Success as an indie game studio is a relative term. Some of us dream about winning an award, some want a million dollars, and others want a million downloads. Some degree of financial success, in particular, is necessary for the fact that we need it to sustain our studio from one project to the next. Using baseball as an analogy, here’s how I measure financial success for an indie game studio.
Before starting the analogy, I’ll clarify a few terms and assumptions:
- Opportunity Costs: The income that the founders would have made at other jobs before becoming indie. Even for part-time indies, you can also measure it as the income from a second job or even forfeiture of overtime/promotion opportunities. Example: If two indie devs that normally would make $50,000/year in other jobs take two years to make a game, then the opportunity cost is $200,000.
- Development Costs: Payments to contractors, asset packs, hardware/software used for development, and utilities/rent/caffeine needed to sustain the development process. Typically, this is lower than opportunity costs unless there’s a lot of outsourcing.
- For simplicity sake, I won’t take into consideration taxes, subsidies, or time value of money, as these will vary greatly by circumstances.
Your Time Has Value
Home Run: Sales exceed the combined total of opportunity costs and development costs.
- You did it, you made just as much if not more than a “regular” job, but all credit goes to you and your team.
- Points aren’t easy to come by in baseball and you just scored by yourself. In financial terms, this is also known as making an “economic profit”.
Grand Slam: Sales greatly exceed all opportunity and development costs (4x)
- True entrepreneurial success. In rare cases, it’s luck, but generally, you knew what to make, who your audience will be, and how to get them to pay for it.
- In baseball, grand slams only happen when other players are on base to setup for the final home run to bring everybody home. In game development, previous projects that helped assemble your development team, build a fanbase for your games, and utilize existing IPs all contribute to lowering costs and increasing the effectiveness of marketing to generate sales.
Baseball =/= Home Run Derby!
Partial Success (aka hits)
Single: Sales are lower than development costs, but studio still benefits through experience, reputation, and future opportunities.
- Financially unsuccessful, but hopefully, there are assets that can be salvaged from the project that can be leveraged for future projects.
- Many of the non-financial benefits only apply if there are future projects in store for the studio. It’s going to take several singles to score even once, so hopefully you can step it up.
- Many of the benefits are also significantly greater if it is the first project for the studio.
Double: Sales exceed development costs, but not opportunity costs. Founders are able to “not starve”.
- About as financially successful as a minimum wage job.
- If you consistently hit doubles, theoretically you can survive long term, but there is little room for error.
Triple: Sales exceed development costs and can provide modest funding for a future project.
- Limited financial success allows for some degree of creative freedom for your next project.
- Consistent triples are enough to survive as a studio long term.
Getting On Base is the First Step to Getting Runs!
Strike Out: Sales are lower than development costs. Even combined with other benefits, the net effect is effectively zero or possibly negative.
- For many studios, this is the end of the road. Whether you made an utterly bad game, refused to learn from your mistakes, offended your players and peers, or committed any other combination of errors along with poor sales, this project wasn’t worth the time spent.
- In both baseball and game development, getting struck out is something that you can’t build upon.
Even when looking in financial terms, indie development success is relative. While sales for modern games are global, opportunity costs focus on the skills/marketability of the founders and development costs vary greatly on where they choose to setup shop. The higher your costs, the more difficult it is to hit home runs that financially justify your indie studio’s existence. Keep in mind that that having modest successes with “doubles” and “triples” is enough for studios to sustain themselves for better opportunities in the future.
It’s natural to get sucked into the hype and look up to big studios that generate millions in sales, but what we should aspire to are the studios, big and small, that can hit grand slams and consistently deliver more with less.