McDon: Sorry i don't know much about the business side of the industry but would they have not made a profit from past titles? Or do the publishers take most of the profit?
most of the money earned from selling a game goes to cover the costs the developers have built up during the period of making it. So most of the profit is "lost" before they start selling the game.... if it makes any sense.
If you imagine a game takes 2-3 years to make, during that time they need to pay rent for buildings and pay the staff (which is where most of the cost come from). In normal cases, a publisher will pay some of this money upfront for a large percentage of the sales when the game is finished, this gives them a stake in the game and rights to interfere (for better or worse). Self financing means that the developer are free from any restraints by publishers.
Bottom line, game development is a lot like gambling.