Category: business

When you are the only person taking a salary from game development, the simple question of whether or not a game has made a profit becomes a bit fuzzy. Normally everyone takes their salary, and after other costs are paid, if money is left over, there is profit. The thing is, as the company owner, you normally take a tiny salary and thus working out if ‘game x’ made a profit is not as simple as it seems. Do you consider a game profitable if it makes more than the bare minimum salary you pay yourself? or if it makes ANY money at all? or if it earns more than the average salary you would get in a comparable job elsewhere? and WTF is a comparable job anyway?

Democracy 3:Electioneering is new DLC for my political strategy game Democracy 3. It was released just over a month ago. So far, total revenue from all sources for this DLC is $18,600.  The total development and marketing cost of the DLC stands at $21,500 so I have (so far) lost $2,900. Thats a ROI of -13%.

Ouch.

But that’s kinda nonsense. Firstly, that’s for 1 month. if I look at the one month sales for Democracy 3:Clones & Drones, then compare it to the one month of D3:Electioneering and project to a year out, I should earn a net of $87,042 from the DLC. YAY!

But again, that’s nonsense because it doesn’t take into account my work. I put roughly 3 months full time work into the DLC (over a longer period), so how much should I be charging myself for the purposes of working out if this DLC was a good move? This brings us back to the whole ‘what do I pay myself question.

Looking at game developer salary surveys, it looks like a typical ‘lead coder’ earns around £47,000. I also run the studio, so lets assume I am a ‘development director’ and earn £59k. A salaried employee would have a pension too, plus sick pay and so-on, so lets add another £6k to that and say a reasonable salary for me is £65,000 a year. I’m 45, been coding on and off since age 11. I’m worth it :D. So 3 months at that rate costs me £16,250. Given exchange rates right now at about 1.3 £/$, lets plug it in…

Whoah thats more like it.  Of course that assumes that the sales of D3:E are the same curve as D3:C&D over time, which they may not be. On the other hand, this is a US election year, and a fairly crazy one, people might be really into a game about election strategy. Or they might be fed up with politics entirely. who knows.

Now before you all quit your jobs to ‘go indie’, its really not this simple. I also released Democracy 3:Africa recently and that game LOST money (so far). It’s close to breaking even, but right now, that cost me money, even assuming I personally earned zero from doing any work on it. Gratuitous Space Battles 2 DID make me a five figure profit (yay!) assuming I worked for free (boo!). Luckily other games, notable Democracy 3 and Big Pharma, are big hits and continue to bring in money, so it all kind of evens out.

The two takeaways from this are:

1. its VERY RISKY to be dependent on just one game. It really is a hit driven business.
2. If you have a contract with someone that mentions ‘profit’ relating to bonuses etc, make SURE you know how they are defining their costs. It really is open to interpretation.

I do not know a single developer who has not knocked back a neat whiskey and, in the manner of someone who has seen things no man should see, when discussing the woes of the battlefield and the horrors of war…found themselves mumbling to their comrades, wiping the dribble of 100% neat alcohol from their chin and expressing the common sentiment… “fucking steam reviews eh?” before sobbing and falling off their bar stool.

Its not just a problem for steam obviously, or games in general, biut all online reviews. Anyone who runs a restaurant or a bed-and-breakfast or small hotel will tell you that ‘consumer reviews’ are not the panacea they are sometimes described as by businesspeople who run online portals.

In a sense, the theory behind reviews given freely by users are perfectly sensible. By definition, the seller of a good (me) is only going to promote it in a positive light. We are going to tell you our game is amazing (even if it isn’t) and we will not draw your attention to defects or bugs, because we have a financial interest not to do so. The other side of this, obviously is the consumer, whose interests (in the short term) are the complete opposite. They have a financial incentive (they do not wish to waste money on an inferior product) to know all the faults of a product before purchase.

So to quote pretty much every character in a Tolstoy epic. “What is to be done?”

The uniformly accepted decision is to allow customer reviews. Theoretically the customer is unbiased, and only interested in reporting facts, Thus the customers have a shared objective and can trust one another, as nothing is to be gained from leaving an unjustified bad review. Thus, sanity prevails, reviews are free, and everyone is happy.

The system described above is based on what is called ‘classical economics’ or what, when I was at the London School of Economics was called ‘Economics’, because back then, we didn’t know any different. Thankfully since then, the whole field of behavioural Economics has grown up, and we know now that Classical Economics, at least at a micro level, is 50% bollocks.

Classical Economics makes assumptions that turn out mostly to be wrong, and the design of customer reviews makes many of those assumptions.

Assumption #1: The customer has nothing to benefit from dishonesty. This is 99.9% true, and thankfully I do not see it as a problem on steam (at least not personally), but the area of restaurants, books and so on suffer hugely from this error. Where reviews are anonymous, chaos reins! As a seller, in theory I have much to be gained from reviewing competing products badly, and theoretically, from creating shill accounts to review my own games positively. More likely (thankfully also rare) is the possibility of extreme fanboys of game A giving negative reviews of game B, because its a ‘rival’ game, or because the developer supported gamergate, or because the developer is female, or whatever…

Assumption #2: The customer has perfect information. In terms of steam reviews, this would mean that the customer is fully aware of the product they are reviewing. To do this, they would need to experience it on multiple PCs, on Windows and Mac, and Linux (if supported), also in multiple languages, and to have completed the entire game, plus tried modding, co-op, multiplayer and so on. In short, they would have to dedicate several weeks of in depth research to completely evaluating the experience. In practice, many reviews are based on one PC, one platform, one language and a relatively short playtime of limited features. This is a partial experience, not an in depth evaluation.

Assumption #3: The reviews represent a representative sample of players. I’m tempted to just type HA! at this, but it requires more explanation. A game that draws people in to play for hours and hours may well get negative reviews in the first day of release, simply because the only people leaving reviews are people who hit a bug, or otherwise stopped playing. In other words, the silent majority who like the game are too busy playing to review it. This is definitely true on steam where you are forbidden from encouraging reviews from the app itself (unlike on mobile), and where there is no minimum playtime AFAIK.

Of the Democracy 3 sales, I can tell that roughly 1% of players have left reviews. The chances of the 1% being a poor cross section is very high. Angry people are more motivated to write reviews than happy people. People with time on their hands (kids & students) are more likely to leave reviews than busy gamers (20+ 30+ and parents).

So what is to be done?

I think if you want to keep reviews you have to accept that the only real way to fix 1) 2) and 3) is to have at least some paid reviews. If I owned steam (I’ll get this on a t-shirt one day), I think I’d take a chunk of the sales profits (steamspy suggest roughly $200 million this sale, so say 30% is $60 million, lets spend 2% of that, $1,200,000) and hire a bunch of reviewers, full-time. I’m sure the world of games journalism has a bunch of unemployed writers that would love the job. Lets pay them $60k each, with admin & health insurance and all that, we get 12x$100k reviewers. So that’s 12 full time games reviewers working for valve.  Not a lot, but not insignificant. They don’t have to review all the shovelware, just the games selling thousands of copies.

Suddenly we have a bunch of ‘pro’ reviews mixed in with the wider range of existing ones. Now a big part of the problem is solved, but I’d go further and do some weighting based on another metric.

Time played.

Frankly if you play a game for 40 hours then give it a negative review you need therapy, or a job. That makes no sense. Also, TBH if you play a game for 40 minutes, you really shouldn’t be reviewing it *at all*. The beauty of ‘time-played’ on a game is that steam already calculates and stores this for ALL the players, not just the vocal 1% who leave reviews. The stat is not perfect (some people ‘idle’ a game to get trading cards’, but its not bad. Presumably steam *could* write some code that detects a player being really AFK and fix that anyway.

I think some combination of pro review scores (let them give 0-100% not just positive or negative) combined with user review scores combined with player time will be a far better (and harder to ‘cheat) version of what we have now. Just my opinion, and I’;d like to read your thoughts.

BTW before anyone starts yelling, I’m not complaining specifically about my scores, I have generally good reviews, and to state it for the billionth time, my games sell fine. You can criticize without ‘whining’ if you lay out your arguments sensibly :D.

Soo… here we are in a steam sale. Sales are….ok. Nothing spectacular. I have D3 Africa in its first big discount, Big Pharma at 50% off, Democracy 3 is 70% off. They are performing ok, but I *may* have overspent promoting them, hard to say. Time to take a look at what I have earned in the last year, and consider what’s coming up.

Video is more important. Increasingly I see video content more often than I see text. It seems weird to me as a coder, who much prefers text. As a result, I’m trying to be a little bit more youtube-y. I’ve done 3 developer blogs on youtube for Democracy 3:Electioneering, and intend to do a fourth. I’ll probably do some with shadowhand too, and Political animals. I think this is an area I have under-appreciated in the past. My video presence sucks. My broadband is way too slow for twitch, and my youtube channel has 1,200 subscribers, not exactly impressive. I’ve finally started dual-camera videos and am trying to upload more frequently.

Press is harder to reach. Going to GDC this year was pretty futile from a press POV. I met a few decent press people, but I guess 99% of the time was useless from a press POV. I have no idea what you do to arrange press meets. Even proper PR firms don’t seem to be able to cut it. maybe my releases were of no interest that year? who knows, but getting through to press seems harder than ever. I am not sure how to beat this, I may just accept that conventional press is more trouble than it is worth. PR firms cost a LOT.

F2P is not going away. I keep expecting a big kickback and backlash but there isn’t going to be one. I think its another year where we have to accept that we get closer and closer to the expected business model, even on PC, even for strategy games, is F2P. If thats how people prefer to play I can’t be a grumpy old man ignoring them. I can see the appeal in some ways, as I am constantly frustrated at the slow pace of reveal of new (paid) content for my current favorite game. Can it work with niche games? possibly. Do I rule out positech releasing their next new IP as F2P? For once I do not. I can’t see me ever selling consuambles, but a free game with paid add-ons and extra content? maybe. Too early to tell.

A lot of the ‘competition’ is junk. Yes, there are roughly 623,000 new games on Greenlight every day. Some of them are laughable and look like they took the developer a weekend (at most). Even those that look good, are often very, very ropey. Unity, and the asset store allows a lot of newcomers to game development to seem good at a superficial level. Look at this cool terrain, and these cool trees, and the shiny 3D engine! Look also at the uninspired gameplay, the cliche-ridden design and the laughable lack of optimization. Everyone has to start somewhere. My first game sucked big time (image above). The difference is everyone’s first games now end up on steam, and people perceive this as a threat. It is not. Good games will still sell.

Player testing & metrics are good. I knew this, but I never thought it worthwhile to really invest both money and time into player-testing and analyzing use. I’ve been doing a lot of re-balancing of Democracy 3 lately, and I think I’ve made it a noticeably better, more balanced and more fun game as a result. Why its taken me so long to tune in to what the F2P crowd have known for years is beyond me. I make games that are very complex, so being able to test every permutation before launch is just not viable. I may also tend towards an early-access style release for my next new IP, as that obviously gives you lots of needed feedback. I know that can kind of wreck the PR of your real launch, but I’m thinking about doing it in a more low-key way anyway.

I need to move on. Democracy 3 sold better than my wildest dreams, but I need to move on to the next thing now. Gratuitous Space Battles 2 was supposed to be my next big thing, but it fizzed and flopped (relatively). I then got a bit distracted with Democracy 3:Africa, which is probably my ‘Tesla Model X’ (a distraction between products). But after D3:Electioneering, its full-steam with new stuff. I already have new stuff up and running. I could show you screenshots right now of a big isometric-style strategy/management game. I won’t do it, because I’m not convinced by the design or look of it yet, but I do plan to release details of it way earlier than I normally do. Maybe this year, not sure.

I think in summary, things are tough, and things are changing (as always). 2016 is likely to be a ‘holding steady’ year for positech, sales-wise. I just checked steam and comparing the last 365 days with previous 365, revenue has dropped by 1% :D. Thats pretty good as we didn’t release any new first-party IP this year, only D3:A, which is an expand-alone. Last year our big release was Big Pharma.

D3:Electioneering, Shadowhand and Political Animals all have strong potential and will all release this year, so there should be some nice sales bumps there. 2017 will be the year of my new IP, with all the risks, stress, potential and roller-coaster of emotions that involves.

I sometimes forget how lucky I am, as I know a lot of indie studios doing a blog post like this would be ‘phew thank fuck we can make it to another year’, and I kind of take that for granted. Mostly this is because I am VERY conservative in business. The big boom-years resulted in me stashing away cash to survive any future dips, and its a strategy that’s worked well. That isn’t the typical ‘get big fast’ silicon valley growth model, but its worked well for me, making games since 1997, still here :D.