[In this in-depth Gamasutra analysis, veteran game developer Jeff Ward crunches the numbers to craft a sobering look at the realities of independent game development business models.]
I'm looking at releasing an Xbox Live Indie Game in the next few months. Recently, along with colleague Darius Kazemi, I started doing a little bit of math about indie game numbers, and it's gotten me wondering whether you can actually support yourself, and a company, on indie games -- indie, in this case, meaning a smallish team experimenting with interesting gameplay concepts and styles.
Now, I understand that since this deals more with money than passion, it may end up alienating me from the indie community, but as a developer I want to see small experimental games flourish, and I want to see those people developing them do well for themselves. This analysis questions whether or not that's even possible under our current thoughts and models.
We've been seeing recently a number of small game companies really hitting a wall when it comes to funding. Introversion had a post on their blog about their money problems, and Mommy's Best Games, though still pushing ahead, made it clear that the numbers on Weapon of Choice were not good.
We've had rants from game players about alternative funding models and suggestions from Gabe Newell about public funding for games. What can we take from all of this? What can we do for funding models?
This whole thing starts with one piece of information: How many copies of a single game does a developer need to sell per year in order to support themselves? Let's start at a baseline of $40,000 per year for a single developer. This may sound like a lot for indie developers and, let's face it, it really is. But it should be a pretty good baseline number, for a lot of reasons. Include taxation and taking into account health insurance costs and the possibility of supporting any person other than yourself, and $40k starts to sound pretty slim.
Now we need to figure in loss to distributors. Let's ignore distributors with upfront costs and approval processes, such as Xbox Live Arcade, PlayStation Network, and WiiWare, because even developing for these services usually requires either an already-proven game or proven team, and we're assuming neither. This leaves us with iPhone, PC (in various forms, two of which we'll focus on), and Xbox Live Indie Games. For each platform, you need to look at distribution numbers, likely price points, and gross income, meaning the income after your distributor has taken its fair share.
iPhone
Let's start with the newest (and, by all accounts, sexiest) guy on the block, the iPhone. Most apps on the iPhone sell for $.99 to $3, with Apple taking 30 percent off the top. Selling on the iPhone is really all about staying new, staying fresh, and staying on top of the most popular list. In order to do that, you need to stay at the lower price points to encourage impulse buys. That means staying at around $.99 for as long as possible. Here are the numbers:
Price Developer Cut Sales Needed
$1 $.70 57,000/year
$2 $1.40 28,500/year
$3 $2.10 19,000/year
$5 $3.50 11,400/year
So at the largely standard rate of $1, a single developer needs to push 57,000 copies of a game per year in order to support himself, or to push multiple applications which can reach that number. With the number of iPhones on the market somewhere around 6 to 10 million, how many sales can you expect? Mac Rumors reports that four apps easily hit almost a million sales, but what's the data like for games, and indie games at that?
The most telling post probably comes from the developer of Dapple, who wrote a very long post on how much money he actually made on the product; he has sold a total of about 500 copies. In addition, this post on the price of apps versus their popularity shows very few indie games in the list and very little money being made, Fieldrunners (essentially an App Store Launch Title) being the notable exception.
Is it possible to be an indie and loved on the App Store? Only indies who have accomplished this can tell you, but 57,000 copies is a really hard number to hit with something interesting or experimental.
Xbox Live Indie Games
So what about Xbox Live Indie Games? Their developer cuts are exactly the same, although the $2 price point doesn't exist, and the highest amount you can charge is $5. Until recently, $2.50 was the lowest you could charge, requiring about 22,800 copies to be sold per year. Unfortunately, sales figures came up very short for most developers. Total download rates are low, as Indie Games were hard to find on the dashboard until recently, and good apps are very hard to find, so I believe most people have been ignoring the service entirely.
Sales for most games topped at probably around 5,000 copies since launch, far from the required 22,000 to support a single developer.
PC
Finally we come to PC. On the PC, you can expect to be able to charge more, but sales numbers tend to be lower and more is expected of a finished product. Games average anywhere from $5 to $30, even from indie developers. Hosting it on your own or through Steam, you get more of the pie. Steam unfortunately doesn't publish numbers, but PayPal does, and we can use it as a baseline. Assuming that you're looking to get above $40,000 here, we're going to use PayPal's range for $10,000 to $100,000, which is 2.2 percent + $.30 per transaction.
