clearcut as it seems at first glance. Although any changes to the royalty structure will mean changes -- and potentially significant ones -- for XBLA, they may still be beneficial in the long run for some people, possibly even increasing indie development.As is often the case with rumors, there's more to the story than a simple royalty cut. Let's think first about what the costs and benefits of the changes are to both developers and Microsoft, after which we can decide why the action might have been taken in the first place and what it all means to us as gamers. From a developer's perspective, the cost is pretty clear: Up to 35% of the total revenues of a game. Does the developer receive any benefits? Yes, some: As reported, developers will no longer have to pay for features like worldwide ratings or localization, which both reduces costs and potentially provides access to a larger international market. And from Microsoft's standpoint, the costs and benefits are essentially reversed: It no longer has to pay the royalties, but it does need to provide some additional services.
