Talent agents are a common sight in Hollywood but a rarity in the video game industry. However, as the size of deals with game publishers inflate -- especially for next-generation console titles -- development companies are coming to realize that representing themselves may not be as lucrative as having a really good agent.

Smaller game developers, in particular -- which usually can't afford an experienced attorney or in-house business development manager -- stand to gain the most from signing with an agency. But there's a Catch 22: The leading agents only want larger clients with good track records, which are frequently the companies that don't need an agent.

That leaves the mid-size developers, like
Digital Extremes of London, Ontario, Canada, which has about 60 people on staff and intends to double in size in the near future. President James Schmalz says he went 12 years without an agent, certain that he was doing just fine without one.

"I was very anti-agent," he confesses. "I mean, why bother to pay someone for something you can do yourself? But then I talked to friends of ours at Silicon Knights who said they've been using agents for the last decade and they raved about them. I was skeptical, to say the least, but I figured it didn't hurt to sit down and listen."

Schmalz listened, was impressed with what he heard and, just three months ago, signed with Interactive Studio Management (ISM) of Los Angeles.

Now he's sorry he waited so long.

"The ISM guys have had lunches and dinner and daily contact with all the biggest publishers," says Schmalz, "and we've seen massive results in just three months, the kind that would have taken us a huge amount of effort to accomplish on our own." Digital Extremes is very close to signing a deal for his company's next-gen, sci-fi action game "Dark Sector", but he couldn't give more details.

"We decided that we had put a few million dollars into that game already and it was time to really push it hard with the publishers," he explains. "That's when we sat down with ISM, who convinced us that it was the right thing to do."

Agencies like ISM make the pitch that theirs is an important function especially now that game contracts between publishers and developers are no longer $1 million deals, as they were just a few years ago, but $10-million and $15-million deals.

"What we bring to the table is our experience," explains Dan Lee Rogers, a partner in ISM, who says his company negotiates at least one or two contracts a month. "That contrasts with developers who do maybe one deal a year or even 18 months. When you're that inactive, it's difficult to get a good handle on things and negotiate in your best interest."

As with a Hollywood actor, it's hard to negotiate on your own behalf without becoming emotional about the deal, explains Rogers. "If you get into an aggressive negotiation, it's difficult to walk away without leaving someone with bruised feelings. Without an agent, a developer will have to live with that."

ISM currently represents 11 developers, including Digital Extremes, Silicon Knights of St. Catherines, Ontario; Next Level Games of Vancouver; Pseudo Interactive of Toronto; Mass Media of Los Angeles; n-Space of Orlando, FL.; and Bottle Rocket of San Diego. The average client employs 75 to 100 developers, is bringing in $10 million to $20 million a year, has two teams that allow the company to work on two games at a time, and signs a new deal every year or so -- thanks to ISM.

Eight hours from Hollywood

Explaining one reason why ISM represents so many Canadian developers, Digital Extreme's Schmalz says that the farther a company is located from California, the more important it is to have an agent.

"Here in London, Ontario, we just don't have immediate access to all the big publishers on the West Coast," he says. "You can't have lunch with a publisher to build a relationship when it takes eight hours to fly out to LA. So accessibility is one of the big things an agent can for us, probably the biggest thing."

Imagine then how important an agent is to Adrian Chmielarz, co-owner of People Can Fly, whose headquarters is in Warsaw, Poland. Chmielarz signed with Octagon Entertainment of Chapel Hill, N.C., three years ago and couldn't be happier. An anecdote he tells about how he signed his most recent deal illustrates why:

"When we prepared the proposal CD for our game 'Painkiller', we included lots of artwork and design documents," he says, "and then sent it out to a few publishers we'd been in contact with the last few years. Dreamcatcher Interactive [of Toronto] was among them. Nothing happened other than getting a few responses like 'please keep us informed' and 'feel free to submit more material when you're ready.'

"Then we decided to go with Octagon and let them handle it," he recalls. "They saw the potential in the game and, because they knew what the publishers were expecting, they advised us to add a few more things to the CD, like a concept game-play movie. And boom! One month later, we put our signatures on the deal. With whom? The very same Dreamcatcher."

Octagon closed the deal for "Painkiller," then the expansion pack, and then the Xbox version which launches this November.

According to Chmielarz, agents are also able to play the "bad cop," letting the developer remain the "good cop."

