Psychochild's Blog

A developer's musings on game development and writing.

20 July, 2010

Indie funding
Filed under: — Psychochild @ 7:59 PM

They say money makes the world go ’round. It certainly makes it easier to eat and live under a roof.

My thoughts have turned to funding lately. Now that my focus is entirely on my own projects, I’ve been considering options on how to keep myself fed while completing a project. Most of you enjoy seeing a glimpse behind the curtain, so here are my thoughts about funding a smaller project.

First: I know this is a long post, and business makes most people’s eyes glaze over. But, I think this is an important issue. If you’re in a hurry, take a look at the last few options below, starting with “Community support”. These are probably the parts most readers are going to care about.

I’m a fairly rare beast: I’m an independent MMO developer. MMOs are a niche within the game industry, and independent developers are another small niche; the intersection of the two is pretty tiny all things considered. And, given news that Blizzard keeps spending more and more on games, the thought of doing a game for “only” a few hundred thousand dollars, especially an MMO, can be daunting. But, that’s my lot in life.

But, this can have certain advantages, too. MMO players tend to be online more and willing to form communities easier. An independent MMO developer can potentially tap into an audience easier through online channels.

In addition, I want to focus on a project that will potentially bring in money to live off of. Not to slight people who run small games as a hobby, but as Dave ‘Over00′ Toulouse is realizing, there’s something really terrific about working on games for a living. I also tend to be the type of person who likes to hyperfocus, so working a “day job” would take a lot of my time and attention and leave little for working on something as large of an undertaking as an MMO.

So, keep this perspective in mind as we discuss funding. Also, this isn’t intended to be an exhaustive primer. I wanted to cover some of the options I’m familiar with and options I’m considering.

Bootstrapping

I define bootstrapping as taking no outside money and investing primary “sweat equity” into a project. Initially, nobody gets paid in this model. It takes a team pulling together on a project they believe in to finish. The goal is to use the first project as a springboard for future projects through income, attention, and/or code that can be re-used.

The big benefit of this option is that it’s very low risk from a financial point of view. The only thing you put at risk is your own time, which admittedly can be very valuable. It also allows you to remain the most independent, since almost no money is being poured into the project.

The biggest downside is that it can be very hard to find people willing to join you. I’ve had poor luck with volunteers in the past. While money isn’t the only motivator for many people, it can be a powerful motivator to keep people focused. It seems some people don’t quite understand the depth of work required to make a game. There can be problems with communication and conflicting goals as well. Not to say that you can’t find good people, but good people who can commit to a project seem to be fairly rare in my experience.

The other problem is that some things require some amount of money. Effective marketing either requires a lot of time (as in, a very long-standing reputation) or a lot of cash. Sometimes you might strike it lucky (or perhaps have a blog that’s been going for over 5 years), but in general you will need some money to not languish in obscurity. “Build it and they will come” is a nice sentiment in movies, not for building a business.

Self-investment (including personal debt)

This is related to bootstrapping, but it assumes that you have money to throw into a project. Now, the source of that money can be an issue. As I wrote before, I used credit cards to fund my share of the purchase of Meridian 59. This method definitely carries some more financial risk. But, some people might be in a good position to save up money and only risk money they can absolutely afford to risk.

Another option, especially if you’re an experienced developer, is to work on a game but then do jobs on the side to bring in cash to fund the project. Of course, this takes time away from working on the project, which can cause some problems if your game concept has a definite “launch by” date or it becomes stale. There is also the risk that you (or the company you own) becomes known for doing contract work instead of original game development. I’ve read a lot of stories about companies who started out doing ports of games to pay the bills, but then the company just became known for doing ports and never got the opportunity to do their own work.

The advantage of self-investing is that you have actual money to spend on the company. You can perhaps pay for some art or for a contractor to help out with some part of the game. As pointed out, however, self-investing carries some risk. There’s the risk of losing your own money or losing focus. This option also requires that you actually have money to spare, or are willing to go deep(er) into credit card debt. Currently, my savings is a bit thin and I’ve already been in the abyss of deep credit card debt.

Traditional game publishing

Yeah, go ahead and laugh. Traditional game publishing agreements aren’t really an option, especially if a developer wants to remain independent. But, let’s take a look at this option anyway.

The advantage is, of course, that you get money that may be more than you can personally invest. Most publishers, however, will want you to have some skin in the game, so you’ll probably have to fund a prototype or even the start of development yourself. You can also, theoretically, tap into the expertise of the publisher to help you confront problems during development.

The big downside is that you’re going to lose a lot of control. Most publishers won’t give you the time of day if you aren’t willing to give them your intellectual property (IP) in exchange for funding; retaining your IP is the best way to make sure your company stays profitable in the long run. Even if you do retain your IP (or if you believe you can still build a business without retaining it), the publisher will still have a vested interest in trying to ensure that your game returns the maximum amount of profit for them. This means making changes based on their feedback, including creative decisions. Additionally, it will take a lot of time and effort. First you need to spend time finding a publisher who will work on an agreement, then you will spend a lot of time reporting back to the publisher to give updates and demonstrate milestones. Doing a dog and pony show in front of different publishers eats up time that could be used for developing.

