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Kowloon Nights: 'We need to realign the power dynamic between developers and publishers'

January 28, 2020

Kowloon co-founder Alexis Garavaryan talks to GameDaily about his global fund for indies, which is backing Godfall, Last Guardian creator Fumito Ueda, Hyperlight Drifter's Teddy Dief, and much more.

Indie development has never been more accessible nor more challenging than it has been in recent years. With tools freely available and self-publishing on digital storefronts at any developer’s fingertips, the game development landscape has been democratized. As a consequence, there are more people making games than ever before, leading to a discoverability nightmare, and the number of game creators in need of funding is on the rise. 

Funding is an age old problem for developers, and securing the necessary cash to bring a project to life often entails sacrificing certain rights or future business prospects to the suits holding the checkbooks. Kowloon Nights, a global fund founded in 2017 by Alexis Garavaryan, Jay Chi, Lindsey Rostal, Ryan Payton, and Sam Lee, is aiming to change that, putting the power back in the hands of the developer. Garavaryan knows a thing or two about the indie space, as he was among the team responsible for establishing ID@Xbox while at Microsoft and he signed indie darlings like Cuphead, We Happy Few, Ashen, and The Long Dark.

One of the key things that Kowloon has set out to do, as described in a Medium post from 2018, is to break up the publishing-funding relationship. Kowloon does not see itself as a publisher, and the fact that publishing and funding are typically intertwined is often where problems begin (and where developers lose power).

“We need to realign the power dynamic between developers and publishers. Publishers can bring a lot of value and expertise, but it’s important that the deal terms reflect everyone’s contribution,” Garavaryan told GameDaily. “Independent studios put in an enormous amount of human, creative and financial capital into their games. Writing checks is a lot easier than making games, but that is not always reflected in the deal’s terms or the amount of control publishers can exert over the creators.”

Garavaryan also pointed out that the options available and the information presented to up-and-coming indie developers can be overwhelming at times. “The first issue developers face is the asymmetric access to information,” he noted. “It’s difficult for developers to navigate the different options available to them and the value that each potential opportunity brings. That’s especially true for people who are new to the industry. We always advise developers to get multiple offers when possible, but also reach out to friends in the industry to get feedback on the terms offered or verify how competent the other party is.”

While signing with a publisher can certainly lead to a discoverability boost, Garavaryan acknowledged, there is the risk that a developer’s name or brand loses some attribution. 

“Working with a well-known publisher can be very positive in terms of discovery. However, it is fairly common for the studio name to be eclipsed by the publisher’s brand,” he cautioned. “We believe the creators should be prominently featured. They should be recognized for their work, not the folks who helped fund or market it. Developers who have successfully self-published were able to build strong studio brands and communities of fans who follow them across games.”

Small indies don’t always seek out (or have the means to pay for) legal representation in their deals, either. Kowloon doesn’t want developers to get bogged down in 30-page contracts. The terms should be very clearly laid out, and to that end, Garavaryan said that Kowloon’s contracts are deliberately short. Developers always keep the rights to their IP, but revenue shares can vary.

“Our terms are very straightforward. While the rev share will vary depending on the scope of the project and prior investment from the developer, pretty much everything else is consistent,” he stated. “We tried to fix some of the pain points that developers typically encounter when working with a publisher or funding partner. Our contracts do not have a recoup, which means developers make money from the first unit sold. They also collect revenue directly from the platforms and then share with us. This avoids situations where the studios sometimes have to wait months after release to receive money.

“Our contract is two pages long. We only receive revenue from the game and have no rights on the IP, future projects or even derivative products like the soundtrack. We wanted it to be simple and understandable for all of our developers. Our team is [also] available to provide feedback but we don’t have any sort of creative control over the game. Finally, we don’t have strict milestones or deadlines. So the developers are able to work on their schedule and release the game when they are ready.” 

Garavaryan’s experience in the East should prove valuable for indies as well. After ID@Xbox, he went on to work at Chinese behemoth Tencent, helping to get indie games published in China via its WeGame service. The name, Kowloon Nights, is indicative of the Asian influence in the fund. Not only is it a reference to Hong Kong’s Kowloon City, but the primary source of money is a group of undisclosed investors in Asia -- which Garavaryan believes are more risk tolerant. Surprisingly, there is some commonality between ID@Xbox and his work at Tencent, and that’s rubbed off on Kowloon.

“The one common thread between ID@Xbox and Tencent is that both are hands off. This hands-off approach is one of the core pillars of Kowloon Nights,” he said. “We invest in people we believe in and let them create. We leave all decisions in the hands of the developers, because we believe they know their game and their community best. We exist as a support organization that developers can rely on if they need advice or expertise on a topic they may not be as comfortable with but are not beholden to.

“We also try to create [a] community for the teams that work with us. We have a giant Kowloon Family Discord server where we share useful information and where our developers can help one another. We also organize events at major conferences where we invite friends and partners to share knowledge.”

Since its inception in 2017, Kowloon has steadily built up its portfolio, with more than two dozen indie projects now being funded, including Fumito Ueda’s next project at genDesign, much anticipated PS5 project Godfall from Counterplay, and Teddy Dief’s (Hyperlight Drifter) next game. There isn’t any one particular trait that Garavaryan has identified in the games he funds or the studios he backs, however.

