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A licence is only as valuable as the amount it reduces your marketing costs

By on July 19, 2010

At Develop 2010, Alice Taylor of Channel 4, fresh (!) from collecting the Publishing Hero award for Channel 4 at the Develop Awards, offered a profound piece of advice to games developers and publishers.

A licence is only as valuable as the amount it reduces your marketing costs

A licence is not inherently valuable to a games business. Its role is to increase the number of people who will buy your game. There are other ways of persuading people to buy your game, marketing being the a key – and expensive – one.

Of course, there are other considerations. In particular, licences play the role of risk-reduction. There is the obvious way: in a hit-driven industry, one way of aiming for a hit is to use an intellectual property that has been a hit in another medium.

The less-obvious risk reduction is perhaps the more important: licences reduces career risk for executives. When someone licences Eragon to be a game, they can point to all of the movie executives who have greenlit it, the marketing support that the title will get, the global publicity. If the movie turns out to be a flop, it’s not the executive’s fault, it’s the movie studios. If the game is bad, they will probably still sell a bunch of units on the strength the licence.

So when you are deciding to get a licence for your game, think about what it brings. If it brings career security, then fine, the price is less important (although frankly, I think you’re in a depressing place).

But if you really want to work out how much you should pay, decide how much *less* marketing money you will need to spend to attract the same number of players with the licence.

That is exactly how much a licence is worth.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: