Let’s Dispel the Myth that Indie Game Development is Cheap (Part 4)
In my previous blog posts, I outlined the beginning of why I believe game development is not cheap. In this post, I'm going to reinforce that point by reflecting upon the costs that I associated with starting a game development studio. It's worth repeating that with this exercise I am not building just a game, I'm building a company.
In the previous posts, I stated that we had six team members devoted to game development. This means that we have some real constraints on just what type of game we can develop. Our game has to fit into 2,000 hours of programming and testing. We only have 2000 hours to develop art assets and finally, we have 1000 hours to develop the game design and levels for the game. The remaining 1000 hours belongs to the producer and is spent running the team and managing the company on a day to day basis. That sounds like a lot of hours but in reality it is not. Those hours start the day you open the doors after landing funding to start your company. You can expect the first month to be dominated by moving in time. Computers need to be ordered, furniture delivered, applications installed and more. The logistical issues surrounding the first month will for the most part wipe out any real development productivity. Consider anything completed in the first month to be a nice head start. That means 2000 hours will be crammed into five months instead of six. We’re immediately at 50 hour work weeks. My best guess would be that the work will bleed into month seven and require more than 50 hour work weeks after month four is completed. This also assumes that everyone is productive for those entire 50 hours each week which they won’t be for a variety of reasons. The key to realize is that there’s a finite amount of work that can be done in that time frame given the size and structure of the team so your game has to fit that constraint or you’ve failed before you left the gate. If your design assumes 80 hour work weeks, you will burn out your team when they have to work 100 hour weeks just to keep up with the issues that arise during development.
Here’s where I make my case for raising money for a game development studio. I’m sure it’s possible for a team to work a full time job while working on the game in the evenings and weekends. This eliminates the largest part of the expenses for a team during the initial development phase and can only be good right? Wrong. By the end of the six months, when the pressure to ship is the greatest, your team will be the most worn out. Emotions will fray; chemistry will break down and if the product didn’t die on the vine earlier in development, then it will die here when it matters the most. Best case scenario is that you ship the product on time and your team is so tired of working a full time job to pay the bills in addition to a full time job building the game that they are worthless after launch day plus one. Well, the team members would be working long hours anyway so what’s the difference? The difference is huge emotionally. In one situation your laboring against a product that you love and care deeply about. There’s a shared feeling of accomplishment and everyone feeds off everyone else’s energy. It’s invigorating and when you get to the end and ship the game, there’s relief but not exhaustion. In the other scenario, you’re doing the chore to keep the house paid for and the spouse happy only to come home and work another job. The spouse doesn’t view the other job as your “real” job and that adds stress to the relationship. Hell, you don’t view it as your real job which makes getting up for the “pay the bills” job harder and harder with every additional hour you spend working on the game. In the second scenario, I contend that you’re far more likely to fail as a company. Sure, you saved money, but at what cost to your chance of success? More importantly, you didn’t reduce costs to zero by doing this and you very likely increased the chance of wasting the money you did spend.
Now that we know what constraints we have to work with, we can back into projections for sales. A typical iPhone game sells for $.99 to $3.50. Let’s use an average from last year because I couldn’t find anything newer that detailed what I wanted, $2.40. At that rate, we need to sell approximately 298,000 copies of our game to break even after Apple’s 30% cut of revenue. On the Xbox 360, we could sell our game for 400 MS ($5.00) points using XNA and assuming a 40% cut to Microsoft (can be as high as 60%) we’d need to sell 167,000 copies just to break even. It’s easy to see that developing an indie game may not be the best way to start a profitable business. Those returns certainly are not up to VC/angel fund expectations. If Indie Fund can help lower the legal costs, streamline the development environment purchases and provide the remaining development funding necessary then they may be on to something because right now, small games don’t look so hot for a team this size. The other alternative is to scale this team to a small to medium AAA sized team and raise more money, lots more money. It all depends on the game, the market, the release timing and ultimately your team’s execution but doing it isn’t cheap.
While waiting to publish this article, Raph’s put up a GDC session post that reinforces what I’ve been talking about. My take on Gamelayers, Inc. from his article is that they never did an exercise like these posts to figure out just what it takes to build a game development studio. They had a passion for an idea and ran headlong into it. Far too many indie developers buy into the “everything will be fine if we build our cool game; who needs a plan or a financial model” attitude. What seems to have happened to Gamelayers is that money was easy to come by at the time and then the market shifted on them. The lack of business acumen, left them scrambling for ways to save the company. That’s just speculation though because no one but the owner and his investors know for sure what really happened.