Price Developer Cut Sales Needed
$5 $4.59 9,000/year
$10 $9.48 4,000/year
$15 $14.37 2,800/year
$20 $19.56 2,000/year
$30 $29.04 1,400/year
Looking at these numbers, it's almost obvious why most successful indie developers start on PC. Even with the PC market shrinking (this talk from GDC shows that you can expect PC sales numbers in the hundreds of copies, thousands if you're lucky), you get to keep a lot more of your money, and the audience is self-selecting. People interested in indie games tend to have PCs and may buy your game.
(A note to pirates: Look at those numbers and see how much you're taking from that developer, and the numbers each developer has to hit before even becoming profitable. That, more than anything, should make you think twice about piracy.)
Hitting these numbers is possible, but not probable. It's quite obvious, to me, from these numbers why most successful indie devs are one man shops, making fairly quick games. This model doesn't scale to multiple developers, and definitely not for multiple years.
Alternative Funding Models
So what about Gabe's suggestion of running a "stock market" for games where you can invest in projects, get a game out of it, and possibly see a little bit from the net profits off? So far, we've seen a commission system partially work.
Let's assume that for these systems, we're talking about multi-developer, multi-year projects. Still talking indie, let's assume four developers over a year and a half. Not taking into account taxes, office space, servers, or anything else, this totals $240,000 that needs to be raised over the course of a year and a half.
Though this is potentially possible, there are other concerns. If a person invests in this game with a promise of returns on the net profits (after other expenses and taxes), he needs to understand the risks involved. After all, if a game company never hits that $240,000 number, and can't survive long enough to complete the game, that money is lost. Attached to this is the idea of due diligence. Each investor is now an investor in your game, and has possible legal rights. If you just take the money and never finish the game, they might be able to sue you. What is there in place to protect the investor and the developer if this happens?
Provided these legal issues could be worked out, how much net profit would you be looking at losing, and how much would you charge for each point of net profit? What would developers look to gain, and what would investors look to gain?
First, let's start with a game that sells about 20,000 copies at $20 each on PC using the numbers above. We're assuming these are good games that have a following, otherwise they wouldn't have been funded in the first place. That totals $391,000 in revenue on the game, and let's assume for argument's sake that we have $41,000 in expenses for the game. That leaves us with $350,000. Assuming we split to end up getting the funding we need, here's what the graph looks like:
Percentage of Valve of each Total Revenue to Revenue Revenue to
net available point net invested investors per point developers
70% $3500 $245,000 $245,000 $3,500 $105,000
60% $4000 $240,000 $210,000 $3,500 $110,000
50% $5000 $250,000 $125,000 $2,500 $125,000
30% $8000 $240,000 $105,000 $3,500 $245,000
That's pretty grim. Only in the 70 percent case do the investors come out just breaking even, and the developers have enough to fund half of their next game. Is it possible? Maybe. But is it worth it for the investors? How many times will an investor lose most of their money from games that aren't finished, or games that don't break 20,000 to 30,000 copies before they just kind of give up investing? How much work is required of developers just to set up the legalities to make sure they don't get sued, and their investors don't get screwed?
Another funding model for indie devs is to keep titles relevant from year to year, maintaining sales of the title up while you work on the next title, and into your third. By keeping these games selling, you can start to see actual profits. However, this also means consistently releasing games year after year, and surviving until these games come out. This takes a lot of startup capital, or at least the ability or desire to eat ramen for years on end, with only the smallest chance of reward.
Conclusion
These numbers make it really obvious to me why most indie (and, in some cases, non-indie) business models exist, and why they produce the games they produce. To be successful, you need to be in one of a few situations:
- A single developer who makes a good title (Crayon Physics developer Petri Purho, for example)
- A single or set of developers with short release cycles to keep multiple games relivant over short periods of time (almost all iPhone developers)
- A developer who has an already-popular game and is able to get on one of the more visible services like Xbox Live Arcade, PlayStation Network, or WiiWare (thatgamecompany, The Behemoth, 2D Boy, Number None)
This is why indie games experiment the way they do -- shorten the development cycle, concentrate on mechanics and prototypes, keep art resources and requirements low, release lots of games quickly. There needs to be more available. I'm sure there are indies out there that want to experiment with things that take longer development cycles -- weird dynamics, involved dynamic art styles, strange narrative structure -- but can't for survivability reasons, and that's a damned shame.
