28 August, 2015
Blaugust, day 28
Okay, I’ve asked the fundamental questions and put together the team to build a prototype and work out a setting. So, now it’s time to get down to business and pay attention to the business elements of making the game.
Where does the money come from?
Professional project need money for development. Not to dismiss indies making their first project fueled by passion and a “never tell me the odds” attitude, but at this point in my career I’m looking to make a living from developing a game. So, where does the money come from?
Obviously, if this is an internal project, the money will come from an internal allocation. You’ll get a budget to work with, and will have to work within that budget. It will depend on the company culture how many other resources you can pull from within the company, though.
But, what if this is a new company, or a small company that is going to be dedicated entirely to a new project. What then?
Publishers are the traditional way to get money for games. They generally know how the game market works and have a pretty good idea of how to help your project to launch. A good publisher can get you the right connections for what you need. The downside is that most publishers are pretty demanding, particularly if you are a first-time developer. They’ll probably want to own your IP, which is the element that will show the most ongoing income in the future. Unfortunately, a lot of publishers also seem less interested in forming a lasting partnership than in seeing a return on profit for individual projects, so once the game is done you might not see much interest out of them again.
Investors are another avenue for getting money. The good news is that investors will take a serious interest in your company, because they want to see a return on investment. Like publishers, a good investor will have connections to help you out. But, you will have to do extra work if you go this route. Fundraising is a serious job that requires a lot of time, effort, and often travel. Starting out you’ll need to attract angel investors to invest small amounts in your company. AngelList has definitely made finding angels easier, but there is still a lot of effort that goes into the company. Also, investors are primarily interested in growth; a solid game idea that is modestly profitable will not appeal to investors. In fact, most investors shy away from games because they’re just seen as too risky. If you want to attract investors, you’ll need to be on the wave of a hot new field or you’ll need to have higher aspirations than a single game, such as building a platform that will attract more income than a simple game. Also, the investors will be looking for an exit to make money, so they will want you to sell the company or grow huge enough to go public.
Crowdfunding has been a viable option in the last few years. The upside is that crowdfunders really are interested in your game, and not in growth to make a return on investment. Crowdfunding is pretty well accepted these days, with Kickstarter being the most well known example currently. However, there are some limitations. Crowdfunders aren’t endlessly enthusiastic about novel concepts; in fact, most of the computer games with the most funding have been sequels (spiritual or otherwise) of previous games; nostalgia is a powerful motivator, so a very original concept might be a hard sell to people. Once you get your money, you often have to be very transparent so people understand they didn’t throw their money into a pit. Especially as some crowdfunded projects are coming under scrutiny for wasted resources, it’s important for you to keep your backers happy.
The final option is self-funding. This works if you’re already very wealthy, but there’s a quip that should serve as a warning: “The way to end up with a small pile of money in games is to start with a big pile of money.” What you get in absolute control you miss out in expertise from the outside from people directly financially motivated by your success. Curt Schilling mostly went this route, and being hard-core gamer didn’t save 38 Studios from an unfortunate fate.
No matter where you get your money from, you have to get people excited about the project. After you get money, your primary responsibility is to spend that money intelligently. You don’t want to be in the situation where your back is against the wall and you have to go get more money at less favorable terms just to keep the doors open.
Where does the money go?
Here I’m going to use the common refrain I’ve said in previous posts this week: the details really depend on the type of game you’re developing. Developing a social network game in the early days was quite different than trying to develop an MMORPG at that time, often by a few orders of magnitude in the amount of money you needed. So, let’s take a look at social network games as an example.
If you’re in a new market, like social networking games when Facebook started opening up its API, then you could get a passable game out for a few hundred thousand dollars with a few months of development. Because the market was not crowded, it was easier to get noticed. A simple game with simple mechanics (such as all of the “X Wars” type games) have a chance to do well.
As a market matures, you need more to differentiate yourself from the competition. The best way to do that was to pour more money into the game to make better visuals and deeper gameplay. This increased development time, which increased the amount of salaries required to make the game. As costs increased, income had to increase to show a good return on investment.
In a fully mature market, there are generally a few large companies that dominate. Today, social network games are mostly dominated by a few large companies. Zynga is probably still the largest, and is sitting on a pile of money. But, a lot of money doesn’t necessarily translate to hit games; Zynga has struggled for many years now to find a success that was as exciting as early Farmville.
So, let’s speak in general terms. Your biggest cost will be salaries for your employees. This is why when you’re building your team you want to start small and grow as you absolutely need to. Growing too fast too soon is a great way to run out of money and be in a situation where you have to ask for more. If you’re starting up a new company, letting people have a small slice of the company so that they profit when the company is sold is a way to sometimes negotiate down salaries.
But, keep in mind that salaries are not your only expenses. You’ll need to pay payroll taxes and benefits for people. You’ll probably also have to pay into unemployment insurance funds and workman’s compensation funds as well, depending on local laws. On top of employee expenses, you’ll also need to cover the costs of offices, supplies, and equipment. Buying a bunch of computers with high-end 3D cards isn’t cheap, and getting servers and rackspace can be expensive. Finding alternatives, such as partnering with a 3D card company or using services like Amazon Web Services instead of hosted servers can help you out tremendously at the beginning.
I did some noodling about MMO costs in a previous post a few years ago. I’ll just leave a link to that for those interested. A few things have changed, and maybe I’ll write an updated version in the future.
Getting the word out
Let’s talk about one last specific element of business: marketing. It’s something most people hate, but the cold hard reality is that it works. If you make the best game and nobody knows about it, then you’ve squandered your potential. “Make it and they will come” is a one-line plot suitable for a baseball movie, but it’s not a viable business plan.
So, how do you market your game? In some cases, this question is easier to answer. If you’re making a game on Facebook, then your platform has a built-in advertising system for you to get the word out. In the olden days, you could spam peoples walls as cheap advertising, but now you’ll need to give Facebook some of your money to advertise on their in-platform network.
Once you have a stable of games, you can start doing more cross-promotion between your games. Most social network games will have ads for other games made by the same developer within the game itself, so that if people get bored with one game they might take their money to another game. If you are working with a publisher, that publisher might use other games they publish to cross-promote your game (and vice-versa).
There are still the more traditional routes of magazine ads, but there are few print magazines that have much reach these days. You can also do ads on websites, but those are very hit-or-miss, particularly on a limited budget. And, there’s still good old personal attention. The reason most of you know my name is because I’ve spent a lot of time over the years reaching out and being available. Maybe it was posting on a community, or an interview on a site, or even just because you searched for some term that brought you to my blog here.
The other big question is when to start marketing. Too soon and you look like you’re hyping vaporware. Too late and your game might be “old news” before anyone even decides to cover it. I’m of the mind that it is better to start a little too early than a little too late. Getting people excited takes time, and if you’re relying on word of mouth it takes time for people to pass along the word. A lot of the changes in game development, particularly in crowdfunding and “early access” type games is about getting people excited earlier rather than later, and I think it works well.
The absolute truth is that marketing is important for every game, and one of the hardest things from a business perspective.
As usual, a business-related post has gone long and covered only a fraction of the really important issues. Feel free to comment below with your thoughts!