Saturday, October 15, 2005

A Game Business Model: Learning from Touring Bands

Most metropolitan areas sport a wide array of bands that eke out a reasonable living by touring about the nearby countryside. At every stop, they get a bit of cash from the till, sell a handful of t-shirts and maybe even an album or two. If they are good, they build up a sizable population of groupies that worships the ground they walk on and follows them from show to show.

Very few people outside of the circle of fans know who these bands are. Yet the moderately successful bands make enough to get by and a few even manage to prosper. These bands do not sell a product like their mass market Brittany Spears brethren. Instead, they survive by providing a service to their devoted fan base.

Over the past several months I’ve been tracking several successful online game developers who operate in a similar fashion. Each operates profitably, employs a small staff and appears to be growing. Their names include Jagex, Iron Realms, Three Rings and Iron Will games. Chances are that you’ve never heard of them.

This essay is about illuminating a successful, alternative, business model that has the following key characteristics:
  • Supports large numbers of independent game titles in a low competition environment.
  • Is amendable to bootstrapping and thus avoids the need for large publishers, money men or other controlling interests.
  • Encourages unique pockets of innovation.
  • Offer an opportunity for sustainable, lower risk profits for a small group of developers.
A business lesson learned from touring bands
A touring band cannot rely on selling millions of copies at $17.95 a pop to anonymous music fans across the nation. Instead, they make their money by selling a wider range of goods and services to a narrow group of fans. There are really only two ways of creating a reasonable revenue stream. You can get a little bit of money from a large number of people. Or you can get a lot of money from a relatively small number of people.

Touring bands aim for the later. They build a brand based off a powerful social experience and establish a strong relationship with their customers. They then leverage this brand to encourage the sale of merchandise, event tickets and more. The result is a strong lasting brand and high per customer revenue.

There is a classic business case taught in most MBA entrepreneur classes that examines the 30-year reign of Grateful Dead. Even though they allowed free taping of their concerts and capped their ticket prices, they remain to this day one of the top grossing bands of all time. They bucked the trend of selling records through the corporate food chain and instead provided music directly to their fans.

There is a simple lesson here. A dedicated fan base combined with a service-based business model can be a great foundation for an owner run business.

Modern games are the equivalent of a Backstreet Boys album
Games have typically relied on the opposite strategy. In order to participate, you first need to get a giant publisher to fund your game development. Then the finished retail game is marketed to a broad audience and if everything aligns, a title can sell the million plus copies necessary to break even.

The result of the standard mass market business model is quite predictable:
  • Emphasis on big mega hits in order to break even.
  • Requires the upfront investment of large amounts of money. If you were a garage band, expect to lose your intellectual property.
  • Products tend towards bland ‘pop’ experiences in order to maximize the market opportunity. More than likely, you are a studio band assembled for the sole purpose of being the next Monkees.
  • High risks of failure due to intense competition in the broader market
What do touring bands have to do with games?
Games are by no means rock bands (despite the existence of lovely men like CliffyB.) However, we can apply the basic business techniques practiced by touring bands to the newly minted field of online games with good success.

Let’s look at what the companies I mentioned earlier are doing.
  • Three Rings produces an online game called Puzzle Pirates that focuses on casual puzzle games in a persistent online community.
  • Iron Realms makes a series of text-based MUDS.
  • Iron Will makes a 2D Ultima Online-style MMO.
  • Jagex makes a web-based 3D MMO.
  • Sofnyx makes a multiplayer Scorch Earth game called Gunbound.
  • There are others, but they all operate far below the radar of the mainstream gaming press.
The similarities are worth noting. Each started with a small community numbering in the thousands. Many customers have been with the games for years. Each operates either a micropayment or a subscription model that doesn't cap the amount of money the customer wishes to spend. Though none of these companies publish their numbers, rumor has it that they are almost all profitable.

Development costs were low and initial investment came from the team members, friends and the occasional angel investor. Publishers or venture capital was almost never involved.

The differences are also important. Core gameplay ranges from puzzling to shooting to turn-based combat. There is a bit of a focus on fantasy worlds, but from what I’ve gathered there is little overlap in the core user bases. Currently this means little competition from similar games and rumor has it that the impact of larger MMO’s is relatively insignificant.

