Online vs. Retail Distribution. How Developers Get Paid: The Retail Market for Games  Laramée distinguishes between cost-based deals and royalty-based. - ppt download

How Developers Get Paid: The Retail Market for Games  Cost-based deals:  The publisher calls for proposals. E.g the publisher wants a fighting game for PS3 by Q3.  The developer evaluates the cost of the order.  The publisher and developer agrees on a profit margin for the developer.  The developer must create the game for the fixed amount that was agreed upon.
The developer sells through its own site and pays only the cut to the transaction company.  Online intermediary model. The developer uses a third party site to host and manage distribution of the game.  Combined models. E.g. Steam or Xbox Live..

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Will video games start to follow true licensing model where you have to pay every month to use it or will this actually result in less revenue coming in per game created?

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