Is there money to be made in the INDIE PC/Iphone

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1

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Is There Money To Be Made?

by Jeff on Jul.28, 2009, under Business, Games / Design, Indie Games, Industry, Media Theory

As I said in my last post, I’m looking at releasing an Xbox Live Indie Game in the next few months. Today, along with Darius, I started doing a little bit of math about indie game numbers, and it’s gotten me wondering, can you actually support yourself, and a company, on indie games (indie, in this case, meaning a smallish team experimenting with interesting gameplay concepts and styles). Now, I understand that this whole post, since it deals more with money than passion, may end up alienating me from the indie community, but as a developer I want to see small experimental games flourish, and I want to see those people developing them do well for themselves. This post questions whether or not that’s even possible under our current thoughts and models.

We’ve been seeing recently a number of small game companies really hitting a wall when it comes to funding. Introversion had a post on their blog about their money problems, and Mommy’s Best, though still pushing ahead, made it clear that the number’s on Weapon of Choice were not good. We’ve had rants from game players about alternative funding models and suggestions from Gabe Newell about public funding for games. What can we take from all of this? What can we do for funding models?

So this whole thing starts with one piece of information: How many copies of a single game does a developer need to sell per year in order to support themselves? Let’s start at a base line of $40k per year for a single developer. This may sound like a lot for indie developers and, let’s face it, it really is. But I will tell you it SHOULD be a pretty good base line number, for a lot of reasons, not the least of which include the fact that, in the US, as a single developer, you will be taxed on that both as a business and again as a person. Also take into account health insurance costs and the possibility of supporting any person other than yourself, and $40k starts to sound pretty slim.

Now we need to figure in loss to distributors. Let’s ignore distributors with up front cost / approval process (XBLA, PSN, and WiiWare) because even developing for these services usually requires either an already proven game or proven team, and we’re assuming neither. This leaves us with iPhone, PC (in various forms, we’ll focus on two as you’ll see shortly) and Xbox Live Indie Games. For each platform, you need to look at distribution numbers, likely price points, and gross income, meaning the income after your distributor (or whatever) has taken their fair share.
iPhone

Let’s start with the newest (and, for all accounts, sexiest) guy on the block, the iPhone. Most apps on the iPhone sell for $.99 to 3, with Apple taking 30% off the top. In addition, selling on the iPhone is really all about staying new, staying fresh, and staying on top of the most popular list. In order to do that, you need to stay at the lower price points to encourage impulse buys. That means staying at around .99 for as long as possible. Here are the numbers:
App Price Gross to Dev Number of Sales Needed / developer
1 .70 57,000 / year
$2 $1.40 28,500 / year
$3 $2.10 19,000 / year
$5 $3.50 11,400 / year

So at the pretty much standard rate of $1, a single developer needs to push 57 thousand copies of their game per year in order to support themselves, or push multiple applications which can come up to that number. With the number of iPhones on the market somewhere around 6 to 10 million, the question is, how many sales can you except? Mac Rumors reports 4 apps that easily hit almost a million sales, but what’s the data like for games? And indie games at that? The most telling post probably comes from the developer of Dapple, who wrote a very long post on how much money he actually made on the product (summary, he has sold a total of about 500 copies). In addition, this post on the price of apps versus their popularity shows very few indie games in the list, Field Runners (essentially an App Store Launch Title) being the notable exception, and very little money being made. Is it possible to be an indie and loved on the App Store? Only indies who have accomplished this can tell you, but 57,000 copies is a really hard number to hit with something interesting or experimental.
Xbox Live Indie Games

So what about Xbox Live Indie Games. Their Gross To Dev numbers are actually exactly the same, though the $2 price point doesn’t exist, and the highest amount you can charge is $5. That said, until recently $2.50 was the lowest you could charge, which required about 22,800 copies to be sold per year. Unfortunately, XBLIG sales figures came up very short for most developers. Total download rates are low, as Indie games were hard to find on the dashboard until recently, and good apps are very hard to find, so I believe most people have been ignoring the service entirely. Sales for most games topped at probably around 5,000 copies since launch, far from the required 22 thousand to support a single developer.
PC