These games are the equivalent of small successful touring bands. They provide a service, not a packaged good. They sell to a dedicated fan base that despite being small provides enough additional revenue per user to make the venture profitable. The result is a self-contained community served by small team of dedicated independent developers.

Village Games (Aka the Small Multiplayer Online Game)
I call these small online multiple games ‘village games.’ They are quirky, isolated communities much like a traditional village or small town. The communities tend to be a bit more friendly and insular then their larger city-sized brethren such as Everquest or World of Warcraft. The game play tends to be a bit more unique and able to take risks.

Here are some defining factors for a village game.
  • Focus on creating a small community numbering typically in the thousands.
  • Either subscription or micro-payment based revenue model. Often there is no cap on the amount that a single player can spend inside the game.
  • A small development team, usually numbering anywhere from 3 to 10 people.
  • The game experience is addictive for a year or longer.
  • The game focuses on a niche experience that is not provided by larger retail titles.
A village games is a distinct service-based offering that is separate from other forms of games. It certainly isn’t a retail title. It isn’t an ‘indie game’ or a ‘casual game’. Those are packaged goods titles that are merely trying to sell the same old shite through a different channel. It isn’t a mainstream MMO because the funding model and number of people served is radically different.

So why in the world would a designer be interested? If it weren’t for a few critical factors, we could write these titles off as a peculiar niche sub-genre.

Business factors
In order to paint a practical picture of how village games operate, I compared the genre to retail titles in eight major categories:
  • Core Business Drivers: How do you make money?
  • Upfront investment: How much does it cost to start the business?
  • Break even and Payback periods: When do I get my money back?
  • Sources of Equity: Who funds my game?
  • Ownership: Who owns the fruits of my labor?
  • Risk of Failure: What are my chances of success?
  • Potential Upside: What do I get if I succeed?
  • Competitive Insulation: Who is going to stop me from winning?

The results are fascinating and suggest that the village game market is a great opportunity for entrepreneurially minded game developers.

Core business drivers
One of the most tricky aspects of understanding village games is the fact that they are driven by completely different business metrics than games sold as packaged goods. Switching your brain over to thinking about quality of customers, not quantity, is the first step.

A retail title gains a developer roughly 70 cents per copy sold. The publisher gains about $18 per copy sold. The price of each copy is fixed and has mere weeks before substantial price erosion takes place. Making money is a matter of selling as many copies as quickly as possible. The viewpoint is always short term and focuses on shipping and placing physical goods.

A village game, on the other hand, is instead about keeping and maintaining customer loyalty. A typical customer will spend an average of $60 a year and stays on for an average of 18 months, with some players staying for years. The developer generally keeps all $60 in revenue. Making money is a matter of maintaining your current customer base and incrementally increasing that base over time. The viewpoint is almost always long term and focuses on maintaining and extending customer relationships.

To put these numbers in perspective a village game customer is roughly 130 times as profitable as a retail customer for the game developer. This means that a game developer can sell less and make more profit.

Upfront investment
However, a highly profitable venture is of no use to your typical game developer if the cost of starting up the venture is too high. Upfront investment is the amount of money that you need to put into a project until it begins to pay for itself. It is here that village games truly shine.

A typical retail game will run anywhere from $2 to $10 million over an 18-month development period these days. In my model I choose a mid-level next generation title that costs about $3 million to develop, plus another million in marketing. Someone needs to sink $4 million in cold, hard cash into a project before they see even the glimmer of profitability. A next generation mid-level retail title must sell roughly 800,000 to 1 million copies to reach profitability.

A village game requires total investment of roughly $250,000 over an 18-month period. In essence, you are paying for the salary of the development team plus miscellaneous marketing and server expenses. At 18 months, your game starts making enough money to pay for your monthly expenses without having to go begging. A village game with 3 to 4 employees needs to maintain a customer base of roughly 6000 to 9000 users.

At this point, you've reached what is known as 'Break Even'. That is when your monthly expense are equal to your monthly revenues. You'll notice that in my model both the retail game and the village game reach break even at the same time. The nice thing is that the village game consumer 12 times less cash in the process.

Payback
If you were an investor, there's another metric you'd be interested in called Payback. After you've sunk so much money into a project, at a certain point you'd like to get it back. If you took out a loan, you'll have to pay it back. If you remorgaged your house, you'd like to unmorgage it as some point. Payback is the point in time at which the vast profits from your venture accumulate to the point where you can payback your initial investment.

