The Independent Developer Will Rise Again!

The Independent Developer Will Rise Again!

The Game Industry Greg Costikyan CEO, Manifesto Games 10/21/08 Me 30+ years in the

game industry(ies) 30+ commercially published titles Adventure Gaming Hall of Fame, 5 Origins Awards, Maverick Award Manifesto Games

Play This Thing! Huge Growth But the Business Model is Broken Moores Wall and the

Decline of the 3rd Party Developer Spiralling hardware capabilities = competitive pressure to take advantage of them = spiralling budgets What Raph Koster calls Moores Wall

$15m now minimum buy-in for AAA title 15 years ago: $200,000 Moores Wall (cont) Art assets the main cost driver A Doom level took one man-day to build; a Doom III level takes 2+ man weeks.

You have no choice: audience expectations, marketing demands Narrowness of retail channel: <200 SKUs, 2 week on-sale window Basic Problem Sales increase linearly Development costs increase

exponentially Console model is broken Average game loses more and more money $1,000,000 $500,000 $0

$500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 Profit/Loss

1985 1990 1995 2000 2003 Conventional Business Model x15% = $3.75 to developer $8 retail

cut $7 platform royalty $25 to publisher $40 retail price

Why Developers are Screwed $3.75/game dev needs ~4m unit sales to recoup advance (very rare) Publisher breaks even at ~800k unit sales (assuming another $5m on marketing)

Once upon a time, a hit game made the dev lot of money. Vanishingly small chance today Result: The End of the Independent Developer Staying independent = unprofitable treadmill

Have to land next development deal or die No upside Selling out only logical path Assured access to dev funding Only way for founders to cash out Market Implications

Field more and more hit-driven Few hits have to carry 90+% of games that lose money At any time, 80+% of sales generated by top 10 games Implications for Publishers Consolidation

All Games Should Be Like Sports Games Licensed crap + franchise extentions Everything has to be AAA Gameplay innovation is too risky! Innovation is Driven by Discovering New Genres

c. 2000BC: Track game with blocking (Royal Game of Ur > Backgammon) c. 800AD: Game of Replacement Capture (Shaturanga > Chess, Shogi) c. 1200AD: Game of Leaping Capture (Alquerque > Checkers) 1756: Thematic track game (A Journey Through Europe > Candyland)

New Game Styles (cont) c. 1850: Trivia Game (Grandmamas Game of Useful Knowledge > Trivial Pursuit) 1856: Word Interpolation Game (Komikal Konversation Kards > Mad Libs) c. 1890: Fishing Game (Fish Pond > Operation)

1910: Military Miniatures (Little Wars > Warhammer) 1953: Board Wargame (Tactics) New Game Styles (70s) 1972: Adventure Game (Colossal Cave) 1973: RPG (Dungeons & Dragons)

1974: Vehicle Sim (Atari Tank) 1977: LARP (Dragohir) 1978: MUD 1979: Flight Sim (Sub-Logic Flight Simulator) New Game Styles (80s) 1981: Platformer (Donkey Kong)

1981: Computer RPG (Ultima 1) 1984: Graphic Adventure (Kings Quest) 1985: Dynamic Puzzle (Tetris) New Game Styles (90s) 1991: First MMOG (AOL Neverwinter Nights)

1992: RTS (Dune II) 1993: FPS (Doom) 1994 TCG (Magic: The Gathering) 1996: Rhythm Game (Parappa the Rapper) New Game Styles (00s) 2001: Collectible Miniatures Game

(Hero Clix) 2003: Big Urban Games (BUG > ConQwest) 2004: Alternative Reality Game (The Beast) ....NONE OUT OF OUR INDUSTRY SINCE 1996

Scratchware Manifesto An industry that was once the most innovative and exciting artistic field on the planet has become a morass of drudgery and imitation. --Scratchware Manifesto, 2000 GDC Rant

You can go work for the machine, work mandatory eighty hour weeks in a massive sweatshop publisher-owned studio with hundreds of other drones, laboring to build the new, compelling photorealistic driving game-- with the same basic gameplay as Pole Position -- Or you can defy the machine.

