Nov 152012

Here is an interesting article on one developer’s decision to go with freemium. Now I think his analysis had some major flaws but he did bring up some interesting points.

“When you make a game that earns 1+ year’s salary, it feels like you’ve made it. 90+% of devs would be delighted to be in this position. For the moment, let’s assume you’ve made it. For what it is worth, I’ve been there twice. Having succeeded, many devs assume that they are inherently talented and can repeat that success with only a small amount of additional work. In reality, the number of ‘developer successes’ that have created multiple highly profitable games is surprisingly low. Go through your list of ‘indie successes’ and ask how many have created more than one hit game. More than two? Your list is likely dramatically smaller.

Given that the current indie resurgence pretty much started in 2008 with games like Braid, Castle Crashers, and World of Goo, I think it’s a little too early to write these developers off as 1-hit wonders just yet. After their initial success, each of these developers spent some time porting their success to additional platforms and is now (to my knowledge) spending a significant amount of time making their next game. And hey, I can’t blame them – if I had a game that made millions of dollars, it would be very tempting to spend 3-4 years getting the next game just right.

Success leads to scale which leads to risk aversion and fragility in the face of volatility
There’s a specific revenue graph that you see for a typical packaged or downloadable game. You get a big spike of money that slowly trickles down to almost nothing. These are hit games in a hit driven industry with hit shaped revenues. This has some fun psychological implications. When the money is good, it seems like it will never end. As a result, teams tend to overextend themselves. They hire on additional people, and they take on more ambitious and exciting projects. They invest in all the heavy lifting associated with moving their hit to other platforms and new audiences.”

And here’s the part where he’s dead on. As soon as you’re successful, it’s very tempting to want to expand and become even more successful. It’s easy to think “Hey, if we were this successful with a tiny budget, if we increase the budget by 300%, we’ll increase our sales by 1000%!” And it’s not just the desire for more wealth that is an issue. Your typical indie game developers wants to make the best games. Chances are their “dream” game requires a much larger budget than they have access to when they’re starting out. So if their dream game would cost $5 million dollars to make and they end up getting millions of dollars from one of their cheap games, the natural inclination is to expand and finally tackle that dream project. We can definitely see an example of this with Jonathan Blow’s The Witness – he’s even gone on record saying that he’s pretty much spending everything he made on Braid on the development of The Witness. That’s taking a huge chance – the game could succeed wonderfully but if it fails, then he’s practically back to square one.

Now the writer of this article seems to think that this desire for more and more growth is a sign that the traditional practice of charging people a flat fee for a video game upfront is flawed and that it’s safer to make freemium games instead and that’s where I think he’s wrong. The big problem isn’t with selling your game upfront; the problem is with rapidly expanding development costs. If you have a big game success and one of your games makes $5 million dollars, don’t rush out and hire 100 people to work on your magnum opus that’s going to take 5 years to make. Instead, be happy that you now have job security. Stay small or if you want to expand and make more ambitious games, grow SLOWLY. As an additional benefit to this strategy, it’s much easier to find individuals that are perfect for your company when you’re hiring one or two people a year than it is when you’re hiring dozens or hundreds of people over a short period of time. Also, game development that involves 50+ people requires very different skills than game development that involves 1-5 people and so growing slowly lets you grow into your role as well.

What I find especially funny about the whole article is that the writer briefly mentions what I think is the correct path to success as an indie developer and then fails to discuss it:

“Spiderweb stayed small and served the same community for years”

If you’re not familiar with Spiderweb Software, here’s a quick introduction – they’re one of the oldest indie developers around with games like Exile coming out way back in 1995. And the secret to their success is that they stayed small and picked a niche – hardcore old-school PC RPGs that give the player a lot of options – and they stuck with it. Their games don’t sell millions but they have a dedicated fanbase that they can count on to buy a new game once a year or so and since their team and expenses are low, they don’t need huge successes to stay afloat. They can sell 15,000 copies at $10 (or 5,000 copies at $30) and consider it a win. That’s the way to do it. Find a niche that is ill-served by the big AAA companies and serve the fans of that genre. That’s what we’re trying to do for fans of turn-based Japanese style RPGs and as long as we can resist the urge to create 50 hour 3D cel-shaded extravaganzas filled with high quality full motion animated cutscenes, I think we’ll be around for many years to come.

Indie game development success can be very much a feast or famine situation. As soon as you make a game that is a big financial success, don’t get cocky. Save as much of that extra money as you can so that you don’t run out of money while trying to create your next success. And hey, one day you might even get so successful that you don’t have to worry about money at all (as long as you keep your expenses low) and could spend the rest of your days making and releasing games that are actually free (not to be confused with fake free, aka freemium) just for the fun of it because hey, you’ve got  millions of dollars just sitting in your bank account.

 Posted by at 6:59 pm

  5 Responses to “The Perils of Rapid Growth”

  1. “When you make a game that earns 1+ year’s salary”

    I am still trying to make a game that earns 1 month’s salary!!!!

  2. I am all for you guys making a 50 hour rpg =p I don’t care about the rest though. I am ok with still images and text for cutscenes, and I have 0 issues with old school sprite graphics. I think a game that did that very well was Phantasy Star 4, using multiple still pictures on screen at one time while using text to explain, and sound effects to add more to the picture.

    I do agree though that slowly building up is far preferable to winning once, so to say, and then gambling everything you received on an unknown. Its stupid in gambling, and its stupid in business, to assume your luck will be good just because it was last time.

  3. I’ve been a Spiderweb fan since the Exile II, and I must agree with the analysis. It is also why I suspect I’ll continue to be a Zeboyd fan for years. As to your last point. Even if everyone on a small development team were millionaires, I’d still suggest to them that they charge a market fee for their games. There is a lot of psychology and economics to suggest this, which I won’t bore anyone about in a comment on an article.

    One thing I would like to request is to see more free demos of games. This is something that has always gotten me back into Spiderweb, and I think it would help bring new fans to Zeboyd. Companies like Zeboyd and Spiderweb profit more from bringing in a new fan because they become dedicated repurchasers, so the profitability of demos should be even more. I know I have friends who would love Zeboyd games, but they are penny pinchers, and a demo would suck them right in.

  4. Great analysis of their article, and I agree with your statement on Spiderweb. They’ve been a favorite of mine since Exile, and with their newest releases they’ve done a great job of adding in modern elements.

  5. Definitely an interesting look. I like the idea of fremium products from the perspective of a game developer because if managed properly can not only rocket you to popularity (Punch Quest) but can also drag in a lot of money (Not Punch Quest).

    Spiderwebs is such a gem of the indie crowd, I want to see them exist forever.

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