Finally we come to PC. On PC, sales numbers small, but you can expect to be able to charge more, though more is expected of a finished product. Games average anywhere from $5 to $30, even from indie developers, and you’d think that, hosting it on your own or through Steam, you’d get more of the pie. Steam unfortunately doesn’t publish their numbers, but PayPal does, and we can actually use them as a baseline. Now, we’re assuming that you’re looking to get above $40,000 here, so we’re going to use their range for $10,000 to $100,000, which is 2.2% + .30 per transaction. Here’s the numbers:
Game Price Gross to Dev Number of Sales Needed / developer
$5 $4.59 9000 / year
$10 $9.48 4000 / year
$15 $14.37 2800 / year
$20 $19.56 2000 / year
$30 $29.04 1400 / year

Looking at these numbers, it’s almost obvious why most successful indie developers start on PC. Even with the PC market shrinking (this talk form GDC shows us that you can expect PC sales numbers in the hundreds of copies, thousands if you’re lucky), you get to keep a lot more of your money, and the audience is self selecting. People interested in indie games tend to have PCs and may buy your game. (A note to pirates: Look at those numbers and see how much you’re taking from that developer, and the numbers EACH DEVELOPER has to hit before even becoming profitable. That, more than anything, should make you think twice about piracy). Hitting these numbers is possible, but not probable. It’s quite obvious, to me, from these numbers why most successful indie devs are one man shops, making fairly quick games. This model doesn’t scale to multiple developers, and definitely not for multiple years.
Alternative Funding Models

So what about Gabe’s suggestion? Running basically a “stock market” for games where you can invest in projects, get a game out of it, and possibly see a little bit from the net profits off of a game? So far, We’ve seen a commission system partially go out, and partially work, but what about Gabe’s suggestion?

Let’s assume that for these systems, we’re talking about multi-developer, multi-year projects. Still talking indie, let’s say 4 developers over a year and a half, which is pretty reasonable I think. This totals (not taking into account taxes, office space, servers, or anything else) $240,000 that needs to be raised over the course of a year and a half. Though this is potentially possible, we’d have to look at other concerns. If a person invest in this game with a promise of returns on the net profits (after other expenses / taxes), he needs to understand the risks involved. After all, if a game company never hits that $240,000 number, and can’t survive long enough to complete the game, that money is lost. Attached to this, is the idea of due diligence. Each investor is now an INVESTOR in your game, and can have possible legal rights to it. If you just take the money and never finish the game, they might be able to sue you. What is there in place to protect both the investor and the investee if this happens?

Now, provided these legal fees could be worked out, how much of net profit would you be looking at loosing, and how much would you charge for each point of net profit? What would developers look to gain, and what would investors look to gain. This post is all about numbers, so here we go.

First, let’s start with a game that sells about 20,000 copies at $20 each (we’re assuming these are good games that have a following, otherwise they wouldn’t have been funded in the first place), on PC using the numbers above. That totals $391,000 revenue on the game, and let’s assume (for argument’s sake) that we have $41,000 in expenses for the game (to make nice round numbers). That leaves us with $350k net. Assuming we split to always end up with getting the funding we need, here’s what the graph looks like:
Percent of Net Available Value for each point Net Total Invested Total Revenue to Investors Total Revenue / point Total Revenue to Developers
70% $3500 $245,000 $245,000 $3,500 $105,000
60% $4000 $240,000 $210,000 $3,500 $110,000
50% $5000 $250,000 $125,000 $2,500 $125,000
30% $8000 $240,000 $105,000 $3,500 $245,000

In general, that’s pretty grim. Only in the 70% case do the investors come out just breaking even, and the developers have enough to fund half of their next game. Is it possible? Maybe. But is it worth it for the investors? How many times will an investor loose most of their money from games that aren’t finished, or games that don’t break 20 to 30 thousand copies before they just kind of give up investing? How much work is required of developers just to set up the legalities to make sure they don’t get sued, and their investors don’t get screwed?

