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Feature: Why Being a Computer Game Developer Sucks | Login/Create an Account | Top | 238 comments | Search Discussion
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The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
He's speaks the truth, can't attack him for that! (Score:1)
by Anonymous Coward on Friday August 20, @10:54PM (#1735684)
He may not like half-life + quake like the rest of you 'masses', but his experience is real. I've been a mere follower of the industry for several years but those on the inside consistently tell how tough it is. It's simply not fair to be expected to work 60+ hour weeks at low wages and have no security that when the project is over you'll still have a job (reality is, the question of making more money afterwords is very slight-- i hear).

Here is another guy from the inside who is very eloquent on the subject.... here's his page:
http://pages.infinit.net/idjy/

Here's a bit of one article...

The Game Industry and the Economics of
Failure

For the past two years, the game industry has been mired in what the financial press calls a
"consolidation phase". Despite growing sales for the industry as a whole, not a month
goes by without some once-proud publisher announcing drastic cutbacks to its release
schedule or being bought out by a more successful one. Countless start-up development
studios set up shop, barely manage to survive until the release of their first title (when they
manage to do it at all), and disappear without a whimper. Meanwhile, the cost of
developing a top-tier title keeps growing, and the marketing budget required to support its
release skyrockets even faster.

No matter which way we look at it, one glaring fact remains: not very many people make
money in the game industry. Especially not the people who create the product.

It is my contention that the current economics of the industry, as supported (actively or
tacitly) by publishers, retailers, the gaming press and most developers, is completely and
utterly inadequate. This article presents some of my observations, and attempts to identify
a few potential solutions which might help improve our lot as a community.



The Distribution Bug

In the early days of interactive gaming (say, until 1988 or so), the "lone wolf"
basement-dweller who developed an entire game (code, art and music) by himself in a few
months was, if not the rule, at least a common phenomenon. Virtually all software was
sold to and by hobbyists, whether in the city's single mom-and-pop computer shop or by
answering adds in specialized magazines. The computer-enthusiast shop owner enjoyed
nothing more than to see the local game publisher (often the developer himself) drop by
once a month with his Ziplock bags full of floppies, which he had copied himself all night
long. They'd talk for thirty minutes or an hour, playing the new releases while the
customers, all of whom knew each other by their first names and proudly showed their
own clever bits of BASIC code to "the professional". In such conditions, a developer could
write 2-3 titles a year, make a comfortable living off of 1,000 copies of each, and then,
after a few years, go out and get his driver's license. A game could sell for years. Taking
a risk with an innovative title didn't require nerves of steel, as not much money went into it
anyway. This was the Golden Age.

However, as computers gained popularity, the hobbyist retailers were gradually replaced
by large, nation-wide chains, which have themselves lost a tasty chunk of the software
market to generalists like Price Costco and Wal-Mart. Now, it is estimated that the top 8-10
retail chains (i.e., Circuit City, CompUSA and Toys R Us) control approximately 85% of all
game sales in North America.

This changes everything.

First Law of the Game Industry: Channel to Market is Everything.

On the one hand, the professional buyer who is in charge of acquiring PC games may very
well never play them at all. He is a businessman, with responsibility for a huge budget, of
which games may not even be the most important item. His job is to acquire product that
will move off his shelves as soon as it hits them. Shelf space it precious, and there are so
many products out there that if one doesn't sell through fast, he'll find another one that
will. Besides, the buyer is a busy man, with lots of salesmen competing for his time.
Unless you happen to be hawking NHL '99, chances are he doesn't even want to see you.
It is not uncommon for a game publisher's salesman to have less than fifteen minutes to
pitch his entire quarterly lineup to a man who can make or break 10% of his company's
channel to market. You, Joe Salesman, had better make an impression right now if you
want to see your big Christmas release in this guy's 2,000 outlets.

That being said, please tell me, what is easier to push in 90 seconds: a weird, wildly
innovative game unlike anything anyone has ever played before, or the sequel to last
spring's 500,000-unit seller with better graphics?

On the other hand, if you know that the only product you can get on the shelves is
something that the buyer feels comfortable with, chances are your competitors do, too.
So, if all of you are coming out with first-person shooters and real-time strategy war
games, which are all essentially the same game, how do you make sure yours is the one
that will sell the most? Why, you advertise more, of course. If you shout louder than
everyone else, people will hear you. This is why game marketing costs have become so
staggering. Ten years ago, a standard of one dollar of marketing for each dollar of
production (back when games cost a few hundred thousand dollars to make) was about
right. These days, with network broadcast spots becoming almost commonplace, a 2-to-1
or 3-to-1 ratio is not all that uncommon. Turok: Dinosaur Hunter reportedly came out with
a $7 million marketing budget; I don't even want to know how much Sony spent to push
Final Fantasy VII.

