Category: business

I was chatting recently to some other devs, and the topic of ‘return on investment’ and more relevantly, the time to recoup the initial investment came up. It occurred to me that the attitude that indie devs have to these values are very interesting, and often completely fucking mad.

Just to clarify how I’m thinking about these terms. Lets say you spend $200,000 to make your game, and after a year from when you commit that money, you have earned $220,000. The game then explodes and can never be sold again. You made a return-on investment, of 10% by getting that extra $20,000 back. That assumes you paid out the whole 200k on day 1, and had no access to any of that money.

If the game went on sale on day 1, and you get $200,000 back on day thirty, I’m saying the time to recoup your money there is one month, but note this is a ‘totally different thing to look at’. I think this is widely misunderstood. For example, one game may cost $200k, earn $50k a year and sell for a decade. Its time to recoup investment is a depressing 4 years, but in total you made $300k profit, and a ROI of 150% which is good. That is, however over ten years, so not as good as it sounds… Game two may cost the same $200k, make $300k in the first week, and then never sell a copy ever again. Thats a really quick and awesome profit, but in the long run…I’d prefer game one thanks… :D

This is what makes looking at steam spy a bit problematic. What you really need in there is a ‘average income per day’ which for obvious bundling/price reasons is entirely inaccurate too, but at least it allows you to make vaguely sensible comparisons over time.

One of the reasons its important to keep these distinction is mind is that often the strategy that gives you the most immediately pleasing result may be in your worst interest. If we go back to our hypothetical $200k game again, and imagine the decision process when it comes to launch discounts or pricing… Arguably game one was priced too high, it didn’t sell that well, didn’t get into the charts, it bumbled along as a failure. for THREE YEARS after that game shipped, you have to admit to your parents each Christmas that no..the game has still made a loss…

Meanwhile game two sold like gangbusters on the first day. WOOHOO! it was maybe a bit under-priced…but who cares. It made its money back and then some profit in a WEEK! OMG riches await, order a ferrari… Except, we may have priced it hilariously too low. Literally everyone even vaguely interested in the game now has it, and paid $1 for it. In the long run, despite us enjoying a smug Christmas meal this year…we will eventually find ourselves at a bus stop in the rain when game developer #1 roars past us in his Ferrari bought in year eight.

Ok, so is this a real issue? and do people make this mistake? I think it is, and they do. A lot of new indie developers are YOUNG. Its just pure maths. to an eighteen year old, the idea of earning money over a ten year period is kinda unappealing, thats like 55% of your whole life AGAIN. To someone who is 45, 10 years is just 22%. I can handle that. In other words, if I’m older than you, I am probably better at thinking longer term.

This whole topic came up because it occurred to me that breaking even in a month on an indie game is seen as ‘average’, which is insane. When you invest in a solar farm or wind farm, you are looking at breaking even within five to eight years. Five years would be AWESOME. Games have a long tail, and its sensible to think of them as long term investments, not one-night stands.

Heres an unusual post from me. Warning: politics ahead…

I am starting to worry about just how mad some of the wealthy elite in society have become. Maybe as a geek, I am slightly more attracted to rationality than most, and I certainly agonize insanely over every decision I make regarding spending my own money. Maybe I take it too seriously, or have too much time to think about implications, and over-analyze peoples purchasing decisions… But here comes a bit of a rant.

