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Small Studio, Big Decisions: OPM = Opium
by Jesse Joudrey on 09/27/13 12:20:00 pm   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

I was driving down Hastings St. in Vancouver.  I just passed Main St., headed east, and was looking at the people on the sidewalk.  If you know the area, you know it is not a nice part of town.  It is the skid row where all the drug-addicted members of society come together.

I could see all these people at various points in their decline and I wondered, "How does someone end up here? Do they know when they take their first ‘hit’ that this is where they are headed?”

Then I had a shocking realization.  This was me.  This was my company.  My company had become an addict and didn't even know it.  We were not hooked on any amphetamine or opium products.  We were addicted to OPM.  OPM is an acronym for "Other People's Money".  Any time you spend money you don't control, that's OPM.  In the video game industry it usually refers to publisher money.

When making decisions for a young game development studio, the decision to take Other People's Money is one of the most important decisions you make.  It is more important than most people realize at first.  It may set the direction of your enterprise forever, just like drugs can set the direction of a human life.

When you are setting up a studio and wondering where the money will come from, you may consider OPM in any of the following ways:

  • "Once we get our tech deployed we'll make our own games."
  • "We will just do it this once to build up our talent pool."
  • "This will help us build the cash reserves to live out our dreams."

This is what I thought, but beware!  It is a trap!

In this article, I am going to describe the trap and how you can fall into it if you're unprepared.  Then I will prepare you to recognize the trap so you can avoid it, or jump in head first.

Understanding the Trap

Taking other people's money can trap you by allowing you to build a team and a studio that requires a continuous cash flow to support it.  The cash you make working for someone else will not give you enough freedom to break the habit.  You will always need new sources of income to feed your expenses.  

The process of building a small studio is different every time, but some elements are common.  Presuming you are not already backed by a major investor or publisher then all you have is the money you've been able to save to start your enterprise, and the money of your partners.  For those of you in this situation or those of you who dream of being in this situation I'm going to explore the sequence of events you'll encounter.

If you take an OPM project you will reach the end without much more money than you start with but with a whole studio of employees and expenses.  See this handy table to see how easily this can happen to you!

Your Situation

What happens here

1. Inception

  • You start with a little money and no employees
  • You build good relationships with potential employees, who say they will work with you if you sign a deal.
  • You talk to publishers with the portfolios of your potential employees in hand.  They like your team and you begin negotiations.
  • They ask you for a free demo or prototype to help the process (This is a topic for another day).
  • Once the deal is basically sealed, you get your potential employees involved and complete final negotiations.

2. A couple months after inception

  • You have a few employees.
  • You have a contract that will require more employees.
  • You have a little money
  • You begin pre-production and begin staffing up to production levels.
  • You begin to deliver milestones and the money starts coming in.
  • The publisher starts to squeeze you for scope and quality. You are definitely building the game, but you are only saving pennies on the dollar.

3. Six months after inception

  • You have enough employees to build a game
  • You have a little money
  • Your cash flow is balanced
  • You work through production and publisher supplied quality assurance begin testing your alpha build.
  • There are either more bugs than you anticipate, or sudden and mandatory feature requests from the publisher.  Either way, the employees you thought you were going to transfer out have to stay on.  In fact, the publisher wants them to work overtime.
  • Beta comes and you ship a couple of builds before you are final.

4. A year after inception

  • You have enough employees to build a game (but they are all burned out).
  • You have a little money plus your final payment, which should cover your team for six weeks or so.
  • There is no future income on this project.
  • This is where the trap happens.  
  • Do you live the dream of exploring your creativity and working for yourself, or do you cycle back spend Other People's Money endlessly?

 

Now you're at the end of the cycle and you have to decide what to do next. Here is the trap in a single sentence...

You will have to lay-off your friends if you don't get more money soon.

