The casual games industry is rapidly growing and evolving. This article is an attempt to identify the paths game developers may use to effectively bring their downloadable game to the masses (yes, causal games now reach “the masses”) through online digital distribution. It also attempts to clarify options and identify pitfalls surrounding casual downloadable games. (Note that I will not address games of skill, community games, ad-supported games or other emerging business models; nor will I address alternative platforms like mobile, retail, or consoles such as Xbox Live Arcade and Wii Virtual Console.) While digital distribution of casual games to the PC via the Internet is not as “sexy” as some of these other emerging opportunities, it still represents the lion’s share of the money being made in casual games.
First of all, to get you to read this article perhaps I need to build a bit of street cred regarding game development. I have been playing games avidly for 27 years, developing games (yes, actual code-writing) for 26 years, and running businesses focused on developing, publishing and distributing games online for the past eight years. In my lifetime I have written thousands of lines of code, developed more than 40 games, and launched over 1,500 through distribution portals that I have controlled. There is much more to tell, of course, but for now you’ll just have to take my word for it: I know a thing or two about the Casual Games business.
To prevent misinterpretation, let’s begin with a few definitions of some ambiguous and constantly evolving terms. Even the term casual game means different things to different people, so my definitions are not necessarily an official proclamation; nor are they necessarily going to align with your definitions; rather, they are simply an attempt to establish clarity within this article.
Casual Games – Games which are easy to learn, with simple but addictive game play and intuitive controls. They are written primarily for internet distribution and their demographics skew toward the 30+ female.
IP – The intellectual property that results from building a game, including the concept, the object code, the source code, and all the legal assets such as copyrights, trademarks, and occasionally patents.
Developers – Individuals or companies that dream-up the concepts, write the code, compose the sounds and music, create the art and generally bring to life a playable game.
Distributors – Companies with websites that focus on the delivery of casual games to consumers via digital distribution.
Publishers – Companies that pay developers to build games—either to their specifications or to the developers’—and in return own the resulting IP.
Reps – Companies that represent a developer’s casual game to the broad market through their existing distribution networks and agreements. Although they receive a percentage of the revenue such games generate, reps do not own the resulting IP.
The right time to consider the big issue of “how to get your game to market” is before you write your first line of code. As a developer, you need to identify what your core strengths are and what you want to be in five years. The reason for this is that many developers fear the recent rumors about escalating costs of developing a hit casual game, and they make decisions more relevant to core games than casual. Does it take a team of 10 and $300,000 to create a profitable hit casual game? Absolutely not. Would $300,000 budget help? Of course. Some recent examples on both extremes are evidence that innovation and addictive mechanics sell games. Will top notch art, sound, and other production values improve sales of your game? Absolutely. Are they required? Not really. Can you turn an average game into a hit simply by spending buckets of money to make it look better? No way (the lipstick on a pig analogy springs to mind). In the past, we have seen high-budget games rocket to the top of the charts (Travelogue 360: Paris, Law & Order, and Bookworm Adventures come to mind). Then again, we have also seen low- or even no-budget games do equally well, including Aveyond, Betty’s Beer Bar, and Cute Knight.
The options to get your game to market can be grouped generally into four approaches:
- Rolling Your Own
- Going Direct
- Going with a Rep
- Going with a Publisher
Rolling Your Own
What I am referring to here is the concept of complete independence, a scenario in which a developer launches its games on its own site only. Unfortunately, a developer releasing a title every six-to-12 months cannot build a viable business because it does not generate enough content, nor does it have the time and resources to do the necessary marketing to drive sufficient traffic to its site. Thus, the decision to go direct is more of a lifestyle decision than a business decision inasmuch as it allows you to concern yourself primarily with personal passion rather than with the commercial viability of your games. Accordingly, if you make a game for love rather than money, getting a few hundred of people to try it may be more than sufficient to make this a viable lifestyle option. The best way to maximize the limited financial upside of this approach is by connecting with a network of other like-minded developers and cross-linking your sites in order to get a reasonable organic search listing to attract potential customers.
Going Direct
The benefits of working directly with casual game portals are creative control, complete distribution control, ownership of your IP, and independence and neutrality in the market. Many developers, from individuals to corporations, have successfully negotiated agreements with most of the points of distribution that matter. If you are not risk averse and can afford to pay for everything on your own—whether your game is going to cost $5,000 or $500,000—this is a viable option. If you are familiar with the industry, comfortable with negotiating multiple, complex distribution agreements, and have a history of successful games (so you can demand a reasonable royalty rate), you should consider going direct.
