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Warner Brothers to change game royalty fee structure based on review scores
by Glen Bayer
Warner Brothers will change its royalty fee structure based on review scores, according to VGPro.com.
Warner Bros. said it is unhappy with the stream of poor licensed games.
"The game industry has had its time to exploit movie studios all day long and to get away with producing inferior products," said Jason Hall, head of Warner Bros. Interactive Entertainment. "But, with Warner Brothers, no more. Those days are over. And we mean it. This isn't just lip service. Honestly, the bad games are over."
As an incentive to third-party developers to develop quality products, royalty fees will be lower if games receive good review scores.
"An escalating royalty rate kicks in to help compensate us for the brand damage that's taking place," continued Hall. "The further away from 70 percent it gets, the more expensive the royalty rate becomes. So, frankly, if the publisher delivers on what they promised -- to produce a great game -- it's not even an issue.
Bruno Bonnell, Atari's chairman and CEO, has responsed to Hall's statements by noting that the Atari-developed Enter the Matrix has sold four million copies, garnering $250 million worldwide.
"That's what a big major motion picture makes," said Bonnell. "And Warner Bros. would penalize us because we didn't achieve 70 percent? Are they joking? Are we proud of everything we do? In most cases, yes. Do we fail sometimes? Sometimes. Do we feel we have to pay because we fail and because the ratings reflect that? No, absolutely not."
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Video Game Business Grows Wary of Hollywood
Sunday May 23 2:47 PM ET
Is the honeymoon over for Hollywood and the video game industry?
Over the last four years, movie studios and game companies have grown closer than ever, so much so that big-budget action movies like "Van Helsing" and "The Punisher" now almost demand a companion video game.
But game fans have grown restless at what they see as a lack of fresh ideas, observers say, while publishers have turned more cautious at the prospect of paying high license fees to take a risk on content they do not own.
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At the same time, studios, most notably Warner Bros. and Walt Disney Co., are slowly moving to take back some control themselves, seeing the financial opportunities in owning a bigger piece of potential blockbuster games.
Last week's E3 industry trade show featured more than a few games spawned by movies, TV shows and comic books, including Activision Inc.'s "Shark Tale," based on the DreamWorks' upcoming animated film, and Acclaim Entertainment Inc.'s adaptation of DC Comics' "100 Bullets."
But the Entertainment Software Association also released a survey showing that about one-third of gamers would like to see fewer licensed titles, especially as technology expands the boundaries of what is possible.
"All of this creates an exciting prospect for game developers and publishers," Doug Lowenstein, president of the trade group, said recently. "What it means is that they will have the opportunity to launch a new era in game design and creativity."
SUCCESSES AND FAILURES
To be sure, some video game publishers have made fortunes from movie franchises. Electronic Arts Inc. has sold tens of millions of games based on "Harry Potter," "James Bond" and "Lord of the Rings," often developing them right alongside the films.
Likewise, THQ Inc. has generated hundreds of millions of dollars in revenue on licenses from the likes of Pixar Animation Studios Inc. and the Nickelodeon cable network, while Activision is expecting a blockbuster this summer in the next "Spider-Man" film.
But for every smash hit, there are disappointments like Atari Inc.'s "Terminator 3" or Acclaim's "Alias," which featured the likenesses of big Hollywood stars, but fell short of targets.
Popular reviews site GameSpot called "Terminator 3" a "rushed hack-job of a game" and said the "Alias" game was plagued by "sloppy execution."
"If we could make all original games and grab a large share in the industry, then that would be a no-brainer," said Kazumi Kitaue, chief executive of Konami Digital Entertainment.
But Kitaue, whose company is making a game based on the upcoming Disney film "King Arthur," also said that because of their built-in recognition factor, licensed games could be cheaper to market.
"Even for original titles, we need to market that title," he said.
While licensed titles have "a certain amount of embedded marketing power," Kitaue said, their costs aren't much different from original games after taking licensing fees into account.
NO GUARANTEES
Atari Chief Executive Bruno Bonnell told Reuters that unless a licensed game is released at the same time as the film that spawned it and features the likenesses of the movie's stars, there is no point in doing it.
"It is not a given that a great action movie turns into a great interactive game," he said.
For publishers too, there is the question of sharing in the success. Besides paying licensing fees up front, which can run into the tens of millions of dollars, there are usually royalties on each unit sold, cutting into profits and making success a question of volume.
And since the licenses are not permanent, a company can risk losing its most important games at almost any time.
"When you're licensing, you're essentially renting stuff," said David Zucker, chief executive of Midway Games Inc. .
Even Electronic Arts, which could coast for years on the successes it has had with licensed franchises and the potential it has with as-yet-unreleased licensed properties like "Batman" and "Catwoman," is pushing for more originality, recognizing that is what gamers really want.
"We're going to be starting to put more and more new ideas that have not been emulated by anyone into production," said Don Mattrick, president of EA's worldwide studios. (Additional reporting by Dai Wakabayashi)
