Working with Licensed IP: The Good, the Bad, and the Ugly

Shortly after the dawn of video games, video game licenses made their debut. Whether it was E.T. and Star Wars on the Atari 2600 or Enter the Matrix on the Xbox, game makers have always sought to have their games rise above their counterparts through the clever use of well-known brands and pre-existing marketing.

For games, mind share is particularly important. Games are an investment, not just of time but of learning.  Each game speaks to us in a different way and must therefore be learned. That takes convincing for most, so developers may opt for content near and dear to a specific audience.

 

The ending for Friday the 13th (1989) on NES (Nintendo Entertainment System)

Licenses have a symbiotic relationship with content in games, which explains why Liquid likes to have a licensed game in development alongside its original IP. When at their best, like Arkham Asylum, we see a game that adds to the world of the license and raises its value. But when publishers leave the license to do all the heavy lifting, we invariably end up with the stereotypical “bad movie game.”

Let’s now take a deep dive into the real power of licenses and why (and how) bad movie games are born.


The Good

It’s difficult to argue with the power of a brand.

Rule #1:  in almost every case, if there are two identical products, the one with the known brand will beat the one with the unknown brand.  Why? In one word, familiarity.  The big brand carries with it an implied promise of quality and care that the unknown brand seems to lack.

Rule #2:  in a market where buyers can’t differentiate between hundreds of products launched every quarter (thousands in the case of mobile), most of them are effectively identical to the buyer.

Add rule #1 to rule #2 you have the following:

When a buyer can’t differentiate between products, based on their own merits, then a branded product will beat its unbranded competition every time. Possible scenarios where this lack of differentiation is an issue: too many products in the marketplace, buyers lacking the knowledge of the true value offered by each product, not enough information about particular features… The list goes on and on.  Unfortunately (or fortunately for licensors!), these rules are definitely in effect in today’s video game market.

 

Enter the Matrix (2003) went all-out to replicate the feel of the movies in which it was based

During my time at Westwood, Origin, and Liquid, I’ve worked on or around brands like The Lion King, Monopoly, Command & Conquer, Red Alert, Land of Lore, Sid Meier, Civilization, Ultima, Wing Commander, Jane’s, Lord of the Rings, Dungeons & Dragons, Desperate Housewives, Thor and others. I’ve definitely become a believer in the power of brands in video games.

I once explained the power of licensed IP to some Microsoft execs like this: we have to think of games as “slippery.” To non-industry folks, games are difficult to quantify. Like a “hard good,” they can list a feature set (which most people don’t understand how it translates into fun) -- and like traditional entertainment, they have to convey an experience (which may be at odds with a feature set). The result is confusing to the unsophisticated buyer. To address the issue, we often need put as many handles on the product as possible. Like a known brand. As it turns out a brand is a significant handle for an otherwise slippery product. Put “Vampire Game” on your box and even a veteran gamer isn’t completely sure what’s inside. They have to probe the box and do multiple searches on the Internet. Is it a survival-horror? An adventure game?  Do I play a good guy or a bad guy?  Put “Twilight – The Game” on the box and immediately a large segment of the population thinks they know what they are getting without asking a single question. My son can’t read, but he looks for the Hot Wheels logo on every miniature he gets. That’s power.

There are lots of touchy-feely aspects to a good brand too. Buyers may have a preexisting set of positive expectations, so you naturally speak to buyers who are predisposed to like your content. Furthermore, people who don’t like that particular IP may steer away altogether, preventing a painful purchasing mistake. 

The buyer gets an immediate sense that they belong -- that they are part of a club.  It gets people who don’t play games to buy them (and sometimes even play them!) and can lead “casual” players to go deeper, getting more involved in the story and gameplay. All of these “soft” concepts are often swept under the powerful “there’s a movie attached” thinking but they are true and very, very important.


The Bad

Where brands fall down is in the licensing. For the uninitiated, licensing is when a brand is “loaned out” to another entity for the sake of creating a product with that brand name on it.  For example, Iron Man was licensed to Sega so that they could create video games with characters from the Iron Man universe.  The person who buys the license (licensee) typically pays an upfront fee for the right, plus some ongoing commitment like an agreement to pay the brand owner (licensor) some portion of the money that the branded item makes when it is sold (royalties).

