Invasion of the IP Snatchers: Exploring Licensed versus Original Games
(A version of this article first appeared as a chapter in Secrets of the Game Business, 2nd Edition published by Charles River Media.)
These days, it would seem that everyone has an idea they think would make for a great game. That, or, they at least intuitively "know" how to make a current game better. So why, then, is it that the computer and video game industry, known for its boundless creativity, must so often turn to ideas from other industries (e.g., movies, books, sports, comics, toys, TV, etc) to serve as the basis for a game?
This article explores the issue of licensed content intruding on territory that may be better served by the game industry's original creative. Is the trend of increased reliance on licenses valid, and sustainable? What are the pros and cons? Can the industry achieve a healthy balance between original concepts and licensed properties?
Some Definitions
Before we get started, let's lay out some basic definitions:
- Intellectual Property (IP). IP is a complex set of legal constructs to protect creators' ideas (as opposed to physical property). For purposes of this discussion, IP mainly refers to copyrights and trademarks. Refer to the IGDA's IP Rights SIG and white paper for a more thorough look at the legal and business aspects of intellectual property.
- Original IP. Original IP is just that, original. This means that a game is based on ideas (i.e., story, characters, concept, setting, world, etc) first imagined in the minds of those working within the game industry and used for the first time in a game. Some examples of games based on original IP would be The Sims , Doom , Tomb Raider , Halo , Myst , etc.
- Licensed IP. Games based on licensed IP leverage ideas that come from outside the game industry. While game licenses are most commonly derived from Hollywood movies, professional sports, and literature, a game is based on a license any time it is set on ideas that are “brought in” from outside the game industry. Some examples of games based on licensed IP would be Enter the Matrix , Madden NFL , Lord of the Rings: Battle for Middle-Earth , CSI: Dark Motives , etc. Game publishers pay a licensing fee in order to use others' IP within games (hence the term “licensed” IP).
- Franchise IP. A longstanding and successful series of game sequels is often referred to as a franchise, and can be based on either original or licensed IP. Some examples would be the Mario series of games from Nintendo, the SimCity franchise from Maxis, the prolific Final Fantasy franchise of Square or the successful series of Tony Hawk skateboarding games from Activision.
The topic of franchises invariably comes up in a discussion of licensed IP, as many view a long-standing game franchise based on original IP to be a form of license. While important to note, exploring the industry's overt reliance and dependence on game sequels/franchises (regardless if they are based on original or licensed IP) is beyond the scope of this article.
The License Curse
Despite its short history, the game industry is full of its own myths and legends. Licensed IP has been a part of industry lore for quite some time…
Crashed in the Desert
One such legend is the story of the abysmal sales of the game based on the E.T. movie. Released during the early-eighties, Atari licensed the video game rights to E.T. and rushed a poorly designed game to market, in hopes of banking on the success of the movie. The game sold horribly, leaving thousands upon thousands of game cartridges on store shelves. As legend goes, Atari had no recourse but to bury the cartridges in a landfill in the desert outside Alamogordo, New Mexico.
Someone, Please Phone Home!
The E.T. game would set the tone for the poor performance of many early licensed games. Ironically enough, a license was viewed as a curse and gamers avoided games based on licensed IP like the plague. The industry was rife with examples of rushed licensed games and flat sales, and publishers were wise to steer clear of licenses – instead relying on the creative and innovative minds of their game developers and designers.
To this day, the classic license curse is remembered via countless magazine articles and top-10-worst-games-ever lists. Even a recent list of “ worst movie games ” still includes many of the classic disasters.
