When banks give loans backed by mortgages it is usually only for the value of what you are putting up.
1. If your house is worth 250k and you still owe 150k you can probably get a loan of 100k. If you want the bank to give you a loan that is larger than what you are willing to put as collateral you have to convince the bank that the loan you receive has a really really good chance of paying them back.
2. Banks will gladly give you loans backed up by something of value that is greater or equal in value to the loan since there is almost no way they can lose money. Not because they feel that you believe in it more and will try harder.
3. Edit: Publishers have more conditions and control than regular loans because they are risking more. If it fails the publisher is out money not the developer. The publisher takes on more risks so they need more things to compensate them for the risk involved. Usually owning IP is one of them since even if a game loses money there is a chance they may be able to get some of the losses mitigated by the value of the IP. It's hardly worse than loan sharks. The fact is that if someone is going to risk losing their own money (banks, publishers, investors) then they are going to need some kind of return that is equal to the risk if they are going to let you use their money.
4. Would you expect your plumber to own your toilet after you pay him to install it? So why would a publisher expect a developer to own a game when the publisher pays for it to be made?
1. Yes, but a good chance is biased and based on personal preference or perception rather than on something solid. This type of loan is common for buying the mortgage and it does not make sense in this situation.
During typical bubble this situation happens and no one seems to really care as all loans are technically higher than what you put as collateral. Simple example: I am buying a house that is worth 100k, and I take 80k loan (I have 20k) from a bank to buy it. When crisis hits my loan is 77K, but the value of the house becomes 60K. If I am unable to pay back my loan the bank sells it for 60K, but I still up ending owning the bank 17K. In USA (some states), the mortgage owner is protected from repaying the rest of the loan, there the bank takes only the house back and I don't own a penny more.
2. That's a condition only for consumer loans that also comes with incredibly high interest rate. Business loans usually don't come with neither of those. If your LTD company takes a loan that the owner guarantees with his personal house and the amount that will not be covered by selling your house as a collateral... What other proof do you need that the idea is good? It works as a psychological test and a mild guarantee. It's not about trying hard, it's about putting your money where your mouth is.
3. Publishers don't give out loans.
It's a master - slave relationship. They own the project, the IP and most if not all the profit. While if you take a loan from the bank you become free once you repay it - that is a very important difference. You can do your own projects for the money you have earned. Publisher's structure their contracts in such way, that developers can never become free or even get their share of profits. I have never heard that any developer earned so much to become fully independent, but I have seen plenty of businesses become free from obligations after they have repaid the loan. You also have no idea what a loan shark is... A loan shark is someone who asks an outrageous interest for a loan that he gives. The bank also would own the IP in the case of bankruptcy, but not in the case of success.
Equal return for risk? Risk is an immaterial thing based on personal preference and perception of surrounding world. If you can't measure it, how can you claim that is equal or lower? Some compensation is not equal to everything, like all the profit, the IP and etc.
That's not how other businesses work. I know that writers get a flat amount, but they typically get much than what it cost them to produce a book or a novel. You don't hear about developers becoming rich for making a "hit" game, but you can hear them becoming broke for producing a "hit" game.
4. You probably come from Sweden so it would be hard for you to understand the difference between skilled labor and manual labor, but bare with me. Skilled labor in most if not all instances earns more money, because the skilled part comes at a personal expense, like a bigger investment in your knowledge. Such as schooling years, the quality of college and etc.
If your qualified labor is paid like unskilled labor it's actually an anomaly. Therefore developers should be viewed as writers and musicians rather than plumbers or cleaners.
Maybe they would have gotten way more on Day 1. I think the developers should get the setting in first and foremost before making a KS.
