Game Design, Programming and running a one-man games business…

Indie game development risk management

cliffski

I saw the merchant of Venice yesterday. Weirdly I sided hugely with Shylock. Granted his terms were onerous, but I had no sympathy for Antonio, who frankly sucked as a businessman, and should have read risk management for dummies. I suspect the play wasn’t intended as a treatise on maritime risk management strategy, but thats how my mind works. YMMV. Anyway… There is a proper point here about indie games.

dummies

People complain there are far too many indie games being released for the actual number of games bought, and I guess there kinda are. I think the bigger problem is that the results of shipping those games are less of a bell curve (in terms of return on investment, which is what people seem to expect…

expectation

…and more of a hit driven model like this:

reality

Which means that the number of indie games that are ‘failing’ in terms of not returning a proper ROI (normal profit) and thus building self-sustaining businesses is really big. People assume that a lot of games will break even, but in actual fact, I suspect the vast majority lose money, a few ‘break even’ and a few are mega mega hits. There is some great writing on this topic here.

This is a problem because what it means is, we miss out on great games. Why? Because we should start with the assumption that peoples first few games suck. On average. Some people get lucky and their first game is awesome, but lets say your chances of having a smash-success game are roughly one in ten. Lets also assume that you can basically have only a few flops before you have to give up and get a job in a bank.

Now in a more even distribution of success, a lot of people will have a track record that goes something like this:

Flop, Almost-break even, Mild success!, Flop, break-even, Mild-success, Flop.

And you can just about eek out a living doing that. Eventually you might have a hit. With my own history it looked like this:

Star Miner (flop) Starlies Inc (Mild success) Rocky Racers (flop) Kombat Kars (flop) Kudos (Mild success) Democracy (hit!).

The trouble is, with the current hit-driven system its basically this:

Flop, Flop,Flop,Flop,Flop, *Get a proper job here*.

Because so many games are not hits, and production values are now driven so high, the risk associated with ‘hanging in there’ until you get your hit is very high. Lets say each indie game costs you a minimum of $150,000 to make, including your food & housing as you code away on it. To get that hit at game number 10 is going to cost you $1,500,000. Granted, the hit may then earn you $2,000,000, and you *win*, but who has $1,500,000 ready to gamble?

This is a classic economic problem. Its solved for farmers (with unpredictable harvests) by the futures market in commodities./ Some years the commodity traders lose, some they win, but they hedge their bets over multiple commodities over multiple farmers. The security for the farmer is higher. In Silicon valley, you have ‘accelerators’ where a VC will throw small amounts of money at ten developers with ten apps, hoping one hits it big. Peter Thiel; says never to invest in anything that can not potentially pay for the losses on every other investment you make. In the example above, they invest $1,500,000 and get $2,000,000, a very good ROI.

Image3

Basically this is indie fund. And the unofficial equivalents that have spawned elsewhere. I do it a bit myself. I fund Big Pharma, and spread my risk between BP and GSB2. I also am funding 2 unannounced games, so my risk is currently spread over 4 titles. The thing is, with just one investor (me) and four titles, there is still considerable risk. What is really needed is a lot of investors and a lot of titles. Basically kickstarter, but with actual proper investments. In some ways, I’m talking about a hedge fund. Is there a market for this? And is the ideal system one with wealthy individuals investing $100k each, or thousands of gamers/savers investing $100 each, acting as a sort of ‘greenlight-but-with-investment’ model? Is it regulatory hassle that has prevented people crowdsourcing investment? It already kinda happens in the UK with sites like funding circle. (Although thats business loans, not actual shareholder investment) Why not a game-specific version?

 

8 thoughts on Indie game development risk management

  1. Traditionally the role of the publisher.

    Except (as happens with VCs too) over time they end up forgetting that they are there to spread risk and expect most things to fail, They start to want to get more back from the ‘failures’ and shoot themselves in the foot by needing most, and finally every, game to succeed.

    They also like to meddle to ‘improve’ things, which leads to risk aversion, playing it very safe and ultimately irrelevance and death.

  2. I don’t really have anything to add, it’s certainly an interesting question around how to set up a situation where everyone wins (or at least doesn’t make a massive loss). Cdr Jameson does make the good point that traditionally this would be where the publisher helped out. The big guys can’t seem to accept any kind of failure these days though. The games that you take on a publisher role for are a little more lucky in having an actual human on their side :)

    Just a couple quick corrections. I think this sentence has the opposite of the meaning you intended:

    “the number of indie games that are ‘failing’ […] is really small”

    Also a stray slash and semicolon in the paragraph before last.

  3. I’m sure everyone is aware of the publicity from various failed Kickstarters who either costed poorly, overspent, went bankrupt or delivered late and overbudget.