So maybe there's not a good living to be made in indie games. Even with alternative money sources, it doesn't look like you can sustain a business, even of a small number of developers, without targeting AAA numbers, which seems to have a quality bar that almost requires a AAA team.
Obviously, the math that is wrong somewhere, as we've seen success stories happen, but is it worth it for me (or anyone else) to attempt the struggle when the reward seems to be mostly more struggle? Is there an answer I'm missing? Is there money to be made, or even survivability, in remaining truly independent? If there is, can it be done with more models than what we have now?
[Jeff Ward is a professional game middleware programmer, amateur game designer, armchair media theorist, and user interface speculator. He is currently the Lead Architect at Orbus Gameworks, providing metrics middleware to game companies, and is currently looking at releasing his first independent title to Xbox Live Indie Games, apparently for very little reward.]
|
Something which could have been emphasised more strongly is the fact that a developer can release multiple titles in a given year - however, sustaining the required rate of releases (almost monthly, if you assume 5k/game) is liable to be a nightmare unless your development pipeline is very robust - and if other people are doing the same, the market is liable to get heavily flooded. Another alternative is to try and get a cross-platform development system - i.e. PC, Xbox, iPhone, etc - but there's sadly little cross-compatibility between the major platforms, so while art assets may be transferrable, separate code bases will almost certainly be needed.
I've thought of multiple strategies to get around this, and they all come with tradeoffs:
-Use the browser-based portal sites to demo a pay-to-play product. There is nothing stopping you from shipping a game demo to these sites - and putting ads on it too, if you want to monetize to the hilt. This is the angle I'm pursuing for my current project as it's in line with the scope of game I want to do right now. It does impose some severe limitations on platform and audience, though.
-Build a game with viral/user-generated elements. Think of stuff like MyBrute or Line Rider. This angle gives you promotional power direct from the users, and it comes up over and over again in indie success stories.
-Long-term brand development of the company, the IP, and the products. This is essentially why Nintendo makes money hand over fist year after year, even going back to the leaner years before the DS and Wii; they manage their brands with a precision that makes the rest of the industry look like they're walking in a drunk stupor, and this lets them pull great sales numbers even when not every product is a breakout hit. Indies don't have the budget to mime everything Nintendo does, but they are empowered with a similar ability to direct their brand as they see fit without any outside oversight.
http://www.nimblebit.com/2009/06/nimblebit-numbers/
I'm also finding a lot of micro-indie iPhone developers are finding tangible revenue using AdMob and releasing the game for free. Which brings up another option: browser based games. GarageGames and Unity are both offering web player distributions of their engines. This gives the option of releasing on portal sites like Shockwave, Kongregate and Facebook.
Not to be discouraged, there are other ways to generate revenue through games besides direct sales and advertising. and I know there are ways we haven't even thought of yet.
One other thing: I think your iPhone data is incorrect. I recently read an article from CasualGaming.biz (http://www.casualgaming.biz/news/28946/Apple-sells-52m-iPhone-in-Q2) stating there are 40 million iPhones/iPod Touches out there, so that increases the potential for profit a bit.
http://www.gamasutra.com/view/feature/3924/wheres_the_cash_for_flash.php
The developer of Hunted Forever has a good look at how he has done:
http://pgstudios.org/revenue.html
Going with the free-to-play model, he still only made $35,000 in a year with some significant success. That's why I think microtransaction-based games are going to be key even for single-player Flash games, if they're good enough.
Rather than quitting your job and launching a business with whatever savings you have, why not just make games in your free time as a hobby, because you want to? When your games become popular, you can then decide if it's time to quit your day job. Otherwise there's too much pressure and risk involved.
