Flash gaming: Doing deals with Chris Hughes
Flash has one of the most remarkable stories in recent game technology. As we've discussed over the last couple of days, it's survived acquisition, competition and the rise of mobile phones to deliver a thriving webgame community that's enjoying considerable financial reward. At the heart of this business is Flash Game License, a company which brokers a huge number of deals between indie developers and portals, small and large. We spoke at length to co-founder Chris Hughes about the mechanics of the Flash gaming scene, from what US players are worth, compared to European and Chinese, to what it takes to make a Flash game worth $50,000.
Could you outline your business and how it's changed over the last few years?
Flash Game License at its core is a marketplace and community primarily for Flash game developers and buyers, but we also do work with Unity developers and HTML5 developers – basically any web game developer we help. But primarily it's still Flash. We've got two main parts to that. We've got our auction system – eBay for Flash games, if you will. A developer will come and upload a game and then we have 5000 buyers visit the site and bid on the games. Once the game has gone through the auction a deal is made – usually some sort of branding gets put into the game. That's what we call sponsorship. The other part of our site is the Game Shop – that's where developers sell secondary licences. A site who just wants content will buy it that way – they're not using it for a marketing purpose. Those are the two things we launched with and are going strong. I think we've seen triple digit growth every year, for four years.
I'd say the biggest thing right now are the non-exclusive licences. We've pioneered a licensing deal that brings in the bigger companies. I'll give you an example: Yahoo wants a bunch of content, but if they want to work with the type of market we're in – indie developers pumping out games quickly – if they want 100 games then they'll have to deal with 100 developers. That's hard, if not impossible for them. Microsoft requires a three million dollar insurance coverage for the games – it's an expensive annual premium. Obviously independent developers can't afford that. So we have Easy License – we bundle all that together, and we work with the large company to sub-license them the game. Yahoo will sign a contract with us, and we'll do the deal with the 100 developers, and we have all this insurance coverage and do all the taxes. This has really gone amazingly well. Everyone loves it. Developers are getting paid faster, they're getting more deals, the big companies are getting content faster. And on top of this the devs are selling their games for tens of thousands to their primary sponsor and then they're getting all these deals from the secondary companies in the non-exclusive market.
Is the main advantage for the small development teams or solo outfits who can't handle all the red tape?
Well, there's a couple of things. One is cost. A lot of them just can't afford it. The cheapest three million dollar coverage you can get for cyber-liability and errors and omissions and so forth is probably ten or twenty thousand dollars a year. A lot of these developers right there can't do it, or it doesn't make sense financially. The other thing is most of these developers are small teams – their main goal is to make games. And really that's been our goal: to help devs focus on what they love to do, so they don't have to wear their business hat, marketing hat or their legal hat. So they have a set contract they do with us and we worry about the contract with the other guy.
And then there's the payment. If we work with a big company who we know is going to pay us, sometimes they'll take 60 or 90 days. If you're living paycheque to paycheque, that might mean you can't feed yourself! But we know we're going to be paid, so we pay the developer on day one and wait to get that money back from Microsoft, or whoever. So that's a big part of it. But on the other hand too, the big companies want one point of payment. They don't want to pay 100 different people.
What kind of deals do you see getting cut? What sort of figures get offered and for what?
We see a huge range. A good game will get anywhere from $5000 and up. A great game will get $15,000 and up. We typically see two to three games a month that are in that 'great' range. Occasionally we get a game come through that gets $80,000, but that's definitely the exception. And, I should note, this is all up-front; a lot of the deals have performance bonuses or ad-share revenue. So these numbers are the bare minimum they're getting. And then there's the secondary market. Kongregate may offer you $20,000 for a primary licence – which means you can sell non-exclusives as well, so you can go to the other portals and sell it for additional money, in the $1000 to $2000 range, or get a revenue share deal with someone like Microsoft or Yahoo, which can be tens of thousands down the line, if not hundreds if the game is popular long enough.