"When things get ugly with the publisher -- like, perhaps, the publisher isn't paying -- the agent is the one who sends out the fiery e-mails, not the developer, who can remain the nice guy who just wants to do this cool game."

Publishers also know that agents are a great litmus test for whether a game is good enough to market, adds Chmielarz.

"Remember that agents can't try to find a publisher for every game they get their hands on, so agents need to be choosy. To the publisher, the very fact that the agent shops the game around is a sign that the game is, at the very least, worth a look."

Indeed, Lloyd Melnick, co-founder of Octagon, says his staff of evaluators sees hundreds of submissions each month but pursues only about 5% of them.

"The most important factor for us is (a) track record," he explains. "If the developer has created successful games in the past, we have a much better chance of being able to place their newest games with the appropriate publisher. We're not looking for new studios or even studios that haven't put out a hit game in the past."

What he is looking for are triple-A developers who have the talent but aren't on good business terms with publishers or don't have the mind share of publishers that they deserve.

"We really are looking for the home runs," says Melnick, "which is why, at the moment, we represent only five developers, including People Can Fly in Poland and Haemimont Games in Sofia, Bulgaria."

For that sort of individual attention, agents typically receive a 5% to 15% commission on a deal depending on what sort of relationship the developer and agent have had previously, on the amount of exposure the developer already has earned itself and on whether the agent is creating brand new business or simply managing a business that's already there.

It's not always about the money

The most important part of the deal between the developer and publisher isn't always about the development fees, says ISM's Rogers.

"The big money for the developer is in the royalties and it's in ownership of the code. You just saw that Electronic Arts did a deal to publish the Xbox version of Valve's 'Half-Life 2.' That deal would never have happened if Valve had done what 99% of the other developers in this industry do -- or are required to do -- and that is to give away all of its (intellectual property) to the original 'Half-Life 2' publisher, in this case Vivendi."

Another major negotiating issue is what sort of resources are required to build the game.

"That's one of the biggest snags right now," says Rogers. "How many people does the developer need to build a next-gen game? The publisher doesn't want to invest a penny more than is required to get the game out the door. The developer wants to get the job done right. That's where the agent can help. We've already been through so many next-gen deals that we can share our experiences."

Rogers estimates that only 1% to 2% of the 300 independent game developers have outside representation. And attorney Jim Charne says that's because not every developer stands to gain from paying for an agent.

Charne is a Santa Monica, Ca.-based attorney who represents game developers, writes a column about legal matters
for the International Game Developers Association, and is a past president of the Academy of Interactive Arts and Sciences.

"If you're talking about a project that's budgeted at $8 million to $15 million, giving an agent even a 5% commission is quite a lot of money," he says. "The question each developer has to ask itself is what value does the agent's participation bring?"

The industry's big talent, Charne maintains, don't require representation.

"By and large, the Wil Wrights and the Peter Molyneuxs of the industry [the creators of 'The Sims' and the 'Populous' series, respectively] can take care of themselves. Tthey've got their reputations, they've got a history of successful projects under their belt and they've probably got lawyers to handle their contracts. It's not clear what value-add an agent can bring to them."

On the other hand, adds Charne, start-up companies or development teams that have broken away from successful developers can benefit the most from an agent, who can help them get in the door of risk-averse publishers. If, that is, the agent is willing to take on a start-up. As noted previously, many aren't.

"What the agent does is provide comfort for the game publisher by serving not only in a business development function but also a project management function," he explains. "The publisher then feels it has a security blanket, that there's someone it can call if there's a problem, someone who can step in and manage the project and keep it moving along."

But despite Charne's skepticism, agents insist it's the right time to be thinking about representation.

"The deals are getting bigger, the stakes are getting higher, the expertise needed to get the deal done is expanding," says ISM's Rogers. "If a developer's primary focus is business development, maybe they don't need us. But for the developer whose focus is primarily on creativity and game design, for that company the deals are getting too complicated and too risky."

People Can Fly's Chmielarz concurs: "Look at Hollywood. Do you know any big star without an agent? I mean, they are on top of the world and could easily find very well-paying jobs. But their agents can always find even better deals. That's the kind of thing we're counting on."

Paul "The Game Master" Hyman was the editor-in-chief of CMP Media's GamePower. He's covered the games industry for over a dozen years. His columns for The Reporter run exclusively on the Web site.