Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

Monday, May 10, 2010

Nontraditional (to say the least) game startup funding

I've been talking about how people deal with what I've been calling the Big Bet - that big initial investment required to get a game printed, before you know whether it will sell or how it will do.

Here's an example of somebody running into this issue, and then responding with a . . . lottery of some sort?  Delivered as some kind of chain-letter spam?  I wouldn't have thought this was legal, and it doesn't come with all of the usual legalese that comes with contests, like family members of employees aren't allowed to participate, odds of winning are XXX, etc.

This thing seems kind of off to me somehow, although the website has pretty complex flash design, and the whois record points to somebody with a matching name on a e-mail address, which lends an air of professionalism and sincerity, if nothing else. There's no detailed description of what the game's like, but it sounds pretty basic and potentially fun.

If this is legitimate, I doubt they'll raise much money, probably not enough to cover the $1,000 they offer in prizes.  But what do I know?  I guess people hold raffles at churches and school carnivals all the time without worrying about the legal aspects.

Sunday, May 9, 2010

Starting a game company with multiple products

Listening to the last Paper Money podcast, where Ben and Rett talked about Jackson Pope closing up Reiver Games, I noticed they'd said one of the things he'd done right was starting up with multiple titles. They said this gives the company a bump in status over other startups. Specifically, they indicated that having more than one product will make distributors take you more seriously. Michael Mindes of Tasty Minstrel Games has mentioned that as part of his strategy too, at his blog.

This seems on the surface like good advice. In the six months or so that I've been exploring this in detail, and in the years that I've been observing from more of a distance, I've seen that there are lots of individuals who pay to produce a single game - they'll make the big bet, invest a pile of money, print up some games, and see what happens. A few of these games are great; of the great ones, some go on to sell well, and a fraction lead to the best possible outcome, the jackpot - they serve to launch a new game company, or they get picked up by a major company and distributed widely. But that's just a fraction of a tiny few. Most of these self-published games are pretty crappy - essentially vanity projects that nobody is going to buy, put out on the market with no research and no real understanding of what makes a good game or how the industry works.

The Purple Pawn even has an acronym for this kind of venture, the SGGC, or single-game game company. On their Terminology page, they define it thusly:
sggc: Single-game game company. Most companies never get beyond this stage, even if they have grandiose plans to do so.
So, starting a company as a SGGC puts you in a pretty questionable category - you're in there with all those hopeless naifs who have more money than sense and have deluded themselves into thinking they have what it takes to make a game, and that their product doesn't suck, and that people will actually like it.

Let's suppose (and this is a pretty big supposition) that I'm actually not one of these naifs. Whether that's true is yet to be determined, but let's suppose anyway. In that case, if I start as a SGGC, anything I try to do in marketing my game could well be hindered by the fact that everybody else like me is an idiot with nothing but a crappy product and dollar signs in their eyes. Distributors and retailers (and even customers) are faced with lots of products from companies indistinguishable from mine, and most of them are useless, a complete waste of time.

What Ben and Rett and Michael say is that having a second product (or a third, or fourth), like Jackson did, lifts you out of this cesspool of incompetence and false hope, and demonstrates to distributors and retailers that you're serious. I can see the logic here. With multiple products, you can demonstrate that you've actually got a commitment and a plan, and that you're not in that category of one-shot losers. You gain real stature. Also, you can leverage your products - if somebody likes one of them, they're far more likely to try another game from your company; you can market all your games at the same time in the same ads; you can do package deals - you actually have the beginnings of a real product line.

But what are the challenges and costs to this approach, especially as a start-up? Well, for one thing, you have to have a second great game. That's harder than it sounds. And you have to go through all the production hurdles to get that second game designed, with art, printed, shipped, and manufactured, before you've even tried getting your first game sold.

Most importantly, this approach requires you to make the big bet - the giant initial investment in manufacturing - twice before seeing if you have a prayer at making it work. I've talked about the high costs and terrible margins of game manufacturing here, and the difficulties of making it work as a start-up here. Doing a start-up with two or more games means you're doubling all that risk, for a venture in which you have little experience, with a small hope of paying off anyway.

My gut feeling is that even if you've got multiple good designs and (more importantly) enough money to print a couple games at once, starting as a SGGC is probably a better bet. The increase in stature you get from having a second game out is not lost forever; you can always publish a second game, and you're free to capitalize on the benefits of that later. If, on the other hand, it turns out you're horrible at this, or your games suck, or you've been completely self-delusional about the whole thing, then you've saved yourself half the money you would have blown.

It's a tough question, though, and it hinges on some unknowables - how big a benefit is the increase in stature compared to the costs - and some big variables - how marketable your game actually is. From what I've seen, though, launching a game company start-up is a low-return, high-risk bet, so doubling down at the outset seems foolhardy.