| Rank | Game | Publisher | Platform |
| 10 | Friday the 13th | LJN | NES |
| 9 | Minority Report | Activision | PS2, Xbox, GC |
| 8 | Die Hard Vendetta | Vivendi Universal | GC |
| 7 | Crouching Tiger Hidden Dragon | UbiSoft | PS2, Xbox |
| 6 | Batman Forever | Acclaim | Super Nintendo and Genesis |
| 5 | Blade & Blade II | Activision | PS1, PS2, Xbox |
| 4 | The Lawnmower Man | THQ | SNES and Genesis |
| 3 | Street Fighter: The Movie | Acclaim | PS1, Saturn |
| 2 | E.T. the Extra Terrestrial | Atari | 2600 |
| 1 | Enter the Matrix | Atari | PS2, Xbox, GC |
Further, to help vocalize the curse, veteran game developer Scott Miller has stated on many occasions that:
"In my opinion, the vast majority of games licensed from movies, TV, novels, and comic books … are a waste of time for the games industry to pursue." – Hollywood Reporter, July 2004
Into the Fire
Given the historical evidence against licensing IP for games (especially from the movie biz), why have we seen such a dramatic rise in the practice? It basically all comes down to risk.
A Serious Business
As the game industry has matured and grown into a serious business, the financial risks associated with a game development project are astronomical (as anyone reading this book should well know). Much like other media and entertainment industries, games are a hit-driven business. As game budget
s continue to grow, publishers need to do whatever they can to ensure that a game is indeed a hit – or at least breaks even.
Exacerbating the challenge of operating within a hit-driven business, many publishers have no real tools – or ability – to predict what will be a hit! On the whole, the game industry has a problem with knowing what consumers would really enjoy - rather, opting to force-feed products that publishers either assume will sell well (often based on spreadsheet calculations of past performances), or that developers themselves want to create and play. While the industry works to improve in this regard (partially due to increased involvement from the academic world), the lack of a rigorous understanding of the marketplace hinders the ability to expand appeal and broaden markets (witness the ever-elusive female market).
Consistency is King
Now, combine the average publisher's inability to foresee success with Wall Street's demand for predictability in corporate financials (don't forget, most publishers are publicly traded corporations). Stock market success is largely based on setting predictable expectations for profits and then meeting or exceeding those expectations, hence the need for publishers to reliably forecast sales (and expenses, of course).
Industry veteran and critic Greg Costikian summed it up nicely when he stated:
"Year by year, budgets increase. Year by year, sales increase less. And year by year, the publishers become more conservative; … it's too risky to invest in any game that's -- risky. Thus only sequels and licensed drivel get funded." – Game Developers Conference 2003
The implied wisdom in Greg's words is that by relying on licenses (and sequels), a publisher can minimize their risk and/or increase their chances of success. We'll look into this thinking, in light of the “classic license curse”, shortly.
Designing for Risk Aversion
While the industry faces countless business challenges, many of these issues are derived from the design of the games themselves. Ideas are a dime a dozen, and pretty much anyone can come up with an idea for a fun game. The real challenge is in executing that idea - actually creating the game. As such, a lot of power rests in the hands of those with the ability to execute on ideas (game developers and designers), and those that have the money to fund them (the publishers).
An inherent risk with any expressive medium is that the creator will express ideas or thoughts that are relevant and meaningful (or even comprehensible ) to themselves and those like them, but not necessarily to anyone else. In the game industry, this is manifested by the notion that young white tech-savvy male game developers create games that other young white tech-savvy males would enjoy. This approach to design carries the great risk of content and audience homogeneity.
The Hardcore
Focusing on a homogeneous market was probably a wise strategy for the early game industry to establish itself with its core audience: hardcore gamers. But, as the business continues to expand, the industry can no longer survive on the core alone. Publishers needed to diversify content and create games that were more accessible and approachable by consumers who were not hardcore gamers. Enter licensed IP.
Once again, licensed IP is viewed as a cure to the longstanding challenge of creating games to appeal to a broader mainstream audience. The theory goes that if someone is a Tolkien fan, has read The Lord of the Rings , has watched the movies, owns the DVD set, etc, then it is very likely that this person will be hungry to also consume video games based on the same world, characters, story and so on. Games are rightly viewed as an excellent means to further immerse oneself into a world you already know and love.
