2D Boy's Ron Carmel calls relationships between indies and publishers "a system that never worked". At the Independent Gaming Summit at the 2010 Game Developers Conference, he explained why -- and further detailed the Indie Fund, a new alternative for independent games funding.

When software development began to be conisdered as an engineering field, design came before building -- the "waterfall approach", as Carmel says, involving big design documents that everyone scrutinizes before implementing. But in the 1990s, people realized that system is less than ideal, and agile practices emerged that emphasized iterative over upfront design.

This is not only easier but more cost-effective in both the short and long-term, Carmel points out. "I think we're facing the same kind of situation in the game industry today in comparing retail games to digitally-distributed games," he says.

What are the problems caused by this mismatch? For one, publishers give too much money; for digital games the budgets are much smaller (for example, 2D Boy's World of Goo had a budget of only $120,000.) Large budgets on smaller games are less efficient -- publishers not only invest too much, but they take too much in return, and the result is developer as "tenant farmer."

How did this paradigm come to be? Ten or fifteen years ago, publishing deals were attractive, desirable goals in an era when retail was the only path to commercial success. When a publisher commits to a game, they not only commit to developing it, they're committed to all of the peripheral costs associated with retail, from packaging to distribution and marketing.

"All of this means it's a huge up-front risk," says Carmel. With that in mind, "it makes sense that the publishers keep all the profits." But with today's new breed of digital game, these costs are no longer necessary. Small teams, far fewer upfront costs and a much lower break-even point should theoretically provide the same upside as much higher-risk investments.

When releasing World of Goo via Games for Windows Live, 2DBoy began negotiating a contact whereby changes had to be approved by an executive and reviewed by a lawyer. From there, a producer supervised the production of the game until launch, and then there was extensive QA -- between the legal and the tech side, "that's a really big piece of machinery for one small developer to deal with," Carmel says.

Working with Steam was "far more efficient," Carmel says. It took one day of legal work: the contract process was conducted over email, signed and returned the same day, and then it took another four days to do the tech integration for Achievements and high scores. That same legal and tech process took four months with Games for Windows Live.

It's not necessarily a fair comparison, Carmel caveats, because Games For Windows Live is still very new, while Steam has established its process after being around for quite a few years. Nonetheless, the point still stands that going directly to digital offers a far easier infrastructure for indies.

Quintessentially, then the only things indies truly need is funding -- which still means going directly to publishers. But Carmel believes there's a solution: "How do we do for funding what Valve did for digital distribution? The answer, we hope, is Indie Fund," says Carmel.

The recently-announced "angel-style" Indie Fund is a group of independent devs who gathered to help other developers become and remain financially independent. There are seven backers involved: 2DBoy's Ron Carmel and Kyle Gabler, Braid's Jonathan Blow, ThatGameCompany's Kellee Santiago, Capy's Nathan Vella, Flashbang's Matthew Wegner, and AppAbove's Aaron Isaksen.

Firstly, they aim to create a transparent distribution process. Stories of indies being "dicked around" by publishers results from no transparency on the process, says Carmel. "With the process that we're planning, it's going to be a lot shorter than the regular approval cycle for publishers," he says.

Second, publicly-available deal terms are important so that developers can comparison-shop, he says. They aren't revealing terms yet until they're sure the model works, but transparency will be a must. Third, they'll offer developers a single point of contact. A personal relationship helps avoid conflict of interest and simplifies the process.

A fourth focus is flexible development. "Anybody who's been in the game industry for more than a year or two realizes that when you start working on a game, you don't necessarily know how it's going to end up being," he says. The process requires experimentation and iteration, so the old methodology of coming up with big design documents ahead of time, with milestones attached that risk employee pay, ends up causing developers stress and ultimately risks game quality.

By this model, the developer submits periodic builds to the fund along with a change list, so the game is evaluated based on where it was last time it was evaluated, "not on where we think it should be," says Carmel. This approach "respects the game design process as it should happen," he adds.

Next, they seek no IP ownership. "We want for the developer to own the IP and for the developer to be master of their own destiny," Carmel says. This means no IP control either -- "We don't want to tell you how to make your game," he states. "If we provide funding for a game, then that's a vote of confidence in the team that they have a vision and that they can execute it," he says. "If I do know better than you what's right for your game, then we probably shouldn't be funding your game."

When asked how large the funding pool is, Carmel said that amount "doesn't matter. The bottleneck is how many games can we find that we think can make good use of the investment. If we can find 20 games a year that can make money, then we can raise money for 20 games a year."