If only outliers/hits succeed, then you need to be able to absorb several non-successes without failing. Going all-in in the hopes of getting a hit isn't a sustainable strategy! Making games a hobby lets you keep costs as low as possible and gradually ramping up rather than jumping in the deep end. Having access to government support for small business can also make a significant difference in terms of keeping costs as low as possible.
Also, the success scenarios given are a bit confused: neither 2D Boy nor Number None had an "already-popular game", WoG and Braid respectively were their debut games.
I definitely agree with James that marketing is the key to being successful. This is possibly why XBLA/PSN tend to be much more lucrative than other channels. Then again it could be the lack of piracy, who knows.
It would definitely be great to have a sure way to make a decent living making indie games, but I'm not sure if it's reasonable to assume that there must be such a way -- there certainly isn't in the realm of music!
But if we are "Indie", then where do we fit in the model above? What is it that we are doing so differently in order to be succesful? Shameless plug: come to SIEGE in October and we may well tell you :p www.siegecon.net for details! And funding models - have we been round a few of them over the last few years?! Here we are 4 years after setting up, two (hit) titles out, next one on the way - all with our own money.
So - is there money to be made in Indie games? Yes, of course. One of my perennial concerns is that developers are always looking for an "easy answer", with "low risk". Hate to say it, but unless you are prepared to take the big risks, there is a limit to how far you will get!
But most all of the Xbox Community games (yes, I'm aware of the renaming) are really, really horrible.
So where do we go from here? That's my next question. I know that there are others than myself that I speak for when I say that it is inherent in the fabric of our being that we must make games and they can't be under the control of larger publicly traded companies that are concerned with netting profit for shareholders more often than making fun, great games. There's certainly a few people that may not feel bad saying I give up on this crap, I'm getting a real day job and I'll be able to support myself/my family and not worry about that. While I won't condemn people who choose that option (nothing wrong with being financially sufficient and supporting a family) I wager there are still many like myself that know it is possible to 'live the dream' of indie game dev and also make a living wage. We might not have as many Lamborghinis as the leads at a nearby AAA game studio has (or any for that matter, lol) but I think there's a place for us that doesn't involve entirely giving up or starving in poverty.
I'm interested in hearing anyone else's opinion on how we can achieve this. I'll get the ball rolling with one idea: A better advertising community. I believe it was Ron Carmel of 2D Boy that spoke this year at GDC about the importance of getting the word out about your game and having sales to encourage people to buy your game. The indie market could be really booming in the current recession in my opinion, because conventional knowledge says that if a consumer can purchase AAA du jour at $50-60 a pop and there's an indie game at $10-20 a pop and they both provide, says 20 hours of the same quantity of enjoyment or fun, what game does that person buy? Well that's obvious...what may be less obvious is that joe and jane q. consumer aren't aware of all the stuff on the market, nor that it could provide the same quantity and quality of a AAA game. Someone should dream up a system or service that could advertise indie games for nominal cost to developers and get consumers informed of what's out there and why they want it.
That's mine, let's hear yours!
1. Flash (which has been mentioned by other commentors) is a great tool for getting your game in front of potential buyers. All kinds of people play Flash games, not just those looking for free fun. Not only does Flash have reach, it is also a powerful, productive toolset for games.
2. The industry is changing in fundamental ways that is making the "old school" revenue models obsolete. We indies can take advantage of these new technologies and trends in ways the big corporations can't.
The rest is too long for a just comment here....
http://www.gabob.com/wp/2009/08/04/making-money-in-indie-games/
sometimes indie is sacrifice!
There's also something that most of the frequently mentioned successful indie games have in common, and that's pre-release buzz (and ideally some industry connections). 2DBoy, Petri Purho, Jonathan Blow, thatgamecompany . . . these are all people whose games were prominent competitors in the IGF and other competitions, and many of them had somewhat of a built-in fanbase to begin with (the World of Goo prototype was one of the most popular creations from the Experimental Gameplay Project, flow and Cloud were popular free Internet downloads, etc.) Trying to go indie without getting noticed *before* your game launches is incredibly difficult.
Huge financial success is not our primary focus though, since our focus is pretty much intellectual/cultural and our company strongly feels that the "part time" route will be the way to go for awhile or even forever. Of course, a sustainable financial success is desirable and we will work on that for starters.