Also keep in mind that publishers will only invest in projects they understand. Something new or untested is hard to get interest in. This is one reason why we see a lot of clones and sequels in the game industry, because that’s what publishers can understand. Ultimately they tend to chase fads (or “trends” if you want to be generous), so that limits your creative freedom even more.

Ultimately, the publisher’s loyalty is to the project, not to your company. They will do everything they think is reasonable to ensure a certain level of success for the project, even if it means harming your business. In fact, it may benefit them to make sure that your company is struggling, because it gives them a negotiating advantage on the next agreement; if you’re getting short on funds, you’ll be more willing to negotiate the next deal fast and in the publisher’s favor to keep money flowing. Many times publishers will require that part of the publishing contract gives them the right to acquire your company at a bargain price; this means that if you are successful, you might not see a lot of return on that success if your company is acquired.

Traditional investment

This is taking money from a venture capitalist or angel investor to fund your company and project. Again, it’s hard to remain independent when you take someone’s money because investments are generally made with the desire to make a return on that investment. In many ways, it’s similar to a traditional publishing deal; for example, most investments will have no return, but it’s the few big successes that cover all those failures. There are some similarities between this and the hit-based nature of publishers.

The advantage to traditional investment is that it’s a well-established system. There are even ways for you to present your company in front of a lot of investors at once. Also, if you can find a good angel investor, they may be more willing to take a chance on you for the psychological benefit of supporting someone “artistic” creating games, even if your business plan doesn’t promise big returns on investment. If you do end up selling the company, you will likely get a better deal on your stake in the company than with a publisher’s contractual provision to acquire your company at a bargain rate.

There are still a number of disadvantages. Like a publishing deal, it will take time and effort to find an investor and then to maintain the relationship. You will almost certainly have to give up equity in your company to get investment of this type; eventually the investor will want to sell their stake for a profit, so you’ll need an ‘exit strategy’ that usually ends with you either selling your company to a larger one (like EA), or doing an initial public offering (IPO) to create shares the investor can sell on the stock market for a big profit. Given how rare IPOs are these days, your investor will probably count on you getting acquired, and may force an acquisition you’re not fond of.

Most of the venture capital firms won’t invest in small projects. If they’re going to go through the hassle of giving you $250,000, they might as well invest for a few million and expect proportionally larger results. This philosophy means that they will only invest in certain things, and like publishers, usually following fads/trends. A while ago I talked to an investor about a mid-scale MMO project. The investor wasn’t interested in my proposed project, but I was told that social games were hot to invest in….

Another disadvantage compared to a traditional publishing deal is that you may not have access to game development experience like you would at a game company. In the worst case, you might have an investor who simply doesn’t understand games, and therefore makes demands that just aren’t feasible. On the other hand, investors usually know successful entrepreneurs, so you might get assistance on technical or business issues that the publisher might not be able (or willing) to give.

Project investment

This is slightly different than traditional game publishing, and is similar to how Hollywood movies are made. In very simple terms, a project is “owned” by a separate company, and investors get a stake of equity in the company that corresponds to a share of the income made from the project. All the major companies working on the project will get a share of this company based on negotiation. The project’s company pays bills and earns profit from the project which is paid out to the owners, including the production company (the people usually making the movie), the publisher (distribution company), etc.

The advantage here is that it still allows outside investment without interfering with the company you own directly. Investment goes into the project company and any failure of the project does not necessarily harm your own company. (Harm to your reputation, however, is another matter.) It’s also a very standardized procedure at this point, so it’s familiar to most people, at least in the film industry.

Disadvantages? First, most industries outside of the film industry are unfamiliar with this system. It can also be fairly complex to the uninitiated; there’s a whole industry of completion bonds for film to guarantee that a movie can be completed and insure the amount invested into the movie. Guarantors are the ones that crack the whip in this scenario to keep the creatives on track, and they are the ones that demand the paperwork and updates to insure the investment. But, it seems that this does remove some of the incentive for the investor to inflict harm upon the developer (production company in the case of film) in order to get an advantage later. Finally, it still results in a lot of conservatism on the part of approving projects, as witnessed by the majority of films coming out that fit within a narrow formula.

Government Funding

Another option is to get funding from the government. The news has had information about tax breaks that the government might give to certain businesses. There can also be loans and grants.

In the U.S., government funding tends to be fairly restrictive. There is the Small Business Administration, but loans are fairly hard to get and require a lot of paperwork to even apply for. Last time I checked (and, admittedly, this was over a decade ago when starting up Near Death Studios), they focused more on businesses with physical locations like shops. There are also grants, but writing government grant proposals is an arcane art. “Serious games” developers usually qualify for grants since their games are often used to educate. You can also find grants for minorities and women intended to encourage them to get into business, so you might be rewarded for having a diverse group of founders.

The big advantage is that the money might be very cheap, meaning you will have a low interest rate on a loan or you might not even have to repay a grant. However, you will have to jump through some hoops in order to qualify. It could take a lot of time and effort to seek out and apply for the loans and grants. Your typical shoot-em-up game probably won’t qualify for a government grant, sadly.

Community support

Now we’re getting to the first of what could really be considered “indie” style fundraising from people other than the developer. In most of the styles above, you’re still on the hook to an investor who wants to protect their investment. This means that they will usually want a degree of direct control over the project to ensure their investment.