On the gripping hand, with so few people controlling so much of your livelihood, you
absolutely can not afford to pass on their business. So, you do whatever they tell you to.
You spend $25,000 a week for a two square-inch add on page 14 of their flyer, which will
net you about as many sales as if you spent the money on Great Aunt Edna's Senior Girl
Scout cookies. You invest fortunes in snazzy in-store displays. You promise to take back
(and refund, in full) every item that fails to sell through, whenever the retailer decides to
return it, even if it comes back in the original packaging, meaning that it never left the
customer's warehouse. You promise that your release will be backed by a million-dollar
print media campaign, and maybe 8 weeks of rotation on MTV. Next quarter, when your
big competitor spends seven to ten million on his big game, you'll have to do the same.

And what does that buy you? Four weeks, maybe six. If your product hasn't sold by then,
it is out of there, and don't expect a second chance, either. Even if the product sells
reasonably well, it probably won't stay on the shelves for more than 2-3 months, because
there will be other, newer games available by then that could sell even better. Only big
hits (i.e., Tomb Raider or Starcraft) get more generous treatment.

So, where does that leave you? With a product that costs you millions of dollars to market
and with 60 days to recuperate that investment, assuming you manage to get a decent
channel to market. In all likelihood, it won't work. As a publisher, your strategy is to put
a good selection of products out there, hoping that a few will catch fire and more than
make up for the money you will lose on the others. Risky business. Given the fact that the
safest way to conduct risky business is to minimize costs, and knowing that ever-increasing
sales and marketing budgets are a fact of like, where do you cut?

Why, in developer advances, of course.



The Development Cost Bug

Which brings us to the second part of this equation for catastrophe.

Second Law of the Game Industry: Whoever stands between you and the customer holds
you by the balls.

You are Joe Developer, and you just barely managed to write a cool little demo and a
design document, while working a day job coding credit card databases and surviving on a
diet of macaroni and cheese because all of your money went into computer hardware. You
finally have a meeting with a publisher. He probably won't want to sign you up, but if he
does, he'll pay you enough money to finish your product, right?

Probably not.

The last figures I saw placed the average cost of developing a PC game at approximately
$2 million. (That figure, by the way, was double what it had been two years earlier, and
more than forty times what it had been a decade before.) Unless your name is Sid Meier or
Lara Croft, you won't see that much money before you ship your finished product. In fact,
chances are you won't even see it after, either.

The game industry works pretty much like the book publishing industry: the publisher buys
the developer's product for a cut of gross sales (typically $6 to $10 per unit for PC games,
a bit more for console titles). Most publishing contracts also stipulate an advance against
royalties which the publisher agrees to pay before the game ships. Most, but not all:
desperate developers have been known to sign with dubious publishers for no advance,
maybe getting a bigger royalty per copy in exchange. Still, advances are the norm.
Advance money is usually non-refundable, no matter how poorly the game performs on
the market (although if the developer fails to deliver the product at all, the case may end
up in court.) Some of that money may be paid upon signature, or upon meeting certain
development milestones.

However, advances are supposed to represent an early payment of royalties, so of course
they depend on expected sales. Since most PC games sell between 15,000 and 50,000
units, few publishers will pay advances based on bigger numbers than these, unless you
happen to have a fantastic track record or a great license to build your product upon.
Therefore, assuming that you negotiate a contract for $8 per copy, with a guaranteed
advance covering the first 50,000 copies, your advance check in going to amount to
$400,000. That is, twenty percent of the average cost of developing a game.

So, how will you finance the rest? Venture capital, maybe. Bank loans, if your banker is a
very optimistic man or if you can get him drunk. Sweat-equity, probably; that $2 million
figure can be misleading, because it estimates the value of the work performed, and the
principals in a start-up game studio often work for little or no pay. Or maybe your
publisher or another bigger company will buy you out and fund the rest of the production.
Or maybe you won't finish the project at all, and go bankrupt. It happens. Often.

Now, assume that you manage to finish your game and to get it published. Further
assume that it sells three times the expected amount, or 150,000 units, which would make
it a minor hit. You are still $800,000 short of the average budget, but that's OK, because
most of your staff have been working for a cut of the profits, so your out-of-pocket
expenses were much less than $2 million. Now what? Unless you want to keep writing
games after business hours, you'll want to start paying your people regular salaries. And
now, you're in trouble, because you have to start the process all over again, and this time,
you'll really have to spend that $2,000,000.

