It wasn’t that long ago—maybe a couple of years at most—that people were still asking us if it really was possible to make any money in casual games. Well they’ve pretty much stopped asking. More and more developers and publishers have decided that casual games really do represent a big business—and as a result, people have modified their questions accordingly. Increasingly, the questions we get now are these: “How much money can I make, and how fast can I make it?”
To provide some perspective on the challenges of operating an independent casual game studio, we talked to a few who are already finding success in the industry. Specifically, we sought out studios which have successfully released at least one game and which subsist fully on revenues from their game(s), on outside investment, and/or through some sort of publishing deal. Here’s what we learned:
Eric Zimmerman, Co-founder of Gamelab
- Founded: 2000
- Employees and Full-time Contractors: 32
- Casual Games Developed Internally: 35+
- Games Developed with a Publisher: 12 online; 8 downloadable; 2 other platforms
- Games Developed Independently: 3 online; 3 downloadable; 8 other platforms
- Average Annual Revenue: $4 million
- Average Annual Revenue per Employee: $160,000
CGA: When you first started doing casual games, what were your creative game design expectations? Did you expect to make the next Bejeweled?
Zimmerman:Peter Lee and I started Gamelab in 2000, which was a few years before Bejeweled and downloadable games as we know them today even existed. We always conceived of Gamelab as a creatively-driven company, with a mission to invent new forms of play for a wide audience. And yes, of course we were hoping for big successes.
CGA:When you first started doing casual games, what were your corporate expectations? Were you looking to dominate the market, grow to 100 employees, and make a quick exit?
Zimmerman:When we started the company, our intention was to make games for people that weren’t hardcore gamers—and seven years ago, that idea was much less a part of people’s thinking about game audiences than it is today. So there wasn’t yet a casual games market to dominate. We just wanted to make our mark creatively on the world of gaming. As our studio has grown to its current size of 32 staff, we have been increasingly focused on making games that can bring strong success in the existing market.
CGA: By all measures, Gamelab is a very successful casual game development studio. How many games did you create before Diner Dash?
Zimmerman:Thanks! We made about a dozen online games before Diner Dash, but that title was our first downloadable game. We had collaborated with John Welch when he was working at Shockwave.com, and when he left to start his own company, we started discussing working together right away. We began the game when PlayFirst was just getting rolling, and we completed most of the production of Diner Dash before PlayFirst even had an office. Luckily, they had staff in place by the end of production to distribute the game—and they obviously did a great job in getting the game out there!
CGA: After your hit game, how did the dynamics of your studio change? Was it easier to create another hit game or was it more difficult?
Zimmerman: Great question. My business partner Peter Lee has always focused on continual process improvement, and we try to learn from every game we make. Things were very fast and loose when we made Diner Dash, but under Catherine Herdlick, our Director of Game Production, we run a very tight ship these days. We have had some hit titles since Diner Dash, but none have had quite the same degree of success.
CGA: How much can a new developer expect to make in the casual games business?
Zimmerman:Lots of folks come into the casual game industry thinking that it's easy to whip out a bunch of simple games and make a killing. While the business is steadily growing, it is incredibly crowded and getting harder and harder to make a hit title. Gamelab has managed to survive and prosper as an independent company in part because we built our expertise doing web games for a few years before we went into downloadable games, and as we moved into downloadables, we worked with premiere publishers like PlayFirst and iWin who could fund top-tier games and get them widely distributed. I don't want to discourage people from entering into casual games, but there are lots of hurdles—from design and production to distribution and marketing—that make it a challenging sector of the game industry.
CGA: After a series of published game titles, Gamelab is now creating self-published content. How does the ROI & investment into these titles compare?
Zimmerman:For a developer, self-publishing a game means that if the game is successful, the developer will share a much greater portion of the royalty than in a traditional developer-publisher arrangement (in which the publisher retains the lion’s share of the royalty). Currently, some of our titles are collaborations with publishers like iWin, and others are funded through project-based investment. As far as return on investment, the titles we self-funded are just now coming out, so it’s a little early to tell.
