The article summarizes where the money comes from and goes to for a successful next-gen game. The assumptions are that the game will cost $20 million to develop, and if so, selling only 100,000 units will result in losing over $20 million. On the other hand, if you sell 2 million copies, you can stand to make a lot of money.
The interesting part: “carefully controlling the factors that affect profits can have a big effect on the profitability of a game.” The Dream Scenario demonstrates that adjusting certain costs can result in significant profit potential. While it is a dream scenario, the point is that a lot of money can be thrown away if care isn’t taken.
But what does it mean for an indie developer selling games online? What can an indie do with this information to improve the chances of being successful?
There is no such thing as Markdown Reserve or Wholesale Price, or at least they should be quite negligible. There are other costs, of course, but there is no need to worry about manufacturing the right number of units or liquidating unsold copies, and negotiating royalty rates for consoles isn’t likely to be a possibility for those developers that have a deal with console manufacturers in the first place. Perhaps the cost for using game portals could be substituted for the cost of having a publisher.
Obviously marketing can get quite a bit more focus, and it should. Without retail deals, customers need to find out about your game before they can even think to buy it. If your game was available at the store, you might benefit from impulse purchases, as well as the advertising for just having a box with the game’s name on it on a shelf. Since an indie will most likely sell everything online, there needs to be a way to get in front of more eyeballs.
We can drop the development costs from millions to possibly hundreds or thousands. My own expenses probably won’t exceed a few thousand needed to outsource art and sound to actual artists and composers.
100,000 copies sold would no longer be a catastrophe with those kinds of numbers. In fact, one hundred wouldn’t be too bad either. Also, lifetime sales can actually mean a lifetime as opposed to the months before a game hits the bargain bin and disappears. When talking about copies sold, we’d need to limit the scope to a specific time range, such as a month or a year. Otherwise, it can be difficult to keep things in perspective.
100 units sold over the course of a month would be great for many indies. Over the course of a year, not so much. We’ll use the term catastrophe if those sales were made over the course of an actual lifetime, but even then that game could bring in potential customers for the developer’s next project, which we can hope will take into account the lessons learned from the previous project.
When you think about the numbers in this way, what’s the risk for an indie? I suppose the biggest risk is the time investment. If an indie spends three months on a game that doesn’t sell well, it isn’t as bad as the developer who spent two years. If lost time in development is such a big risk, then I suppose the next biggest focus for an indie are development practices.
Since time is money, we can still ask the money where it is going when talking about what a developer does. How focused is the project? Does the developer spend every waking hour working towards completion of the project, or does he/she manage to work a couple of hours every other month? Is there an opportunity cost for not working on the project, delaying its release and potential sales revenue? Are there development practices that might make the developer more effective? Spending 40 hours making a significant component of a game is fine, but if you can do so in five hours, you can finish the game faster.
Marketing can get the resulting game in front of more potential customers, but an indie may want to invest in learning how to do things more efficiently. The more important the skill, the better the benefit you would receive for improving it.