Category: business

So recently I went to Canada for reboot banff, although tbh half my reasoning was to go to the games conference, and half was to go on holiday with my wife as we had been there a long while ago and loved it, so we knew it would be a great place to go visit. This was a pretty small games conference (500ish people), when you compare it to the likes of GDC, but it was worthwhile, the talks were mostly good, and the atmosphere (in every way) was just so much better.

One of the things I really dislike about GDC is its price tiers. You are literally barcode scanned when entering a talk to check you are sufficiently wealthy enough to hear what is being said. The top tiers are stupidly pricey. I’m a bloody successful developer, but I’m not paying thousands of dollars just to sit in a few room and hear people tell me about the way they used shaders in their AAA game, or to give us a post-mortem that is 50% advertising and pitching for a better job at another company…

Everything in reboot is the same price, plus you get FREE coffee and buns/cakes/yummy things in the morning and afternoon and a FREE buffet lunch. Everyone mingles, everyone is chill. There are no torturous queues to be able to spend $5 on a crap cup of coffee… its ace.

Plus for fucks sake…banff. I’m sure we all know about the insane homeless problem and literally shit problems in San Francisco. and here is a picture I took at banff from my hotel window:

I was celebrating something while I was there, so we did something truly insane and went on a helicopter trip to the nearby mountains, and I cannot convey the awesomeness of this with a mere photo like this:

But trust me it was amazeballs.

The hotel that the conference was at is very nice, although you need deep pockets to eat there each night, but luckily the town is way cheaper and a very pleasant walk 15 minutes along a clear glacier-water stream. Hardly a chore. We saw a fair few deer on our walks there, although TBH living in the UK we have deer in our garden now and then but still…its pretty cool.

The talks were a nice variety, a fair few businessy ones which I found interesting. Some slightly avante-garde ones too, but I chose mostly business and industry ones. I went to probably 4x as many talks at this as I do at GDC, which is amazing really, given GDC has about 50,000 talks (about 5 of which you can go to as an indie…).

Anyway, the real value in these things is the over-dinner and after-party chats with fellow devs. I met some new people, re-connected with old friends etc, and it was cool. I definitely learned some things, and its good to take the pulse of other indies in person. Would I go next year? Maybe… I don’t know what to do about GDC. I’m thinking NO, mostly because of flying, but it will be Democracy 4 launch year so maybe I should? Still undecided.

But I give reboot 5/5. You should go.

Right then… I’m in Canada for #rebootred, so on a laptop, and this will be a simple blog post with no images, but hopefully distills a lot of careful thinking…

I am worried that western game devs, (mostly indies) are totally and utterly fucked. I am super-worried (and confident) that western indie game devs who are based in California (esp san fran area) are so hugely utterly fucked that its like a disaster movie. Not today, not tomorrow, not next year, but soon. Here is why.

The mindset of many california/west coast USA indies seems ridiculously optimistic. In talks, many of them talk about game design, company culture, personal development, aesthetics, mental health, safe-spaces and how they are anti-crunch, pro-union, and want to create idealistic creative environments, but rarely touch on economics or money. All of this sounds wonderful, and positive and desirable in a happy, optimistic ‘wouldn’t it be great if star trek:TNG was real’ kind of way. The trouble is, I think its idealistic naive insanity and that historical chance is currently lulling people into thinking this is going to continue.

There are basically two points to make here. One is how exactly I think this is naive insanity (I’m trying hard to avoid the word bollocks), and the other is why nobody has seemingly noticed yet. Onwards with point one:

Its stupidly expensive, and inefficient to make video games using middle class American twenty somethings working in California or Vancouver/Seattle. If you asked me how to lose money by writing software, I guess three of my best ideas would be to hire people with as little experience as possible, ensure they were only vaguely pressured into working real hard, and also place them in the most expensive office space I could find. That should do the trick.

Newsflash: You get at better at programming with experience. You get better at art with experience. You get better at almost EVERYTHING with experience. I am vastly, hugely, hilariously better at coding now than when I was 40 (I’m 50). The code I wrote when I was 30 was embarrassing. The code I wrote when I was 20 was a joke. I started coding aged 11. I am still learning. The code in Production Line is way better than Democracy 3. If I was hiring coders now (I’m not), someones advanced age (assuming equiv experience) would be a HUGE factor in selection. Your grey hair might not be a huge boost for your prospects on tinder, but they are a boost for your prospects as a potential employee at my company. Why? Because I’m not a total idiot. People with 30+ years of experience are BETTER at stuff. How is that even up for debate.

