The Business of Games Developing a Philosophy For Success

Presented by Larry Kuperman

I haven’t written a line of code in over 40 years and I am possibly the least talented person in the world when it comes to graphics. And I am laughable when it comes to on-line gameplay Yet I have been somewhat successful in the games industry and can honestly say that I have fun every day.

My goal is to teach you what I have learned in the hope that it contributes to your success.

1 My Credentials….

2001 to 2011 – Games included Galactic Civilizations, Sins of a Solar Empire, Demigod, Elemental.

2011 to 2013 - Business Development Manager for GameStop, in charge of PC Digital sales

2013 to Now - Director of Business Development for Nightdive Studios. Over 100 titles published on Steam, GOG, Xbox and Switch including the System Shock and Turok games, Blood: Fresh Supply and Doom 64.

*Education- B.S. from NYU, MBA from Detroit Mercy, MBA Scholar of the Year, Beta Gamma Sigma, etc. Presented by Larry Kuperman

I am presenting my background just to establish that I have significant industry credentials. In close to 20 years in the games industry I have seen a lot of changes and we’ll talk about some of them. I have put my educational credentials at the bottom. I have never gotten a job in the game industry because of my education. That said, I am proud of my education and what it means. More about that later.

2 In the Media

Presented by Larry Kuperman

Star of stage, screen and podcasts. One area where I have been particularly successful is in managing media coverage.

3 Active in the International Game Developer Association (IGDA)

Co-chair of the Las Vegas Chapter. Regional coordinator. Mentor.

Acknowledged for my volunteer efforts in the community including service to the Red Cross and WHO

Presented by Larry Kuperman

Volunteering and participation in community activities is very important to me.

4 The Business Mindset as a Philosophy

• An approach to problem-solving • Analytical, data driven • A guide for making decisions ranging from game design to hiring • Not just about profitability, but profitability is an important aspect • Putting this into practice with an example: “How long should I work on my game (and still be profitable)?”

Presented by Larry Kuperman

My goal is to show a framework that will help guide you through making choices.

5 Why You Should Care About Profitability • If you want game development to be a career, not just a hobby. • If you want to be happy in the business. The primary source of dissatisfaction cited on game development forums is lack of compensation, specifically a disconnect between effort and reward. • What Defeats Us – Lack of a business focus at the outset. • Ask yourselves: How do we expect our games to generate money? How much should we expect? Where will we sell them and what will we sell?

Presented by Larry Kuperman

When you start out to make a game, deciding on the business model should be as important a factor as which platform or what engine you will use. I help out on game development social sites. The single most common complaint that I hear from developers is that the amount of money that they make doesn’t justify the effort. Yet when I ask about their business plan, they never had one. It needs to go alongside your development roadmap.

6 Disagreement over monetization is the primary source of friction in game development today. This was recently posted on the Indie Game Developers Facebook page:

Presented by Larry Kuperman

This is funny because it is true. The dev figured our pricing based on effort and need, not content.

7 Why You Need A Plan

Presented by Larry Kuperman

South Park’s Underpants Gnomes “Now we just need Phase 2…..” I don’t know anyone in the games business that is not familiar with this. The point is the the business model needs to be well-thought out and realistic.

8 The Basic Formula

Costs – Most especially development time, equipment, licenses, marketing spend, etc.

To be profitable costs must be less than:

Revenues – Sales revenues, ad revenues, etc. Net of platform fees (Steam, Nintendo, Play, Apple) and other deductions (taxes, VAT, returns.)

Presented by Larry Kuperman

I phrased this in a specific manner – rather than saying that revenues must be greater than costs, I flipped it. You’ll see why later.

9 How to Determine Costs? • Developer time is going to be the single largest component. • Track EVERYTHING – all your coding time, art, discussions, meetings, etc. (You are going to NEED this information for your next game!) • Time IS Money – but how do you assign value? • Ask your fellow developers – what is the going rate for game developers with similar experience and skills?