However, if you are footing the bill yourself and you are mortgaging your home to fund the game, you must also be ready to live in an apartment. Nothing about developing a game is guaranteed. You must have the financial ability to withstand several failures. While you should hope that you get at least a few singles or doubles, do not count on a home run. Home runs are extremely elusive. Many industry veterans who are sure they have the secret recipe for building hit games find that the more they think they know, the less they really do.
Also, be sure to carve out both time and money for securing and negotiating contracts that will range from simple three-pagers to 20-page head-spinners. Very few developers have law degrees, and even if you hire a great attorney, few attorneys know the dynamics of the industry, what the norms are for various terms and what is or is not fair for a distributor to ask for. There is no such thing as a standard agreement and every term is always negotiable. Accordingly, be careful about what you sign. If you see the word "exclusive" in a standard distribution agreement, demand that it be removed, as you have everything to lose and nothing to gain from a term that restricts what you can do with your content. If you see a confusing definition of revenue (such as “affiliate fee net revenues” with a two paragraph explanation), ask yourself: “For every dollar a consumer spends, what ends up in my pocket?” If you cannot come up with an answer, demand that the distributor simplify the definition or walk away. No distributor in this space has enough power or market share to push you into terms you do not want or do not understand.
Then, there is the big question of royalty rate. What is fair? It depends on what the distribution partner is doing to deserve its cut. If you are ending up with less than 30 to 40 cents out of every consumer dollar spent on your IP, you can probably do better. While you are unlikely to get distribution on every site out there, that is not the point of going direct. As you build credibility with a series of high quality games (or launch a single monster hit), you will find doors opening that were previously closed.
In light of the opportunities and the risks, is going direct worth the effort? Yes—if you are up for it. Big Fish Games started as a studio and forged ahead directly to all distributors. We started small (our first few games were built on budgets of under $10,000), maintained ownership of our IP, had a few hit games to fuel the continued growth of the company. We now have the luxury of being perpetually self-funded and have built a portal big enough that even if no other site wants our games, we can usually get a positive return on our site alone.
Going direct is obviously not the right path for everyone; but if you have patience, a strong interest in the business side of the industry, and the nerves of steel that it takes to walk away from bad contract terms offered by major distributors—and if you have fully analyzed your financial situation and know what you will do if your game fails to find an audience—it is definitely worth considering. But if you want to spend your time purely on the creative side of the business, this is probably not for you.
Going with a Rep
The term rep is a relatively new term that used to fall under the umbrella of publisher. Although reps approach their business in a variety of different ways, for the sake of this article we will define a rep as a company that:
- Works with developers at the alpha or beta stage of development
- Offers a token prepayment against future royalties (but something far short of the total cost of development)
- Offers advice, beta testing and surveying
- Doesn't take any ownership of a developer’s IP
- Presents the game to all of its distribution partners
- Takes a percentage of sales, but passes the majority back to the developer
The primary benefit of going with a rep is that it allows you to focus on game development while maintaining ownership of your IP and capturing higher returns. A good rep will cover most relevant game portals (and if it doesn’t, it should allow you to try going direct with any distributor through which it does not currently distribute games). A good rep should offer a long history in the industry and a strong stable of existing content as proof that it has negotiated favorable terms with distributors. Often a strong rep will offset any percentage it receives by offering broader distribution than a developer might get by going direct. If the rep is also promising advice, be sure to look at both its history of success and its success-to-failure ratio since its historical performance is the best indicator of its potential for future success.
The downside of going with a rep, of course, is that you must give up a certain amount of control over your title along with a small, but meaningful, percentage of your earnings. The pitfalls of going with a rep lie within that single agreement you still need to negotiate with the rep. At the end of the day, a rep is just passing content on to others, so the percentage it asks for should be reasonable. (If it is not, shop around, or consider other options like going direct or working with publishers.) Another thing to be wary of is the amount of control you are giving up. If you are handing over the keys to the future success of your IP, the “right” you are granting should be contingent upon success; in other words, you should be able to get the keys back and go direct if the rep fails to live up to its promises or is unable to gain distribution. Also, be very wary of the definition of what it is you are actually licensing and strike anything that grants sequel rights or the right to derivative works. Since a rep isn’t funding the IP, anything that implies ownership or future rights should not be a part of such an agreement.
