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Q&A: Meridian4's Steve Milburn Talks Digital Distribution Shift

How does a small PC publisher survive in today's market? Gamasutra speaks to Steve Milburn of Montreal-based Meridian4 (Shadowgrounds, Alpha Prime) about the company's shift to a focus on digital distribution, and why the retail front has "lost a l
Montreal-based independent PC publisher Meridian4 was incorporated in 2004, with the goal to help smaller developers take their games to market, and do it with an element of mutual respect. As well as attempting to put an equal amount of effort into the promotion of each title published, this also means that the royalty split for releases is generally at an even 50/50 level. In the time since its incorporation, Meridian4 has also moved further into a focus on digital distribution: Steve Milburn, Director of Marketing, estimates that the percentage of titles sold online has shifted from 30% to 50% over the past three years. This has happened through distribution partnerships with services like Boonty, Manifesto Games, Stream Theory and TotalGaming.net, amongst others. We spoke to Milburn recently about the challenges involved with being an independent PC focused publisher, and why the retail front has “lost a lot of its power and prestige” for PC gamers. When was Meridian4 formed, and what were the goals at the time? The idea for Meridian4 first took root when two of us were carpooling together when we worked at a game publisher here in Montreal - name withheld to protect the guilty. We had long discussions about what our employer was doing wrong and how we could do it better and not make the same mistakes. Once we left that company, we incorporated Meridian4 in 2004 and began looking for our first title. We formed Meridian4 to help small, independent developers get their games out to retail. We wanted to dispel the myth that all publishers are evil, money-grubbing SOBs. We wanted to form an equal partnership with our developers built on mutual respect. We realize that these games are their ‘babies’ and we wanted to make sure we treated them as our own. Has the business plan changed in that time? Yes, the games industry is in a state of constant change and the last two years have seen a drastic decline in retail shelf space for PC titles, while online distribution is starting to get the recognition it deserves. When we first began, our retail-to-online split was 70/30. In just two short years this split is more like 50/50. We’ve had to alter the way we analyze games to determine ROI [return on investment] and how we negotiate contracts with our developers. We’ve also had to alter the way we promote and market our games to a community of gamers that are more savvy and knowledgeable about the entire industry. Gone are the days of publishing a B title and still selling over 50,000 units. These days, unless you have a AAA title or license backing up your game, you have to fight for 10,000 to 20,000 units. We still have our core goal of creating strong and equal partnerships with our developers, but we are constantly tweaking and modifying the way we approach their games and the games market. This is the only way to survive and flourish if you don’t have millions to risk on the next great thing. What effect has being based in Montreal had on the company? Montreal is a great city and the gaming community is ever-growing. Everyday we hear about another company coming in and opening up offices. We have a terrific infrastructure for developers and we have highly trained and educated employees to fill many different roles. This growing awareness of Montreal becoming a major player in the games industry has helped lift our credibility with developers, especially in Europe. In the past, you always had to say Montreal, Quebec, Canada, now it’s just Montreal. How is the service offered by Meridian4 different from that offered by the larger publishers? Larger publishers need 100,000 or more units sold to reach their breakeven point. They may ignore titles that are still fun to play but don’t meet their ROI goals. We’ve kept our overhead low and we run very lean, allowing us to break even with 10,000 or less units sold. This allows us to look at publishing possibilities with smaller or more niche products. This also means our developer partners see royalties a lot sooner and that makes everyone happy. I also feel that the next ‘big’ thing in games or gameplay is not going to come from large developers, but from the small, independent developers who are continually striving to push the gameplay envelope. How does focused promotion of games like The Chosen: Well of Souls as featured products on your site and through press releases help Meridian4's business as well as that of the developer? We strive to put an equal amount of focus on each game we publish. We will, of course, concentrate on the title that is about to be released to make sure that it gets the attention of the gamers. This is why we put a game into our Featured section of our web site and focus our PR and marketing efforts on that title. Our developer partners see that we are making every effort for their game, treating it as they would treat it. This again helps us maintain an equal relationship with our developers. How equal is the revenue share with developers? Most deals that we have with developers are a 50/50 royalty split. Our goal of equal partnerships with developers is reflected in all aspects of the relationship, including the sharing of revenue. What challenges are there in stating that "no product is too small or too 'niche' not to be considered"? One of our biggest challenges in stating that is that we get a lot of submissions from all over the developer spectrum. We’ve seen some really interesting but not financially viable games, and it is difficult to email or talk to the developer and tell them that their game isn’t ‘good’ enough. If it was up to us, we’d publish everything; it’s just some games, no matter how unique, are just not publishable. Why do you think the adventure genre is confined to smaller publishers and developers at this point in time? When you’re talking about different genres of games, certain genres go in and out of fashion. Traditional adventure games peaked years ago and have been declining in popularity