Workshop
The business
Video-game developers design and produce for a range of platforms, from personal computers and consoles to phones. They can either self-publish games through platforms such as Steam – which allows them to keep control over development, features and the bulk of revenue – or strike a deal with a publisher, which comes with a loss of autonomy in exchange for financial, technical and marketing support. Developers can range in size from tiny studios with a few dynamic multi-taskers, to big operations where people fulfill roles as specialized as perfecting leg animations.
The opportunity
The video-game industry was already flying before the pandemic. Since then, with more people forced to stay at home, that growth has only accelerated. Research group Mordor Intelligence says the global market grew almost 20% in 2020 to $174 billion, and is forecast to reach $314 billion by 2026. Pretty much all areas are seeing a boom, with mobile games revenue, for example, up by 26%, according to market intelligence group Sensor Tower. Games account for more than 70% of all in-app spending.
Crucially, the average age of gamers is rising. In the US, it's 31, according to the Entertainment Software Association, and these older gamers with deeper pockets provide fertile revenue streams. The US and China currently dominate game spending, but markets in Latin America and Asia are growing rapidly, while smartphone ownership and internet speeds and availability are dramatically increasing in developing regions.
Although there are well-known industry giants, the gaming market is quite fragmented, with thousands of new games being released every year. Self-publishing platforms like Steam, as well as the growing interest of venture capital in the industry and the possibilities of social media to create hype, mean that opportunities for new players to break into the market are plentiful.
The prerequisites
Jay Powell is founder and CEO of gaming consultancy The Powell Group, which assists developers at various stages of their journey, including testing, striking deals with publishers, licensing, marketing and monetization. We spoke to him about the basic requirements when it comes to starting your own business in the game-development market.
The checklist
What's your business model?
Are you making a premium game that users pay a fixed price to download, or a free-to-play game that makes money from in-game purchases? If it's the latter, you need to make sure you have enough funds to run a potentially costly user-acquisition campaign before revenue starts ramping up.
How are you going to fund it?
The two main funding sources are publishers, who invest in the game itself while providing technical and marketing expertise, and investors, who will put money into the company as a whole. Obtaining publisher funding is contingent on convincing them that your game will reach completion, and you may require substantial self-funding in order to get to that point. Kickstarter funding is possible but challenging, as it depends on having a large community already built up around your game, says Jay.
Do you know your genre, demographic and platform?
Who, how, when, where and why people will play your game are crucial considerations. Shooter games are typically played on PCs and consoles by younger males; simple, free-to-play hyper-casual genres are played largely on mobiles by an older female demographic; and in-depth, free-to-play games like Fortnite are popular in south-east Asia and India, but are concentrated predominantly on mobiles rather than PCs or consoles.
What sort of outside expertise are you going to require?
During the development phase, you'll need ‘producers, artists, coders and designers – pretty much for the whole time,’ says Jay. Beyond development, you'll need business expertise to build distribution relationships, and marketing expertise to create a community and tap into influencers. This could be done through specialist agencies and consultants, or by striking a deal with a publisher.
How much labor will you need?
Once your game is published, you'll need a team to manage live operations, which could include handling technical issues such as bugs, releasing new features and content, community management and running events and promotions. You'll also need someone who's data savvy to track player life cycle, user acquisition and engagement and monetization.
Expertise
Although there are some successful two-person studios, they're rare. According to Jay, a core team needs a ‘designer who has the vision, programmers and artists to actually make it, and somebody to handle the marketing and community management at a small level and scale up’. And don't forget a producer to keep the project on track.
Cost
When publishers work out costs with developers, they go with a ballpark figure of $10,000 per person, per month, says Jay. So, for a team of five who take 12 months to complete a game, it would be roughly $600,000. That includes hardware, rent and benefits. For a team of individuals going it alone, the costs would be lower.
Space
‘Without a doubt, 2020 proved that everything can run remotely, from small indie teams to gigantic, multimillion-dollar projects,’ says Jay.
Major players
Excluding hardware, the Chinese tech giant topped the global video-game earnings chart in the first quarter of 2021, with more than $8 billion in game revenue.
The Santa Monica gaming company has produced a number of blockbuster games, including Call of Duty, Tony Hawk's Pro Skater, Candy Crush Saga and Crash Bandicoot.
Also based in California, EA has produced several classic sports games, such as FIFA and NBA Live, as well as other household names, including The Sims and Medal of Honor.
This article was first published in Courier issue 44, December 2021/January 2022. To purchase the issue or become a subscriber, head to our webshop.
