Editing Video game developer (section)

== Types ==
=== First-party developers ===
A ''first-party developer'' is part of a company that manufactures a [[video game console]] and develops exclusively for it. Such developers may use the name of the company itself (such as [[Nintendo]]), have a specific division name (such as [[Sony]]'s [[Polyphony Digital]]), or have been an independent studio before being acquire by the console manufacturer (such as [[Rare]] or [[Naughty Dog]]). Whether by purchasing an independent studio or by founding a new team, the acquisition of a first-party developer involves a huge financial investment on the part of the console manufacturer, which is wasted if the developer fails to produce a hit game on time. However, using first-party developers saves the cost of having to make royalty payments on a game's profits.

Current examples of first-party studios include [[PlayStation Studios]] for Sony, and [[Xbox Game Studios]] for Microsoft.

===Third-party developers===
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Third-party developers are usually called upon by a video game publisher to develop a title for one or more systems. Both the publisher and the developer have a great deal of say as to the design and content of the game. The publisher's wishes generally override those of the developer's, as the publisher is paying the developer to create the game.

The business arrangement between the developer and publisher is governed by a contract, which specifies a list of milestones intended to be delivered, for example, every four to eight weeks. By receiving updated milestones, the publisher is able to verify that work is progressing quickly enough to meet the publisher's deadline, and to give direction to the developer if the game is turning out other than as expected in some way. When each milestone is completed and accepted, the publisher pays the developer an advance on royalties. The developer uses this money to fund its payroll and otherwise fund its operations.

Successful developers may maintain several teams working on different games for different publishers. In general, however, third-party developers tend to be small, and comprised of a single, closely-knit team.

Third-party game development is a volatile business, as small developers may be entirely dependent on money from one publisher. A single canceled game can be lethal to a small developer. Because of this, many of the smaller development companies last only a few years or sometimes only a few months. The continual struggle to get payment for milestones and to line up the next game contract is a persistent distraction to the management of every game developer.

A common and desirable "exit strategy" for an extremely successful video game developer is to sell the company to a publisher, and thus become an in-house developer.

In-house development teams tend to have more freedom as to the design and content of a game, compared to the third-party developers teams. Part of the reason for this is that since the developers are employees of the publisher, their interests are as exactly aligned with those of the publisher as is possible. The publisher can therefore spend much less effort making sure that the developer's decisions do not enrich the developer at the ultimate expense of the publisher.

In recent years the larger publishers have acquired several third-party developers. While these development teams are now technically "in-house" they often continue to operate in an autonomous manner, each with its own culture and work practices. For example, [[Activision]] acquired [[Raven Software]] (1997); [[Neversoft]] (1999), which merged with [[Infinity Ward]] in 2014; [[Z-Axis]] (2001); [[Treyarch]] (2001), [[Luxoflux]] (2002), [[Shaba]] (2002), [[Infinity Ward]] (2003) and [[Vicarious Visions]] (2005). All of these developers continue to operate much as they did before acquisition, with the primary differences being in exclusivity and the financial details.

History has shown that publishers tend to be more forgiving of their own development teams going over budget and missing deadlines than third-party developers.

===Indie game developers===
Independents are small software developers that are not owned by or beholden to a single publisher.

Some of these developers self-publish their games, relying on the Internet and word of mouth for publicity. Without the huge marketing budgets of mainstream publishers, their products may receive less recognition or popular acclaim than those of larger publishers. However, they are free to explore experimental themes and styles of gameplay that mainstream publishers would not risk their money on.

With the advent of digital distribution of inexpensive games on current game consoles, it is now becoming possible for independent developers to make direct deals with console manufacturers to get wide distribution for their games, such as Everyday Shooter, a downloadable PS3 game entirely created by a single person.

Other independent developers create game software for a number of video game publishers on various gaming platforms. In recent years this model has been in decline, with the larger publishers such as Electronic Arts and Activision increasingly turning to internal studios, usually former independent developers that they have acquired for the majority of their development needs.