Some, and I have to stress with enormous underlining and boldness here to say SOME of the super-rich are acting like dicks on an unprecedented level. I think we can sum it up with stuff like this:

That’s a Chanel “Diamond Forever” Handbag and it can be yours for just $261,000. A bargain! This, to me is partly the sign of the end of times. Now generally speaking, I am one to say that if you work hard, take risks, have talents and abilities, and you leverage all that to make a lot of money, then good luck to you. Thats awesome. (I am *much less* of a fan of people who are simply handed a bucket of cash by their parents…but thats another rant…). People who know me well, would not describe as a socialist, or a supporter of Jeremy Corbyn. I am not someone who supports what is sometimes called the politics of envy, and I am not someone who feels that my life is worse because me neighbor earns more than me. I have even read a few chapters of an Ayn Rand book. (in my defense, I’ve also read the communist manifesto, I try to keep my mind as open as possible). I say all of this not to make the internet hate me, but to give the rest of this blog post some context…

If you have a spare $261,000, and the ONLY use for it you can imagine is to buy a handbag that frankly, looks like its $19.95 from some high-street store, then you have lost all sense of perspective. You have lost all touch with reality, and you need to come back down to earth as soon as possible. You clearly have NO IDEA what that amount of money means to people who are worse off than you, and you need to think about what the hell you are doing.

I think earning money is great, but money is not just a magic ticket that lets you buy cool stuff, I think its much more important than that. How you spend you money makes a difference. When you are on average income, there is little ‘discretionary spending’ and thus you have little influence in the marketplace, but as your income rises your ‘consumer & economic power’ rises along with it. To quote a common phrase ‘with great power comes great responsibility’. or a more interesting quote, from an Iain M Banks book: “Money is power, Money is influence, Money is effect”.

I’ve been reading a book by Henry Ford, and he seemed to believe this too, and saw the purpose of business was to maximize the efficiency of production so that the benefits of technological progress could be brought to the common man. In his world, earning profit from a business was not the objective, this was merely the system by which the business was able to re-invest and further drive down the price of its products for the benefit of all. A worthy attitude, in my opinion, and one that has been lost.

Another businessman I’ve read books by is Warren Buffet, who always asserts that if a business has no idea what to do with its surplus cash, it should give it back to its investors by means of dividends. In other words, companies hoarding cash and just sitting on it are being dicks. And the same is true with people.

Apple currently has cash reserves of $203 billion. They don’t know what to invest it in (otherwise they would be spending it), and they weirdly refuse to pay it out as dividends, and even more annoyingly, they want to keep it in tax havens to avoid paying tax. This infuriates me not only as a taxpayer and citizen, but as a ‘fellow corporate citizen’. To be exceedingly British about it, this strikes me as ‘impolite’.

Too many big businesses seem to be managed these days by people who act like extremely immature individuals. Regardless of age, they seem to be competing for the sake of it, wanting to ‘win’ by having the biggest profits and biggest market share or market capitalization. They may even compete on who has the biggest yacht, or salary. Frankly, I don’t care, its fine, if thats what drives people who are ultra-successful to keep working, then so be it, but they have forgotten the responsibilities of controlling such vast wealth, and on a tens-of-billions of dollars level, they are behaving as madly as the people buying $261,000 handbags.

Now maybe I am a huge hypocrite, as I recently ordered a geeky sports-car (lets not pretend it isn’t one) that cost a relatively big pile of cash. Maybe that hunger for new cool glitzy stuff just never goes away, and I’ll read this in ten years time in my gold plated office and laugh at my innocence. I sincerely hope not.

The thing is, I’m not suggesting that the rich should be taxed more (I don’t think they should, personally, although I understand the arguments in favor), nor do I think companies should be taxed more. Obviously I think tax avoidance should be made harder, but much more importantly than this (and in fact, I suspect HUGELY more effectively), we need to move as a society to a situation where people are more lauded for their accomplishments that their possessions or bank balance. Steve Jobs is massively lauded for creating a rich, powerful company, but we hear less about what Bill Gates did with his money (some incredibly good things, as it turns out). Politicians need to praise and support companies that act like decent corporate citizens, and we need more people starting businesses who have a heart and a soul as well as a desperate tiger-like desire to kill the opposition.

It also strikes me as just ‘bad business’. We all know a few things about apple: They make very cool phones and tablets, and they invented the ipod, and they are very hip, and a big company that makes lots of money. They are famous also for avoiding taxes, and making all their actual products in china in factories plagued by horror stories and suicides.