Another funding model for indie devs is to keep titles relevant from year to year, keeping sales of the title up while you work on the next title, and into your third. By keeping these games selling, you can start to see actual profits. However, this also means consistently releasing games year after year, and surviving until these games come out. This takes a lot of start up capital, or at least the ability or desire to eat ramen for years on end, with only the smallest chance of reward (from looking at these numbers anyway).
Conclusion

These numbers make it really obvious to me why most indie (and, in some cases non-indie) business models exist, and why they produce the games they produce. To be successful, you need to be in one of a few situations:

  • A single developer that makes a good title (Petri, for example)
  • A single or set of developers with short release cycles to keep multiple games relivant over short periods of time. (Almost all iPhone developers).
  • A developer that has an already popular game and is able to get on one of the more visible services like XBLA, PSN, or WiiWare (That Game Company, the Behemoth, 2D boy, Number None)

This is why indie games experiment the way they do. Shorten the dev cycle, concentrate on mechanics and prototypes, keep art resources and requirements low, release lots of games quickly. I feel like there needs to be more available. I’m sure there are indies out there that want to experiment with things that take longer dev cycles, (weird dynamics, involved dynamic art styles, or, god fobid, strange narative structure), but can’t for survivability reasons, and that’s a damn shame.

So my answer to everything here is, maybe there’s not a good living to be made in indie games. Even with alternative money sources, it doesn’t look like you can sustain a business, even of small number of developers, without competing for AAA numbers, which seems to have a quality bar that almost requires a AAA team. Obviously, the math for that is wrong somewhere, as we’ve seen it happen, but is it worth it for me (or anyone else) to attempt the struggle when the reward seems to be mostly just more struggle? Is there an answer I’m possibly missing? Is there money to be made in remaining truely independent, or even survivability? And if there is, can it be done for more models than what we have now?

http://www.jeffongames.com/2009/07/is-there-money-to-be-made/

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I think, you’re thinking too much.

There is no guarantee that you would make even 1 penny with any given iPhone app. Some of the best selling apps are, in my opinion, worthless… yet they sell a lot.

Being an indie game developer is a lot like being a musician (an artist), you can work your heart out making a song you love or a song you think others will love… no guarantee that it will be a commercial success.

Your best bet is to create a game and find out firsthand how much money can be made… or not made. :slight_smile:

Personally I like that making games is comparable to most other creative art forms (music, painting, sculpture).

3

Something’s wrong with this :

If an indie can’t just try a new concept only for survivability, then he should do another job.

That’s exactly my case :
According to big companies regular troubles to keep financial stability, I realized pretty soon that it would take a truckload of money to launch myself into gamemaking, just to afford unpredictable sell losses.

You can’t really make a livin’ of videogame, because of many factors, unless you can carry on the burden of being underpaid, or being longly unemployed between 2 projects, or passing on the management side, in which case you can say goodbye to family.

I’m a bit overacting it here, but I followed a lot of sites dedicated to VG industry, VG studies, testing, making, community sharing, or job offering. And according to all the pros experiences I’ve read, I’m not so overacting.
Hopefully some did succeed.

But I made my mind, I won’t jump into that blackhole for now.
Daytime, I got a stable, secure job.

And I didn’t give up my dreams, because nightime, I’m sailing on the sea of gamemaking, alone.

This way, I have no money risk, no financial duty, no restricting publisher. I can make whatever game I want, freely.
Hell I’m loving so much the fact that even 4 monthes after starting to dev my project, I can still radically change some features, or add new exciting ones. This thing, I could never have it done if it was my profession.

I don’t have to “survive”, because I gave up on livin’ with videogames.
But this is givin me so much wings into real gamemaking.

And to be honest, I’m pretty sure that’s the best way to make money : not searching to make money, but making everything to love the result you are building. People can’t love your work if you don’t love it first.
That’s a hard goal to reach, but so much a pleasure.

No constraints. That’s how I see an Indie’s profile :wink:

4

There is no money to be made with PC/iPhone games. Go home.