Tuesday, May 4, 2010

More Kickstarter info

I got a response back from another Kickstarter-funded project, the game Inevitable designed by Jeremy Bushnell and Jonathan A. Leistiko. Like my earlier post on Jim Taylor's Gentlemen of the South Sandwiche Islands project, I asked Jeremy what his results had been, and what percentage of his donors were known to him. My guess was that most of the Kickstarter donors were going to be friends and family or other folks connected to the project authors. In the case of Jeremy's Inevitable Kickstarter project, it looks like it's more like 50-50. Here's what Jeremy said:
In terms of the percentile mix that you're asking about: I have a pretty supportive social network, and a number of the contributions were from that group. We have one $500 backer who is a friend, and another $150 backer who is also a friend.   But our largest contributor -- offering $700 -- was a stranger to me.
A lot of the continued support we've been getting has been from strangers-- people who I assume found us through the Kickstarter page. The site has a good buzz on it right now, and a lot of people really are visiting it just because they want to find good projects. I haven't crunched the numbers on this, but I'd say that around 50% of the contributors are people who neither Jon nor I know personally, and when all is said and done we will definitely have gotten more money from strangers than from friends (the $700 donation from our mystery donor certainly helps to tip the scale that way).
Our $75 price point is far and away the most popular among strangers. It effectively works as a pre-order for people, with a few extras. (People are open to paying $50 for a game, and so getting your name in the credits and a feeling of good will for an extra $25 seems attractive to people.)
Like other projects, they've structured the Kickstarter project in tiers. The lower tiers provide low-cost rewards, like buttons and PDF versions of the game. To get a copy of the actual printed game, you have to put in $75. Roughly half of their funding is from that level, with the other half from three big donors (one at $350+, two at $500+).

They're doing a very small print run (100 games), so the relatively high donation level to get a game probably reflects the higher printing costs to make such a small print run. Their game is complex and has a lot of components, so I'd bet the printing and parts costs take up the majority of the $75 donation, depending on the quality of the board and packaging they use.

This makes Kickstarter look more promising as a way to whittle away at the huge start-up cost for printing games.  It's more suited to small production runs, like this one and Gentlemen, than to something larger, like starting a business, but most indie designs probably won't sell that many.  The PDF version of Inevitable also offers a low-cost, high profit-margin alternative for marketing the game, and the Kickstarter funds probably allow them more latitude when funding artwork and design.

Neat stuff to consider. My thanks to Jeremy for responding to my questions.

Sunday, May 2, 2010

Gentlemen of the South Sandwiche Islands and Kickstarter funding

I've discussed James Taylor's game, Gentlemen of the South Sandwiche Islands, and his funding model, via, in previous posts here and here. The quick summary is that James has used Kickstarter to amass nearly $9,000 toward production costs for his game, mostly in the form of pre-orders. He's pledged to print 500 copies, so he's raised just under $18 per copy - a reasonable price-per-copy for a small production run of a game without too many parts. You have to pledge at least $26 to get a copy of the game, so there's probably at least a small profit margin in there at that price point. Furthermore, he's raised the money via 141 pre-orders, so he'll have the opportunity to try to sell the remaining 359 copies he prints entirely for profit. With those numbers, this looks like a viable way to take the huge personal financial risk out of self-publishing a small print run of a game.

This is a model that I've now seen used on Kickstarter a couple more times, although most successfully with this game. In looking at this, my guess, stated in my last post, was that Kickstarter isn't a magical source of startup capital from strangers - instead, most of the funds raised are actually from relatives or friends of the authors.  But I didn't know.  So, I figured instead of just guessing, I'd ask, and James was gracious enough to reply. (Holy cow, I suddenly become an actual journalist!) He says:
"I would say I knew about 70% of the people who bought a copy of my game through Kickstarter. Some people think they can put a game on kickstarter and just wait for the masses of strangers on the internet to fund it, but that's not the way it works. Kickstarter even describes itself as a way to pool your own social network in order to raise funds."
So, there you have it. You're not going to magically produce money from places like Kickstarter - in some ways, it's kind of like a Tupperware-party hit-up-your-friends model, although more techno and less guilt-laden. What it does provide is a place to organize and raise startup capital, mostly from sympathetic friends and acquaintances (some of whom will probably get their copy of the game, play it once, and then put it on a shelf). Because you specify a minimum amount to reach before actually charging anybody, you actually place a bet on your game and gauge interest (and simultaneously find out how many friends you have).

If you're interested in the Gentleman game, there's an interview with Jim about the game here, and a commentary by one of his professors, Henry Jenkins, here. It looks pretty clever - a simple concept, but a really fun theme.