How much would it cost to fix the last sentence there? A billion dollars? I doubt it. Lets go crazy and say ten billion dollars. Or roughly 5% of the current available cash… It would be different in the company was barely making a profit, but come on…

I could never run a business that way. It just feels the wrong way to do it. How the hell did we get to this point? (and lets forget, its not just apple, such practices are commonplace).

 

 

I try not to be *too* doom and gloom, but I’ve been keeping an eye on things, industry wise and lately a few things have darkened my mood. I’ve been ‘hearing reports’ about fellow indies new releases doing very badly, and a quick glance at some titles on steamspy seems to confirm those rumors. Because we are, in effect, just apes with keyboards, we are very vulnerable to following the crowd, and few indies who know *anything* about marketing will admit on twitter/blog/gamasutra that their game has flopped and they are looking for contract work unless they have completely given up hope.

I suspect a lot of indies are currently coasting on savings, sitting depressed and hitting F5 on the steam sales figures…

..hoping its all an error.

I don’t think it is.

Lots of people have speculated on the possible reasons for this, and they include the prevalence of easy-to-use tools like unity, and its asset store, the many tales of ‘teh indie riches‘, the opening up of steam with greenlight, and so on. These may all be contributing factors. There are also various theories on how to survive and thrive despite this going on, such as concentrating on owning a small niche, slimming down development costs, hedging your bets with multiple games, or just gritting your teeth and riding it out and hoping other people go bust before you do. Again, these may all be sensible strategies.

But what occurs to me today is not ‘is it bad?’ or ‘how do we make it through?’, but the slightly more ominous question of how ‘how bad can this really get?’. To quote silicon valley, is it ‘apple maps bad’?

Maybe it really is.

In a situation of perfect competition, prices drop until ‘normal’ profits are generated for the people supplying the product.  perfect competition doesn’t exist, but lets be honest, PC gaming is quite close. Almost anyone can make a game, almost anyone now can get it on steam, you can set whatever price you like and sell to the whole world. Thats pretty close. That also means that there is huge downward price pressure for commodity goods, such as generic shooters & platformers & clones of existing games. It also means that ultimately, all the games get made in China or India, where the cost of production is lowest. In theory, this means that developers in the US and Europe making indie games are kinda fucked. Why did you think outsourcing to china wouldnt work for PC games?

Lets forget for a moment the indies with established fan-bases, their own recognizable IP, or sufficient scale that they can throw around big marketing budgets, and lets look at the ‘new’ indies making their first game, maybe 2-3 people working on it. My question here, is how is the situation over the next few years for such a developer going to differ *in any way* from the situation with iphone apps?

Depressingly, I do not think it will. We have an overloaded media, who have neither the time, or the staff (thanks to everyone using adblock) to actually cover new games and tell us which ones are worth checking out. We have a ‘popular myth’ that you can make a game and become a millionaire overnight. We have almost no barriers to entry at all, and we have a marketplace based around deep discounting, sales and bundles that are driving prices through the floor. Oh…and lets not forget that there are AAA publishers with huge back-catalogs they can dump on app stores for pennies, despite them originally costing millions to make.

The popularity of free-to-play facebook games, and other web games show that its delusional to think that people gaming on a beige box are any less-likely to demand ‘free’ as the price, than those same people are on mobile. Just look at the money made by world of tanks, or DOTA or LoL. Free is the new price, whether you like it or not….in almost all cases. At the other end is Star Citizen and its associated craziness…

The big problem with that, from a small business POV, is that the ‘free’ marketplace does not scale *that easily* down to indie size. The popular F2P games tend to be rather large affairs, backed by hedge fund money and run by big publishers who may have a dozen or more such games in their portfolio, happily leveraging this scale to populate databases of customer behavior between games. Indies can’t do this. I can email Democracy 3 buyers and tell them about big pharma, but its small beer. Very small beer.