-- Game Developers Rant, GDC, 2005 So Find Another Way The Internet Changes Everything Major impact on industries from music to telephony We sell bits. Why put them in a box when the net is designed to transmit

bits? But so far the impact on the game industry is marginal. 1993 All told, 15m shareware copies of Doom were downloaded across the world... Doom was a watershed event...

Because it changed the way videogames circulate and reproduce. -- JC Herz, Joystick Nation Doom was an Aberration It didnt change the way games are distributed, because CD-ROMs came along, apps bloated by

an order of magnitude Internet users were stuck with dialup Hours-long downloads for apps of any size. The shareware model ruled for about 6 minutes. Web 1.0 (circa 2000)

Free Internet play bolted on to RTS and FPS games MMOs adopt hybrid model (retail distribution of apps, but play solely online, with subscription) Ad-supported play of classic card & board games attract tens of millions of monthly uniques (unprofitably)

Web 2.0 (today) Were back in 1993, in terms of app size/bandwidth ratio A success like ids is again feasible The market is about to be disrupted Cui bono? Consumers: greater choice, lower costs

(Some) creators: instant fame, but hard to make a buck Casual Game Market $0 to $700m (US domestic only) between 2000 and 2007 60 min demo, $20 purchase price Portal distribution

$250-500k budgets Middle-aged women Match 3 Games Hidden Object Games Mystery Case Files

Time Management Games Diner Dash Casual Game Economics 2003 2008

80% $4 60% to portal = $12 $16 $8 to developer

$20 retail price $250k budget = ~32k unit sales for breakeven $500k 125k Not a Panacea

But a sign post showing the potential. Its possible to create whole new game markets on the Net. But as usual, the game industry has learned the wrong lessons: Casual Games: Lesson 1 Everyone, even a demographic like

middle-aged women who historically are NOT major purchasers of games Middle-aged women will buy games on the Internet if theyre designed to appeal to them. cater to their interests Casual Games: Lesson 2

at the right level of difficulty Online, games need to be dirt simple to appeal to the casual game market intended audience Casual Games: Lesson 3 A $20 price point with a 60 minute limited

demo is a great way to monetize online lousy gameplay ...only 1.2% of downloaders convert to purchase... Casual Games: Lesson 5 are one way

You need deals with portals to achieve a large enough audience to generate enough sales for profitability transactions Casual Games: Lesson 6 The success of Xbox Live Arcade shows that casual games work on consoles

too! hardcore What, you call Geometry Wars a Casual game? Crap. Its a shmup, A genre for geeks if ever there was one. Free MMOs The logic of the conventional MMO market:

8-figure budgets Monthly subscriptions Multi-year development times Enormous technical complexity Free MMOs The logic of light-weight MMOs: 6 or 7 figure budgets (initially)

Free to play, upsell with status items (clothing, leaderboards, furniture, etc.) Far shorter development times Modest technical complexity 10-20% of your audience will pay Runescape

Runescape Browser-playable, traditional fantasy MMO 9m active players Of which 1m pay $5/month for premium services Plus advertising revenue

Player acquisition largely by word of mouth Club Penguin Club Penguin Flash minigames aimed at kids held together with a virtual world metaphor

Free to play $6/month premium membership for status items Club Penguin (cont) Key distribution arrangement with Miniclips #1 free game site on the Internet, >40m

monthly uniques Receives 50% of lifetime revenue from users who join CP via Miniclips Sold to Disney for $350m Screw console gaming Webkinz

Webkinz Plush toys with codes that allow you to adopt the critter as a Tamagotchi-like pet in an online virtual world Clearly inspired by Neopets Free to play online $45m in retail sales (06)

Social Networking Games Games built on APIs provided by social networks Facebook, MySpace today OpenSocial tomorrow The average Facebook game has

>2.5m installed users Multiplayer ones see 11% of them active each day Mobsters Social Networking Games Social networks designed for virality

Minimal marketing/distribution costs Turn-based, web pages Straightforward (and cheap) web development Free, Micropayments + Cost per action advertising

Zynga rumored to make $1m+ per day ($36m in venture capital) Social Networking Games Many seeing tens of millions of daily page views Already seeing VC interest: Conduit Labs ($5.5m Series A)