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In a way, yes, but there is a matter of scale and person-hours. One musician can easily make more money by producing their own record, than an entire orchestra, conductor, and everyone else involved in the score for a Hollywood Blockbuster. The person-hours involved for the single musician will potentially be greater (although that’s not even necessary), but the time investment to make your average big-selling record is much less than that of your average big-selling video game. A game also requires much more in terms of multiple skills. So although you may be a master at creating a type of music, it’s highly unlikely that you’re going to have similar mastery of all the other aspects of game creation, yourself.

A big-budget game is more akin to a film, than it is a record or a physical piece of artwork. With current technological tools, one person, or even a small indie team, has no chance of competing with what the big boys are creating. The obvious solution is to balance this by charging less for your games. Even if you charge a fraction of what the big companies charge, you should make more than enough to live on, if you can match them sale-for-sale. But that’s a pipe dream, as indies don’t have the advertising dollars to attract those sales.

So, a different approach would be beneficial, if selling your own games to make a living is what you want to do. However, I look at most indie developers, and still see them trying to sell themselves like the big companies do. That’s a huge barrier to success.

When you are a pop star, or a rock band, you are an entity that is easily-definable to a human being. Humans with spending money can sympathize with you. They’ll buy your song, because they heard it somewhere and liked it, but they’ll keep buying your music, because they know to go searching for more products created by this entity that they already identified with.

People don’t watch a film because the same key grip or technical director is working on it, from a previous movie they liked. Those people get repeat jobs because of competence, and connections in the industry. They get paid indirectly, as do the people who make Unity. However, people will watch films because the films star actors they like. In some cases, a director may have enough of a public presence to also create a draw. I was tempted for a moment to think that PIXAR, for example, would create a draw due to brand recognition, but I also need to remember that I’m an obsessive nerd, and need to give myself a reality check all the time. For instance, Shrek did just fine. I doubt the majority of people who made it successful could even tell you what studio made it. But that’s fine, because the studios have money to back up each individual film as a standalone product. (In terms of video games, I think we can see a parallel in Pikmin. Nintendo tried to market a new IP, and although the first game was fantastic, it couldn’t compete sales-wise with the sub-par Mario Sunshine. The star is the draw. Not the faceless corporation.)

Now, to contrast this, let’s look at some of the best Indie games I’ve played lately, and how the people who created them have handled their situation. You would be hard-pressed to find anything out about the people who made Emerald City Confidential, Return to Ravenhurst, or Cooking Dash. So, despite the fact that I definitely would like to fund these people’s future efforts, it will be a challenge, because I have no idea who they are. On the other hand, it’s definitely going to be easy for me to find out about anything Jonathan Blow does in the future.

Without paying for advertising, it’s going to be difficult to attract anyone to your games in the first place, but that’s just the state of things for the time being. I think an indie’s only chance is to make something that is good, rely on word of mouth and free self-promotion (e.g. YouTube) to sell that product, and make it easy for people to learn about the actual humans involved. Interested parties can learn about the indie’s previous and future efforts in this manner.

A studio doesn’t make something. People make something. If your studio is small enough that you can advertise it with a face, do it. Otherwise, you’re just throwing things to the wind. Keep in mind, this can backfire, if what you make is crap, obviously made solely for the purpose of cashing in. I think Unity Technologies actually embodies this spirit very well, but they have the benefit of only selling (basically) one product, which isn’t traditional entertainment.

So, long story short, I think that any lack of success the indie community has had so far, comes down to one of two problems: 1. Your game isn’t very good. 2. You’re trying to present yourself and your games in the inhuman, cash-centric fashion of the big studios.

6

Those are very valid points, Jessy.

7

I think the musician metaphor is really good. On the one end, everybody wants to be one, and will give away the store just to have their game played.

On the other end you have the big studios employing massive numbers of devs for low wages, producing things that no small studio could pull off.

It’s just like my other dreams of becoming a rockstar or astronaut…not bloody likely I’ll ever make anything out of it, but if I go back to writing business apps I’m going to end up going on a murderous rampage with a weedwhacker or something.

Luckily, I have an indulgent wife that is just finishing up her PHD and starting to make enough to support me in the style to which I’d like to become accustomed. She took care of me during the musician phase too, though I earned more at that than I have with the games so far.