When I look around at games that seem to punch through all this and make mega-bucks even now, I struggle to see any new names there. Lots of names I already know, but who is new? Who is the latest PC indie millionaire? All the names of my mental list of indie success stories have been around 5 years or more. I have to conclude that the ‘smart money’ is not on making an indie PC games right now. A bit of a bummer, as I’m making one, partly outsourcing another, and funding two more. Yikes.

FWIW I think the ‘smart’ money is in renewable energy, electric cars and biotech.

 

Tech companies drive me bananas. IO deal with lots of them, as a developer. I won’t list the ones I’m talking about, but we all know the names of the big ones. Most (not all) of them seem incredibly incompetent when dealing with small business partners, and of course…customers.

More than one big tech company has assigned me an ‘account manager’ who insists on telephoning me to ‘catch up’ or to ‘discuss how I might use the service better’. Not when I want to talk to them, but when they decide to phone me. I’ve threatened one such company that if they ever phone me again I’ll stop working with them.

(Obviously its insanely crazy for an INTERNET company to decide that they should talk to their customers by phone rather than…I dunno, maybe email? a far superior asynchronous means of communication that comes with free perfect logging of all information… but I digress…)

Much more annoying than this weird phone fetish that these companies occasionally have is when they decide the best way to deal with customer support is not to have any, or at best, to deal with it at the end of a two hundred step process of making people go through menus and drop down lists. I’ve just been trying to communicate to one such company about a problem they have, which they assume is mine (but is not), and there is literally no way to email them. None. nada. I have gone through the endless drop down lists for the ‘frequently asked questions’ about my problem, but it isn’t there. And like many of these genius companies, they have firmly refused to have a ‘my problem isn’t listed here, please contact me’ option.

Odf course its absolutely hilariously when companies like this have some major bug or website glitch causing mayhem, but nobody has any way to tell them about it. Pure Schadenfreude. I could reply to one of the many emails I get from them DEMANDING that I sign the updated 45 page legal agreement that changes every week, but obviously thats from one of those lovely ‘donotreply’ email addresses…

What I don’t get is the reasoning behind all this. If these tech companies were operating on tiny profit margins and had no money, and desperately needed to cut costs and run slimmed down operations…then sure. But these companies are often making billions, or tens of billions of dollars every year. Hiring some staff to reply to emails is NOT expensive, it really isn’t. And even hiring high quality staff, sending them on dedicated raining courses about the companies products, and giving them decent employee perks and bonuses and so on…it really isn’t going to break the bank for these guys. (They do not do this. I’ve never spoken to anyone at google who knows how their systems work even half as well as I do, a casual user…).

And yet instead…they sit on vast piles of cash so huge that it defies calculation, money that they neither return to stockholders or invest in new ventures. Its like they are trying to pretend that the money does not exist and that the *worst possible thing* they could do with that money is to give people jobs doing something their customers would appreciate.

I just do not get it.

 

So….it always bugs me, when I live in this glorious 2560 res world of mine, when I visit a website that has this tiny thin little column of ‘site’ in the middle and then…blankness. I get it, designing a website that scales in the x axis is a pain. and yet…

I have managed it, and recently tweaked it a bit more. Here is the positech.co.uk website at low res:

…at medium res (oooh extra boxes!)…

…and at big big res: (oooh even more)

Basically I don’t want people to have to scroll when they don’t have to, and if the visitor is staring at the screen I want it full of screenshots and logos for all of my games. Hey, people still buy Kudos 2 in non trivial numbers, kinda :D

Plus I need to have a site that supports more games as positech gradually (like a snail carrying heavy shopping) expands… By the Summer of 2016, I hope to add Shadowhand to this site, PLUS another game that I have not announced yet, PLUS maybe be teasing yet another game that…I haven’t announced yet. Strength through diversity and all that kind of thing. Plus who knows, I may finally get some crazy VR thing working and put that up there :D.