Charlie Cleveland, Founder of Unknown Worlds
- Founded: December 31st, 2003.
- Employees: Two full-time, five to 10 part-time (working as contractors for up to 20 hours per week in exchange for revenue share)
- Revenue Expectations: A typical first casual game might bring in $5,000 to $30,000 a year.
- Casual Games Developed Internally: One: Zen of Sudoku.
- Games Developed on Contract: Two: Charlie & the Chocolate Factory and Roblox.
CGA: When you first started doing casual games, what were your creative game design expectations? Did you expect to make the next Bejeweled?
Cleveland:Actually, I do have to say that I thought I was going to make a hit. Our first game (Natural Selection, a multiplayer, first-person shooter) was quite popular, and making a casual game seemed like an easier prospect. Zen of Sudoku would have less code, less art, and a simpler design than Natural Selection. Plus it was single-player, with a broader audience and proven game-play. It ended up taking a bit longer than expected: around 10 months (compared to 18 for Natural Selection). Of course, the nature of a casual game is that it has to be totally done at version 1.0, whereas with a multiplayer game we were just getting started when we released the first version. We’ve released 20 subsequent versions of Natural Selection over the course of the years.
CGA:When you first started doing casual games, what were your corporate expectations? Were you looking to dominate the market, grow to 100 employees, and make a quick exit?
Cleveland:No. I've never been interested in making a quick exit. Dominating the market isn't the right goal for us either. I wanted to gain a financial foothold with Zen, bringing in some dependable income that would support me for a year or more so I could work on the next game. If it was a hit, or allowed us to easily make a sequel to it, or gave us some IP or knowledge in making games for a broader audience, even better.
CGA: If a good developer decides to open his/her own studio, how much can he/she expect to make with a full team of three to five developers working full time?
Cleveland:In our experience, you make a whole lot less for a while on your own—perhaps 1/3 or 1/4 of what you would make working for someone else. That reduced rate might last one year or five, depending on what kinds of games and deals you do. After that though, if you've worked hard, played your cards right and maybe gotten a little lucky, you can make a full developer salary—or a lot more. My partner and I (Max McGuire) decided to make very little money upfront with the idea of building something much bigger in the long-term while keeping our independence. So in our case, our salary might be $0 for a couple years, $20,000 for a few more, then suddenly we're making $500,000. Then at some point maybe we sell the company as well.
CGA: How much should a good game studio expect to make per game?
Cleveland:We went a pretty non-traditional way here. We gave away our first game to build the IP as big as possible with the idea of selling the sequel. A typical casual game might bring in $5,000 to $30,000 a year, which obviously isn't going to make you rich any time soon. However, each game gets you more knowledge, a larger audience or brand recognition, better royalty rates with distributors and general momentum. I think our second casual game would be much more successful than Zen of Sudoku was for all of these reasons.
CGA: Why did you exit casual games to go back to the core gaming industry?
Cleveland:We are passionate about online games and Natural Selection really gets our blood pumping. Developing Zen of Sudoku was enjoyable (far more so than I expected), but we're ready to get back to atmospheric sci-fi and team-play. Zen was always meant to be a stepping stone for Natural Selection 2. That said, we are especially interested in making games that "unite the world," so the knowledge we gained from making a very accessible game is quite beneficial.
CGA: What advice do you have for independent developers?
Cleveland:Decide what kind of games you'd be happy making, regardless of how much money you do or don't make. If you can say to yourself that your project or venture would be worth it even if it ended tomorrow or was a flop, you know you're on the right track. Live for today and make sure you're enjoying your work—your passion will shine through in your work and people will be attracted to it and you. Also, realize that no matter what stage you're at in your company, you will never be "done" and you will never have "made it." Even if you become filthy rich, there will be other developers doing work you think is cooler or more meaningful. Given that you can never "arrive," you must learn to enjoy what you have and make the most of it.