Big Fish Games does occasionally rep content, so you might sense a bit of bias here; but I truly believe a good rep can make life much more enjoyable for a developer, both short- and long-term.
Going with a Publisher
For this article, publishing is defined as work for hire. The publisher pays the developer a fixed fee to build a game of either the developer’s or the publisher’s design. There are variations in deal structures, but the basic principle is the same. The upside of going with a publisher is that it lowers the financial risk of a pursuing your passion to build games. It also provides fuel to developers who have the talent and vision to create a great game but do not have the financial resources to even start work. If you are building games out of passion and building a business is a secondary consideration, publishing provides a means to pursue that dream without risking foreclosure on your home. It can also be a stepping stone in your evolution as a developer, enabling you to gain experience or financial resources so that you can later go with a rep or even try going direct. For that evolution to come to pass, however, you must be careful about maintaining a feasible scope for each project and make sure not to jump into a situation in which your payment is equal to or greater than the cost of bringing the game to market. In this sense, an accurate estimate is everything. Don’t make the classic mistake of accepting X dollars to produce a game in hope that it will take just X-Y to produce—only to discover (too late) that the game actually costs X+Y. Lack of accurate cost estimating can, and often does, result in a death spiral in which a developer loses money and is forced to quickly sign another bad agreement to try to keep the company afloat.
The biggest downside of going with a publisher is that you must forego the upside of success. If your game becomes the next big thing, the publisher reaps the financial and public relations rewards, and you are left with only the pride of knowing that it was your brilliance that made the game a hit. What’s more, because you must give up complete control of your IP, you will need to get comfortable with giving up rights to sequels and derivative works as well. If you have lots of great ideas, this may not be a big deal; but if the game is the culmination of a vision that has been growing inside you for years, think twice before signing it away.
What Path Is Right for You?
The world has not changed. Consolidation is not changing the rules. Budgets are only skyrocketing if you let them, and the days of fun independent development of casual games is alive and well. There are as many options for what to do with your talent as there were seven years ago. The decision is yours to make and all options should be on the table when making the decision.
My simple advice is to think long and hard about your current situation and where you want to be in five years. Most importantly, be absolutely paranoid and ruthless in your analysis of any legal agreement you sign. Consult with peers and hire professionals before signing an agreement that could decide your future for you instead of vice-versa. Content is what makes this market grow and, the creators of the content hold the power—if they act rationally, carefully, and in concert with one another.
Some Final Words of Advice
Beware of these classic, often devastating pitfalls:
- Be paranoid and ruthless about every legal agreement you sign. Many developers have blindly signed bad agreements they have regretted for many years to come.
- If you think a game will cost you $X and you really want it to be a good game, assume it will cost you $2X. If a publisher is only willing to pay $X, either build a marginal game for $X or go into debt to produce the great game you wanted for $2X.
- Never assume your game will be a hit just because you love it. Test it out on real customers who buy games, not your friends. Friends and family will never tell you your game sucks, even if it does.
- If you want to build a business, maintain ownership of your IP. If financial resources do not allow this, do not sign away future IP. Brand franchise you create today may allow you to eventually gain independence tomorrow. Do not sign away your sequel or derivative rights, ever.
- Long-term “exclusive” anything is generally bad. You have everything to lose and little to gain by such an agreement. Keep your future flexibility and options wide open as the market is constantly changing.
- Do not underestimate the difficulty of building an audience. Developers who roll their own and rely only on their own distribution have rarely built a business around their creative passion. If you want long-term, attractive financial returns, you will need to embrace the wider market in some form or another.
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Paul Thelen, Big Fish Games Founder and CEO, has an MBA from Stanford University and a Bachelor of Science in Electrical Engineering from the University of Washington. Prior to founding Big Fish Games in 2002, Paul worked at RealNetworks as Director of Consumer Marketing, where he wrote the business plan for RealArcade, an online game distribution service. Paul's latest venture, Big Fish Games, has become a top casual game site worldwide and is a leading publisher and developer of content. Big Fish Games’ rapidly growing customer base downloads over 500,000 games per day.