One way to raise money with less of this problem is to go directly to the community for who the game is intended. These people have a vested interest in seeing your project succeed if you can present it to them well enough. The main advantage of this funding model is that it spreads out the risk between a large group of people. 5000 people chipping in $50 each results in a budget of $250,000, which is a fair budget for an indie-scale game. If the project flops, you might have a few people miffed at you, but it’s not as awkward as facing one person who gave you a quarter of a million.

The downside is that you have to be a pretty good salesperson to pull this off; people are unlikely to throw fifty bucks at you without a lot of convincing. You might also have to promise something to the people who chip in, potentially creating a legal obligation. In fact, this whole system is fraught with legal peril if things are left too ambiguous. You also have to work hard to manage expectations for a larger group of people. Someone throwing in $50 is going to want to give you some feedback, and while this isn’t quite as bad as a publisher making contractual demands, it’s something that will still take some time to deal with properly.

Finally, the community might be more skittish than traditional investor. Someone who invested $250,000 into your project will probably understand the risks they are taking and might write you another check (if they can afford it) if you come along with another good idea. I suspect a lot of community investors will think “once bitten, twice shy” if the project isn’t completed for some reason beyond the developer’s control, or if it doesn’t turn out quite the way they wanted.

Merchandising

This is another way to raise money, but you directly promise something to the community who sends you money.

We actually did this in the early days of Meridian 59‘s relaunch. We needed a quick infusion of cash, so we sold CDs with the client burned onto it. We also promised people a 3-character account on a server instead of the normal 2-character account, making it a bit more special. We commissioned some artwork for the CD and got 1000 CDs printed up. We sold about 700 of them at $35 each, making about $10 or so profit on each. Of course, it took a lot of work to get the CDs printed, and my business partner (Rob ‘Q’ Ellis II) and his family turned into a shipping station for a while as we worked to fulfill orders. There was also some issue with shipping the CDs to Canada due to customs issues, unfortunately. But, this gave us a nice cash infusion to keep us running for a few months while we worked to get our proper billing system implemented for subscriptions. This resulting in a lot more money than when we asked for donations from the fans.

A recent game to do this is Sanctuary 17, a free Flash game where you can buy a paper manual to support the developer. A clever idea, even if you might beat the game before the mail with your manual arrives. (Now, if they only had a referral program…. ;)

The advantage here is that it’s a traditional transaction. No potentially empty promises, you send the user something or give them something in exchange for sending you money. People will also tend to appreciate getting something physical.

Of course, there are some disadvantages. The first is that sales of items can cause tax issues. If you live in the U.S. and will ship to people in the U.S., you’re looking at sales tax issues, at least in the state you live in. You will be required to get a seller’s permit to collect the taxes, and will have to file additional sales tax forms on a quarterly or yearly basis. As governments are looking for additional revenue, many are starting to look at the “lost” revenue from mail order and internet purchased items. There have been discussions about requiring companies to track and remit sales taxes on purchases even beyond the state they live in for many years now. Hard economic times is making this more and more likely. Also, as I pointed out above, it can be quite a bit of work to ship the goods to users. You also have the costs of producing the goods and shipping them. Outsourcing to a company like Cafepress is easier, but it reduces your potential income.

Specialty investors

This is a very interesting development. The current example of this is the Indie Fund, where a group of independent developers who have seen some success with their own work contribute to a fund that will seek out and invest in independent projects. Hopefully this is the vanguard which will lead to other similar investments.

The advantage here is that you have investors who understand your struggle and are likely to be patient. From the sounds of it, they’re looking for a return on investment, but they aren’t necessarily looking for the huge multipliers a traditional investor is looking for. Like a traditional publishing deal, you are likely to benefit from this fund’s expertise. Plus, being indie, they know how important things like retaining the rights to your IP is, so they aren’t going to take it from you in the name of profit. They also explicitly state that they want the project to bring something new to gaming, so they aren’t likely to fund another clone like traditional game publishers are wont to do.

Disadvantages? It’s still an investment, so someone still might exert some control to ensure that return. They also require you to have something playable, so you still need some way to get your game to a playable state to show that the core concept is good. The requirement of having a video seems to imply that the visual aspects of the game are going to be rated highly as well.

Miscellaneous

Of course, there are tons of other ways you can fund a game. Winning a contest, playing the lotto, working nights and weekends for years on end, releasing a game and getting financially rewarded when it manages to become a runaway success. Unfortunately, a lot of these options are hard to plan for, so I’m not spending a lot of time on them.

So, what do you think is a good way to raise money? For me, this is more than just an academic question. I’m thinking of ways to make some of the ideas in my head a reality. So, leave some advice for me to consider! :)


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25 Comments »

  1. The article was already running long, but one thing I was thinking about covering was the different ways to collect money from the community. Obviously there’s the “Hey, here’s my Paypal account, gimme cash!” Another interesting option is Kickstarter (http://www.kickstarter.com/). It’s interesting in that it allows you to raise a minimum amount of cash you think you’ll need to make a game; if the minimum isn’t met, nobody pays. I’ve also heard there’s an enthusiastic community of people who like supporting indie games there. On the other hand, they take a chunk of money out of the pledges to cover their own costs, etc.