Saturday, May 1, 2010

The Four Principles of Independent Game Publishing

Jackson Pope over at Reiver Games has a sad post here where he says he's going to have to shut down his company for economic reasons. He's been hinting at this for a couple months; I looked at what I could figure out about the economics of his venture here.

He's in a situation I imagine myself being in in a couple years. He's got piles of games in storage, and they're not selling very quickly. He's got another game in the works, and was at the point of making the big bet - the big initial investment to get it printed, in this case £15,000, or $23,000. He's made that bet three times, and from his earlier posts, it sounds like the bets have actually paid off, albeit barely. But (a big but, I cannot lie) he's not making any money to support himself, and he's got ongoing expenses (storage, loan payments) that have to be paid. So, he's not willing to ante up a fourth time - a reasonable decision. You have to know when to fold 'em.

In this recent post, he says the value of his stock (games on hand) is actually equal to the amount of money he's invested in the company so far. The value he uses here is the printing cost, so even if he sells at a deep discount, he gets his initial money back, assuming he can sell out at a discounted cost-of-goods price. That's breaking even - actually an acceptable place to be for most independent game designers/publishers who aren't trying to make a career of it, as Jackson has, but it's a place they're not likely to reach, since Jackson's already done a bunch of this right - good designs, reasonable production costs, a network of distributors, going to the trade shows. Any one of those things is easy for an indie publisher to mess up, and then they wouldn't even be where Jackson is, barely breaking even.

What's the lesson here? There are several; take your pick. I've ordered them on a scale of diminishing practicality (and increasing insanity):
  1. Don't ever get into this loser of a business - find another job. Resign yourself to crushed dreams.
  2. Try only to get your designs published by an existing company - that way, somebody else is placing the big bet, on you, with their money. Resign yourself to hours of work in pursuit of almost-guaranteed disappointment. Often functionally equivalent to #1, but with a bunch of futile labor and postage.
  3. Publish through a print-on-demand service. Resign yourself to obscurity, tiny profits, and single-digit sales.
  4. Go it alone, as Jackson did, and resign yourself to hours of work, losing money, obscurity and tiny profits, and then crushed dreams - all the above on one easy package.
I'm considering doing #4, which probably certifies me for institutionalization, but I'm going in with several major caveats learned from Jackson's experience and from the rest of my life. Let's be grandiose here and call these The Four Principles of Independent Game Publishing:
  • Don't borrow money - this is probably going to be a really bad investment; only do it with the part of your own money you can afford to set on fire.
  • Have another job - you're not going to support yourself with this; destroy any hope of doing so before going in. You won't make rational decisions otherwise.
  • Minimize ongoing expenses - these are things like web hosting, storage, salary - you can't get these to zero, but a web site can be $50 a year, and you can store stuff in your kitchen, closet, or basement and do the work in your spare time.
  • Be willing to give up - that's where Jackson is; and he's clear-eyed enough to get out while he's avoiding a loss - and realize that you will need to give up at some point.
Depressing, eh? But if you can do all four of those things, I think you can still have a good experience with it. My goal is less to make money and more to get my designs in print, which isn't likely to happen any other way. The business end of it will either work or it won't; I'll learn from that while not counting on it for food and rent. I used the same approach to my shareware company, which had, at least initially, the advantage of nearly no overhead costs.  But at the start, I got it going by following all four of the principles above. Luckily, it succeeded; if it had failed, I'd still have been employed and living a good life.

We'll see if I can make this work too.  Best wishes to Jackson Pope - he's at least been able to live the dream for a while, which is more than most of us can say.

Tuesday, April 27, 2010

Kickstarter again, and more economic woes

Via BoardGameNews, here's another instance of a company seeking startup capital to launch a board game project via  Their game is called Alien Frontiers.  I discussed this funding method in an earlier post.  This is actually working for some folks, I guess - two Kickstarter projects I linked to last time have both met their goals for startup capital, one of $3000, one of $7600.  I'm still not sure how many of the preorders are random web wanderers and how many are family and friends - my guess is that it's a lot of the latter.

Like those earlier funding efforts, this campaign offers donors a chance essentially to pre-buy a copy of the game.  Let's run the numbers:

  • They're trying to raise $5000 to print 1000 copies of the game, or $5 a game.  
  • That's a small print run; I bet their costs per copy are at least $10, more probably $15-20 or more, depending on components or packaging.
  • Therefore, the $5 per copy they're raising on Kickstarter isn't going to come close to covering it all; they're going to have to put in $10-$20,000 of their own money.  
  • Their total revenue for selling out this print run would be $50,000, if they sell all of the games at their list price of  $50.

Suppose they complete the Kickstarter campaign.  Roughly speaking, they'll have collected $5,000 of capital, and they'll have pre-sold 100 of their 1000 games.  They blow that $5000 and another $10,000 (conservatively) on their print run, and ship the pre-ordered games.  Now, they have to make $10,000 back on 900 games to break even.