and, in turn, have become less profitable for the ‘big’ publishers and developers. There is still a devout community that continues to buy and play adventures, but the genre has become significantly smaller and is being replaced with multi-genre titles. Traditional adventure games had you follow their story - you figured out puzzles, took certain paths and talked to NPCs; but there was always a start, a middle and an end. A lot of gamers these days want to create their own story, not follow someone else’s. RPGs with detailed back stories and copious amount of options have started to become the new adventures. How important are demos to small publishers like Meridian4? As with the consumable products industry, sampling or demos is extremely important to the games industry. Demos are still the number one reason gamers give for purchasing a game. To us, a demo is invaluable. We have smaller budgets for advertising and promotion. We have to fight for every word written about our games and a demo seems to break through the editorial barrier and will be featured extensively throughout the gaming sites. How do you work out the pricing structure for the game you're publishing? Is there a "sweet spot" for independent games? If you are looking at retail, there is only one price; $20. A $10 price point is now exclusively the domain of jewel case products. $30 is no longer a viable price point with retailers and gamers. They see a $30 game and assume it’s not good enough to be a full priced $40 game and if they purchase and are disappointed with the title, they immediately complain that they had to spend $30. $40 and $50 are the realm of AAA or licensed product and it’s rare to see ‘independent’ games at that price point. So the ‘sweet spot’ is $20. It’s a very fair price for the amount of gameplay that gamers receive from our titles. What other companies is Meridian4 currently partnered with, and how were the companies chosen? Developer wise, we are partnered with Rebelmind, Frozenbyte, Elephant Games, Cinemax and many others. In the case of each of those listed, we’ve published multiple titles with them. We want to build a long-lasting relationship with our developers that will see us publish all of their future titles. What do these partnerships offer to the overall business structure of Meridian4? By having a smaller number of developers that we work with, we’re able to focus more on the individual games and this is the main reason we see our developer partners coming back to us to publish subsequent titles. These relationships allow Meridian4 some stability knowing that we are working with talented developers that deliver consistently and on time. It allows us to concentrate on marketing and promoting their titles rather than negotiating contracts from scratch, learning each developer’s quirks or never knowing what’s happening with a title that’s being developed 5,000 miles away. How does distributing titles through multiple online services help, and why is this something that more publishers and developers aren't doing? To answer the second part first: I do not know. Online distribution is here, it’s not going anywhere, and for PC gamers with broadband connections it the easiest, quickest and sometimes most economical way of getting their games. Online distribution allows us to hit literally millions of potential consumers, day one. Also, to limit your offerings to only one site or a few doesn’t make any sense to me. It’s rare that a publisher will sell a game in Best Buy and Gamestop, but not in Target. Usually that’s dictated by the retail buyer, not the publisher. The same holds true for online distribution: get it out to as many channels as you can and get it in front of as many gamers as possible, so as to not limit your market potential. Where do you see online distribution heading in the next three years? In three years, online distribution will dwarf retail for PC games. Other than a solid box and a printed manual to put up on your book shelf, retail is a lot more inconvenient than digital distribution. And most gamers have quickly adopted the idea of online distribution and have changed their shopping habits. It also opens the distribution channels for smaller, independent titles that would most likely never get picked up by retailers. I believe gamers want more of a choice when purchasing their games and don’t want to be dictated to by the big retailers. Are you looking to become more involved in the retail space? What challenges exist in this? We are not abandoning retail, but we have certainly changed our focus to include digital distribution in all of our plans. As a small publisher, it is very difficult to affect retail space. Everything done in retail costs money; end aisles, better positioning, couponing - it all costs money. With some retailers you even have to pay to get your product on their shelves. You are essentially paying the retailer to take your product…it’s nuts! Retail will never die, but for PC games, it has lost a lot of its power and prestige. Which other distributors are you looking at working with in the future? In the past, we have worked with top-tier distributors for our retail presence and found that, as a small publisher, you never get the attention that you need to succeed. Also, as most of these companies also publish their own titles, we had to struggle and fight to get our products in front of retail buyers. I won’t even go into some of the financial difficulties we’ve had with those distributors. We are now with a smaller, independent retail distributor who understands the market for smaller titles and is able to focus more attention on our products. We hope to make this distribution relationship long term, which will mean success for both companies. Will the company be staying with the PC platform, or is it possible that you will be working with consoles and handhelds in the future? We chose PC games because it had fewest barriers to entry. It was also where our experience lay, but looking into the future, we are most certainly looking to the console market. As the barriers become less significant with the advent of downloadable content with services like Live Arcade, smaller, more independent games, like ours, can get on to the couch and off the desk.

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