I decided to write a response to a rather poignant post on Gamasutra by a developer who is tired of being laid off and is trying to make sense of the business forces behind his constant relocation. It’s a big question, so my response will sometimes generalize and summarize rather complex systems. I’m going to put aside industry trends (like Facebook games and rising costs of AAA development) and try to focus on the challenges business people face, and how they result in developers' lives sucking. Risk Investing is about one thing: managing risk. If you want to understand the perspective of your business overlords, it’s seeing how risk management drives the entire chain of money behind games, from institutional investors to the person green lighting projects at a VC fund or Publisher. First off, that person isn’t just trying to make more cash so they can upgrade the mistress’ Benz. The people guiding huge investment portfolios have to keep their investments balanced as market conditions change, so they don’t lose all the teachers and firefighters retirement savings in one swoop. It sounds like a cute summary, but it's true. Valuation Nightmare Some Russian Mining Tycoon calls you and says, “Here’s access to every piece of research in the world and some crack financial modelers. I need to know the value of three video game projects: a Facebook game prototype, a half finished cloud based RPG, and a core shooter that’s just started their private beta. Pick one to buy and fund. Pick the right one and set the right budget so the project is profitable, or you and everyone that works for you is fired. Lucky for you, they’ve closed all the gulags, Yankee.” *click* Think you know video games? Try putting a dollar figure on a project. If there is anything I wish creative people understood is how unbelievably difficult it is to make these business decisions. Imagine being an executive who gets three Facebook game proposals an HOUR. Which projects should you bet your career on? First the game has to be fun and finished on budget and on time. Then there has to be a way to take the game to market so that people notice it and play it fast enough to build momentum and recoup costs. How do you value you that, even as late as in Private Beta? Respect Business Builders One quick note. I hate to get short, but we’re going to have to stop complaining about the locations and clusters of game companies. It’s really hard to run your own company. If you don’t want to deal with that risk and just work for someone else, be prepared to move to where those people are. It’s easy to say, “There should be more game studios in North Dakota. Facebook games make so much money. Why aren’t developers here too?” Try throwing your entire life into a company and facing that decision. The business is risky enough. You want to make it 10x harder to find experienced engineers just so you can help ‘the local game dev scene?’ If you do, that’s awesome, but it’s not really fair to hate on founders who just want to make games. Will it stay like this? Yes, but it will get better The good news is that the constantly changing industry is settling into better business models. The inherit risk will NEVER go away, but the business will get better at managing it. I think the number one thing a studio can do is have more than one customer. If you’re a AAA developer with 150 employees working on an Xbox game, you only have one customer - the publisher. All it takes is one bad board meeting for the plug to get pulled. The industry is getting better, though, by nature of online games. Facebook games are cheaper to make, produce persistent revenue streams and have near-zero distribution costs. Even the online games that are not free-to-play are a step in the right direction, because you’re able to reduce the ‘fun’ risk by easily being able to update the game. Silver Lining This may sound like the Oz of econ we all hear about but never really see. The truth is that this situation is really awesome for the fans. A chaotic market can be hell for those in the business, but fans are always getting new products from new teams on new platforms with new technology. The chaos on our end means innovation on their end. Final Note Entertainment businesses suck because they all face this problem. I used to want to be a film producer. Then a friend worked on his first game project and I realized the ocean of difference. At least the games industry is open and can be attacked by outsiders on a daily basis. At least we don’t have to break into the industry by fetching coffee or the casting couch. All you have to do is make something great. Comments11/25/2011 12:23
Thanks for the full blog reply. I certainly appreciate hearing about it from the other side, and I know from talking to every management person I have worked with that they are as equally frustrated with layoffs and turnover as much as those in the trenches. Leave a Reply |
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