It is estimated that between 1,200 and 1,800 PC games are released every year. Less than
10% of them break even; fewer still earn significant profits. Not surprisingly, very few
independent start-ups remain independent for very long. They either collapse, or get
bought out by bigger companies with more cash flow. (Companies founded by industry
legends who have publishers at their feet begging for the rights to their products are the
obvious exception, but how many Peter Molyneux's and Sid Meier's are there?)

It should be noted that the situation is different for console developers. Sony, Nintendo
and Sega regulate who develops for their platforms, and who published what, so the
number of titles on the market at any given time is much smaller. Furthermore, console
owners buy more games than PC owners, and rental outlets buy large numbers of console
games. Therefore, it is easier to break even with a console game than with a PC title.
However, writing games for the PlayStation (tm) is not a license to print money, as some
people believe. If anything, console games cost more to develop.



The Press Bug

The so-called "Game Press" is a misnomer.

Third Law of the Game Industry: Style is at least as important as substance.

Over the years, I have met quite a few people who write in game magazines, and they are
not "journalists". They are gamers, mostly in their early twenties (or late teens), who grew
up on a steady diet of Doom and Super Mario. Most of them have very definite ideas about
what makes a good game, and they stick to them. They are not objective, they are not
investigators, and they are not supposed to be. Game magazines are basically written by
fans of a specific type of game, for fans of the same.

Now, there is nothing inherently wrong with that, until you realize what it entails for the
industry's economics. For the gaming press, Risk on CD-ROM is not a game. Neither is
Barbie's Fashion Designer, no matter how many trillions of copies it may sell. You Don't
Know Jack barely qualifies, because it is funny, but a dead-serious trivia game might not.
In fact, a good game, in the eyes of the press, has to have the following:

More and better graphics than was thought possible six months ago;
Lots of fast action;
Stuff like secret levels, bonus characters and moves that are hidden so well that only
Real Gamers (tm) will ever find them.

So, basically, anything simple to play is not a game, unless it achieves 60 frames per
second with 10,000 Phong-shaded and/or texture-mapped polygons per frame. And most
of all, anything that could have been made with the technology available two years ago
sucks. Which means that if you ever try to develop a game that would cost you
significantly less than the above-mentioned millions, the gaming press will kill you.

Therefore, either you saddle up and work on the next framefest, or you find a completely
different way to get people talking about your game. Not many people have achieved
this. If you know a sure-fire way to do it, please tell me.



The Vaccine?

So, it seems that given the current channel to market situation, publishers can not survive
while paying developers enough to allow them to survive as well. We are stuck in an
economy where someone, somewhere has to fail on a regular basis to let the industry as a
whole survive. This doesn't sound right. Besides pushing salaries down (and we all know
that salaries in games are typically quite a bit lower than in the rest of the software
industry), it wastes a tremendous amount of talent and effort.

What to do?

First, since success in the retail market, which depends on the press and on a few major
retailers, is so difficult to achieve, we might want to look at the alternatives. Online
distribution, via high-speed networks, might be an interesting avenue. Virtual shelf space
is basically unlimited, so a game's life cycle could be multiplied by a factor of 10 easily.
Unit prices might also go down (or, alternatively, more of the unit price could go to
publishers and developers, reducing the sales volume required to break even.) Bundling
can be extremely lucrative as well, and you don't have to spend on advertising.

Second, it is high time to stop sneering at low-cost game development, and the mostly
untapped markets they represent. Face it: your grandma will never play Quake or Total
Annihilation, but many, many older people would love to play simple, social, relaxing
family games with their friends, children and grandchildren. And guess what: you can
write them for a pittance, and make money with them. Low-cost games can also be
distributed as part of multi-genre packages, along with magazines, web sites, books, etc.,
and publishers may be able to carry more of them for longer, giving developers a chance
to produce titles somewhat out of the ordinary.

Third, realize that games do not have to be hard. Deer Hunter is not complicated, it is not
difficult to play, and it is not overly flashy, but despite (or thanks to?) this, it appealed to
far many more people than most big-budget titles.

Fourth, we need more games that appeal to a general audience, so that the regular
computer press (and even the mainstream media) start paying us more attention. The
gaming press is good at promoting a certain type of product destined to a certain audience,
but if we want to reach mass-market penetration, we must generate awareness in the mass
market! If games with a broad appeal become common instead of being oddities, access to
the pages of high-circulation press will be ours. This is why I welcome traditional
board-game publishers and media companies, like Hasbro or MGM, into our fold; if they
can associate their market savvy to our talents, everyone will be better off.


Maybe, by implementing some of these ideas, we can increase the market profile of
interactive entertainment as a whole, and allow more people to make a better living in this
great business. Who knows, maybe by increasing the appeal of games in general, we
might generate more demand, and even gain access to more of that elusive retail shelf
space!


Francois Dominic Laramee
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