  • Suppose they sell all of them at list, that's $45,000, or $25,000 net.  A great return, but not realistic.
  • Suppose they sell all of them, but at distributor prices (say a 60% discount).  That's $18,000, or $8,000 net.  Not so great.
  • Suppose they only manage to sell 400 of them to distributors, and the other 500 stay in an attic somewhere, eventually discovered by their descendants playing hide and seek.  That's $8,000, or a net of $2,000 lost.

I think my numbers are relatively conservative, and, very importantly, they don't include business and operating costs - shipping, storage, marketing, commissions, damaged goods, returns, travel, lost components, etc. - which can be pretty large.  Also, it looks like Kickstarter takes a 5% cut of your funding off the top before you even see it, so that's even worse.

This gets to the problem with independent game publishing.  The numbers are stacked against you; there's a huge initial printing cost, and you have to do a big print run to bring the per-unit cost down.  Then, you have a pile of games you have to work to sell, without the connections and reputation of a major manufacturer, and you bleed more money all the time trying to attract customers.

People make this work, as new game companies emerge every year, but I wonder how lucky these few are.  How many are left as burning wreckage by the wayside, thousands of dollars in the hole?  I wish these Alien Frontiers guys well; their game looks neat, although investing $50 in a game I've never seen with an uncertain future printing date isn't something I'm comfortable with at the moment.  They're trying something useful, though - getting buy-in from others through something like Kickstarter is a great risk-free way to distribute the investment (and the risk) from the designer/publisher to a broader group of interested parties.

Thursday, April 8, 2010

Game boxes - setup box vs. tuckbox?

In an earlier post on boxes, I faced the conundrum of whether to go with a simpler tuckbox for my game, Diggity, or whether to pay more to get a two-piece base-and-lid style box (called a setup box by many in the industry). Within the tuckboxes, there was the question of whether to go single-deck (a small, thick box) or double-deck (wider and thinner). As I discussed before, the tuckboxes are cheaper and more resource-efficient, but most games like mine are sold in setup boxes in stores, and a setup box looks and feels more significant.

So, the comparison becomes:

Setup Box
  • significantly cheaper
  • more environmentally sound
  • smaller and lighter for storage and shipping
  • more impressive on a shelf or in a store
  • looks more professional (meets the industry standard)
  • may allow me to charge a higher price
  • easier to open and use
  • more room for artwork and text on the outside

So, what's the would-be publisher to do? Let's look at the actual numbers from one of my bids. I didn't ask permission to share these numbers, so I won't identify the manufacturing company by name, but I will say it's an overseas printer and among the lowest bids I have received. Here are the figures, for a print run of 6,000 copies:

(two-deck double width)
Setup Box 
(5.5"x4.75"x1.5" with insert)
$1.62 per copy
$10,620 total with shipping for 6,000 games
$2.42 per copy
$15,420 with shipping for 6,000 games

Caveats: these are just the printing costs (no art, design, etc.) and I'm probably only including part of the shipping, because I need to get the games to where I am in the U.S. rather than just to the nearest port. There may also be import duties and other fees. But at least it's a ballpark estimate. And for that ballpark, I'm looking at $0.80 per game for the nicer box. I got quotes for different sized print runs, and the tuck vs. setup box differential was always near that (ranging from $0.65 to $0.92 per game).

In this post, I assessed the not-too-rosy economics of publishing. The question about whether the better box is worth it depends on how much higher a price for the game it can attract. I'm guessing it will draw at least a $4-$6 per game difference in final retail price, e.g. from something like $9-10 per game to something like $15-$16 per game. Building on that, I'm faced with the following possibilities:
  • If I'm selling all my games direct to consumers, I need the setup box to be worth about another dollar per game in price in order to break even. So, not a problem if my estimate above is right. However, if I'm selling direct to consumers, I really don't think I'll be able to sell 6,000 games very quickly, maybe ever, unless Diggity really catches on.
  • If I'm selling direct to retail stores, who expect maybe a 50% discount on eventual retail price, then I need the setup box to be worth at least an additional $2 in retail price to break even. But that's hard to do; from what I've heard, retailers mostly rely on distributors.
  • If I'm selling to distributors, who expect a discount of 60% or more, then I need the setup box to be worth maybe an additional $3-4 in final retail price, especially because there will be more shipping costs involved with the bigger heavier boxes making two trips before reaching point-of-sale.
So, from the cost-benefit analysis, it's looking like a small but positive effect to have the bigger box. On the less tangible side, I get a product that looks more professional, is easier to advertise, and is at the same production level as its competitors, which might open more doors for distribution. Countering that, to get the better box, I would have to invest at least another $5,000 (or an additional 50%), and if the whole thing tanks, then I'll have a significantly larger loss on my hands. Also, I'll have to have more storage space for the games, but that's not a big concern at this point. And I'll be paying more in shipping for all orders for the entire life of the game, which might run to a few thousand dollars, wiping out any benefit from a higher eventual retail price.