Presented by Larry Kuperman

This last point – asking your fellow developers – is going to become a reoccurring theme here. You can do research on-line – looking at sites such as GlassDoor or job sites – to determine the going rate. But there is a better approach.

10 Build Your Business Network

• Valuable and relevant sources of information – remember that wages and value are dependent on region. • Shared resources – You may find that you have a lot in common and are working toward common goals. • Depending on your situation you might get a job offer. • Antidote for loneliness – a serious issue in the world of game development.

Presented by Larry Kuperman

Find game developers – you can look for your local IGDA chapter as one example or simply use search engines – and then contact them. You can use social media – LinkedIn is my preferred path but Twitter also works – and be candid. “I am a game developer just starting out. Would you have a few minutes to answer some questions?” Be frank about your experience (or lack thereof) and the nature of your request. If you are like many developers – an introvert – this can be hard. But it is so worthwhile!

11 Cost Equation = Value Multiplied By Hours

For our example you and two friends work on your game for two years. You each devote as much time as you can, but it is uneven. Track the number of hours and you can do some conversions: Average work week = 40 hours. (5 days of 8 hours each.) Man-month – Number of hours worked in a month. Some variation here – EU defines it 140 hours, US definition is closer to 160 hours. Annual time – again there is some variation, but generally we think about 2000 hours (50 weeks at 40 hours per.)

Presented by Larry Kuperman

These concepts are often foreign to developers – we think about working as long as it takes. So why is this important? You need this for your own growth and professional development. You need this for your other team members. But there is another reason for this – publishers want to know the costs. If you are going to pitch your game to a publisher the expectation is that you will not only be familiar with these concepts but also that you will have this information at your fingertips.

12 Revenue Terms

• Gross Revenue – Sale price multiplied by the number of units sold; example 1000 units sold on Steam at $10 each equals $10,000 in gross revenues. • Net Revenue – the amount that you actually get paid; gross revenue less allowable deductions; store fees (Steam retains 30% as an example), returns, fraud, etc. In the case above, net would be $7,000. • Other “allowable” deductions – Taxes and Vat are standard. If you sign with a publisher there is often a paragraph defining these deductions. These can include things such as marketing expense. In the “old” days of retail, marketing development funds (MDF) were a big deduction.

Presented by Larry Kuperman

Standard platform fees are 30%, Epic charges less. Mobile and Free to play revenues are harder to predict, so let’s use a PC game sold on Steam as an example. If you are staying truly independent, that is self-publishing, you need to understand these terms for your own decision-making. If you are looking to cut deal with a publisher a thorough understanding is even more important. The second time that I signed a game with a publisher, we agreed that marketing was an allowable deduction, but we didn’t define what “marketing” actually was. My company ended up paying the salary for their marketing manager who did very little (if anything) to help our sales. I learned an important lesson there.

13 Forecasting Revenues – Tools for Projecting Units Sold

• How can you project the number of units you will sell? • Find comparable titles – same genre, similar size developers. • There is a fair amount of data available online – SteamSpy is one example. • The best way to come up with sales projections – Networking.

Presented by Larry Kuperman

You need to be able to forecast how many units your game will sell both for you to make sound business decisions and as a key part of any pitch that you send to a publisher. Basing these projections on similar titles from roughly equivalent studios is the best way to project sales – and can have an additional benefit. I am to use a hypothetical Visual Novel (a type of game that I know basically nothing about!) as an example. If you are pitching your Visual Novel to a publisher you probably don’t want to compare your game’s sales to Fortnite. So how do you develop your projection.

14 Finding Comparable Titles

Presented by Larry Kuperman

If I was hired as a consultant for an indie working on a Visual Novel, I would probably begin by heading over to Itch.io I look at the titles and find the one that is closest to my client’s. Clicking on it gives me a link to the developer’s studio and, in some cases, to contact info. In many cases you can get a Twitter handle. Reach out and ask if they can spare some time. “Hi, I am an indie developer working on a game similar to your title ______. Would you be able to spare a couple of minutes to help me by answering some questions?” Two things about “cold communications.” Always be clear that you are asking for help and that you won’t take up much of the other person’s time. Time is always precious. Get to the point and don’t waste their time. I usually won’t stop with just one title, I am going to find as many as seem appropriate. If I get lucky and establish contacts with all the developers, I’ll have a great network of contacts.