    Another angle to consider.

    Comment by Psychochild — 20 July, 2010 @ 9:05 PM

  2. Nice post and well timed (for me), as I’ve just started working on a little indie MMO. We’re working on “sweat equity” now, but I’m considering using Kickstartr or something similar once we have something to show off. Wonder if there are any similar options for people outside the US.

    Also I still have my day job and am ready to invest the money it gets me.

    Comment by Nevermind — 21 July, 2010 @ 12:48 AM

  3. One thing you haven’t covered and I’m not sure how much it applies in the USA is social funding. In Europe there are all sorts of grants available to entrepreneurs. The European Regional Development Fund gives grant money to deprived areas of Europe. I think there’s a grant if you’re currently claiming welfare to help you get off it.

    In addition to grants given to entrepreneurs simply to encourage new businesses you could also be eligible for grants from a charity if your game coincides with their aims. So for instance a charity for gifted children might give money to a cyberpunk game that celebrated and explored genius.

    If you are interested in following this up probably the best place to ask is your local public library.

    Just to encourage inspiration regarding the intersection of game design with real world problems here’s Jane McGonigal’s TED talk:
    http://www.ted.com/talks/jane_mcgonigal_gaming_can_make_a_better_world.html

    Comment by Stabs — 21 July, 2010 @ 3:53 AM

  4. Nice post. I think about these funding vehicles a lot. My last startup took “Traditional Investment” and the amount of control you give up is not to be taken lightly. We also did a lot of work-for-hire games, which is kind of like the bastard child of “Project Investment” and “Traditional Game Publishers”, where you give up even more control than Traditional Investment. My new startup is bootstrapping and we’ll see where it leads.

    However all of that is to set up, that while I don’t have the right answer for you, put me down for $10 on Kickstarter if you go that route.

    Comment by Chris Carella — 21 July, 2010 @ 7:44 AM

  5. Nevermind wrote:
    I’ve just started working on a little indie MMO….

    Congrats! I hope it works out. If you should have questions, feel free to contact me. As I tell everyone, I can’t promise to work extensively for free, but I am happy to give at least a little advice.

    Wonder if there are any similar options for people outside the US.

    Yeah, Kickstarter only works for people in the U.S. currently. I’ll also note that my perspective is very heavily U.S.-centric. I’d love to hear more about options in other countries.

    Stabs wrote:
    One thing you haven’t covered and I’m not sure how much it applies in the USA is social funding.

    Ah, government funding, I did overlook that. I’ve edited in a section for that. Thanks, Stabs.

    Chris Carella wrote:
    My last startup took “Traditional Investment” and the amount of control you give up is not to be taken lightly.

    Yeah, especially if you’re starting out you will not be in the dominant negotiating position. In fact, you’ll most likely feel like you’re just along for the ride, from most people I’ve talked to. But, getting experience is always good.

    …put me down for $10 on Kickstarter if you go that route.

    Awesome! :) I’ll keep that mind.

    Thanks for the comments, all.

    Comment by Psychochild — 21 July, 2010 @ 1:20 PM

  6. “I suspect a lot of community investors will think “once bitten, twice shy” if the project isn’t completed for some reason beyond the developer’s control

    While I agree that the current model of MMO financing is doing bad things to the genre, I fear this grossly overstates the limitations and perils attached to the “community support” model.

    What do you do when, instead of the 500 contributions of $50 you want, you get 400? 250? 100? 10? Starting development is the only way you’re going to demonstrate the progress that will inspire more donations, but at what point is it bad faith to accept $25K when that is such a small fraction of your budget (assuming that you managed an accurate budget in the first place, which many well-funded studios fail to accomplish).

    For that matter, $50 is a relatively big ask if you’re a genuine indie. That’s the established price tag for a finished AAA title, and you’re expecting hundreds of people to send you that much without receiving anything in exchange, in support of a game that may or may not ever arrive (for reasons that may or may not be within the your control)? I guess smaller numbers means a smaller group of contributors to keep happy, but I’d be very curious to hear whether anyone has EVER pulled something off on the scale you’re talking about. Then again, I suppose that managing the expectations of thousands of players who think their $10 contribution means they run the place wouldn’t be fun either.

    Comment by Green Armadillo — 21 July, 2010 @ 5:49 PM

  7. Green Armadillo wrote:

    What do you do when, instead of the 500 contributions of $50 you want, you get 400? 250? 100? 10?

    That’s one reason why something like Kickstarter, which I mentioned in the first comment, is interesting. If you don’t raise your intended amount, then the money isn’t contributed. But, yeah, this assumes that the person has drawn up an accurate budget and can stick with it. I would hope that people would give more weight to someone with experience compared to some enthusiastic kid who wants to make an MMO.

    For that matter, $50 is a relatively big ask if you’re a genuine indie.

    Why is that? Is this because “indie” automatically means “inferior”? Or does it mean “can get good art at discount prices”? Or, perhaps it means “should enjoy eating ramen noodles and hot having health insurance”. I think “indie” should be taken out of the pricing equation. If an indie is going to make a cyberpunk game when nobody else is going to, why should someone be willing to give Monolith $50 for The Matrix Online but not give an indie $50 to make a game that might be closer to your vision of cyberpunk, even if the first iteration isn’t high-poly 3D with video ads (with annoying sound!) Indies already have to deal with less money because they have a smaller audience; giving them less money on top of that ensures that we continue to see the same stuff from the same large companies that’s fun enough to play, but doesn’t really scratch the itch of game connoisseurs with specialized tastes. Unless you really are happy with ineffective WoW clones and cheap FarmVille… sorry, I mean FarmTown knockoffs.

