Editor’s Note: This is part one of a two part series. We spend over two hours talking about the games industry, the role of publishing, and challenges with certain platforms. The first part of the series (this article) is focused on the experience of founding a tech company in a small city, and the general role of a publisher. The second part will concentrate on different challenges in the games business.
When people hear the term video game publisher, it’s relatively common for one of the “big 3” publishers to come to mind: Take-Two Interactive, Activision Blizzard, or Electronic Arts. The big publishers soak up much of the media landscape, but they certainly aren’t the only players in the industry. The past ten years have been marked by a flood of “indie” game experiences, and the publishers that service that portion of the industry. Before we talk about the rise of small business publishing, let’s discuss something else: location.
Most of the corporate office “structure” in the video game industry is located in large urban areas, often with millions of people living in the city and surrounding area. California and Texas both have their fair share of games industry offices, along with other major urban centers around North America. If a company needs access to thousands of skilled employees, it make sense to go to where the talent (probably) lives. Urban centers create a positive feedback loop: People move to urban areas for jobs, employers move their offices to urban areas where they can find employees. This obviously isn’t the case with 100% of employers in the games industry, but it’s common enough that it’s no surprise when a new studio / office is opened in Montreal, Austin, or San Diego. Imagine my surprise for a moment, when I found out in the summer of 2021, that a game publisher was located a lot closer to me than I expected.
While browsing Twitter in June of 2021, I stumbled upon a CEO commenting on the fact that only a small portion of their revenue is derived from what was implied to be the PlayStation ecosystem. I’m not ignorant to the struggle of indie game publishing, but that particular thread (and the thread it was attached to) was immensely helpful in revealing the challenges of an small business video game publishing firm. I come to find the CEO, and the company, are located right here in my hometown of Erie, PA.
GOT: “I admit, I did not realize that we had a publisher in Erie. What’s the story behind a video game publisher ending up here [in a small American city]?
CEO Matthew M. White: [Condensed & Paraphrased] “In 2017 I left Playstation and returned here because my wife is from here [Erie]. Don’t get me wrong, I love Erie and it’s my home, but she’s originally from here. I’m from Canada. We wanted kids…and it’s really, really, difficult to live in California, not just because of the cost of everything, but even if you just want to go buy a t-shirt, that’s hours of your life. The most basic situations become an all-day chore.”
“The thing that drew us [to Erie] is that when you’re starting a business yourself, you’re looking for places of opportunity that aren’t New York City, or Los Angeles…because they’re so punishing to the workers. It becomes a quality of life question. It’s just not the kind of life we wanted [or for the employees]. Ultimately, publishing work is usually completely distributed.” [Dr. White started Whitethorn Games himself by working three different careers.]
“The reality is, people go [travel] for games jobs. We’re in Erie…but if you’re not from Pennsylvania you probably haven’t heard of it. When I tell people ‘Erie, PA’, the next question usually is, ‘Where is that?’ But, that doesn’t necessarily matter. In the last six months [from this interview] we moved people, and their families, from Seattle, Austin, Dallas, Chicago, etc. We regularly pull people from the entire country. We probably do half local sourcing, mostly for the entry level positions. Almost all of our junior positions are filled local. When I need an Unreal developer with three years of experience, I’m not going to find that here [yet]. But that’s OK! When we do need to pull people here, we do this interview trick: We go out on the lake. We eat at a couple nice restaurants. We hit up some of the local establishments and give them a gift bag filled with gifts from the local area. They say, ‘This must have cost thousands of dollars,’ and I tell them, ‘it cost four hundred bucks.’ That experience, without even saying a second word, plants the idea in their head that they can live here with a better lifestyle than what they are used to. For people that haven’t spent any time here, when they see the combo of amenities, culture, activities, food & drink, quality of life, natural landscape, buildings, history, proximity of clear & clean nature…it can be very convincing. That is so hard to find, coupled with a cost of living that isn’t obscene.”
Editor’s Note: We spent the next few minutes talking about the significant cost-of-living differences between major metropolitan areas and small city America. Dr. White also jokes about how often he’s asked about “roommate websites” for Erie. (Trust us, you don’t need a roommate to rent an apartment here.) If there is one thing consistent in the conversation, it’s that people born & raised in large urban areas are surprised by the true cost of living outside the traditional “hub” zones.
GOT: “People need to hear this angle, not only just for this interview, but in general.”
CEO Matthew M. White: “The other side of the coin, unfortunately, is that there is some ‘adjusting’, especially when going from a major urban area to Erie. Some of them [hiring candidates] have trouble adjusting to the fact that they have to drive everywhere, for example. I’d say that 30% of our new hires don’t have a drivers license, because when you live in LA, what’s the point? Unless you’re wealthy, [owning a car] is just a massive extra expense. About 1/3 of brand new employees, that we move in, don’t have a car or drives license. The interesting thing about here [Erie] is that you generally grow up with it [a driver’s license] because it opens up the whole world to you, but if you live in an area with a ton of public transit…there is a little bit of a culture shift for them [when coming here]. It’s an interesting cultural challenge when you have to walk a 32 year old through driver’s education class. But, there’s also the excitement when people realize they’ll be able to own one of these [a car].”
“The other challenge of living here is that if you have a very specific hobby [that you want to continue]. For example, you’re into collecting punk records from the 70s, you can’t really do that here. If you’re into concerts or whatever, you’re going to have to drive an hour to get there. But, I’d say that’s the extreme minority of people.”
Editor’s Note: Erie happens to be situated between three major metropolitan areas, including a slightly longer drive to Toronto, Canada. We both agreed that the ability to get to those areas helps alleviate some of the concern for potential employees, especially those looking for access to metropolitan areas.