You don’t need to begin by browsing Itch or Steam. If there is a particular title that influenced you, that is great place to start. Reach out and explain how influential the developer was to you. Flattery is good, if it is sincere.

15 The Equation and the Consequences

• We learn through our research and networking that the best price for our game is actually $5. Further the low end of sales is 2000 units, the high end is 8000 units. We use an average of 5000 units for our model and we’ll sell our game on Steam. • The equation becomes 5000 times ($5 times 70%) or $17,500 in projected net revenue. • With this information in hand we can now answer the question “How long should I spend developing the game?”

Presented by Larry Kuperman

Let me again emphasize that these are completely made up numbers and I used $5/$10 price points just for ease of calculation. We do have a budget now for creating the game.

16 Equation – Part 2

• We have a “budget” of $17,500 to work with. If our costs are less than that and our sales projections are accurate, we’ll be “profitable.” • It turns out that all the tools that we need to create our game are free for use. We are fans of the Doki Doki Literature Club and it turns out that the tool used was Ren’Py. No cost and even support is free via the forums. • Further it (conveniently) turns out that the going rate for developers with our level of experience in our home location is $17.50 per hour, so we want to create our game in 1000 hours or less.

Presented by Larry Kuperman

17 What Do We Do With These Numbers? • I said that the Business philosophy helps you make decisions about every aspect of the game including design. • With a goal of creating the game in 1000 hours or less, you now examine your work habits. It turns out that you average 20 hours a week working on your game as a one-person studio. • That means that you want to complete the game in 50 weeks or less. • Now you have the start and end points for your development schedule and can develop milestones to fit those goals. • Milestones, or goals that are tied to specific times, are key to staying on track.

Presented by Larry Kuperman

One thousand hours is a concept. A milestone, in contrast, is a goal with a time limit. Saying that you are going to spend 20 hours a week for 4 weeks to learn the software and some of the Python that you will use is something that you can keep track of. Having these milestones helps you to stay on track and to measure your progress.

18 Tools and Resources to Help You • Twitter – In looking to build up you network, Twitter is the easiest way to reach fellow developers. Unfortunately, until you are known your DMs may be ignored. • LinkedIn – Many developers ignore LinkedIn because it has a business focus. But that is its very strength. You can search by company, search by name, get the person’s title and background before you reach out. Also, and don’t ignore this, once you have a network you can get referrals to new people. • Email – It might seem funny that I am calling out email as a tool, but writing a business email that gets a response is becoming a lost art.

Presented by Larry Kuperman

19 Email For Success

1. Know your audience – don’t write generic emails, they are spam. 2. Be focused – get to the point. 3. Use the person’s name – nothing catches your attention as much as seeing your name. 4. Use key words – Words like “help,” “advice,” “referral” are attention grabbers. 5. The Subject Line is your friend. Example: Larry, New Developer Seeks Your Advice

Presented by Larry Kuperman

True story. I was meeting two young developers for dinner and I received an email that had to be six paragraphs of closely written text. No spaces between the paragraphs so that visually it was a solid block of text. If I wasn’t waiting for my dinner companions, I would have deleted it. Instead I replied saying “I am sure that your are asking me for something, but I have no idea what you want.” It was actually from a streamer on Mixer asking me for a key to one of my games. If the email had said “Hi, I am streamer with an audience of ___ and I would like to ask you for a key” I would have complied immediately.

20 Web Sites and Tools

• https://igda.org/ • http://steamspy.com/ (Steam stats) • https://www.gamasutra.com/ (Game business news and blog site) • https://www.powellgroupconsulting.com/online-business- matchmaking-events/ (Connects indie game developers with publishers)

Presented by Larry Kuperman

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