But the average age of indie developers seems to be going down each year. Its crazy. Your first attempt at making a game is usually awful. You think its better than it is because unity superficially makes stuff look better than it really is. The western attitude of praising youth over experience is a crippling flaw. The flipside view in many asian countries makes vastly more sense. Its 2019, much work is now mental, not physical. A 20 year old laborer is more productive than a 50 year old laborer. But coders….lol no.

Modern western millenial (or zoomer???) attitudes to work are different to the boomer/genX attitudes. Thats in many ways an improvement. I am a huge workaholic. I will work myself to death in order to win. I LOVE finding myself in a situation where the person who works the most wins, because then I know I will win. This is very unhealthy, and very bad, and rightly looked down upon. Its also the predominant attitude still in a huge swathe of the world, especially the ‘developing’ world, or to put it another way: China.

California/Seattle/Vancouver are rich. The middle class kids who lightly rebel against their parents by having dyed hair, a mac book air and a copy of unity need not fear too much that they will end up in the gutter hungry. The game dev thing is their dream, but if it fucks up, they can get a job at facebook/microsoft/amazon for a high six figure salary anyway. Their parents likely own houses that have quintupled in value and will bail them out anyway. Do you think the average seattle indie dev has the same hunger to work on their game as a kid from a poor family in Shenzen who sees this as their ONE CHANCE to escape life in a factory?

Poor people have an added incentive. Harsh but true. I’m not exactly ‘from money’ (to put it mildly), so I know this. Nothing encourages you to work harder than hunger, and west-coast indie devs dont have it.

I could look up relative apartment/office rental costs in China versus Seattle/SF here, but why bother? you already know the answer. A dev in India/Russia/China/South America has a trivial office rental bill compared to you. Guess what… a $20 strategy game royalty buys a lot more *stuff* in mumbai than it does in san francisco, but the developer still earns the same $20 regardless of where they coded the game. Steam doesnt deduct income from chinese developers because they *cheat* by developing games somewhere more affordable.

So yeah… pure economics mean that western devs, in western cities, with western attitudes, and work-life balance are fucked. You cannot compete. Its over, you lost. Poverty awaits. You*are*fucked. Point one ends here.

Now point two… if this is really true, how the hell is ANYONE still in business making indie games in SF/London/Seattle?

CULTURE

Anyone who has witnessed triple-A devs outsource art or design or code to the developing world will say its CULTURE that *we* have an advantage on, and *they* don’t. Chinese devs cant make art that appeals to the precious artistic sensibilities of all the people buying games, which is rich westerners, hence, they might be ok to model the odd tree…but chinese devs can never compete with western ones for creating real IP, or whole games…

HAHAHA.

Yeah maybe…in the past. But thats bullshit now. Firstly, The chinese economy has been transformed, and there is now a HUGE middle class. There are a staggering number of chinese gamers, playing everything. The idea of Chinese outsourcers making content for rich westerns is seriously out of date. If anything, its now hungry western indie devs asking how they can ‘break in’ to the huge and lucrative Chinese market.

Secondly, the whole ‘cultural advantage’ thing is about to become bullshit. In the past, people had a point. Thanks to WW2, my own country (England) was economically kicked in the nuts a while ago, and became effectively subservient in economic terms to the USA. As a result, US culture invaded and dominated our own, to the extent that English people know what Hamburgers, High-School, High-School proms, Little-League, Baseball, Cheerleaders, Trick-or-treat and Pretzels are, even though none of this is English. You can make a video game in san francisco about a pretzel-munching cheerleader at the high school prom, and thats just fine, because US culture has basically conquered the world. US culture dominates, and thus people 100% immersed in it in San Francisco get an advantage over kids in rural China.

Not any more.

Some commentators suggest that ‘Gangnam Style’ was the tipping point towards Asian dominance of global culture. Maybe instead its ‘Crazy Rich Asians’. Maybe it will be some movie/game from next year. Hard to tell, but everybody can see the direction of movement.

In economic terms We have ZERO defence against domination by asia of almost everything. We have got away with ignoring this for a few decades because of the cultural overhang of western (esp US) media that created a narrative of needing to get IP and art from the west if you wanted to be a success in the media. That cultural advantage is collapsing right now.

To clarify: I dont see this as a BAD thing. Or a GOOD thing. Its just a thing. Its the gears of history. Britain was good at shipbuilding and built a trading empire based on naval might that let us get away with punching above our weight culturally and economically for a while. Then the US had their turn, after WW2 basically fucked everybody else. Now its time for Asia to take both the the cultural and economic crown. Stuff changes. All I’m trying to do is spot when changes might cause me, or people I know, to have to adjust.