Tricky stuff, but at least I've got some numbers to chew on. Let me know what you think.

Monday, March 29, 2010

Indie game publishing costs, or the grim reality of game economics

Today, I'd like to share my thinking with regard to the economic viability of publishing games with relatively small print runs. This would cover either small game companies or self-publishing - whatever you want to call it, that's what I'm looking to do.

To get started, I've solicited manufacturing cost estimates from a number of manufacturers both in the U.S. and overseas. There is less difference there than I'd thought, although overseas sourcing is a bit cheaper at most production run sizes. That's before factoring in the hassles of additional shipping, customs, transport, etc., which (along with a general preference for U.S. production) may well be enough to move me back to a U.S. printer. Regardless, I've compiled and graphed my various estimates for Diggity, a card game with 96 cards and a box. Some estimates are higher, and some are lower, but they generally fall along the curve I show here (click on all the graphs to see a larger version):
So, you can see there's a big economy of scale at work, with a run of 2000-3000 games being necessary to get to where the pricing is a good deal cheaper, and a run of 5000 or so to get down to about $2.50 a game.

Knowing how much you can make the games for is only half of the information you need to figure out if this is going to be a profitable venture. You also need to figure out how much you can sell them for. That's tricky - there are a lot of mass-produced card games that are somewhat like Diggity. The GameWright card games retail for about $8-$12. They have a big box, lots of art, and they obviously benefit from a big print run. They usually have fewer cards than my game. Set retails for $12-$14 - also a big, popular game. Fluxx, which is probably more parallel to what I'm doing, retails for more like $15-$16, although it now has a bigger box than I'm including in my estimates here. 

Even so, that sounds great - I can make the game for $3-$4, and then sell it for $12, or even $16! Profit! But that's not how it works. The $12 or $16 is the retail price, and other than customers to whom I sell directly, I'm not likely to get the retail price. If I sell directly to a game store, they're going to want to buy it at maybe half of retail, so that they can make a profit. Worse, if I sell through a distributor, the distributor is going to want to buy it from me for maybe 40% of the final retail price, since they need to mark up when they sell to retailers.

Let's make some conservative assumptions. Suppose I'm only able to get a retail price in line with my cheaper competitors, like the GameWright card games. Even if mine's better, and has more cards. Suppose I can get $10 retail for it. That means, if I'm going to sell through distributors, I need to assume I'm only going to get $4 a game for my product. That means I can modify my graph to show where I'm profitable and where I'm not as follows:
On the graph above, I'm only making money on my games if I can get them produced for less than $4, which is only true if I'm in the blue zone. Which means I need to print over 2,000 games just to get to the point where I could possibly make any money. And these are just the production costs - they don't count advertising, legwork, artwork, web design, office supplies, Internet costs, web hosting, shipping costs, transaction fees, returns, spoiled or damaged products, non-payment or outright theft, and on and on. 

The above also makes the rosy assumption that I'll sell all the games I make in a reasonable amount of time. It's possible that sales will go very slowly, and even if I'm potentially profitable long-run, I'll have to make a really big initial payment and then wait a long time (years) before I see any return on my investment. Worse, there may not be that many customers out there for my game (although my shareware experience has taught me that the web, and the world, are pretty dang huge). Suppose, though, that the limits of the exposure I can get and the interest of consumers are such that I can only ever expect to sell about 4,000 copies of my game. That's not a conservative estimate - lots of companies go with smaller print runs, and many many games sell less than that number. But even so, that limits my potential profits as shown below:

My blue field of happiness and profitability has gotten a lot smaller. Not looking too good.

Another concern is how big that initial investment has to be. As you can see above, the cost per game decreases significantly the more you buy. The counterpart to that, though, is that the amount you have to invest increases, because you have to buy each of those games to reduce the per-unit cost. The green line shows the total up-front manufacturing cost (marked on the right side of the graph) that I'd have to shell out to get the game printed.
To even get to the blue zone, I'm looking at a significant initial investment just to get started. Here's an example of how that can be pretty grim. Suppose I really want to publish my game, and I want to make a profit doing so. But I only have $9,000 to spare to get started (call that my Investment Limit). If I spend all of that on printing, at the prices above, I can only print about 2400 games (call that my Production Limit) at a cost of about $3.75 a game - barely below the $4 price I can get from the distributors. That's shown here:
My profitable zone has shrunk to a tiny triangle, almost definitely not enough to cover my other expenses, and my business is doomed before it starts.