    …you’re expecting hundreds of people to send you that much…

    There was an interesting post a while ago about the theory of 1000 True Fans. I don’t believe it’s quite that easy (reading the followup post is recommended), but it’s not outside the realm of possibility for some people. According to hosting records, I have many times 1000 unique visitors hitting my site last month (and that’s a bit of a slow month as far as I remember the stats from my old host). The problem is one of a chicken and egg, and the reason I’m talking about funding here: a game needs funding, and some people won’t pony up cash without a game. For an indie, most of the ways of getting cash outside of going to the fans is either unreliable or causes you to lose control and no longer be independent. Given that MMOs aren’t something you can throw together in a week like a Flash or casual game, some kind of cash needs to be invested in it.

    So, ultimately, we need a solution here. Unless, again, people are fine with the status quo. Given the ranting on some blogs, I doubt this is the case. ;)

    Comment by Psychochild — 21 July, 2010 @ 11:14 PM

  8. A possible riff on some of the items above: a bootstrapping/merchandising crossbreed, depending upon the final product, could be to produce and sell parts of the overall product as stand-alone pieces. I’ve seen this a couple of times with non-game projects: for example, we produced a module for importing time/attendance data into several of a client’s payroll services as a stand-alone, which was followed by (and intended as part of) a full-fledged scheduling app they were also having us develop. They used the receipts for the former to offset the costs on the latter, as I recall.

    For an online game, that might be selling a single player game featuring one aspect of the online play. For cyberpunk, maybe the net-running subgame, assuming there is one? It wouldn’t necessarily have to be high polish, if it was presented as 1) this is a taste of what we’re looking at doing, and 2) buying this is a way to help support the development. Dragon Age’s Character Creator would be another recent example, I guess… (tho I can’t remember off-hand if they actually charged for it, or just used it as a marketing element.)

    -=-

    Personal situation plays a big part in whether or not $50 is a big ask, I suspect. I don’t see that as unreasonable, if it’s a project I’m interested in. (Note: I’m not thinking Bejeweled clones here.) Considering that the typical AAA MMO runs $15/month… you blow by $50 pretty quickly at that rate. (Given a decent community discussing the prospective game, the indie will be more entertaining on a monthly basis even before it’s built, IMO.)

    My perspective: for an MMO that actually differed substantially in game mechanics from the AAAs? I’d gladly risk that much cash (and more) to support such projects that seemed to have a fair chance of coming to fruition. Admittedly, tho, projects that boil down to “WoW, with _lasers_!” or the like… not so much.

    Comment by DamianoV — 22 July, 2010 @ 5:35 AM

  9. For that matter, $50 is a relatively big ask if you’re a genuine indie. That’s the established price tag for a finished AAA title

    A bit of personal experience here. The trick here is that not everyone do the “AAA = $50 > Indie” math. Most people I guess do but you’re not trying to interest “most people” for an indie project either so I think it can be achieved.

    For example regular supporters of my MMO Golemizer have spent way more than $50 and some even spend that amount each month. And they do so not really to get their hands on the items offered through the cash shop but simply because they understand the project cannot exists with no support. Getting the items from the shop just give them an easy justification to spend money but that’s it.

    The fact that Golemizer is a released project is not so much important here. Why? Because based on conversations I had with those players they are first supporting me … and then the game. They are just happy that someone is offering them something different from typical AAA titles. They appreciate that and wish I can keep doing so and release more projects. It’s quite clear that not everyone will throw $50-$25 per month on a game that doesn’t match AAA quality but there are people willing to do so.

    I wouldn’t have been able to fund Golemizer by asking people $50 right away simply for the fact that nobody knew me. I had no background whatsoever in games and no credibility for a newbie trying to build an MMO. However I have now shown what I can do (just making it to the end and release is a good start) and built a small fan base that would probably be more than happy to fund an unreleased project.

    So if I’ve been able to do it on a small scale I think that someone with more experience (and professional experience that is) and an established base of “fans/followers/readers” like Brian can pull it out. Not that it’s easy as nothing is ever easy and nobody gets a free pass but I believe it can be done.

    I have seen people complain at the “high price” of high quality indie games at $10 (just hang around Steam forums). Now if I was to tell these people that some players have spent 10 times that amount on Golemizer they probably wouldn’t believe it.

    Comment by Dave Toulouse — 22 July, 2010 @ 6:36 AM

  10. “The problem is one of a chicken and egg, and the reason I’m talking about funding here: a game needs funding, and some people won’t pony up cash without a game.”

    This was my point about the $50 number. You’re talking about asking for the full retail price of a finished game as a donation in support of a game that does not yet exist. As Dave Toulouse points out, there’s a chicken and egg problem before you get to the chicken and egg problem: you need to inspire confidence that you can actually produce the game if people collectively fork over a quarter of a million dollars BEFORE you can start making the case that the not-yet-existent game will be worthy of a full retail box price tag.