Zynga ($36m in two rounds, latest against a $100m+ valuation) Micropayments Common in free MMOs, of course A way to monetize gameplay short of the $20 purchase High proportion of casual gameplayers

run up against the 60 minute limit Double Trump Micropayments DoubleTrump 60 minutes free, pay 1 cent/minute thereafter

After 2000 minutes, you own the game outright as tech demo Wild Tangent Micropayments Wild Tangent

Token model 1 token allows unlimited play until you quit from the application 25 cents/token Or watch ads to get tokens Advertisers can sponsor play of games Credit toward purchase Micropayments

These are models built for casual games But expect to see free web games start to use micropayments E.g., first 12 levels free, another 12 for $3 Some of this already on Kongregate & Miniclips

Ad-Supported Web Games Contract development for sites like Nickelodeon, Adult Swim Not just crap any more some of the Adult Swim stuff is actually good Rev share with portals like Miniclips,,

Kongregate VC-funded startup to encourage this Kongregate Ad-supported Web Games Problem is that per-user revenues are small

Hit games can get millions of plays But figure a few cents per play Possible to support a small team, but not a path to riches Does micropayment upsell change the picture? Second-Tier Genres...

Conventional retail channel not friendly to games that have no chance of selling 1m units Yet there are genres that have passionate fans but not enough Computer wargames Graphic adventures 4X

Etc. ...Migrate Online Now sold primarily as online downloads Often with a retail SKU but the bulk of sales online Matrix Games

Computer wargames Stardock 4X (Galactic Civilizations), RTS (Sins of a Solar Empire, currently #4 on the NPD PC Games best-sellers list) Gary Grigsbys World at

War Galactic Civilizations II Secondary Genres (cont) Can sell in excess of 100,000 units Galactic Civilizations Gary Grigsbys World at War

Retailer disintermediation Real (if modest) profitability Opportunity for aggregation Slitherines Play History Serious Games

Yes, there can be serious money here Forterra Spin-off from Virtual worlds as training environments for military, medical, transportation customers Second Life may get the press, but this is where to look for actual success

Serious Games Peacemaker Began as a student project at Carnegie Mellon Modest VC investment, grants from nonprofits Major press attention 100,000 copies distributed in Israel & Palestine by the Peres Center for Peace

Peacemaker Re-Mission Funded by Hope Lab, a medical nonprofit Rather high budget FPS (shoot the cancer) Clinically shown that players are better

about taking their meds Re-Mission Serious Games Increasing amounts of money available from government, non-profits Most developers in the space have no

clue Clear opportunity for those who focus on it Mostly contract work little to no upside... But psychic rewards, surely Indie Games

Ill-defined, but usually means casual game-like business model, but not casual games Some indie developers have supported themselves for years at a modest level (ApeZone, Spiderweb, Chronic Logic) Increasing Attention

Both print and online media increasingly willing to cover indie games High-volume sites like Fileplanet feature indie game demos Playfirst deal for Dave Gilbert graphic adventures.

Emerging Distribution Channels Steam first really successful distribution channels (can generate sales of tens of thousands) Gleemax/WOTC Penny Arcade/Greenhouse

Indie Games (cont) Still a small market by comparison to, say, casual games But why should middle-aged women have all the fun? Critical factor: establishing the indie is good meme in the minds of gamers Relentless PR critical

The lesson of Uplink Indie Games (cont) IGF Possibility of upsell to XBLA, Nintendo Virtual Console, etc. Blue ocean dont try to compete with big budget titles

Bandwidth problem Some casual channels open (e.g., Oberon) But sucky margins Braid Defcon

The Shivah Immortal Defense Audiosurf Ten Years from Now...

The retail channel will be minor Console titles will be sold via download The hardware manufacturers will be the key gatekeepers PC gaming, broadly defined, will see an enormous resurgence, all online There will be vast diversity in

successful game styles Ten Years from Now... There will still be multi-million unit hits... But a huge midlist of games that sell far fewer numbers, profitably, will exist Application sale will be only one of many successful business models

Conventional wisdom will have reversed major publishers are dinosaurs The Independent Developer Shall Rise Again The futures so bright you gotta wear shades


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