Depressing, eh? Well, you have to be realistic. But what are some ways that I could push against this inconvenient truth, and actually make a self-publishing or indie company economically viable? Here are a few:
  • Put in a lot of money - Suppose you can put in more personal funds, or you can raise money from investors. If you make a bigger initial investment, you'll have lower costs of production, and you'll make more money with every sale. You'll have a lot of products to sell, so you'll want to do a lot of advertising and promoting to get your game noticed by potential customers. But if your game is just not that good, or not that marketable, and you do run into a finite market for your game, you'll just have spent (and lost) more money, and you'll have a lot of sad stacks of little cardboard boxes in your basement.
  • Charge a higher price - if you can get people to pay a higher price for your game, then you move the red 40% of retail bar in my graphs upward, and your profitability increases a lot. Given the way the production line is curved, you'll also be able to stay profitable at smaller print runs. Having a higher price than competing games will of course lose you some purchases, but if your game is good enough, and especially if it has some kind of draw, interest, or unique feature that others don't have, you can still sell out. Remember, the benefit of indie publishing is that you need to sell out, but your print runs are pretty small. It's a lot easier to get rid of a couple thousand games than it is to get rid of 10,000 or 20,000.
  • Sell direct - This is a big one, and maybe the best option here. If you can sell your games direct to consumers, then you don't have to weather the discounts that distributors and retailers expect - you get the full purchase price, which means your margin is a lot higher. There are a bunch of easy-access ways to do this - through your own website, through eBay, through Amazon - but the challenge is getting noticed. If your game is sold only on the Internet, you've got to be visible to lots of people in places they go to look for games. That's a big challenge. It's possible that you can sell in a variety of ways, too - get your games out to distributors and retailers as best you can, but also sell in person, over the web, at conventions, by the side of the road - anywhere you can find where people are willing to buy.
There are some other ways I think you can get around this perplexing economic model, and I'll discuss them in future posts. But, like any business venture, self-publishing a game or starting a small indie game company is a big gamble, and not a particularly good one. You shouldn't do it with money you can't afford to lose, and you shouldn't stake your career (or your family's future) on succeeding.

Saturday, March 27, 2010

A game publishing case study

Jackson Pope of Reiver Games has a post up at Boardgame Geek about the financial history of his company, and a follow-up post on his blog.  Interesting stuff, and he gives a glimpse at the underlying numbers.  There's not enough there to figure out his entire financial picture, but he's said (as I commented on earlier) it looks like he's not making enough money to do this full-time.

It looks like, after an initial phase of hobby publishing (which I'll define as selling very small print runs of hand-assembled games to friends, acquaintances, convention participants, and random internet dudes), he took the plunge and ordered a modest print run of one game, It's Alive, where modest is a few thousand games.  It looks like for his initial game, if I read his numbers right*, his expenses were in the neighborhood of £34,000 for 3,000 copies, or about £11 and change per game.  That seems pretty steep, but it's got a lot of components, great production values, and a nice box (see a picture of the whole game on BGG here).  Also, he printed it in the U.K., which is probably a bit more expensive than Asia, and the print runs he's been doing aren't quite big enough to get to the cheapest production costs, if my experience getting quotes is any guide.  He may also be including non-manufacturing expenses in there, too, such as postage, office space, computers, etc.

He's been selling that game for several years, and he's come out with a couple newer titles since then, in smaller print runs with higher prices and better margins.  It sounds like he has had some success - he's sold 2/3 of the It's Alive print run, and more than half of the other two, and made some money, all in two years - but it's not been enough to replace the income from working.

So, what are the lessons?
  • The economics are not bad for hobby publishing - you can probably make enough to cover costs by selling hand-manufactured games at conventions and over the Internet.
  • The economics are very tough for mid-scale independent publishing of manufactured products
  • You need a second source of income, or significant savings, to go into it.  It can't replace your real job, and you shouldn't expect it to do so.  
  • Even if you're clever and do things mostly right, you probably won't ever see enough return to live on. If you do, it will come after years of hard work and investment, but even such work and investment still don't guarantee success.
  • You need to buy more copies to reduce production costs and increase margins, but...
  • You will only sell so many games per year, and how many is mostly out of your control, and...
  • There's probably a finite market for any game, after which you've reached all the easy-to-reach, early-to-buy customers, and your sales will slow to a trickle. 
So, your decision to publish becomes a very important calculation, where you know only a few of the variables (production costs, your financial situation) and have to guess at the others (sales potential, retail price, marketing, total long-term demand), sometimes nearly blindly.

I wish Jackson well, and I hope he's able to keep his company going while earning enough to support himself.   His games look really neat, and his blog is very informative.  It's a tough business, and a bad global economic climate.

*3,000 print run, break even if selling 75% at £15 means £33,750 in publishing costs.