    I can’t help but think about Hellgate: London in this conversation. Obviously, that game was on an entirely different scope, but I think it illustrates a point – with the knowledge that I had at the time, I assumed that Bill Roper would be able to do a good sci-fi Diablo clone. As an outsider, I had no way of knowing that neither he nor anyone else on the team had any conception of how to make and stick to a budget. The bigger hype associated with an AAA title encourages the current trend of developers promising more than they will be able to deliver, but wouldn’t the pressure to promise just one more feature be even stronger if 100 extra sales literally makes or breaks the product?

    In the short run, even shipping a community-funded MMO to have people be disappointed with it would be a huge accomplishment. In the long term, though, this model would have a very tight balance between offering enough to convince players that the hypothetical game should be made without promising things that can’t be delivered. Also, unfair though this may be, one Hellgate-style flop under this model could poison public sentiment against it for everyone else.

    Comment by Green Armadillo — 22 July, 2010 @ 6:50 AM

  11. Awesome stuff as usual! I was going to mention kickstarter as well, but you beat me to it :-)

    Comment by Kevin — 22 July, 2010 @ 8:00 AM

  12. The specialty investors seem the most attractive if we’re talking about starting right out of the game with a relatively complex game (like an MMOG). As described, the other options either come with too many strings attached or are too unreliable.

    But there are two other possibilities:

    1. Be someone well-known and respected in the game industry, or convince such a person to join your development/management team.

    From what I’ve read (not personal experience, so judge these comments accordingly), pretty much everybody, including Famous Game Designers, has to pitch their ideas. But if you’re known throughout the game industry as well as by gamers, and you have a reasonably good reputation for getting games made, you can trade on that reputation for considerably larger amounts of funding than someone who’s toiled in obscurity.

    If you can’t be that person, maybe you can convince someone like that to join you to make your game.

    2. Make some smaller games. Bootstrap from the revenue from those games to fund the game you really want to make.

    This isn’t as much fun as leaping directly toward making your dream game. On the other hand, a real game designer will always have lots of game ideas percolating, including concepts for smaller games. So making a good small game or two would not necessarily be a complete waste of time.

    (Note: If accomplished well enough and for long enough, this may also lead to satisfying Possibility #1 above.)

    So how effective might these approaches be? #1 is obviously a bit tongue-in-cheek, but in theory it could be possible to come up with a game concept or demo so insanely great that a pro might sign on in some capacity. That could help secure more money than otherwise, or perhaps a basic amount of money but on more favorable terms.

    Suggestion #2 is more practical. In fact, I suspect it’s how things really work. But it would be interesting to hear some confirmation — or denial — of that suspicion.

    Comment by Bart Stewart — 22 July, 2010 @ 12:18 PM

  13. One such Indie group trying to bootstrap itself into the industry is Zero Point Software. They have been releasing web (Unity3d) based minigames or “Slices” of their main project Interstellar Marines. The slices ask for a donation to unlock rewards or you can pre-order and get all of the web content at once, and they are selling merchandise as well. It seems like they are doing pretty good with the method and it gives me hope that more projects like this can make it.

    Comment by Haversack — 22 July, 2010 @ 1:14 PM

  14. Not knowing makes you feel safer

    [...] Brian wrote a post about indie funding. It got me to mention a case where people were complaining about the price of an indie game on [...]

    Pingback by Over00 — 22 July, 2010 @ 7:22 PM

  15. I wasn’t going to comment, because I generally prefer single player games, but..

    If an indie is going to make a cyberpunk game when nobody else is going to, why should someone be willing to give Monolith $50 for The Matrix Online but not give an indie $50 to make a game that might be closer to your vision of cyberpunk, even if the first iteration isn’t high-poly 3D with video ads

    That’s a huge ‘might’, especially considering Matrix Online exists and is playable right now, and deviance from my expectations is a known quantity. (Or would be if I wanted to play Matrix Online… I wasn’t enamoured with the movies)

    CCP expanded and improved again and again from a very barebones EvE, but they didn’t ask their players to fund initial startup. (They also had the benefit of a much stronger global economy, access to substantial funding, etc … I don’t think EvE would be a successful startup MMO today).

    Single player examples, but didn’t Mount&Blade get financed by effectively selling access to the beta, and raising the price point as the multi-year beta progressed?* Positech did kinda the same thing with GSB, giving pre-orders beta access and promising that the pre-order price would be lower than the release price. That game was close to finished however.

    I think if you asked for $50 up front via kickstarter or whatever, and then day 7 after release any shmuck could buy the game for $40… well you could get away with it once, and I guess if it works you’re next game would already be funded. :) The other way around would probably work better. Or provide various incentives to the ‘funders’ like the pre-order bonuses for buying through various retailers that Cryptic, etc do.

    giving them less money on top of that ensures that we continue to see the same stuff from the same large companies that’s fun enough to play, but doesn’t really scratch the itch of game connoisseurs with specialized tastes.