Un-Just Justification
So, it seems like publishers are justified in turning to licenses to increase the appeal and profitability of the games they release. But is this really the case? Once again, taking a historical perspective, it is games based on original IP that are the top selling games, and the game that are most critically acclaimed. Below is a list of some top games, and game franchises. Arguably, it is original IP (or at least franchises based on original IP) that has generated much of the economic value, notoriety and fun for the game industry.
| Civilization | Metroid |
| Command & Conquer | Monkey Island |
| Doom | Myst |
| Final Fantasy | Pokeman |
| GoldenEye | Quake |
| Gran Turismo | SimCity |
| Grand Theft Auto | Soul Calibur |
| Half-Life | Star Wars |
| Halo | Tetris |
| Madden NFL | The Sims |
| Mario | WarCraft |
| Metal Gear | Zelda |
Given that there are not a lot of games based on licensed IP in the above table, why is it that the industry seems to be overrun by licenses? Once again, it is a question of risk.
Hitting Hard
As it turns out, it is quite rare for a game based on original IP to be a big hit. Figure 1 is a theoretical bell curve of how many games sit in various sales ranges. As the figure demonstrates, few games based on original IP make sales at the right end of the curve (i.e., BIG sales) – but, there are some. Rather, the curve is “bottom heavy”, with way more games falling below the middle of the chart – or, what is figuratively labeled as the break-even point. The curve shows us that many original games barely make their money back, with just as many selling next to nothing.
Figure 1: Theoretical sales distribution of games based on original IP
Turning to games based on licensed IP, we can see a much different-looking curve in Figure 2 . This curve has most of the games huddled up around the break-even point. That is to say, even fewer licensed games sell towards the right end of the chart. But also, few of them sell horribly. Rather, roughly as many licensed games will make their money back (and make some decent profit) as do those that will lose a bit of money.
Figure 2: Theoretical sales distribution of games based on licensed IP
Tough Decision, Not
Presented with the theoretical sales probabilities demonstrated in figures 1 and 2 , what is a publisher to do? While it is hard to reduce the extremely complex nature of deciding which projects/games to approve, fund, sell, etc, we can deduce several factors in the decision process. For starters, most of us have an innate human instinct for self-preservation: No one is going to consciously make a decision that will get themselves fired. That is to say, there is a strong do-not-take-a-risk motive when publishing execs are making decisions on multi-million dollar game projects.
Another factor is the inability to predict which games will be successful or not – as was explored in the business risks section above. Couple that with the corporate pressure to meet and beat stock market expectations (i.e., the need for consistent profits) and the odds are really stacked against greenlighting games based on original IP.
To summarize the decision, risk-averse publishing execs looking to keep their jobs and not lose their company money will more than likely go with projects that leverage licensed IP, providing a much better chance of at least breaking even.
To be fair to publishers, not all of them are so risk-averse. Some publishers rely on their ability to gamble on original IP and hit it big. As noted, this is an attempt to generalize and simplify a massively complex decision-making process. And, developers are certainly part of the issue, as they often create what they think publishers' conservative mindset will approve.
Making Money is Good
All of these decisions lead us to a situation where licensed games dominate the retail shelves and sales charts. Looking at weekly sales charts, we invariably see a dearth of new games based on original IP. In 2003, the world's largest game company, Electronic Arts, generated nearly $3 billion in sales, with only 3% of their production based on original IP! Yet, no one can deny that making money is a good thing. Strong sales fuel the industry, allowing more projects to get funded and ensuring that development studios stay in business.
Licenses are not an inherently bad thing for the game industry. And, like most other forms of art and entertainment, there is always a certain amount of crossover and exploitation borrowed in from other industries. But…
Where's the Problem?
The challenge lies in finding the right balance between using licensed IP versus fostering original ideas. Given the current proliferation of licenses, the game industry is at risk of losing its identity as a unique and emerging art form. Rather, games will simply be viewed as tools to help market and extend IP from other industries.
This trend also leads to a lopsided generation and accumulation of wealth. To begin with, for every game based on licensed IP, the publisher must pay a licensing fee. This fee is money that flows out of the game industry and cuts into the profitability of publishers and developers. Further, the truly big selling games (e.g., The Sims , Myst , GTA , etc) are more often than not, based on original IP. So, here too, by taking a safe bet on licenses, a publisher has a much smaller probability of really hitting it big and generating vast wealth for the industry. In addition, when a publisher invests in original IP, it controls that IP and can choose to license it to other industries (e.g., Eidos selling the Tomb Raider movie rights to Paramount) – another lost opportunity with licensed IP, since the publisher is not in a position to sell rights in what they do not own or control.