TL;DR: There is no safe space to protect from the economics of Chinese game development.

This is just my view. I could be totally wrong. I’ve never even been to India, China or Russia. Am I wrong?

So…. In the complete and utter absence of any interest from curators, youtubers, the traditional press, or platform/store people to promote games these days… how is a struggling indie able to get any eyeballs on what they make? I guess its back to the wonderful world of adverts…

So I have been running facebook ads for AGES, and have loads of stats, and recently decided to break out excel and go through some stats on how advertising spend to promote production line stacks up against actually earning a profit. This stuff is extremely opaque, and because valve will not let devs have any kind of store page conversion tracking…we have to guess as to how our promotional efforts work :(

So I have a big spreadsheet that tracks the following things on a daily basis:

• Ad spend on that game for that day

• Raw steam revenue for that game (and its DLC) that day

• Estimated net revenue after valves cut, chargebacks, returns etc

• Profit for that day!

So if I look at a nice selection of 48 days (not during discount sales) data, I can plot these against each other and then analyze them in various ways to see whether I am doing something sensible or not. To do this I am just comparing columns of data using the excel CORRELATE() function, and the results are thus:

A raw correlation over those days of ad spend vs revenue gives this:

Simple ad spend vs revenue correlation: 0.50

Thats positive, which is yay! showing that I *am* actually driving revenue (not mere eyeballs, which is obviously working…) from my ads.

If I look at the correlation of ad revenue to profit I get:

Simple ad spend vs profit correlation: 0.39

which is weaker but still good, implying more ad spend == more profit. However, this is pretty useless as a metric, because the impact of an ad is likely not instantaneous. Someone sees an ad, follows a link, then thinks ‘gee! what an awesome game! (they are 1950s sitcom schoolkids), and then they add it to their wishlist to remind themselves to buy it the next day, or some such effect… so really I should look at pairs of day spending against pairs of days profit, to iron that out giving me this result:

rolling 2 day ad spend vs rolling 2 day profit: -0.32

Which is kind of wtf? If I go one steps further and average things over groups of 4 days I get this:

rolling 4 day ad spend vs rolling 4 days profit: 0.92

Hmmmm. This is a positive result, but actually I wonder if I’m actually doing it wrong. After all.. if there is not much variety between the ad spend on a given day, or profit on a single day, then how can I really draw conclusions. I probably need to go on a financial analytics course or do a lot of reading to understand this.

For example, if I do a correlation of a days ad spend, against the profit of that same day PLUS the 3 following days, I get a NEGATIVE correlation (only just) suggesting this is all bullshit :D

What I really need is some way to assess what the correlation is, and revenue really attributable to ads is… given the level of confidence I can get from the level of volatility in my ad budget... or what I imagine is called ‘volatility adjusted correlation’?

A bit of googling suggests this is called R squared, or ‘adjusted coefficient of determination) and on my rolling 4 day figure I get an RSQ of 0.84. I *think* this suggests that I can sensibly attribute 84% of the variation as being correlated, so effectively 84% of my profit each day is attributable to ads? Or is it that I can be 84% convinced that 92% of my profit is due to ads? In that case roughly 79% of my profits are ad-driven…?

No wonder most devs are confused by this stuff… I need to go back to school.

I know there have been surveys and studies in the past that show how many indie games on steam have sold a very small number (like under 10) of copies. Its no secret that many indie games are total flops. Its also no secret that the indie games market has skewed in recent years to be more hit-driven than in the past. There are a relatively small number of games making huge sales and a LOT of games making virtually no sales. I think that a lot of devs attitudes to this are somewhat fatalistic, and probably counter-productive and I want to explain why.

The general, subconscious ‘common-sense” supposedly rational mental model to how work equals success looks something like this:

But in actual fact, it seems to me that the real graph, in the real world is actually a lot more like this: (excuse my quick crappy hand drawn mess)

Which is something we are absolutely not used to dealing with, because we do not naturally encounter anything like an exponential curve in our primitive ape-like brains. here is a great article explaining just how ‘against common’ sense this is:

The AI Revolution: The Road to Superintelligence

(Scroll down to ‘All of This Could Happen Soon‘ to see an amazing animation that shows just how much exponential curves totally fuck with our brains).

