As the digitally distributed games industry matures, small developers should consider carefully how best to compete. Given the evolving budget realities of independent development, how can developers minimize their risks, while retaining their independence and building a future for their companies?
The Changing Market for Casual Games
One reason developers originally left the enthusiast core market to work on downloadable casual games was the vast difference in investment risk. Enthusiast core games required a staff of dozens, budgets counted in millions, development cycles measured in years. Developers had no choice but to work for publishers in order to get financing. By comparison, the casual industry has thrived on a fraction of those numbers, so developers have found that they can self-finance, create direct relationships with distributors, and most importantly, retain ownership of their intellectual property—the key to building the value of their companies.
In the last year, the cost of building casual games has increased, however, as production values have risen dramatically along with customer expectations. In order to compete, it takes bigger teams with bigger budgets to make a quality game, and because of the longer development cycles, developers can’t afford to launch as many games each year. Don’t get me wrong, there will always be a place for quirky, out-of-nowhere, low-budget hits, but no one can predict where they’ll come from next (that’s why they call it “out of nowhere”).
On top of these competitive pressures is the reality that in casual games, like in any hit-driven entertainment industry, more than 80% of the revenues are generated by less than 20% of the games. While a large publisher can play the odds by shipping many games per year, offsetting losses from its duds with the success of a single hit, independent developers find themselves betting it all on one game—one game that determines the ultimate fate of their fledgling enterprise.
Reduce Your Risk with Web Games
One way you can reduce your development risk is to downshift into a part of the industry that has a lower ticket to entry: web-only games (that is, Flash or Active X games). Budgets and development cycles for web games are much smaller than those of their downloadable counterparts. Compared to what it might cost to finance a single high-quality downloadable game, you can launch many more web games in less time and with a smaller team, allowing you to spread your bets across multiple games and increase your chances of scoring a hit.
Unfortunately, revenue models for independent developers of web games are not as well developed as they are in the downloadable market. Some distribution portals still do not share advertising revenue at all, and those who do employ a wide range of contract terms. Fortunately, this points to a royalty shakedown coming soon as the advertising market solidifies. Investing in this part of the market sooner rather than later could position you ahead of the rest of the pack in this critical and fast-moving corner of the casual games industry.
Fund Your Independent Projects with Money from Published Projects
Another way to diversify your risk is to swallow your “indie pride” and accept money from a publisher in order to fully fund one development team. The key is to take advantage of this period of steady income to self-finance the development of a second downloadable game in which you own the IP (or several more web games if you’re going that route). It’s easier to endure the evenings and weekends of working on side projects, knowing that at least your salaries, equipment and software are being paid for by your published project.
Keep in mind that a publisher is unlikely to fund development with a completely unproven team, so this option is usually open only to developers who have already produced one or two casual games and have proven that they have good production values and design instincts—even if those games weren’t mega-hits. As the web-only market becomes more sophisticated, a strong web-game portfolio could be enough to secure publishing deals—either work-for-hire to create web versions of existing download games or to make the leap from web to download production.
License Your Intellectual Property
Once you have a hit on your hands—with a game that you own, that is—you need to find partners who are capable of taking your IP to other platforms or distribution venues where they have the means and expertise to generate revenue.
A common example is licensing for mobile development. Creating a mobile game that works for all of the carriers and their handsets represents a huge potential expense, so leave that work to an experienced mobile publisher. Mobile is also a perfect fit for casual game IP, since the overall complexity and game-play depth is a closer match.
If you start feeling guilty about “renting your baby” to other publishers, just remember that if you are unable to develop and distribute the game on other platforms, any revenue generated through a licensing agreement is revenue that you would not have earned otherwise. It also allows you to get back to the business of generating more original IP.
Managing Your Risk and Planning for the Future
These strategies for managing risk are not unique to the casual games industry, but rather they can be seen at work in many other entertainment industries, including the core games market. As the casual games industry matures you must continue to adapt to changing budgets and changing business models, but we must all work together to ensure that the spirit of the independent developer survives and thrives in digital distribution.