    I think one of the main issues surrounding funding for indie games is that many developers seem to have no business sense or management skills and their development plan is more “play it by ear”, leaning towards “make it up as we go along”. These sort of things which will turn investors off from risking money on indies as the danger of absolute failure seems very real. I’ve seen threads in the SteamDev forums of such naivity they made me wince. Hell, it looks like plenty of “pro” developers funded by publishers can’t manage their budgets on time, never mind the indies.

    I’m sure Cliffski picks his horses very carefully and actually having considerable dev experience himself, probably helps in cutting the wheat from the chaff.

    As for mega-corp publishers aversion to failured projects, haemorrhaging millions of dollars does not do their shareprice any good and it is shareprice that is the blood of all large corporations. Poor decisions gets executives sacked, bad decisions gets the board sacked, and terrible decisions gets everyone sacked in a hostile takeover.

  4. While I think the visual art quality of indie stuff has gone up, the overall feel from the stuff that I see as probable failures is the rehashing of same concepts. Almost as if all “game designers” at work there played certain few popular type of games in their past and decided to make a new game just to make it “their way”. I have to admit I had such temptations as well except the game I was looking to modify was really so complex (even with the source and assets at hand) that I just threw my hands in the air. Later I saw some fan mod come out and it was pretty much what I expected would have happened if I had “dabbled” away at something anyway with no one paying (=lacking proper commitment to go extra mile or hundred – such as sourcing dedicated/skilled team instead of random volunteers on forum)- not really fun to play or great to look at.

    Now there’s many companies doing sequels to old hits that haven’t been hastily rehashed but having seen how often direct sequels done by other team than the one which did the original tend to be disappointing, it just makes me think there is a strong possibility the new guys doing the sequel are yet more people who really should be doing ‘paid mods’ to polished games with polished assets at hand instead of doing a full game because most likely they are underestimating the amount of talent and time by great deal. (eg. some of the best games around might have taken 5-10 years of various levels of simpler prototype concepts and finally the game everyone knows about took maybe 3-4 years with a team that already had years of experience – good luck achieving something of similar quality – yet you paid for rights to sell it under same name – in many cases even originally involved people doing sequels tend to disappoint as often the sequel was done due to market pressure and didn’t involve same amount of planning – the originals usually had some ‘founder type’ spending a lot of creative juices and compiling great ideas – the sequels may be ideas that were discarded or bunch of “wouldn’t it be cool” rather than something some real game designer spent a lot of time thinking about / prototyping).

    OK I just made all that up, I’m not in the industry, but it’s comforting to make up some story for why the rehashes of old ideas, sequels etc tend to not meet expectations.

    Point being, if ones game is essentially in competition with free mods for some popular AAA game, it’s hard to avoid looking bad – ones only hope is in the “new sucker born every day” idea.

    So my 2 cents to indie game devs that aren’t just “lets make a paid mod but use Unity because we can’t do paid mod otherwise”, broaden your gameplay experience and see if there’s good ideas to incorporate from other places. That’s usually how all the great things come about -they plain plunder great ideas all over the place instead of trying to do a straight clone of existing game/concept with few tweaks.

  5. Addn. “broaden your gameplay experience” infact when I hear about some veteran game designers, it seems they didn’t even use computer games necessarily as source but other type of games, books, perhaps even life experiences.

    Obviously the problem with getting some other person to design the game is that then it isn’t your game. So really the problem is (as ALWAYS) about “casting” – finding the talent that kinda shares the vision or can be talked into it and then contribute broadly without ending up with plain clone of existing product (which probably will happen if you get bunch of people together that loved to play the same type of game and didn’t do much else).

  6. I have to qualify the “dabbled” part more:

    Infact this can result in good mods things as well over time but yeah you probably have to have years of “dabbling” (prototyping, writing, design) and then get together the paid team to get the kind of commercially competitive results one has in mind.

    So we could look at a lot of the indie “failures” as attempts to gain experience “dabbling”. It’s just they all try to clone the same couple easy to clone game types, I’m not sure if that really is the approach to use, unless they are actually just doing it to avoid revealing their more original ideas they are saving for later… smart or not.. hard to say.

  7. And last but not least… ultimately having the best gameplay and original concepts does not matter at all unless you have one of these a) visibility when you need it most b) uncrackable protection

    Since a) is hard to guarantee, if I was doing a game, I would probably make it heaviny online dependent but in a way that the online part provides such strong value that it wasn’t there just for the copy protection (which makes business sense but the negative reviews might not be worth it, so I’d prefer game designs that have legit reason to be connected and that at the same time actually makes actual copy protection less relevant).

    Such approach combined with original concept and actually great gameplay lends to Minecraft type of success- where you don’t pay megabucks for marketing but instead let the time, gameplay and novelty do the marketing in large way. Obviously you probably have to be a bit of a genius to pull this off :-)

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