Monday, March 15, 2010

The Problem of Boxes

I'm finding boxes to be the most expensive part of a game.  Looking at my card game, Diggity, the initial quotes I'm getting are for a simple one-deck tuckbox - i.e., a one-piece box with a flap that tucks in, like a regular deck of playing cards.  Now, Diggity has 96 cards, so it's more like the size of two decks stacked on top of each other, but the cheapest quotes are still for a single-deck tuckbox.

My problem?  I've only ever seen one stand-alone game marketed that way recently, and that's Fluxx.  Maybe that's just because I tend to shop in big chain stores or online rather than in specialty game shops, but I think it's generally not done.  Even Fluxx has now changed their packaging.  See here for their new Family Fluxx version, and notice how the cards are in a little chamber inside of a big box.  That's pretty typical; as another example, nearly all the Gamewright line of small card games which used to be sold in tuckboxes are now in boxes that measure about 5"x6"x1.5" (e.g. Chomp), even though most of them consist of a deck of about 50 cards.  The single deck of cards sits inside a little plastic tray with an empty margin of wasted space around them, almost an inch and a half on each side.  I'm told by one of the manufacturers I've contacted that the plastic trays are very expensive to set up (thousands of dollars), but then cheap to produce.  Prohibitively expensive for a small-timer like me.  A cardboard platform might be workable if I want to do a three-piece box.

Environmentally, this is nuts.  I'm paying extra and using more resources to package and sell empty space.  Fitting-your-games-on-your-shelf-wise, this is also nuts, for the customer and the retailer and the distributor, since a game that would have taken up 14 cubic inches in a tuckbox will take up close to 45 cubic inches in the three-piece box, for the exact same contents.

Marketing-wise, thought, it's quite possible that people are happier dropping $18 for something that has some heft to it, even if the heft is artificial, and the number of cards actually lower than Fluxx or Diggity in a tuckbox.  But the only things that seems to be sold in tuckboxes now (other than standard playing cards) are games like Old Maid or Hannah Montana Uno, and those are only going for $8 or so.

So, what do I do?  A three-piece box is going to add at least $1 per copy to the manufacturing cost, maybe more like $3 per copy, for a game that is would only be $2-$3 per copy to produce in the tuckbox.  Insane - doubling the manufacturing cost to get a box that's about three times as big but holds the same deck of cards!  But apparently not insane if my game would fetch a far lower price in the tuckbox than it would in a big, wasteful box.  If I can retail at $18 for a three-piece big box version that costs me $5 to make, and only get $10 retail for a tuckbox version that costs me $2.50 to make, then I make significantly more on each sale of the big box, even though I'm just selling air.

A halfway option for me would be to use a tuckbox, but have it contain two half-decks of 48-50 cards side-by-side rather than one thick deck - that makes the box a little bigger, and might make it look more impressive on a store shelf.  That's the route that the makers of Set have taken with some of their games.  Set (81 cards) now usually comes in a double-deck plastic box with a printed cardboard wrapper, which is probably more than I can afford at this point, but Five Crowns and Quiddler are multi-card games in wide tuckboxes (although even they have some extra space added to the box to make it wider). I'm looking into that and soliciting quotes.  Any advice is welcome.

Saturday, March 13, 2010

UPCs and ISBNs

One of the things I've looked into for self-publishing is getting a UPC (Universal Product Code).  Looking at games already on the market, nearly all of them have both a UPC and also an ISBN (International Standard Book Number).  I'm still working my way through this, but here's what I've found so far:


These are granted by a group called GS1 (website here).  It looks like you need to pony up at least $750 to get a set of UPC numbers for your use (the price varies a little based on your expected sales and revenues).  For this, you get a prefix for your company and a set of reserved code numbers you can use on your products.  There are different tiers of registration; the price above is for 1-100 different products.  The initial set-up fee lasts for a year; for subsequent years, you need to pay again, in the neighborhood of $150 per year.

If you don't want to go the official route, and you don't need too many different UPCs, you can buy individual UPC numbers from reseller brokers.  Prices for these vary, but they can be a lot less than the fairly steep $750 setup fee to do it the official way.  Some folks seem to think this is fine; others point out that you're relying on the reseller to stay in business, deliver an unused code, and keep all the registration stuff current for you.  Also, if you did get wide distribution in retail, your codes wouldn't map directly back to your company, which might not be ideal.  However, you might be able to get this to work, and for significantly less money.


ISBNs seem to work in a similar way.  There is an agency (a government designated private firm, Bowker) which assigns and records ISBNs.  You can buy them singly, or in sets of 10, 100, or 1000.  A single ISBN costs $125; there doesn't seem to be the big initial registration fee that makes the UPC so expensive.  Ten numbers are a significant cost-per-unit savings at $275, a hundred are $995.  I wouldn't expect an indie publisher to need more than 10 initially, and if you've only got one product, you could buy them one at a time.

