Penny Arcade Creators start Greenhouse

Gabe and Tycho have started a new venture called Greenhouse, a games distribution channel for independent games developers. Originally it started off as a way to digitally distribute their Penny Arcade game, but they realized it could be much more. There's a highly entertaining interview with them at Wired.

Particularly telling is their business talks with GameStop, in which Gabe describes a metting between their business manager Robert, and GameStop:

We had a meeting with GameStop to talk about selling a boxed version of the game. Once we had a bunch of episodes together, we would collect them and put them in a box, you know? And GameStop said, oh, that's fantastic. We'd love to do it, we'd love to carry the game... but it's not going to be available anywhere else, is it?

And Robert said, well, we're going to digitally distribute it first.

They got really upset. And they said, no, you can't do that. We can't have it in our store if it's coming out digitally first. And he said, well, I'm sorry, that's the way it works. We're publishing our game and we can say where it goes. And so the deal that they tried to strike with Robert was okay, well, listen: If you cut us in on the profits from online distribution, and XBLA, and everything it comes out on, then we'll think about carrying it in the store.

The games business is fundamentally a three step process: development, publishing, and retail; some companies, like Blizzard, manage to do all three; others rely on publishers like EA to aid in the development capital or in the marketing push to get it into retail stores like GameStop or Wal-Mart. GameStop, fundamentally is the mall store for games, and holds tremendous power as a retailer. Not being carried by GameStop pretty much kills any hope of a boxed retail release for a traditional publisher, however I find it hard to believe that anyone would accept the terms and conditions offered to the Penny Arcade guys.

For the average, small, independent developer trying to get a title into the retail outlet, digital distribution is the only way to earn a reasonable rate of return; production of boxes and media as well as shipping them to the retailer, taking returned inventory and all the rest takes a large chunk out of their profits; going directly to the consumer means that they can price at retail without a large portion of the revenue going to the middleman. With the fanbase that Penny Arcade has, it should be no problem for them to distribute digitally and make a profit, and with them potentially distributing other indie games on their network, I can see Greenhouse being both lucrative and successful in achieving their goals.