James Gwertzman, Co-founder of Sprout Games
- Founded: June, 2003 Sold: June, 2005
- Employees and Full-time Contractors (at Time of Sale): Three full-time employees, two full-time contractors, three additional contractors
- Casual Games Developed Internally: Word Harmony, Color Harmony, Feeding Frenzy, Iggle Pop!, Pizza Frenzy
- Games Developed with a Publisher: all of the above were published through RealNetworks.
- Games Developed Independently: none
- 2004 Revenue: $400,000
- Average Annual Revenue per Employee: n/a
CGA: Tell us about how you and your partners got into the casual games business.
Gwertzman:Prior to co-founding Sprout Games, I had co-founded a console studio named Escape Factory with a partner, Ed Allard. Despite having no previous experience in the game industry, we had very high expectations for Escape Factory and for a while there it even seemed like we might make it.
We had managed to sign a multi-million dollar contract with Sierra Online in 2001 to build an action game for the Xbox and PS2, and by 2003 we had grown our team up to about 25 people. Unfortunately, after nearly two years of development, our project was cancelled. To keep the doors open, we took on some contract work—we agreed to build three “retro arcade” games for WildTangent (Overball, STX, and Mars Rover) and one “match-N” game (Bounce Symphony). I don’t think we called them casual games at the time, though that’s what they were. We built all four games in six months with just four engineers, one artist, and one level designer. Believe me, after working like dogs for two years on a game that ultimately didn’t ship, shipping four games in six months was a blast.
That’s when we decided to officially shut down Escape Factory and start Sprout Games to focus exclusively on casual games. We cut costs to the absolute bone—we worked from home using hardware and software left over from Escape Factory—but even so we would not have taken the risk if it weren’t for a publishing deal we signed with RealNetworks. Based on the strength of our WildTangent games, they agreed to advance us some money, and we agreed to ship six games in two years. Back then (in the summer of 2003), it seemed quite realistic.
CGA: When you first started doing casual games, what were your expectations? Did you expect to make the next Bejeweled? Were you looking to dominate the market, grow to 100 employees, and make a quick exit?
Gwertzman:I liken the founding of Sprout Games to a rebound relationship—we were all burned out from Escape Factory, and in some ways Sprout Games was the anti-Escape Factory. We had minimal expectations—we agreed we’d be happy if we could just make a living for a few years making games. Also I personally wanted to try my hand at actually making a game, since at Escape Factory my time was spent entirely focused on growing the team and managing the company.
Whereas at Escape Factory we had had an elaborate mission statement and set of objectives, at Sprout we had only one motto: “Simplicity over personal gain.” In other words, we’d sacrifice a royalty point here or there in return for a high quality of life and no stress.
Nine months later, in the spring of 2004, we shipped our first two original games: Word Harmony (which I designed and coded), and Feeding Frenzy (which my partner Ed designed and coded). Our third partner, Joe, built the engine and tools that we all shared. All art and music for these games were produced by former Escape Factory employees who we hired as contractors.
CGA:How did you manage your cash flow challenges during those first few months?
Gwertzman:Because those first two games took much longer than we had originally planned—and we realized that our initial royalty advances from RealNetworks were not paying the bills—we signed a new deal with them. In return for a guaranteed monthly royalty advance for the next year that would pay the bills, we agreed to give Real exclusive third-party distribution rights for the two games we had already created, and we agreed to create another four games over the next 12 months. At the time, it was a good deal for us and it satisfied our motto—with a minimum of stress or fuss we had ensured that we could continue making games for at least another year.
We had no idea at the time, of course, that Feeding Frenzy would go on to become the monster hit that it did. As it turned out, Feeding Frenzy was the second best-selling casual game for 2004, second only to PopCap’s Zuma. We went on to produce two more games in 2004 (Iggle Pop! and Pizza Frenzy), both of which did okay but neither of which came close to the success of Feeding Frenzy—thus proving the point that in a hit-driven business like the casual game industry you can’t predict success. We had assumed, of course, that with sufficient funding our next games would be even more successful than Feeding Frenzy, but that proved not to be the case.