    Most of the indies I’m aware of don’t differentiate themselves on this point though. There’s a difference between saying Cyberpunk, which is pretty amorphus, and saying ‘Snow Crash style anarcho-capitalist dystopia’, ‘Bladerunner style androids’, or ‘PROCTO-POD ENHANCED SUPERUSERS AND CALAMARI, WHOO!!!’. If you’re serving a commercially viable niche with well defined tastes, the users will pay over and above AAA rates– this happens in the data driven historical wargame market. Those games come out at $59+, and hold that price point for years** because those players have very well defined tastes, and they’re willing to pay for it. (I have no idea whether some subset of cyberpunk is comm. viable in this sense or not.)

    *- Question mark because I may be thinking of a different game.

    **- Naturally, both Paradox and Matrix are having deep discount sales right now. And probably neither is indie, but neither is AAA either.

    Comment by tfernando — 23 July, 2010 @ 1:26 AM

  16. Green Armadillo wrote:
    You’re talking about asking for the full retail price of a finished game as a donation in support of a game that does not yet exist.

    Right. As I said, what’s the alternative, then? As a developer, I want to know how I can get funds to make a game better than I can make with sweat equity alone. There are players out there who want something besides yet another mediocre WoW clone. How do we make this happen? It seems a shame if the answer is “we just can’t”.

    Also keep in mind that a publishing deal has to deal with the same issue: a game company has to judge a game that usually isn’t done yet before signing a check. This is one reason why they hold so much power in the developer/publisher/player relationship. If players want to take that power from the publishers, it seems reasonable that they need to start considering doing the same thing. And, honestly, can you say you’ve never spent a chunk of change taking a risk on a game that turned out to be a real turkey? I have. After all, how many people bought lifetime subscriptions to Champions Online and pretty much regretted it immediately after launch? Why not give it to an indie that you think has a great plan to make a game that you would enjoy? I just don’t get why risking $50 (or even more) on a pre-order of a AAA game better than doing the same on an indie game?

    Bart Stewart wrote:
    2. Make some smaller games. Bootstrap from the revenue from those games to fund the game you really want to make.

    The problem is, as I said in my post, this can be a distraction. Especially if we’re talking about an MMO, they take some time and effort to maintain since your income depends on the service continuing to run. One goal with us buying Meridian 59 was to develop other games. What happened, at least personally, was that I poured everything I could into M59 and that left not quite enough time to get other projects going. When I started taking time away from M59, the players got upset that I was “abandoning” them and “ignoring M59″ and “just living off the profits” (HAHAHAHAHA… *gasp* HAHAHAHAHA!)

    One studio is trying something along these lines, though. Runic Games released the single-player game Torchlight and has announced they want to make an MMO version. Of course, they’re well-funded by one of the largest Chinese MMO publishers, so it’s not quite the same thing here. But, we’ll see how it goes. I worry that unless they really thrwo everything into it, the MMO version might not pack enough punch. And, to be honest, I wasn’t all that thrilled with the single-player game after playing it through once, so I’m not necessarily all that eager to jump into an MMO version.

    tfernando wrote:
    …considering Matrix Online exists and is playable right now….

    Actually, it’s not; Sony closed it down last year after it struggled for a several years. I chose this game specifically because it also shows that a big-name company might not be able to deliver on a game even if you’re paying for it.

    CCP expanded and improved again and again from a very barebones EvE, but they didn’t ask their players to fund initial startup.

    No, they got government funding and somehow kept their IP after the publisher stopped distributing their game. Without these lucky breaks, EVE wouldn’t be around. Not exactly something I could hope to duplicate.

    Some more thoughts.

    Comment by Psychochild — 23 July, 2010 @ 3:36 AM

  17. I apologize for the factual error wrt Matrix Online. I do see a difference between a pre-order on a game near release and first round financing, though. If you do go that route, I hope you’re successful. I’m not part of your market then, at that stage, even if I am later.

    Comment by tfernando — 23 July, 2010 @ 5:06 AM

  18. I just don’t get why risking $50 (or even more) on a pre-order of a AAA game better than doing the same on an indie game?

    I don’t think there is a difference, but a lot of people have been burned by risking that money on both styles of games. There’s been a lot of high profile flops and under-performers: Aion, Alganon, Allods, Champions Online, Fallen Earth, STO, Mortal Online, Darkfall, and others. There are also indy games in development that the fans are realizing it’s a lot rougher ride to be part of them: Xyson and Dawnrise I think are two. Consumer confidence is shaky.

    That wouldn’t make it impossible, but it does make it dangerous, because you’d have to be very accurate on what your game will be like and avoid promising too much. Plus, you are going to need to make the community first, which means having defined game concepts, advertising, and art.

    I’m only a player, but I think mixing that with merchandising would work well. Not so much game advantages at first, but things like a making of book, signed concept art, or a game soundtrack are cool. But there are so many variables it would be hard to say if it would work when put into practice.

    Comment by Dblade — 24 July, 2010 @ 5:01 AM

  19. The Best Of The Rest: Onwards To London Edition

    [...] Brian writes a very insightful post on indie MMO funding. [...]

    Pingback by We Fly Spitfires - MMORPG Blog — 25 July, 2010 @ 2:32 PM

  20. “I just don’t get why risking $50 (or even more) on a pre-order of a AAA game better than doing the same on an indie game?”