So take a bath, trim up your fuzzy head, and get out there and find your sugar mama!

8

amazing russ bet your wife does not know you posted this message… :wink:
and if she does you have hit the jackpot and I want to know has she got a sister!..

:wink:

9

You’re right. That was indiscreet of me.

We’ve discussed these things though. As far as she’s concerned, I’m an oversized, expensive house pet with benefits.

10

Man. I want that marriage. Mine expects equal share of responsibilities (including bread winning) with more time spent with the family than on the computer. SHEESH!! Can you believe that??? The nerve… :stuck_out_tongue:

Seriously, though…I love her and the boy, and I’ll just have to plod on at 4-6 hours a week for development time.

11

The trick to success in the games industry is the realization that not all products should be games in your early stages. Utilities, teaching aids, consulting services, etc… are essential for keeping your funds up when games sales are down.

I think the model of Ambrosia Software is my inspiration in this area. Snapz Pro X alongside the glories of Maelstrom and Bubble Trouble.

Putting all your eggs into one basket has been the cause of so many companies I’ve watched failing. If you don’t want to make applications, get a “respectful” job alongside your games projects. Always have a backup plan, and don’t be afraid to work on something not strictly a game.

PC vs. iPhone, though, I’ve always been on the side of the PC and Mac development. iPhone just isn’t profitable to any but the less than 1% of developers that get lucky.

12

very true…
working your heart out gives you a lot of satisfaction but that does not guarantee success. Many times you do something and think that it can create a revolution but it just comes out as a total flop…

13

At the beginning, yes … :wink:

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I agree with you about big-budget games being akin to movies. Now could it be that indie game development could evolve into being akin to being a writer? For instance, a novel is written by an author (a single person). I’d like to think that this analogy could work for indie developers.
Here is a blog post I wrote about this topic (four years ago)…

http://sharpgeek.com/2005/12/evolution-of-gaming-industry-and-art.html

15

I definitely think there is plenty of room for evolving forms of artistic expression to come about via interaction with hardware and software. So what you’re talking about is one approach that we may take. Although I’m a big fan of what is traditionally called a “video game”, there’s no reason that interactive entertainment has to have any “game” to it. I’m interested in exploring what we can do in terms of that. Other than software that is designed specifically for creating art (I definitely think of using Unity as a source of personal entertainment - not tremendously far removed from Mario Paint, which was my favorite SNES “game”), I can’t think of anything that fits this bill. The Graveyard, for example, was not interactive for the majority of its duration.

But at the same time, it’s also possible to emulate what the big studios are still doing, but on a smaller scale.

Unity is a great tool that allows for either possiblity. And it may even be hard to draw the line. I mean, what section of the App Store does a gamebook go under, if the story is told via real-time 3D animation? :?

16

Yeah, The Graveyard is a great example of what I was trying say in that old blog post. However, it was developed by a small team of people… I’m wondering/hoping it gets to the point where a single individual creates the whole “game” and that individual becomes the brand behind the product… i.e Stephen King for instance. I suppose Sid Meier and Will Wright are close to what I’m talking about… but then again they are more like directors; like Alfred Hitchcock and Steven Spielberg.

In short, I’d like to see game development fork into a new form that allows for Stephen-King-types not just Universal-Studios-and-Spielberg-types.

17

Jonathan Blow, like I mentioned, probably fits that bill now. It will be interesting to see just how much notoriety one person can accumulate, however, in the future of this medium. Personally, I’ll settle for being known as half of my two-person team, considering we share a bank account. :smile:

…It will just be like we’re Neil Gaiman and Terry Pratchet, except we don’t write books without the other. :wink:

18

I really like the Idea Randy mentioned about the Author relationship.

Unity I believe empowers artists to create cool content I am a artist first and foremost and my codeing skills some may question however after a year playing with Unity I am finally seeing some decent results and Osprey I hope will be one of them…It was solely created by myself and with a bit of luck it will do ok when It’s released to the unsuspecting public on the Appstore sorry for the plug. :wink: