Category: business

A few days ago I saw an article about Star Wars Battlefront, saying its out this week. With super-slow ADSL, I wanted to start preloading, so went and ordered it right away. I think it was £50. That is about $80. For a digital game. Thats not a season pass, all I get for that is just one game. And it’s $80. Did I mention the $80?

How can a company in 2015 justify $80 for a game (standard edition) when so many indies struggle to get $9.99 for theirs? The answer is a combination of ‘brands’ and ‘animal spirits’. Animal spirits is a term by an economist which describes how in many ways we can be irrational and illogical. Its often a term thrown around on the stock market to explain all the irrational buying and selling that goes on when the fundamentals of a stock have not changed. Its basically people thinking with their emotions, and we do it a LOT with brands. You can even see it in brain scans.

You see animal spirits at play with purchasing decisions most obviously with big brands. Half Life 3 is available for download right now. It’s $100. Add to basket? y/n?. of course you do, how could you not, its HALF LIFE THREE. The same is true for Star Wars Battlefront, Fallout 4, the next (inevitable) COD game, and so on. I bet a lot of people do not even look at the price, especially if the marketers can generate a ‘rush’ mentality like they do with concert tickets, where you do not DARE waste time asking if 1direction tickets should cost that much, you must BUY IT NOW.

We probably underestimate the extent to which this sort of behavior works, as a business strategy. Lets take the example of a product that costs $10 to make, and sells for $11. Thats great, we are in profit! (obv. its not a digital product in this example). If we can spend a STUPIDLY BIG amount of money on that product to make it a ‘must have’ then we can actually charge $20 for it. We haven’t multiplied the profit by a bit, but by 900%. Even if we are spending an insane $5 PER ITEM to market it, we are still making 400% the profit we used to make.

I think there may be a ‘tipping point’ where the steam discussions about ‘is it worth getting full price’ basically evaporate. Very few people will wait for Half life 3 to be in a sale, or a PWYW bundle. Ditto the other games listed above. The trick is to have the confidence in your product (and a good enough product to warrant it), to try and push your game into that area.

Now you probably think thats bullshit, and impossible for indies because we do not have anything close to the required scale. True, we cannot make our game as *generally* desirable as Battlefront or HL3, but can we make it desirable within its niche? Can you hype up, promote and generate buzz enough about your game within its niche so people are excited on launch day and MUST HAVE IT NOW? Big Pharma was very popular on release day, people really wanted it, and paid full price for it. It can be done.

I think a lot of us could do it. I think most of us (including me) wimp out, with our fingers hovering over the ‘buy advertising’ button thinking ‘Jesus what if this is a waste of time’. I would like to make Democracy 3:Africa and Shadowhand absolute ‘MUST BUY’ products on their release dates next year.  Lots of work ahead…

…although people seem to be pricing them like they are. Which is kinda weird. I’ve seen games listed for $0.10. Thats kinda…desperate, and its either a signal that the game is an absolute botched together clone of something simple and generic, or it shows that the developer isn’t aware that games are not commodities.

About a week ago, Anno 2205 came out, and I bought it right away (in fact I even pre-ordered it, based on my like for 2070). The price of the game is interesting. here is steam spy…

So…no launch discount, a price of $60.00, and so far about 40,000 owners (clearly more off-steam as well). So thats $2.4 million, so take 70% and it means 1.68 million. IO don’t know the games dev costs but I’m guessing its not stratospheric. A few million? hard to tell, but I think its safe to say the game will be a decent retrun on investment.

Ubisoft know that Anno is Anno, and other games are not Anno. If I look at the strategy new releases chart on steam…

Ok, so no denying age of empires is cool, but a bit…old, and mini metro might be fun. One of them is DLC and I’ve never heard of the others. This isn’t my point though, my point is, I could buy the entire newly released top ten strategy games for less than the price I paid for Anno, and yet…I bought Anno. Judging my sales charts, so did everyone else.

Games (good ones) are not commodities. I don’t *need* to price Democracy 3 to compete with those 10 games listed there because they are NOT competition. Big Pharma is still priced at full price because it pretty much has no competition. There are *similar* games, sure, but there are *similar* games to Anno, but they are *not* the same.

Stop pricing games like you are selling a generic commodity. You aren’t.

There is a bit of a misconception among people who are struggling to get ahead in any industry, that all of the people they look up to, and see as a success, and who have in some way or another, by some metric ‘made it’, live their lives 100% of the time like this:

(I just googled for ‘TED speaker’. Apparently that guy is a ‘renowned leadership expert‘.).

Anyway, thats bollocks. And its also slightly destructive bollocks because it can be harmful to your motivation, your ambition, and your belief in yourself. Here is a little secret that people who have ‘made it’ don’t often admit… (I am putting myself rather embarrassingly in that slot, because I have a life which by a lot of peoples metrics is very good, no boss, comfortable income, blah blah. This isn’t generally how I describe myself…)

We have really really bad days too. Sometimes lots of them. Sometimes they are really bad.

I do not leap out of bed each morning and jump into my office chair and start coding flawless neural networks with one hand whilst dealing on the stock-market and making a fortune with the other. In fact this only happens about half of the time. In fact, most of the code I write has bugs and is broken and slow the first time I write it. A LOT of my code gets thrown away. A lot of my ideas get thrown away.  My current prototype project folder that I’m creating my potential next game in, is called ‘Research Cats’. Its not about cats, and its not about research. I ditched both ideas. Nor is any of the three other ‘really cool ideas’ I had, which I have also thrown away. Nor does the current game even look like it did two months ago. (It was a side-scroller then, its isometric now).

