Digital reverberations: Doug Kennedy on digital publishing

With more and more developers opting to forgo traditional retail outlets in favor of digital distribution, we decided to talk to someone in the know.

That someone was Doug Kennedy, CEO of Reverb Communications, the digital publishing company behind Dungeon Defenders, an indie game which has now sold over a million downloads. In part one of this interview, we talk about digital publishing, Tim Schafer’s Kickstarter, and the effects of bad habits on the industry.

It’s been a big month for digital distribution. Could you say something about what Reverb is and how digital publishing works?
We’ve been in business as an agency for about ten years now, as Reverb Communications. From the publishing side we saw a lot of changes in the marketplace about three or four years ago. Working with a lot of developers, we saw them kind of getting burned by publishers, kind of not understanding how the publishing world is working. So we don’t like to call ourselves a publisher, we like to call ourselves a support mechanism for digital publishers. And so we were able to go out and secure our publishing licenses with a lot of the major console platforms, and really act as a means to support the developers, and get them built up so that they can launch their games effectively on the different platforms.

And what exactly does that entail?
There are a lot of companies out there that are claiming to be digital publishers, and what do they do? They sit back and they sign contracts with developers, and then what they do is they put out press releases and they do a little bit of marketing to support those developers. We took a completely different approach.

We knew from having ten years at Reverb Communications, that we’ve be able to, you know, go out and do the marketing, and the public relations, and be able to support the platforms, but we really had to differentiate ourselves from what was going on in the marketplace, and that was… we wanted to secure our digital publishing rights to all the consoles; be able to work with Steam; we wanted to add a producer to the program, so that we can have an added value so that the developers could really focus a hundred percent of their efforts on just building the game. So we differentiated ourselves, not just by doing press releases and not just doing marketing, but really tackling the things that were distracting developers from developing games.So we were able to do that and offer that to a lot of developers we went out to work with.

You guys had a couple of games recently that have gone blockbuster: Dungeon Defenders has over a million downloads, and I hear you just got a deal to do Sanctum 2. What is it that makes a digitally distributed game successful versus traditional retail?
Well, I think if you take a look at the way the industry has taken shape over the last several years, you’ve got publishers, you’ve got developers, and the marketplace has gotten much more stringent in terms of what the retailers are allowing on the store shelves. The innovation from this industry is not coming from publishers. It’s definitely being driven by retailers. Really they’re limiting what they’re allowing to come into the retail marketplace, now that’s in terms of full-version games.

I think what we’re seeing with Apple and iOS and then a follow-on with the growth of PSN and XBLA and obviously with Steam, is that, you know, a lot of these marketplace distribution means are allowing the consumers to decide what they want to come to market. The problem is, retail is stuck in the dinosaur ages, and retail is looking for ‘Sequel 1’, ‘sequel 2’, ‘sequel 3’, from any said name publisher, and they’re not letting any creativity from these developers come to the marketplace. They’re not taking risks on new IPs, they’re not allowing new things to come to the marketplace. On the converse side, you’ve got iOS and ‘Droid that, you know, pretty much open up their platforms and let anything come to market.

So I think the sweet spot for us as a digital publisher is really PSN, XBLA, and Steam, because there are some guidelines, there are some approval processes, and you really have to be a formidable developer to make it to those platforms, and we look at the development teams as the inspiration and mind-share leaders in terms of the creativity that’s coming into the marketplace for those platforms.

So for example… Tim Schafer’s Kickstarter?
What I think Tim and his team did was they cracked the top up off a soda bottle that’s been shook up for five years in the industry. There’s a lot of pent-up demand, there’s a lot of frustration in terms of how games get funded, there’s a lot of frustration in terms of what developers are allowed to do.

The publishers in this industry for years have kept the developers in check. They don’t let them come out, they don’t let them develop the games they want to develop, and they hold the purse-strings in terms of how they’re gonna fund these kinds of titles. I think the publishers are confused about… many publishers are confused about the digital marketplace.

You know, so Tim, what he was able to do was take all that pent-up frustration of both the consumer and the industry executives, and allow them to funnel their frustration through investing in a project, and I think what he did… It’s going to be a landmark day in this industry and people are going to look back at it and go, this is a new way for developers to cut the shackles off the publishers and say, look, we’re going to do things on our own accord, and be able to drive business that’s gonna allow us to retain our intellectual properties, build the games we want to build, and fund them in the manner we want to fund them.

So you’d say it is a game-changer for the publishing industry?
It absolutely is a game changer because I think you have to take a look at what they’re going to do with the money, and the type of game they’re gonna develop, but I think we can all agree that if you’re going to retail you’re talking about a pretty expensive type of game that needs to be developed, and you have all the associated costs that publishers do pick up. You’ve got manufacturing the disks, the marketing funds, the development funds, the returns, all the things that need to be handled when taking a game to the retail marketplace.