Sega's Iron Man (2008) had a hugely successful movie behind it

More often than not, this is the first challenge. The most common error here is paying too much for the brand.  Eager to make loads of money on the back of a TV show, famous movie, or upcoming release, licensees will often pay way more than they should. This puts pressure on the other aspects of the project: to deliver the same quality under a less-than-ideal budget.

[As an economist, I subscribe to the “one wallet” theory of budget spending where a company or person has a finite amount of money. When they spend in one direction, they are required to spend less in another.]

Sometimes, the licensee will take from the budget of another project but, in my experience, this is the exception to the rule. The money will often come out of a project (or projects) related to the brand.

This is where the bad may show its ugly face.  Let’s imagine that a publisher has decided to put 15 million toward a project.  Furthermore, it decides that the market is crowded and so the easiest way to “rise above the noise” is to attach a license. Good so far. The idea is to spend 10 million on the game and 5 million on marketing, sales, and distribution. The next step is to approach someone with a brand. They want 3 million upfront, plus ongoing royalty commitments. It’s a great brand with a movie coming next year so they say “yes, please.” Now they have to find the money for the license.

The licensor, happy to see the project moving forward, may try to limit their investment even further. “The movie is coming, that’s kind of like marketing, so we’ll cut the marketing budget to 3 million and the development budget to 9 million.” Yes, you read that right. We just went from 15 million down to 12 million in a single paragraph.

I know the example is simple but this kind of thing happens more often than you might realize. Add to this any unforeseen circumstances like:

You see, this can become a bloody mess very quickly. There are so many moving parts that can go wonky that not paying too much for a license is probably the best first decision a potential license buyer can make.

The second issue is the quality shortfall that many games take while hiding under a brand. Our industry is littered with licensed products that didn’t result in a good game (80 and above on Metacritic). I’ve been in this industry long enough (21 years) to have heard the stories right from the horse’s mouths about how many games were intentionally made poorer. I myself have been approached by an unnamed company with a license they wanted to make into a game in a very short timeframe. When we indicated that the quality would suffer they said, “We just need something in the box, it doesn’t matter what it is. People will buy it for the brand.” At one point, it was so common that now it is difficult to put out a good game to the hardcore market, under a new brand without getting, in my opinion, an unduly harsh once over. I can’t blame gamers, really. They have been burned again and again by products that were put to market unfinished and broken. It hurt (and hurts) all of us.
 

The Ugly

Finally, there’s the financial shortfall that many licensed games suffer from. In the last few years, successful AAA console titles have publically announced budgets between 45 million and 100 million.  While that’s a big range, I don’t personally know of a single licensed brand console title that has gotten a budget in that range with the exception of The Force Unleashed (more might exist, I’m just not familiar with them).  What this means to the buying public is that games that had 1-25 million dollar budgets are put alongside games that had 45-100 million dollar budgets at the same or virtually the same price. How can they compete?  Should players buy the $59 MegaBeast: The Game that cost 2 million to make or the $59 God of War budgeted at 45 million? The worst part here is that somewhere during the development the burden seems to completely fall off the license holders’ shoulders and land firmly on the developers’. Conversations go from “We know it won’t be a God of War” to “Why isn’t it God of War?” almost overnight and the developer is left to figure out how to make a game that took 45 million dollars and 4 years with less than half the time and money. It’s tough. It leads to a lot of strained business relationships and little success.

A branded product is not an excuse to make an underfunded product. Licensees must still consider the market competition and provide a comparable experience if they are to effectively use the brand they have purchased. That brand should be a boost to blow past the competition, not a crutch to catch up to them. 

Many in the industry regard GoldenEye 007 (1997) as one of the best licensed games ever made

Conclusion

It’s currently in fashion to say that licenses “don’t work.” It’s the business model that needs adjusting, not licensing IP per se. Licenses do work.  They are powerful, effective and profitable when used properly – like in GoldenEye 007.

Licensors need to see their licensees as extensions of themselves. Treat them as if they were on the same side… Because they are. Rather than overcharging them for a brand, figure out what will make money for both parties, because anything less hurts the value of the brand in the long-term and annoys gamers in the short-term. On the other side of the fence, licensees should stop seeing a brand as a short cut to AAA heaven. Instead, see it as that extra push your game needs to crush the competition.

There will always be a market for high-quality licensed games. We just need to treat the brand with respect, budget accordingly and give the studio enough time to build a game we can all be proud of.