Plus my path-finding code is currently getting stuck under certain circumstances. My coder art looks HORRIBLE. I am not even sure this is a good idea for a game, and it may be a total waste of time and money.

The last game I coded and released made *some* money, but not that much. Certainly not a hit. The game before that was a HUGE hit, but every day I code I worry that maybe I just got lucky with that one, maybe I have no actual ability whatsoever, and was in the right place at the right time. Maybe I’m an idiot to not code in java or use unity. I could be wasting the next year of my life on a game that will *lose* money, plus I’m investing in three other games, all of which could potentially lose me money. Plus all the savings that I have are in investments that could go badly wrong. That iron-pellet factory in the Ukraine now looks like a dreadful investment, and the last tech company I invested in was actually in the news headlines for technical failures that wiped out 50% of its stock value.

I have mood swings that are so rapid and variable that I’m basically impossible to work with, and I’m such a workaholic I sometimes think I have ‘no idea’ how to ‘have fun’. I could talk for hours about my various fears for the future.

Now the thing is, *you don’t see that*, because like anyone who is selling something, I put forward an ‘image’ of super-confidence, success, motivation and ambition. Nobody wants to hear someone whining all day about how things are going wrong. We want inspiration, and we want to look up to people. Thats perfectly understandable. The trick is to realize when we are going too far, and expecting to live up to an idealistic vision of how people should feel/look/behave. Women have endured this for ages with the looks of airbrushed supermodels being demanded of them. Men get similar pressures in other ways (You MUST have a job, you MUST have muscles, full head of hair, fast car blah blah). What I’m saying is the same thing happens in business.

(There is actually no difference between these)

When you look at a successful developer, or indie game studio owner, you are seeing the vogue cover-model image of them. All the failure, the doubt, the stupid decisions, the drunken sobbing at 3am about how they are wasting their life… thats all kept from view. In short, we all fuck up, we all get it wrong, we all get demotivated and miserable, and wonder if we are doing the right thing. Or hopefully we all do, because if its just me, I am so fucked :D. So anyway, on your off-days, hang in there. That person you think has all the answers is probably having one too.

I was chatting recently to some other devs, and the topic of ‘return on investment’ and more relevantly, the time to recoup the initial investment came up. It occurred to me that the attitude that indie devs have to these values are very interesting, and often completely fucking mad.

Just to clarify how I’m thinking about these terms. Lets say you spend $200,000 to make your game, and after a year from when you commit that money, you have earned $220,000. The game then explodes and can never be sold again. You made a return-on investment, of 10% by getting that extra $20,000 back. That assumes you paid out the whole 200k on day 1, and had no access to any of that money.

If the game went on sale on day 1, and you get $200,000 back on day thirty, I’m saying the time to recoup your money there is one month, but note this is a ‘totally different thing to look at’. I think this is widely misunderstood. For example, one game may cost $200k, earn $50k a year and sell for a decade. Its time to recoup investment is a depressing 4 years, but in total you made $300k profit, and a ROI of 150% which is good. That is, however over ten years, so not as good as it sounds… Game two may cost the same $200k, make $300k in the first week, and then never sell a copy ever again. Thats a really quick and awesome profit, but in the long run…I’d prefer game one thanks… :D

This is what makes looking at steam spy a bit problematic. What you really need in there is a ‘average income per day’ which for obvious bundling/price reasons is entirely inaccurate too, but at least it allows you to make vaguely sensible comparisons over time.

One of the reasons its important to keep these distinction is mind is that often the strategy that gives you the most immediately pleasing result may be in your worst interest. If we go back to our hypothetical $200k game again, and imagine the decision process when it comes to launch discounts or pricing… Arguably game one was priced too high, it didn’t sell that well, didn’t get into the charts, it bumbled along as a failure. for THREE YEARS after that game shipped, you have to admit to your parents each Christmas that no..the game has still made a loss…

Meanwhile game two sold like gangbusters on the first day. WOOHOO! it was maybe a bit under-priced…but who cares. It made its money back and then some profit in a WEEK! OMG riches await, order a ferrari… Except, we may have priced it hilariously too low. Literally everyone even vaguely interested in the game now has it, and paid $1 for it. In the long run, despite us enjoying a smug Christmas meal this year…we will eventually find ourselves at a bus stop in the rain when game developer #1 roars past us in his Ferrari bought in year eight.

Ok, so is this a real issue? and do people make this mistake? I think it is, and they do. A lot of new indie developers are YOUNG. Its just pure maths. to an eighteen year old, the idea of earning money over a ten year period is kinda unappealing, thats like 55% of your whole life AGAIN. To someone who is 45, 10 years is just 22%. I can handle that. In other words, if I’m older than you, I am probably better at thinking longer term.

This whole topic came up because it occurred to me that breaking even in a month on an indie game is seen as ‘average’, which is insane. When you invest in a solar farm or wind farm, you are looking at breaking even within five to eight years. Five years would be AWESOME. Games have a long tail, and its sensible to think of them as long term investments, not one-night stands.