Digital offers up the ability to simply get the game developed and take the game to the marketplace. Now, when you do that, the costs do come down. So, I don’t know the type of game, or what platform he’s looking to get a game out there, but I think what he did by opening that up was he talked to the masses and he talked to the consumers and to the industry and said, ‘This is broken, let’s fix it.’

The developers in this industry need to have the power. If you’re a publisher in this industry, and your business closed up, or let’s say we closed every publisher in the video game industry; they all just disappeared and went the way of the dinosaur one day. You’d still have video games. Developers would still be making great games. But if you got rid of every developer in this industry, there would be no more video games.

The industry can’t survive without developers, but for years, we’ve pushed these developers into the closet, told them not to talk about their games, let the publishers go out and communicate, and the publishers aren’t the passion behind these games, it’s the developers. They create the games, they develop them, they come up with the concepts… but generally speaking they’re asked to develop them and just hand them through this glass door so the publisher can go and talk about a video game they know nothing about.

The way I view it is, if I have a developer worrying about their intellectual property library, worrying about making money, worrying about paying their employees or paying their staff, they’re not worrying about building a really good quality game, they’re worrying about a bunch of other things. I want them worrying about building great games.

So does this change digital downloads at all or does it just cater to your favor?
I think it caters to the fact that developers are starting to really get back into a power position in this industry, and I think that move last week speaks volumes about how people feel about the development teams in the Development industry. It showcases that people aren’t going to put up their hard-earned dollars unless they realize something’s broken. And the way that it gets fixed means handing developers the funds and means to build great games.

So this isn’t just Tim Schafer finding a way to cut the publisher out, this is a sign that the balance of power has shifted in favor of the developer.
Right. Now there’s always going to be some need for publishers, look… at the barest bones situation in this industry a publisher is needed to fund projects. If you’re going to retail they’ve got the distribution means to get out on the store shelves, they’ve got the ability to market the title, they can help you with first-party going through to get approval, those kinds of things but really, let’s think about it; if there’s no game being developed then what the hell do you need a publisher for? Once again, if the developers aren’t funded, if they don’t have the means to make these games and pitch them to the publishers, publishers are going to sit on their hands for a pretty long time waiting for that next IP to come rolling in. So I think what they did last week was, they got the industry as a whole to take a look and say, ‘alright, we need to put money behind these guys, and bank on the fact that they know what they’re doing, know the type of games they want to develop, and give them the means to be able to go out and shop these kinds of games to either publishers, or launch themselves.

So where does that leave the industry?
The industry right now is in a state of disaster if you ask me. I mean, you’ve got a very select group of publishers in the industry that are allowed to put games into the retail marketplace, and that’s decided… well primarily by the retailers. They choose which games they want to put on the store shelves. And if you talk to any retail buyer at any of the major retailers: Wal-Mart, Best Buy, Target, Toys ‘R’ Us; they are risk averse right now. They want that ten-year old franchise; that game that’s gonna guarantee a sale, they’re never going to take a risk on a new IP. And that’s bad for our industry. Consumers don’t wanna see another Guitar Hero, you know… any given franchise that’s gonna be on its fifteenth leg rolling out into the marketplace. So you’ve got retail that’s a mess; you go to the digital space.

You look at what Microsoft’s done with Xbox Live Arcade. As an independent developer, you almost can’t get onto the franchise. Microsoft has created a black market for independent developers where they have to go shop their game to approved publishers; pay them a royalty to even get access to Xbox Live Arcade, and the publisher at the end of the day doesn’t do anything. They don’t do marketing, they don’t do PR… What do they do? Stamp the game, stamp the certification, send it to Microsoft, take a percentage, collect the money, and then pay the developer. And if that publisher goes out of business or is slow in paying, that developer doesn’t have access to that money.

I think what Sony’s done is interesting, where Sony’s been able to allow to developers to come in and be directly approved by PSN. Microsoft -which is surprising, because Microsoft’s foundation was built by developers- has really created a black market for the development community.

So is this a change or die thing? You’re heaping a lot of praise on Sony, but they’ve had a really rough quarter. How is this helping them? If you have one guy who’s getting it right, and one who’s not, and he’s getting more money than the guy who is getting it right, then what exactly is going on from your point of view?
You’ve hit it right on the head. I think part of the reason Sony had to make decisions like this over the last couple years is because they were seeing an exodus of developers who may not have been looking at PSN as the development platform that they wanted to be on. Now look, it’s easy when you’re sitting a little bit higher up on the food chain, like Microsoft is, to turn things down or say no, and not let developers or small publishers become approved on their platform.

I think the challenge is, if the table ever turns, and Sony ever leap-frogs Microsoft or slides into second or third place, I think they’re going to have to start looking at that. I’m not saying that Microsoft’s wrong in their approach, but what I’m saying is it’s damaging to creativity, and it’s damaging to the development teams that want to get to the Xbox Live Arcade platform, but have to pay some type of access fee to the small, select group of publishers that are allowed to publish stuff on Xbox Live Arcade.