“As a group we have very diverse taste and I believe it is reflected in our portfolio. We react well to strong creative voices and we are in a very fortunate place to be able to sign almost any project that gets us excited. We also hope that some of our games like Spiritfarer or The Red Lantern leave a lasting impression on players,” he commented.

“The one question we always ask ourselves before signing a game is whether the team will be better off after working with us. This is our metric for us success, even more so than awards or units sold.”

The amount of funding allocated per project can range from as low as $500,000 to higher, AA-level figures like $5 million. Garavaryan said that recently that figure could even be as high as $10 million, which isn’t a AAA budget, but it could allow a small indie team to accomplish quite a lot. 

With crunch continuing to be top of mind, and a lot of AAA veterans feeling burnt out, transitioning to an independent studio with a more moderate budget and scope could be quite appealing. Even for studios owned by big companies, developers are beginning to realize the value of this approach. Ninja Theory, for example, talked about their new development strategy (while unveiling Project: Mara) that enables them to tackle multiple projects by splitting into 20-person teams. 

Garavaryan is a big believer in sustainability, and he’s hopeful that Kowloon’s funding will help developers realize their visions in a sustainable way. “Kowloon Nights exists to allow creators to express themselves and to do so in an environment that is both healthy and sustainable. In order to allow for that, our contracts don’t have milestones or strict deadlines. Creating games involves a lot of risk and potential anxiety for developers and our role is to help alleviate some of that pressure,” he remarked.

Kowloon has had a bit of momentum recently, and just last week, the company added four new people to the team: Callum Underwood, Anlu Liu, Astrid Mie Refstrup, and Danika Harrod. These additions will enable Kowloon to be more responsive to development partners and prospective partners. Underwood, in particular, should give Kowloon a leg up in signing more talent, as he’s already shown a penchant for indies, signing dozens of games for indie label Raw Fury and for VR outfit Oculus. 

“We care about being accessible,” added Garavaryan. “This means responding quickly to people reaching out to us, but also covering more shows all across the world so that developers who can’t afford to attend major conferences can easily meet with us. Callum, Anlu, Astrid and Danika will help us be more available and provide better support to the teams we already work with.”

Things have been progressing nicely for Kowloon, but ironically, the company’s founders aren’t worried at all about ROI or meeting some particular metric. “Our goals for Kowloon have been consistent since we started,” Garavaryan continued. “We currently support 26 incredible teams across 12 countries. We do not have a limit on the number of games we can sign per year so we simply support projects that get us excited as a team. I know this may sound counter-intuitive for a fund, but we are not focused on growth. We want to ensure we give the right amount of support to the teams we sign.”

As more of Kowloon’s portfolio hits the market, we should get a better sense of the fund’s impact on the market, but the early feedback from developers has been positive. Hyperlight Drifter’s Dief praised Kowloon in 2018 for a “simplified relationship,” according to Polygon.

“There’s no such thing as money without a relationship, or money without a process,” Dief remarked. “You always want to be careful before you take money. That being said, I think I’m part of a group of indies that are much more comfortable with taking money. I think that there was a period a little bit earlier in indie games, maybe like 10 years ago or something, where the reaction against being involved with other organizations was so strong. It was like, if you can self-fund your project, do it. Don’t take anything from anyone.”

Now Dief and his contemporaries understand that taking money from the right people and getting the right deal can make all the difference and help a new game rise above the noise. “If I had to, for the rest of my career, give someone a piece of the profits of the work to reduce risk, to make this a sustainable career, to keep getting to make things that I want to make, I [would] happily do that every time,” he said.

The role of the indie in 2020 and beyond is likely to take on even more importance as cloud gaming tries to gain a foothold and next-gen consoles hit the market. It’s not uncommon for new platforms to lean on indies to populate their digital storefronts around launches. We saw it with Nintendo Switch and the eShop, and indies should be in a prominent role on the platforms to come as well. Kowloon is keenly aware of this. As the saying goes, content is king.

“No matter the technology or platform, they all need content. We would never push any technology on a developer, but we’ve found the teams we work with are very forward thinking and often are looking to leverage different technologies to make their game unique. That said, there are no requirements from us, a good idea can be a good idea on any platform,” Garavaryan said.

The rise of subscriptions like Xbox Game Pass is likely to be a boon for indies as well, he said: “This an exciting time for our industry. Subscription services give players the ability to discover games and developers they may not have otherwise. It also provides developers with an additional revenue stream to recoup their investment. The folks behind those services on the platform side are also very passionate and love good content. 

“We make introductions for our teams to the platforms, but ultimately, what they choose to do with their game is up to them. We are there to help provide guidance based on what we know; however, we want them to decide what they think is best for their game.”

Garavaryan said that Kowloon will be attending most major shows in 2020 and he and the team remain eager to speak to more talent. The influx of indies in the industry has led to the rise of numerous indie labels for developers to choose from. Every indie has to evaluate for themselves what kind of deal is right for them, but by separating out the publishing component from the funding, Kowloon’s provided a unique approach that many might find appealing. 

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