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Going Small(er)

Games Industry Budgets: Assumptions and Realities

Marc Scattergood

Archive Post from Old Blog: Originally published December 8th, 2014

At the end of October, a sad thing happened. Uber had to let go a number of people in order to try and sustain the business. I was one of those people. So while I search, I write. And this episode is about funding and budgets in an age of Kickstarter and Early Access, which didn't exist all that long ago.

Recently, the topic of our Kickstarter, Human Resources, and our unusually high asking funding amount of $1.4 million US. While I can't go into too much detail, I do want to talk about the realities of funding a project. Because it's not cheap. And while $1.4 million may be high for Kickstarter, as far as most game software projects go, it's a tiny amount. What a lot of people don't realize is that these numbers, especially from larger, established studios, aren't budgets. They're commitments that "If we hit this, we have a high level of confidence we can bring this game to market"

Does that surprise you? To hear someone in the industry say that out loud? I assure you, it's not an intentional deception on the part of anyone running a Kickstarter. Well, I certainly hope it's not. For me, after 17 years in this industry, it just wouldn't even occur to me that a funding amount on a crowdsource site == The Budget.

Some things people don't realize when a team starts to create a budget for a game. One, there's a good chance they have some money already. Probably not a ton, otherwise they presumably wouldn't crowdsource, but some. From prior projects, or prior investments, or a trust fund, or getting five out of six numbers on your state lotto. Any time you pool 2 or more people together, there's a good chance they have a few dimes they can tap together. This is the seed for whatever the next project will be.

Existing projects can still be bringing in revenue that may help pay for a project.

Some teams have investors that have committed to matching any crowdsourced funds. A number of projects have had external backers commit to backing based on Kickstarter performance. Cloud Imperium had some external investments lined up, and I think inXile did as well, though I could be remembering incorrectly.

In my first draft of this post, I tried getting in the actual economics, but my most excellent proofreading friend, Forrest, rightly pointed out that it was muddying up the core thesis. I'll repeat it before I dig into breaking down funding, and hopefully help some excpectations.

A Kickstarter funding goal is not a budget. Period. It can be. And some studios may hope for it to be that amount. But rarely are they the same thing. There are good reasons for this.

Any responsible group making a Kickstarter can do math. They can calculate how many person months a project will take (roughly), and I think in this case we'll just trust Tim Schafer when he used the $10,000USD per person month cost. It can be higher, it can be lower, but it's a solid middle point. (Edit: GREAT post about estimating person month costs from my friend Simon.)

When we crowd funded Planetary Annihilation, for months afterwards, we had investors approaching us pretty much constantly. At that moment we had a choice to make. Do we rely on our own funding plans, or do we sell a bit of our souls - our company equity, our ownership of the IP, our right to distribute wherever we want - to obtain the funding needed to see the game all the way to a full retail launch. I'm not trying to be hyperbolic with soul selling, by the way. In a very real way, however, being financially independent is the soul of an independent studio, and as soon as you take actual investment from anyone, you're diluting that core company value. It's not a value judgement either. For some studios, it is one of the most important values. For others, it's simply one piece of data among many others, and possibly not even an important one. As anyone who follows Uber knows, we chose to not partner with anyone on the actual development of the game. The closest we came was our strategic partnership with Nordic Games to handle the retail distribution of the game, since we had no real plans to do so.

There's a good chance that your favorite crowdfunded project had a number of funding plans post Kickstarter to guarantee they could finish development. I know of only one professional studio who managed to keep their Kickstarter goal as their actual budget. As it was told in confidence, the studio can't be mentioned by name, but there's a good chance you've played - or at least heard - about one of their Kickstarters if you're an avid gamer. They are the exception though. No one else I've talked to over the past few years assumed that a crowdfunded amount could finish often hugely ambitious games to a polished retail level.

Some of the mechanisms you should expect to see studios use to continue to generate revenue to fund their project, and as a gamer who wants more good content, you really should expect and support. The only exception to this rule is if they stated explicitly they would NOT use a particular technique and then did anyway. And even then, if they're honest and transparent about changing their decision, instead of excoriating them for being hypocrites, maybe try applauding their openness and honesty and willingness to tell you, their funders, that things don't always go to plan.

  • Post Kickstarter Funding: Best example of this is Chris Roberts and Star Citizen. Because. Damn.
  • Early Access: This is one of the best things that has ever happened to independently developed games. Yes, I know some people are angry that they have to "pay for the privilege of beta testing", but more and more people are seeming to realize that you're not paying to beta test. You're still supporting the types of games you want to see made in the most direct possible way - by buying it before it's done and helping the development team finish it with cold, hard cash, and feedback through whatever mechanisms that team has.
  • I already talked about this. If you need a refresher, go up a few bit to "When we crowd funded Planetary Annihilation". Again, not value judgement, it's just a choice.
  • Straight up pre-orders (no early access, just a copy of the game when it's done)
  • Various other forms of publishing or distribution deals
  • Probably a few other mechanisms that I haven't even thought about

Building a game is a risk, no matter what. It's a complex process, and far more things can go wrong than can often go right. A great idea can end up not being fun, a vocal but small group can make it seem like there is more excitement about a game than actually exists, resulting in very limited sales at launch, and a hundred other unknowns. A lot can go right, and with the help of Kickstarter and Early Access, we're seeing brand new avenues for great ideas to become reality. That's awesome, and good for everyone. But it doesn't mean there aren't lots of challenges, and next time you see a company get $20,000 (or even a million) over their goal, that does not translate into profit. It just improves the likelyhood of a more polished game, but when you figure in stretch goals, it often also means increased scope, increased risk, both which can lead to LESS polish. Early Access in particular is one of the primary ways to help mitigate polish risks, as it provides ongoing funding as the game goes from alpha, to beta, to release. Even if the funding goal is the budget, there's no guarantee a team will hit it. There are already a few examples of that, sadly.

Be supportive, be critical, but mostly, be introspective and try and put yourself in the developer’s shoes before you start going into internet rage hulk mode. While there may be collusion or nefarious plots afoot, usually the simplest explanation is the most accurate. Most game companies just want to sell their games, pay their employees, and keep making more games. Profit is wonderfully crazy, and about as mythical as a unicorn.

Hope you enjoyed the read. I'll be back soon. Probably talk about recent experiences in Unity. Man, that engine has matured! Til then, my friends.