You can't afford to continue to pay the people you hired with the OPM from your first deal.  Laying them off or taking another OPM deal to pay for them are your only options. There are lots of reasons you will not want to lay-off people too.  Some of them were your friends before you started your studio and the rest have become friends over the last year making a game with you. No-one wants to do something like that to a friend.  Laying off people and shrinking the studio to a manageable size will be seen as a failure by friends, family and colleagues.  It will be professionally and personally embarrassing.

On the other hand, you can make everyone happy (except your creative self) by just signing up for another OPM deal.  If you did well on your last project, this one might even be bigger than the last, which will make the trap that much more difficult to escape next time.

So What are the Options?

Now that you understand the trap you can make your own decision.  There are two options available to you.

1. Take The Money
     The risks are lower and you can make a lot of money this way.  Also, you're far less likely to lose your shirt.  Since you know what you're in for OPM stops being a drug and starts being food. There is nothing wrong with using Other People's Money to make Other People's Games.  After all, I did that for years and it got me everything I have today. 

2. Take Independence
     This is a much slower path.  Taking the money is far quicker, easier and more seductive.  Find partners who are financially stable and who share your vision.  Make them shareholders rather than employees.  Keep your team and project scope small.  Only if your games are successful will you make money.  Not only are you free to be creative, but you must be.  You won't be able to compete on anything else.

Conclusion

Ultimately making other people's games wore on me but I didn't see the trap until it was too late.  It's just like a person at a party taking their first hit without knowing that they're going to end up on Hastings St. This is one of those things where knowing really is half the battle and now you know.

Taking Other People's Money doesn't set you up to do your own games, it sets you up to do Other People's Games again.

Keep your eyes open, stay informed and make the decisions that are right for you.

 

Jesse Joudrey got his start at Electronic Arts Canada in Vancouver before co-founding his first studio in 2004. A.C.R.O.N.Y.M. Games grew from 2 to 42 people before his departure in 2013.  His second studio, Jespionage Entertainment, is focused on mobile development in Unity.
You can follow him on Twitter - @JesseJoudrey or visit the Jespionage website at http://www.jespionage.com
 


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Comments


Jonathan Jennings
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This article is a little eerie in all honesty because I have been in environments where these 3 bulletp ointed phrases

"Once we get our tech deployed we'll make our own games."
"We will just do it this once to build up our talent pool."
"This will help us build the cash reserves to live out our dreams."

were exactly what our team felt said and thought . We eventually got to make a very simple indie title in about a 3 week span as well. I don't think we even realized were in the trap and after we ha most of the project finished we were ll unfortunately laid off .

well written article Jesse , very relatable and a path I am sure our teams weren't the only ones to tread down .

Jesse Joudrey
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Hi Jonathan
I've also heard these things said all the time. That's the reason I wanted to share. I started out wanting to make our own games and it took me eight years to figure out it wasn't going to happen. At least making other people's games can be reasonably profitable.
Jesse

Jay Anne
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There was the hope of a lean studio model with only a core veteran skeleton crew that outsourced everything after the inception phase. Ideally, this would leave the skeleton crew more time to explore during phase 4. It does not seem to have worked successfully for anyone in practice though.

Jesse Joudrey
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Hi Jay
Unfortunately publishers get (understandably) upset if the best team members stop working on their game. Often they'll insist on a "key person" clause in the contract specifying people who have to be on the project for the entire duration.
Outsourcing and contract labour could break the cycle, but it's tough to find good employees looking for temporary work. I still have some hope for this method though.
Jesse

Mike Smith
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I would think as all these studios are closing shop it must be nice just to get OPM in the first place.

Jesse Joudrey
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Hi Mike

That's an interesting observation. Some studios are closing because they have used OPM to grow to a point where they can't sustain their team without more OPM. In they article I talk about choosing to get another OPM deal, but what do you do if you can't find the next deal?
Jesse

Robert Ling
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Great article, thanks very much for this one Jesse. Glad to hear about the venture as well, best of luck with everything!

Jesse Joudrey
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Thanks!


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