CEO Matthew M. White: “We [Erie] are very much a city. But, I always tell people to anchor their expectations with the size. This area has a population of around 300,000 (including the suburbs). Boston area is like 800k. Pittsburgh area is like 1.3 million. Montreal area is about 3.5 million. Ever been to Carlsbad, California? Erie is about the same. It helps to anchor their expectations. Yes, I do mention the snow in the conversations.”
GOT: “I think we have some similar views on the Erie area. Let’s move on to the second topic. I think most people understand what a game developer does, but I don’t think everyone understands the publisher role. Can you expand on the publisher role? Additionally, can you clarify if Whitethorn is purely a publisher, or the business contains publishing & development work?”
CEO Matthew M. White: “Absolutely. We do have some development work, but to be totally clear, almost every publisher does that. When you make a purchase on a console, for example the Switch, or the Xbox, or whatever, quite a few people are putting their ‘fingers’ into that transaction. Suppose you spend $10 on a game through Nintendo. That $10 is split between:
- The payment processing company (a few cents)
- The government, via tax
- The console themselves (for providing a platform)
- The publisher (e.g. Whitethorn Games)
- The developer (or developing entity that made the game)
The largest single piece is usually the developer, but largest single piece might mean they only make 40% of the sale price. They are making more than anyone else, so you can imagine how that breakdown works: a few cents for the payment processors, tax to the government, payment to the console, $2-$3 to the publisher, and $3-$4 to the developer.”
GOT: “That’s very interesting. Is the percentage breakdown between you [Whitethorn Games] and the developer relatively typical, or can it vary?“
CEO Matthew M. White: “It can vary, it fact it can vary a lot. It’s a case by case basis. For example, someone comes to us with their first game ever made, they are totally ‘green’ in the industry, they need help, and a million dollars. In that case our cut is going to get a little bigger because the risk is tremendous. If the project loses money, I might have to lay people off. Generally speaking, if that’s the kind of risk we’re taking on, we might take 45%. That would be a very deep cut, and the only reason we’d present an offer like that is due to the deep financial risk to us [WTG].”
“We, as a publisher, like to operate in that 25%-40% net range. We don’t take care of any of the tax actions, so in the end the purchase price we work with is $10. The console (Playstation, Xbox, Nintendo) takes their cut and leaves the remainder [editor’s note: industry media commonly reports this to be approximately 30%]. If I say we take 50% net, that would be (approximately) $3.50 to me and $3.50 to the developer. That would be highest the [indie] industry goes. At one point one of our biggest competitors (redacted for article) was running net 50. Whatever hit the bank account from the transaction was split 50-50 between them and the developer. It’s a better deal than some of the major AAA publishers offer. Those deals often favor the publisher. We, as a publisher though, like to operate in that net 25 to 40 range. Usually that means around 30 net range. We’ll take $3 and leave the developer $4.”
“On the pitch standpoint, we probably receive about 5-15 games a week. About seven of those, usually about half, just show up in our inbox. Those are typically pitches from developers around the world and they vary in quality and ‘brand fit.’ We get a lot of super early prototypes, budget breakdowns, and perspectives of what the developer is going for, etc. We get a lot of those. The other half of the mix is active scouting. We have a full-time scout and all that person does is hunt for games that meet our brand perspective. We published games from Chile, Argentina, Canada, Japan, Australia, Germany, France, etc. It’s global both in our acquisition footprint (where we acquire the games) and where we sell. You can buy Calico, for example, on about eight different platforms in about 56 different countries. It’s widely available, and even more than that via Steam.”
GOT: “Basically anywhere Steam has a footprint?“
CEO Matthew M. White: “Yep. Consider though, that the consoles are little different. There are thousands of Saudi gamers on Steam, for example, but not so much on any other platform. Saudi Arabia is very much a PC country. Russia, same way. We target our advertising and strategy differently depending on the demographics of the country. We have a large mobile footprint in India, where mobile is very lucrative, but not on any other platform. You have to estimate game usage by country. That’s ultimately what a publisher brings to the table. If you’re a brewer, for example, and you make great beer, and you have it down to a science, but how do you regulate and sell it in all 50 states? That’s what we do [for video games]. We are sales people, compliance people, export people, taxation people, legal people, reporting people, and of course technical. We assist in the process that takes your game that was built on PC, for example, and transferring it over to Switch, mobile, or Xbox, for example. This is the stuff that folks never really see.”
Editor’s Note: At this point, Dr. White laid out a concrete example where WTG was able to save their client a half million USD due to a particular tax issue. There are, of course, limitless examples where publishers help their clients with this type of expertise, but it was valuable to understand the reality of what a publisher can actually do for the client.
Speaking of clients, you can check out the full Whitethorn Games catalog on Steam.
End of Interview
I consider myself rather well versed in how a publisher operates, but this interview convinced me of two things:
- The games industry can make a home in small city America (or any small city with access to proper infrastructure), but it likely depends on how they want to be structured. Whitethorn Games, using the hybrid distributed model, has made it work in Erie. Would it work for large publisher? Possibly, but that’s a harder sell. Coincidentally, our hometown was featured in Silicon Review as a potential location for the “next Silicon Valley.”
- Publishing is complex, even when a person understands the role it provides in the industry. A significant portion of games media hyper focuses on the development process, but to really understand how many games even come to market, one needs to understand the role of the publisher (small or large).
I want to say thanks to CEO Matthew M. White for giving me the opportunity to conduct this interview. I hope it sheds some light on the complex challenge of publishing, while at the same revealing how a tech business can find a home in a not-so-typical location. Part two of this interview is planned for the first half of 2022. If you’d like to discuss this article, you can find our Twitter here. Please feel free to comment and share, if so desired.