The Rockefellers and the Rothschilds control the Federal Reserve Banking system ( yes it is privately owned )
They also control all the major banks ( B.O.A., Goldman, Citi, Chase etc etc )
They're employees make up more than half of the presidents cabinet.
They overspend to the point that they need to print money, this decreases the value of money.
Then they contract the money ( they stop giving loans, easy ones anyhow )
and now read the results...get ready...here it comes....
http://news.yahoo.com/s/ap/us_plummeting_taxes
Very soon, they will have a bank holiday, no banking or credit cards for a week or two.
How much cash do you have on hand? Do you have a lot of canned food stored ?
No one is going to be able to afford $40 games, which makes online distribution look VERY appealing
for a much lower price point and much lower development budget.
Those that adapt will survive, those that don't....won't
The game industry is recession resistant NOT recession proof, believe me...after XMas it's gonna get VERY VERY UGLY.
bye, and have a good day...remember what I told you...it can't hurt to be a little prepared right ?
In this age, the product itself is a dead lump of coal compared to the overall vibe needed to make something successful. Marketing is part of that vibe. Use it, love it, need it.
Here at Edgebee Studios we've developed a Flash based casual MMO called Sorcery Quest which is free to play and supported by premium content purchases. We've been spurring our growth using regular ad networks such as Google Adwords and promoting the game on some Flash game portals. So far we're seeing some pretty good progress.
We've never even considered other platforms such as Xbox Indie or the iPhone because we were convinced it wasn't suitable, thank you for the research validating our choices.
My contribution: regarding the marketing problem indie games have--what about an independent agent model, like a band promoter? Someone looks at your game, see's it's promise, and pimps it on various sites and venues for a percentage of profits (no money up front). I could see a whole (small) industry of indie game promoters writing copy and posting on forums and stuff, maybe even opening up their own sites for the promotion of the games in their current "stable", drawing people in with editorials, webcomics and other content. Hell, this is something a kid at college for marketing could do for a project/practice/resume material.
And my question: I'm student, and I'm wondering if you're allowed to follow the indie band model (i.e., make games in your spare time for your own profit) while working for a shop with a publisher? Don't they have rights to what you do while employed with them?
Pretty much all employment contracts in the game industry explicitly state that all the rights to whatever you develop, even on your own time, is theirs. And most of the time it's a really vague clause, so even if you invent something totally unrelated it would still be theirs.
I know because it's why I had to quit my job in order to make the game I'm working on.
Heh, as for making a living indie, the games are small and so are the salaries. A $40k yearly goal is great, but don't expect it. Don't expect half. Do expect to be eating away at your savings even after the first game launches. Some lessons can and will only be learned through actually failing. Also, learn to love Ramen and Kraft Dinner. :)
Making a living effectively requires you to lower your financial expectations. The sooner you do, the further your reserves and earnings go. Very few people win their first game out of the gate.
I'd like to see something to substantiate your claims about Paypal, because that's definitely not what we're seeing. Another thing is that Paypal offers instant credit card payments without registration with far better payout than any other CC processing provider we've seen.
According to our experience, Paypal is clearly the best option when you're starting out, especially if your market is mostly north american.
None the less, a lot of developers do opt for systems like BMT and Plimus. They do cost more, but they'll deal with VAT, host your full versions, do phone and snail mail receiving of money, and/or generate keys for you.
But as you said. If you can get order script stuffs work on your site, and if Paypal truly less fussy today, 41 cents off $5 is certainly a far better deal. Just be sure to do your VAT homework.
I think the key things that indies tend to lack are
1) A remarkable product (good isn't remarkable by the way) that feeds a profitable niche
2) Sales, marketing and advertising know how (I passion / interest in business would help here)
3) Great execution of all thee above (timing and strategy)
I also agree that flash is a great tool for reaching consumers. Models that I think will win (and in some cases are already winning) for the future are Social and Freemium content (this has been winning for decades).
With this in mind I think it's relevant and wise to consider social networks such as Facebook and MySpace (over a 100 million users or something like that) as platforms in their own right (much like xbox live, PSN etc, Steam) except they don't have gatekeepers / barrier to entry that many of the others tend to.