This should be intuitively obvious. Our primitive ancestors did not ever have to deal with exponentials. We hunt for an hour and find a single wild squirrel to kill and eat (my knowledge of primitive man is…sketchy). We hunt for 2 hours, we find and kill 2 squirrels. At no point did we ever hunt for 8 hours and then find/kill 32,600 squirrels. This is not in our experience. In fact, its not been in human experience, in the day-to-day sense, until EXTREMELY recently. Until the internet, we had ‘natural barriers’ to extreme success. To be popular as an entertainer in Michigan, you needed to live in Michigan, or have a sales team/rep in Michigan, or at the very least in the USA. Now anybody can make and sell anything anywhere. The total audience size for your product is probably a few BILLION people. Sell a $20 video game and you can potentially make $40 billion. Its extremely unlikely…but its POSSIBLE.

And even if you never achieve that, you have to accept the fact that other people are doing it. Fortnite and Minecraft are not selling to hundreds of thousands, but to hundreds of millions of people. NOBODY is safe from the financial and marketing reach that those games have. That includes you.

To put it another way: the natural result of global reach due to the internet, is that the big can get bigger, and bigger and they can and WILL compete with you. There is no local home-team advantage. There are no barriers. We are in the age of exponential entertainment. EVERYBODY knows about Game of Thrones, The Avengers Movies, Harry Potter et al…

So thats just fab…but how does that help a struggling, probably failing, probably bankrupt indie dev?

You have to learn to embrace and enjoy exponential growth.

In practical terms, what it means is that every improvement to your product yields an increasing relative improvement in sales. It also means that the very earliest upgrades and improvements to your product are the least rewarding, in comparative terms. When you check out the graph above you can see that if we make linear steps to the right along the X axis, each step yields a higher and higher boost in sales.

To put it yet another way, the first patch for your game will boost sales by a tiny, almost unnoticeable amount. The 99th patch for your game will double its sales. Yes really.

I am fully on-board with this mentality because my latest game (a car factory tycoon game called Production Line) is about bottlenecks. Like all factories, a factory in production line will move at the speed of the slowest link in the chain. The first few improvements to your line will maybe only raise production from maybe 1 car/hour to 2 cars an hour. The final ironing out of bottlenecks will take you from maybe 250-300 cars an hour.

Think about the effort required to improve fortnite by 1% in terms of content, quality, or presentation. Now think about how to improve your game by 1%. Its probably not a MASSIVE difference. Game engines and game design are very similar whether a game is a smash hit or an also-ran. But a 1% boost in your games sales will buy you a coffee, whereas a 1% boost in fortnite sales buys Belgium.

The problem is…people give up. They put in ALL THAT EFFORT to update their game with less bugs, more polish, more features, or a tweaked balance/difficulty/onboarding process and they earn an extra cup of coffee a month. WHY BOTHER? That is 100% the way most rational humans think. They then abandon the game, and start a new one from scratch, or leave the industry.

Do Not Do This

Read every article you can about compound interest. Then read about the chess rice wager, or simply watch this video to understand exponential growth:

And yes…its seems MAD doesn’t it? Like there is NO WAY that simply doubling something regularly so rapidly builds a pile of rice so high it stretches to the edge of the solar system. Those numbers MUST BE WRONG.

A bit like…. the sales figures of minecraft and fortnite.

So back to indie games… the point of the update that only has the impact of earning you a cup of coffee, is that the extra player (just one) per month builds a bit of momentum. The next update gets you another cup of coffee/month PLUS the extra 1/4 shot of coffee from a partial signal boost from the extra player and so on and so on… until every time you update the game you get a huge boost in the success and sales. This can take a while, and MOST people give up.

I am currently working on update 81 for production line. You can read the list of updates to the game on steam here: https://steamcommunity.com/app/591370/allnews/

Its a very, very long list. Its also enabled me to run a lot of steam visibility rounds on the game. I think the last one was number eight, and every time I run them, they are being shown to a bigger, and bigger audience, which helps grow the game even more because now we have more sales and thus more eyeballs and thus more sales and thus more…

The average indie gamer with mediocre or disappointing sales is at the 3rd or fourth square on the chess board. they have their 16 grains of rice, and they go take a job at facebook which pays them 64 grains of rice, which is obviously a better deal. Meanwhile Tim Sweeny and notch are sat on a pile of rice larger than Everest wondering why everybody else gave up so early.

TL;DR: The first post-release update for your game is the least effective in driving sales. This should be mathematically obvious, as its being delivered to he smallest ever number of customers. Giving up at that point is common sense AND totally and utterly wrong.