So, if I've got this right, UPCs are expensive, but you get them in bulk.  You have to renew them each year with an additional smaller payment.  ISBNs have less overhead and can be bought singly, but they're comparable in cost to UPCs in bulk.  I couldn't find anything saying that ISBNs need to be renewed - they seem to be permanent.

Does  an indie publisher need these?  The answer is probably yes if you want to be picked up by any major retail store or distributor.  If you're planning on selling only over the internet, at conventions, or to your local game stores, then you might not need them.  It looks like getting the codes provides yet another cost (and thus yet another barrier to entry) for somebody looking to self-publish.

Caveat:  I'm not a lawyer, and I don't have experience in the retail market.  The above is based on my research, and isn't guaranteed to be correct or accurate.  Do the legwork on your own to be sure.

Funding via

One independent game design partnership, creators of Inevitable: The Game, has managed to fund publication of their game through an online donation-collecting site called Their fundraising page is here.

The deal is, they can collect donations of any amount through the Kickstarter project. If they reach their goal over the fund drive period, they get to keep the pledges. If not, then it all just goes away, and they get nothing. They are going to use the money to design and produce a print run of 100 games, which is really small for a game production run. They've promised rewards to donors, such as PDF copies of the game, one of the games from the print run, T-shirts, and other stuff.

It looks from the link as though the Inevitable project reached $3000 in funding already from nearly 30 donors in only eight days. That was their goal, which means they'll get the money. Great for them!

Here's another game project, Gentlemen of the South Sandwiche Islands, also fully funded through Kickstarter. They were looking to print 500 copies for $7600 (about $15 a game), and they've exceeded that goal.

It seems like this might be a way to fund indie game publishing. Donors get a good feeling for donating, and low-cost reward goodies, almost like an NPR fund drive, and the designers get to publish. For many of the donors, this Kickstart thing has been essentially just a way to pre-sell copies of the game, which is great.

However, before using these two data points as proof that the concept is generally workable, I've got a few concerns or questions:

  • For Inevitable, $1350 of their contributions are from three people. I'd be interested in knowing if they'd be able to pull this off without these few angel contributors. For Gentlemen, it's not quite as focused on large donors - most of their donors have pledged $26 or $36 to get a copy of the game, while a small number (13) have pledged $150 or more. This small group makes up 25% of the total.
  • For Inevitable, you have to donate $50 to get a real copy of the game. On a print run that small, with the components visible in the pictures, I doubt the cost of production is lower than $25 or $30 a game, maybe more. With the bigger print run in Gentlemen, they've apparently got lower costs, as you'd expect, but in each case, they don't have much of a margin.
  • It looks like the Inevitable guys have a fairly active support group (e.g., they have 88 fans on Facebook) and have had a number of playtest events. For Gentlemen, they've gotten some support in the game media and from a faculty member (the creator is a grad student in design). My guess is that for each of these projects, many of their donors are friends and family, rather than random people they didn't know who happened to see the project on Kickstarter. If that's the case, then Kickstarter has provided only a framework for hitting up friends rather than a magical source of independent financing. It might not work if you haven't got friends, or if you don't do the networking legwork before listing on Kickstarter.
  • As I said above, I don't think there's much of a margin in either of these projects for profit. It looks like the funding collected will go almost directly to manufacturing costs. There's absolutely nothing wrong with this, of course - it's great to have your game printed up and played by hundreds of people - but that makes this a means to support a hobby, not a way to support yourself or a family as a "real" job.
  • It also isn't a clear path to a broader print run or wider distribution. Again, not a problem at all - if your goal is getting some nice copies made, and getting it out there to your friends and acquaintances and maybe a few others, then it's a clear success. Just not a way to found a company. However, these seed projects could allow the authors to prove that their games have a market, and might allow them to recruit bigger investors or get a traditional publisher to pick up the games, or provide a foot in the door to publishing future works.

Anyway, a very interesting model, and apparently in these cases a very successful one. Congratulations to both the Inevitable and Gentlemen of the South Sandwiche Islands projects, and good luck.

Distributors and middlepersons

Interesting discussion here at BGDF about distribution, fulfillment services, pricing, and the overall economics of game sales.  The takeaway: In order to make a profit publishing games, you need to be producing your products at 20-25% of the cost of their eventual retail price.  For a game like mine, I think I'd end up at about $15 retail, which means I need to get it produced for under $4.00 a game.

For the curious, "gameprinter" on BGDF is Ben Clark of Imagigrafx, a game manufacturing company.  He also co-hosts the Paper Money podcast, which is a really neat insider's look at the game industry.  "dobnarr" on BGDF is me.