Category: business

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.

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…

…and more of a hit driven model like this:

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.

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?

 

Its a tough time out there in the world of indie gaming. I talk to a lot of devs ‘off the record’, whether we are just chatting, they are pitching a game to me, or they ask for advice… so I hear opinions from a lot of people and… its a tough time out there. 1,592 games have been added to steam this year apparently (and its only July). How on earth do you get any attention for your game? who on earth is going to buy it? how are you going to break even.

Now to be honest, I’m one of the doomsayers who will tell you that you won’t, and you will almost certainly lose money. Thats just the way things are. Only the top 20% or so will break even, only the top 5% are going to make a living. Maybe. There are a lot of poor games out there, and the globalization of attention means the distribution of attention/money to games gets more skewed all the time.

So you might think its fine for established devs, with money in the bank, and known IP. But actually those devs have a problem new developers do not have. lets arrogantly call it the success trap.

If you are working on your first game, or have a bunch of failed games behind you and little/no press attention / audience, in some ways you have a big advantage. In fact three advantages, a sort of ‘newcomer bonus’…

1) Nobody is bored of hearing about you. You are new, fresh and exciting. If you make an amazing game, you are an ‘overnight success’ and also ‘hot new talent’ and ‘the new face of…XXX’ and all these other media friendly things. We seem hard wired to get excited by ‘new’. If I make the same game, its less newsworthy. Seriously.

2) There is nothing to compare your game to. Its the ‘first’ (even if it isn’t) game from you. MY GOD YOU MUST BE TALENTED. Literally 100% of your games are hits! you are like Guns n Roses with their first album, or the first Highlander movie. Surely everything you make will always be this good how awesome. Also insert comment about minecraft here.

3) You can take risks and do new things and be adventurous with your game, because there is no opportunity cost.

This last one needs some explaining. Right now I am mulling over what to do when I finish tweaking Gratuitous Space Battles 2. I like working on it, I want to keep improving it, making it as good as possible. I may then do a completely new strategy/sim game (designed in my head, but not started yet). I also have 2 ominous looking camera tripods in the office now hinting at something even more ‘new’ I could work on instead.

or…

I could make Democracy 4.

If Positech Games was actually a public, traded company, we would be making Democracy 4. We would *have* to, because shareholders would kill us otherwise. Its the *obvious* thing to do. It would sell, it would make money. We should do it. We should do it in *exactly* the same way that Valve should be making Half Life 3.

And yet…I’m trying to resist doing whats ‘easy’ and expected’ and thinking about doing radical things instead, but this takes effort, and is worrying, because there is an opportunity cost. In other words, if I do something weird and new, it has to do better than Democracy 4, or internally I’ll think I screwed up.

New devs don’t have that in the back of their mind. And thats a good thing. Be experimental while there is no downside.