How many times have you heard or read the following advice – you are great at video games, who don’t you start a video game company? Sounds easy, and even more so, fun. After all, it is all fun and games, and you and some friends are great at tech. But with that word company within the question, or the term starting a business that it implies, things can be as far from easy as it can be. But if you still think you can and you should, what does that imply? Actually, how to start a video company, anyway?
If you begin to search the topic, even the multitude of information can be mind-boggling. Why? For a very simple fact that many like makingitbigingames.compoint out. Game publishing is a multi-billion dollar industry. Geekboss.com notes that there are 4000 game titles published worldwide each year. Judging by that fact, the field should be quite lucrative, shouldn’t it?
But the author adds also the following facts. Of all these titles “50% of them sell less than 10,000 copies. Only the top couple of dozen sell enough to be classed as hits. Typically, this is in the 500,000-1,000,000 unit sales range on PC and two to three times that on Playstation One.”
Even those entrepreneurs that have made it in the video game industry have some serious warning stories to tell. These stories include how much, time, money, effort, and enthusiasm is needed to make it in what is a very lucrative, but at the same time competitive industry. Starting a video game company can be a road to success, but at the same time, it can be a road to ruin.
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What does it really take for a video game company to make it?
Back in 2014 Guillaume Boucher-Vidal, founder of Nine Dots Studio, wrote an op-ed on Polygon, one of the more established gaming sites. In it, he discussed what it takes financially and otherwise to make a video game company stand on its feet.
He suggested that the invested money, emotion, and lost opportunities can be enormous. “In three years, I personally went from having $20,000 in savings to $35,000 in debt,” he wrote. “After two unsuccessful Kickstarter campaigns, I was on the verge of bankruptcy before signing a deal with Bandai Namco.”
Discussing his article, insights.dice.com adds that “from initial incorporation ($500, excluding lawyer costs) to equipment ($3,120 per person, including $800 per PC) and salaries (roughly $3,250 per person), running a relatively small studio is a cash-drain, even before you throw in legal and accounting fees, advertising, and the cost of attending conferences. Boucher-Vidal managed to minimize some of these costs by hosting his employees at his home for the studio’s first year of existence. Despite that, however, he ended up burning through $80,000 in three years before his business saw its first significant profits—a number that would have exploded to $700,000 had he paid employees more in salary.” Oh, and those numbers were applicable back in 2014.
Game career coach Rick Davidson adds another warning: If you have never made a commercially-released game before, you ARE NOT ready to start your own video game studio/company. In the above article, Davidson made a checklist of questions anybody contemplating the idea of starting a video game studio/company should ask themselves before they venture into hot waters of this industry.
Still, with all the warnings, there seems to be a way to make it a video game entrepreneur.
How to start a video game company -starting out as an independent
In his above-quoted article for Making It Big In Games, Jeff Turnell advises a step-by-step approach on how to get involved in video game business. He lists the steps as follows:
- Step #1: Hobbyist
- Step #2: Educational, Resume Building
- : Step #3: Spare Time, Secondary Revenue Stream
- Step #4: Full-Time Developer, Supplemented by Contracts
- Step #5: Full Time, Your Games Only
According to Turnell, the first step will show the potential video game entrepreneurs whether they have an aptitude for this business. At that point, they can start learning the craft by using different levels of programming languages. After that, they can turn to what he calls “real game-making engines.”
The following step involves getting full knowledge about the game-making craft and pulling together a resume and portfolio of what one can do. This process also includes starting a personal gaming blog.
The third step presumes that the potential participant in the gaming business already has “ a full-time job, family, and lots of obligations.” By creating a game in their spare time and bringing it to market will give them an idea of both, how much money they can make and whether they like the whole concept.
If they decide to keep on going, the next step involves lining up some contracts “to keep revenue flowing” while they create their first real independent game. And that is all before they quit their current daily job.
According to Turnell, the last step is the goal any potential gaming entrepreneur wants to reach. As their own games become successful, they can start scaling back on the contracts. Their day job and “indie game development and publishing venture are one and the same.”
From one-person business to a full-fledged company
Running a one-man/woman show and collaborating with a few freelancers is one thing. Starting a full-fledged company, that involves additional staffing, working space and financial involvement is completely another. There, it makes no difference whether it is a construction company, design studio, or a video game production business.
Still, there are some specifics tied to running a video game company where the experiences and advice from people that are already involved should count the most.
Entrepreneur points to one such person. It is Philip Holt, the original president and CEO of the Orlando, Florida-based game development studio called Row Sham Bow (currently studio head at Undead Labs).
The project Row Sham Bow (RSB) started out with was “Woodland Heroes,” a game nested on Facebook which currently has around 74,000 followers/players. Holt describes the start-up proves as follows:
1. Get smart fast.
The game team hit the deck running by reading articles, analyst reports, and news stories. They also collected daily headlines, purchased target research, and talked with a hundred industry sources. Only then did the focus on Facebook.
2. Create competitive advantages.
Holt says 50 percent of his job has been hiring because a competitive edge always starts with a stellar team. He hires for intelligence, problem-solving, passion, hunger, and teamwork over specific technology skills. The reason? Technologies change and you don’t want to be swapping your team out.
3. Find the right advisors.
As the first-time entrepreneur, his mentors were venture capitalists who provide guidance on what to look for in an investor, feedback on negotiation tactics, deal terms, board recruiting, and equity participation for early employees. “You have to add mentors and guides to your team that can level the playing field.”
The right business plan can be the key
Holt had two more points to make:
4. Partner with the right money.
According to Holt, “you need someone who believes in your vision, will support your decisions and goals — especially when you are pitching to such a huge company as Facebook.”
5. Build and pitch the company you always wanted to work for.
“When it comes to workplace culture, Holt says you just can’t out-Apple Apple or out-Google Google. Such esteemed cultural traits should define your company and your behavior, whether it’s the freedom to be creative, becoming a member of a team that works well together, or receiving support and encouragement from a key mentor or manager. It’s the environment that creates success.”
A specific experience like Holt’s always comes in as an eye-opener. But there are more technical steps that one has to take to ensure that his video game company sets off on the right track. Maybe the key there, as BizFluent points outs is a good business plan. : Your business plan should fully represent your business idea, explain how you plan to grow, and show why your business model is unique. It should also include a financial model with scenarios.”
According to Truic, such a plan should involve the following elements:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Actually, each of these questions begs a few more. In the calculating startup and ongoing costs, the following questions come up:
- How does a video game company make money?
- How much can you charge customers?
- How much profit can a video game company make?
- How can you make your business more profitable?
Only when you have specific answers to these question you are set to go.
The right plan is only a beginning…
As Truic (above), step out, a good business plan is only a beginning. The steps that follow, have much less to do with developing an exciting video game, but are quite essential to turning, passion, will, and knowledge into a profitable business. These steps include:
- Forming a legal entity
- Registering for taxes
- Opening a business bank account & credit card
- Setting up business accounting
- Obtaining necessary permits and licenses
- Getting business insurance
- Defining a brand
For anybody that has overcome all the hurdles described above the answer to the question of how to start a video game company might seem easy. Still, like with ships, setting it to sail is one thing, keeping it afloat and on course (to success) quite another. It will take a lot of planning, effort, enthusiasm. Oh, and obviously, a lot of financial investment. But, whoever decides to venture, will also need to have a good dose of luck.