    This comparison is irrelevant because relatively few AAA pre-orders are a direct transaction between the player and the game’s publisher. Most pre-order promos are, instead, arrangements between the player and a retailer that would like to retain the players’ business beyond this single transaction. For this reason, most of what we refer to as “pre-orders” are fully refundable, or at least partially refundable/exchangeable, especially if the game never ships.

    Frankly, the CO example illustrates precisely why players SHOULD be wary of anyone who wants non-refundable cash up front for an unreleased product. Even in that disappointing case, though, at least CO lifers have the option of returning to the game if it later meets their expectations. As you noted in the original post, you can’t promise even that when soliciting funds without putting yourself in legal peril should you be unable to finish the game.

    Comment by Green Armadillo — 28 July, 2010 @ 12:01 PM

  21. Green Armadillo wrote:
    Most pre-order promos are, instead, arrangements between the player and a retailer that would like to retain the players’ business beyond this single transaction.

    And someone raising funds for a game project isn’t looking to retain the players’ business?

    I think looking at the motivation is a red herring, anyway. What is the motivation for the player in getting a pre-order? They are saying, “I think I will like this game enough that I want to spend some money before obtaining the product in order to ensure I get it.” Why is that not the same attitude when pitching in to help fund an indie game? You’re taking risks either way that the game might suck.

    Even in that disappointing case, though, at least CO lifers have the option of returning to the game if it later meets their expectations.

    Really? Because in the Champions Online EULA they state, “c) THE ENTIRE RISK AS TO THE QUALITY, OR ARISING OUT OF USE OR PERFORMANCE, OF THE GAME, REMAINS WITH YOU; and (d) Cryptic DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE GAME WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT DEFECTS IN THE GAME WILL BE CORRECTED.” (Section 8, capitals for emphasis in the original.) The Champions Online Terms of Use state, “CRYPTIC MAY SUSPEND, TERMINATE, MODIFY OR DELETE YOUR ACCOUNT, AND/OR TERMINATE OR SUSPEND YOUR ACCESS TO THE SITE AND/OR THE SERVICE AT ANY TIME WITH ANY REASON OR NO REASON, WITH OR WITHOUT NOTICE, WITHOUT ANY LIABILITY TO YOU WHATSOEVER.” (Section 6, capitals for emphasis in the original).

    Basically this means they can close the game at any time, leaving the lifetime subscribers out in the cold. They hide it in long legal agreements, I’m just being honest that something might happen (like being in a catastrophic vehicle accident, or being sued for patent infringement) here and obviously being properly appreciated for being so forthright. :P

    In all seriousness, I think you’re focusing a bit too much on the game project not being finished for reasons beyond the developer’s control. I’m not talking about getting bored and abandoning the project here (something completely within one’s control), I’m talking about serious physical or financial harm being done that absolutely prevents the project from being completed. As always, you do have to make a case-by-case analysis to see if it’s worth contributing to funding. But, it’s frustrating that people would simply not contribute to a funding drive simply because it’s indie and not worth as much as you implied in your earlier comment when you wrote, “For that matter, $50 is a relatively big ask if you’re a genuine indie.”

    Comment by Psychochild — 28 July, 2010 @ 3:59 PM

  22. To add an example to the discussion here’s a movie asking the community to support it: http://www.ironsky.net/site/support/how-to-support/

    For 50,00€ you get minor toys that will probably end up deep in some drawer. No promises to actually complete the movie as you are buying “something”. Something that wouldn’t make much sense if the movie is never release.

    Oh another example http://www.quelsolaar.com/love/index.html. We often see players complain that they are paying for beta testing when a new game comes out (for right or wrong, whatever) but this one IS actually asking people to pay for beta. Yes I’ve seen people whine about that (probably people who will never be satisfied by an indie MMO anyway) but those who are paying must understand that it’s an indie project I guess …

    I have no idea how successful it is right now but maybe it’s one way to go. Release early to a playable state and let players in right-away. They get to play for their money and some might even think that having front row seats to the development of an MMO an interesting experience. Of course that might also mean more work for the dev. Depends if the revenue is worth the trouble.

    Comment by Dave Toulouse — 29 July, 2010 @ 6:19 AM

  23. Another post that slipped under my radar. It’s Google Reader’s fault (that’s my excuse and I’m sticking to it – nothing to do with busy days and hitting the “mark all as read” button, nope. Nuh-uh).

    Mark me down for the kickstarter option too — I’m a starving translator and not a starving developer but the stomach growls are the same. We starvers got to stick together.

    And if you ever need some writing done for your game, holler. I can’t code and I can’t draw (stick figures?) but I can write some mean prose when I put my mind to it. I even have a degree to prove it. (Well ok, to prove that I can critique other people’s work, but near enough.)

    Comment by Ysharros — 9 August, 2010 @ 1:41 PM

  24. Indie Funding – And What Comes First

    [...] Psychochild on Indie Funding

    I think it’s a pretty exhaustive list, actually, with all kinds of weird options covered within broader headings.[...]

    Pingback by Tales of the Rampant Coyote — 12 August, 2010 @ 8:48 AM

  25. The Big List Of Indie Marketing And Business Tips

    [...] Indie Funding – And What Comes First (Response From Rampant Games To A Big List About Indie Funding) [...]

    Pingback by Pixel Prospector — 25 August, 2010 @ 8:04 AM

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