Editing Video game console (section)

===Licensing===
Since the release of the Nintendo Famicom / Nintendo Entertainment System, most video game console manufacturers employ a strict licensing scheme that limit what games can be developed for it. Developers and their publishers must pay a fee, typically based on [[Royalty payment|royalty]] per unit sold, back to the manufacturer. The cost varies by manufacturer but was estimated to be about {{USD|3-10}} per unit in 2012. With additional fees, such as branding rights, this has generally worked out to be an industry-wide 30% royalty rate paid to the console manufacturer for every game sold.<ref name="ign licensing">{{Cite web | url = https://www.ign.com/articles/2006/05/06/the-economics-of-game-publishing | title = The Economics of Game Publishing | first = Ralph | last = Edwards | date = May 6, 2020 | access-date = August 11, 2020 | work = [[IGN]] | archive-date = May 20, 2021 | archive-url = https://web.archive.org/web/20210520180001/https://www.ign.com/articles/2006/05/06/the-economics-of-game-publishing | url-status = live }}</ref><ref>{{cite web | url = https://www.bloomberg.com/news/articles/2020-08-19/epic-games-fortnite-battle-with-apple-and-google-can-be-traced-to-nintendo-tax | title = Epic's Battle With Apple and Google Actually Dates Back to Pac-Man | first1 = Takahashi | last1 = Mochizuki | first2 = Vlad | last2 = Savov | date = August 25, 2020 | access-date = August 25, 2020 | work = [[Bloomberg News]] | archive-date = November 6, 2021 | archive-url = https://web.archive.org/web/20211106025128/https://www.bloomberg.com/news/articles/2020-08-19/epic-games-fortnite-battle-with-apple-and-google-can-be-traced-to-nintendo-tax | url-status = live }}</ref> This is in addition to the cost of acquiring the dev kit to develop for the system.

The licensing fee may be collected in a few different ways. In the case of Nintendo, the company generally has controlled the production of game cartridges with its lockout chips and optical media for its systems, and thus charges the developer or publisher for each copy it makes as an upfront fee. This also allows Nintendo to review the game's content prior to release and veto games it does not believe appropriate to include on its system. This had led to over 700 unlicensed games for the NES,<ref>{{cite book | title = The NES Encyclopedia: Every Game Released for the Nintendo Entertainment System | first = Chris | last=  Scullion | date = 2019 | chapter = Unlicensed Games | pages= 216 | publisher = Pen & Sword Books Ltd. | isbn = 978-1526737823 }}</ref> and numerous others on other Nintendo cartridge-based systems that had found ways to bypass the hardware lockout chips and sell without paying any royalties to Nintendo, such as by Atari in its subsidiary company [[Tengen (company)|Tengen]].<ref>{{cite web | url = https://www.vice.com/en/article/how-third-party-game-devs-reverse-engineered-their-way-onto-your-consoles-nintendo-sega-atari/ | title = How Third-Party Game Devs Reverse-Engineered Their Way Onto Your Consoles (and Into Your Heart) | first = Ernie | last = Smith | date = March 18, 2017 | access-date = August 11, 2020 | work = [[Vice (magazine)|Vice]] | archive-date = June 20, 2020 | archive-url = https://web.archive.org/web/20200620183356/https://www.vice.com/en_us/article/9amg87/how-third-party-game-devs-reverse-engineered-their-way-onto-your-consoles-nintendo-sega-atari | url-status = live }}</ref> This licensing approach was similarly used by most other cartridge-based console manufacturers using lockout chip technology.<ref>{{cite journal | title = Production Protection to Copy(right) Protection: From the 10NES to DVDs | first = Casey | last = O'Donnell | journal = IEEE Annals of the History of Computing | pages =54–63 | volume = 31 | issue = 3 | doi = 10.1109/MAHC.2009.49 | date =2009 | s2cid = 14026551 }}</ref>

With optical media, where the console manufacturer may not have direct control on the production of the media, the developer or publisher typically must establish a licensing agreement to gain access to the console's proprietary storage format for the media as well as to use the console and manufacturer's logos and branding for the game's packaging, paid back through royalties on sales.<ref name="ign licensing"/> In the transition to digital distribution, where now the console manufacturer runs digital storefronts for games, license fees apply to registering a game for distribution on the storefront{{snd}} again gaining access to the console's branding and logo{{snd}} with the manufacturer taking its cut of each sale as its royalty.<ref name="ign licensing"/> In both cases, this still gives console manufacturers the ability to review and reject games it believes unsuitable for the system and deny licensing rights.

With the rise of [[indie game development]], the major console manufacturers have all developed entry level routes for these smaller developers to be able to publish onto consoles at far lower costs and reduced royalty rates. Programs like Microsoft's [[ID@Xbox]] give developers most of the needed tools for free after validating the small development size and needs of the team.<ref>{{cite web | url=http://www.destructoid.com/what-do-indie-developers-think-about-the-id-xbox-program--272223.phtml | title=What do indie developers think about the ID@Xbox program? | work=Destructoid | first=Brett | last=Makedonski | date=March 20, 2014 | access-date=February 7, 2015 | archive-date=November 26, 2020 | archive-url=https://web.archive.org/web/20201126034955/https://www.destructoid.com/what-do-indie-developers-think-about-the-id-xbox-program--272223.phtml | url-status=dead }}</ref>

Similar licensing concepts apply for third-party accessory manufacturers.<ref name="ign licensing"/>