At a more fundamental level, many licenses are not “tuned” to interactivity. That is to say, content from linear media (i.e., movies, books, etc) are not well suited to replay in a non-linear and interactive context. Converting from one form to another is a great design challenge that not many have been able to solve – refer back to the “classic license curse”. While developers have been getting better, with several current generation licensed games receiving strong reviews (e.g., The Chronicles of Riddick: Escape from Butcher Bay ), the linear nature of the content will always be an obstacle.
The great Shigeru Miyamoto has been quoted specifically on movie licenses as saying:
"Seemingly, movies and games are similar, but they are poles apart. I do not think anyone can come up with a good project simply by converting a scenario of a good movie to a game, and vice versa." – Nintendo Power, April 2002
At a more selfish level, most game developers and designers would simply state that they prefer to work on their own ideas and bring their dreams to fruition – rather than toil on the ideas of others. The increased productivity from such passion and enthusiasm is immeasurable.
A Balanced Approach
Many of the above criticisms could be overcome if a more balanced approach were taken. As noted throughout the article, games based on licensed IP do have benefits to bring the industry, namely:
- access to a broader and/or more diverse audience
- leverages excitement/marketing generated by other industries
- more consistent at generating positive revenue
Conversely, we see that games based on original IP bring us:
- greater probability of becoming a huge hit and generating wealth for the industry
- best demonstrate games as a distinct form of art and entertainment
- potentially more fun to work on
Further still, games based on licenses could be helped if many developers didn't use them as an excuse to do poor work, or be lazy. As alluded to above, this could be due to a lack of interest in working on others' ideas, a notion that the game won't be a big hit anyway, or that it is impossible to create fun gameplay from linear content. As the esteemed Warren Spector has noted, licenses are not an excuse to do bad work:
"I really, truly, don't see how setting/character/context -- a license or previous game, in other words -- significantly limits a game developer's ability to introduce original GAMEPLAY elements into his or her work." – Game Developers Conference 2003
If fewer games based on licenses “sucked”, there could be a more positive overall contribution to the game industry by bringing in these external ideas.
Conclusion
In many ways, the industry's current dependence on licensed IP is just a symptom of the greater issue of risk. As such, the industry needs to find ways to minimize risk -- or at least the perception of it -- in order to cultivate a healthier mix of IP generation and usage. Part of the solution is in creating tools that will allow for greater insight into gamer (and non-gamer) playing and buying behavior.
Greater insight into consumers will likely lead to the realization that the marketplace can support a greater diversity of content, beyond what the industry is currently supplying. In part, this demands that those creating games need to be made up of a more diverse set of people (i.e., gender, age, race, culture, etc) in order to deliver content and ideas that truly reflect a diversity of interests and biases.
This diversity of content and broadening audience will require that the industry build up alternate business models and means of distribution. Reliance on limited retail shelf space and/or the blockbuster-only approach to publishing games will simply not support this diversity of content – much of which will not likely be created by the mainstream industry (think web games, mods, shareware, art house, etc).
Bottom line, the game industry needs a thriving “ecosystem” to succeed. Licensed IP and original games can happily coexist in that ecosystem, along with an overall greater diversity of creators and content. Ignoring our responsibility to maintain a healthy environment may mean that the fundamental values of the game industry will be snatched away from us.
Related Resources/Links
- Discuss IP related topics in the discussion forums
- IGDA IP Rights Special Interest Group
- “Intellectual Property Rights and the Video Game Industry" white paper
- Developer Business Summit Report and Proceedings
- "IP on licensed games" by Scott Miller
- Games * Design * Art * Culture blog
- Secrets of the Game Business, 2nd Edition published by Charles River Media
- Grand Theft Adaption - The Escapist, Issue #6
Author Bio
Jason Della Rocca is the executive director of the International Game Developers Association, working to build a unified development community and common industry voice on topics such as student outreach, concerns over game violence, diminishing the impact of exploitative patents, and increasing diversity.
The opinions expressed in this article do not necessarily represent the IGDA.