CGA: What made you decide to sell Sprout?
Gwertzman:By the time the spring of 2005 rolled around, we had some tough decisions to make. We had enjoyed a comfortable living thanks to the regular monthly advances from Real, but they were due to end in April of 2005, and under the terms of our agreement we still owed them two more games (the games that would ultimately become Feeding Frenzy 2 and Talismania). Thanks to the success of Feeding Frenzy we had managed to pay off our advances, and even earned a little bit extra, but by no means were we rolling in the dough.
Also, looking ahead, we saw an industry that was rapidly becoming far more competitive. The word was out—casual games could be profitable, fun little projects—and more and more companies where entering the space. The industry was transitioning from a cozy little club to a real business, and games that would have been huge hits just a year before were only doing “okay.” We knew that to keep up we would need to be able to invest significantly in our own sales & marketing.
As we saw it, we had three choices:
- We could continue to grow organically and hope that the on-going revenue stream from the games we had already shipped, plus upcoming games like Feeding Frenzy 2, would allow us to keep going. This was not an attractive option, however, since we realized the industry and its development budgets were growing faster than we were. We also knew that since profits from your last game typically provide funding for the development of your next one, it would only take a few “duds” before we’d be out of business.
- Alternatively, we could look for outside investment. With our solid track record in a “hot” new industry, we probably could have raised some money, but this wasn’t an attractive option either. For one thing, raising money is a full-time job and that would have taken me out of production. For another thing, to realize the typical early-stage investor goal of at least a 10x ROI would have required us to radically change the nature of our company, something we weren’t prepared to do.
- The final option was to get acquired. On reflection, we realized this was the best option. With the right partner, we would be able to keep doing what we wanted—making great games—but without having to worry about where the next paycheck would come from. Also we figured that trading in our Sprout equity for equity in a faster growing, more successful company made good financial sense too.
CGA: Was it difficult to find an acquisition partner?
Gwertzman:Not really. When we started looking for an acquisition partner, we quickly learned that we were a valuable commodity: a successful small developer with a good track record who could work independently. After considering a few suitors we chose PopCap Games because we felt its culture was the closest fit to our own.
CGA: Any regrets?
Gwertzman:We closed on the deal in June of 2005 and haven’t looked back. One of the unexpected benefits of joining a rapidly growing company like PopCap was that it allowed the Sprout partners the freedom to go our own ways within a much larger company. I could go back to doing business, Ed could become an executive producer for new projects, and Joe could keep writing code.
As it turns out, our timing could not have been better. If we had started the company today, and built the exact same set of games that we created back in 2003-2004, I don’t think we would have been nearly as successful. The industry has become more competitive even more quickly than we had predicted.
Eric Zimmerman (email) is the Co-founder and Director of Game Design at Gamelab, a game development studio based in New York City. Gamelab invents new ways for people to play, including the hit casual game Diner Dash and a host of other online titles. A 13-year veteran of the game industry, Eric is the co-author of the game design textbook Rules of Play and the anthology The Game Design Reader. His email address is eric@gamelab.com.
Charlie Cleveland (email) is CEO and co-Founder of Unknown Worlds, a self-funded, independent game company located in San Francisco, CA. Prior to creating Natural Selection and Zen of Sudoku for Unknown Worlds, Charlie and his partner, Max McGuire, worked on Titan Quest and Empire Earth for Iron Lore Entertainment and Stainless Steel Studios. Next up for Unknown Worlds: Natural Selection 2—built on the Half-Life 2 engine. Charlie can be reached at charlie@unknownworlds.com.
James Gwertzman (email) leads PopCap Games’ operations throughout the Asia Pacific region, a key market for PopCap as it expands its leadership role in producing hit casual games beyond the United States. Prior to co-founding Sprout Games and Escape Factory, Mr. Gwertzman worked for Microsoft in a variety of roles including Director of Online Marketing for Microsoft Asia. Mr. Gwertzman graduated from Harvard with a degree in computer science. Contact James at james@popcap.com.