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6 Comments
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I will reiterate that funding a game development company is not a good idea, neither for the developers nor the investors. There is only one company (I hesitate out of respect to call them a game company), that manages to produce game software that consistently sells at a premium price and in mass volumes. Nintendo Company Limited. Every other entity in the game industry is engaged in a hit-and-miss shootout that looks like a bunch of newbies playing Unreal Tournament - every so often someone scores a kill, but it's more luck than skill. The iOS or iDevice platforms are so replete with identical-concept games that success is defined only by first-to-market. Once the clones appear, the purchase dropoff rate is so staggering it makes Niagara look a leaky faucet. Repeatability is a key factor in investment - that or monopolization. Regardless of indie scale or AAA scale or Hollywood scale production values, games are easy to mimic. The best financial models will fail you, if six months later some kids from Ghana produce the same product plus fifty ice-cold new features at a tenth the cost, because they felt it was, like, an awesome challenge, dude... and they release it for free! <sigh>
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Thanks for your comments on both posts. You raise a some good points about how to scale things back to bare bones costs. While I agree with all of them from a cost standpoint, I find it harder to agree with all the saving methods from an intangibles standpoint. For instance, I believe the creativity required at the onset of a game developement project requires if not demands proximity. On a shoestring budget, a team doesn't have the luxury of being able to afford the additional costs of communication from being remote. I'd wager that the expense of an office and a formal setting to conduct business is far more conducive to a successful development cycle than the perceived cost savings of working from home. I'm betting that in the end, it will take longer to produce and require more refactoring to get right thereby eliminating the cost savings from not having an office. When starting a company, I prefer to "properly" fund it because I believe that is the best chance to succeed in a creative endeavor such as game development. No need to be floating in cash from big VC but there's also no need to be concerned with where your kids are going to get their next meal. Thanks for the comments. Glad you enjoyed the article. Your feedback gives good counterpoint to my statements.
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@njc, Blizzard seems to have mastered this is well. What they have in common is a very strong brand and a long track record of consistent quality. Unfortunately, this is something no indie startup has.
@Derek, I'm torn on the office issue. On the one hand, traditional work environments often reduce productivity (see www.ted.com/.../jason_fried_why ). On the other hand, while individual productivity may go up for a home office, collaboration may suffer without face-time. But I still think it's far from clear whether, in general, working from an office or working from home is the best choice.
Anyways, great article. Almost scares me away. Almost. ^_^
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@Jeffrey
Thanks for your comments. The issue of an office or no office is so dependent upon the company's circumstances that I don't believe there is a one answer fits all answer. There are anecdotes supporting both sides of that decision. For me, I prefer an office with locally hired talent, at least initially. Once you get a stable product launched and running, the locality of workers is less of an issue but in the early days of a startup, there's too much uncertainty that gets magnified by distance if you're not all local. That's my opinion. Others will beg to differ.
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Hi, thanks for writing this.
Something crossed my mind as a developer when I read this.
You stated that the first month will be spent on getting things set up, and little, if any, productivity will occur.
I won't say this is false, but I feel as long as there are tables, chairs and surfaces to write/draw on (even off-site), this first month is a golden opportunity to nail down design elements. The programmers can specify what and how to do regarding the general code structure and design, and the artists can, at least, sketch some ideas and discuss how they would work with the end goal in mind.
As an aside, I wish my group would not even touch our keyboards until after this initial process is completed. The throw-aways, redo's, and oversights cost us dearly in terms of production and debugging time.
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Agreed that there is a pile of up front planning to do and design work to do during that first month. Ideally, you would get that stuff mostly done before even setting up shop. As you said, don't touch the keyboards until after this step. My statements in this stream were based around the idea that progress means coding and crafting art assets towards the production of a predetermined design. If you're designing as you go, there's even more pressure on the founders to provide revenue/investment money to handle the inevitable throw-aways, redos and oversights.
That's not to say that you can't design after setting the studio in motion. That's going to happen but I'd strongly caution against founding the company beyond a shell and a couple legal agreements binding IP before the design is first pass done. You have to have a product in mind as the basis of your vision before you form the company to execute that vision.
6.26.2010 at 7:10 PM