For a retail game, the sales come in a giant spike upon release. Payback occur almost immediately, typically 18 to 20 months after the start of development.


Here village games show their first sign of weakness. Payback occurs after about 30 months. If your goal is making large amounts of profit (or 'greedy pig profits' as a profession in economics termed it years ago) village games are a long haul.


From a developer's perspective, this means two things. If you are in the business for making games, the path to profitability is roughly the same for retail and village games. If you want to simply make a big profit, retail games will get you there more quickly. However, you need to take into account both risk and your ultimate goals.

For the moment, I'm assuming that you are in it for the love of making great games and that the slow road is just as good. In that case, you need to consider how to fund your village game.

Sources of equity
Funding is the boogie man of game development. We have nothing like the 'producer' structure that exists in movie industry where rich folks toss good money at creative entrepreneurs. Instead, we have the publisher system, aka 'selling your soul'.

When you are dealing with millions of dollars in start up costs, the requirements of an advanced distribution channel, and low success rates, a portfolio model of funding retail games is inevitable. Publishers rule the roost for good reason. They are the only ones who have the critical industry knowledge to fund and maintain a quality portfolio of retail game titles. In general, a company must fund 20 to 50 titles a year in order to maintain a positive return on their investment. Your game can not simply be ‘good’. It has to be the correct puzzle piece that fits in the middle of a highly nuanced portfolio mix. Due to all these factors, getting funding for a retail title is nearly impossible.

A village game operates in a completely different world. Due to the relatively low burn rates, it can be funded with ‘sweat equity’, the main developers working for a pittance. It is also amendable to both friends and family investment as well as angel investment. As a village game grows its customer base, the revenue and profitability numbers became much more exciting to smaller VC companies. You'll need to find folks who are comfortable with the longer payback period associated with village games, but that is not an insurmountable hurdle.

The upside of all this is that unlike a retail title, a village game has readily available sources of start up funds and means of supporting growth at later stages if desired. This ready access to seed money is perhaps the strongest benefit of all that village games have going for them. There is no excuse to not make a village game.

Ownership
A major side effect of the funding model is that retail games and village games have radically different ownership models.

Retail games give over ownership to the publishers. They typically own the rights to original license and have full managerial control over the development and execution of the title. All of the risk and all of the potential upside is owned by the publisher. The game developers are studio musicians that do their job for a meal and a place to sleep. The result is often craftsmanship, not entrepreneurial breakthroughs.

A village game tends to be owned by the developers themselves. They take on all the risk, but they also get a bit of the upside if they succeed. Personally, I’m a huge believer in the entrepreneurial spirit. Overall, a company with an ownership culture will be more agile, more profitable and more innovative than one that treats their workers like hired guns.

Village games lend themselves well to lifestyle businesses. They are exhausting initially due to their reliance on sweat equity. However, as a steady subscriber base is built up, that company has more freedom to combine work and play.

Risk of failure
There is a more pratic reason to consider starting up a village game. Most games fail and there is nothing more crushing than working on a title for multiple years and seeing it crash and burn. Village games offer smart teams the opportunity to steer their way out of danger.

Retail games have an impressively high risk of failure. Only 116 games out of roughly 5000 released in the US since 1995 have broken 1 million in total unit sales. A mid-level title needs to sell almost a million copies to break even. For next generation console titles, a 5 to 10% break even rate will be impressive.

Releasing a retail title is like firing a solid gold cannonball at a moving target while wearing a blind fold. Retail games get one shot at success during a short 4 to 8 week release window. If all factors are not perfect, the title’s sales will suffer. This risk of failure is also almost entirely due to market factors that are outside the control of the development team. Items like the funding of other teams, the marketing spend, the release schedules of other major titles and the whims of the player all are big factors.

Village games, on the other hand, typically experience a soft launch. An initial version of the title is released into the wild and it attracts a few customers. The developer has the opportunity to adjust their title in order to fix the most egregious errors. Often a title will evolve over a period of years, until it matches the demands of the target audience nearly perfectly.

Village games succeed or fail based on the skill of the developer and their ability to successfully target a niche market with compelling game design. If you are an experienced game developer, you have a much greater chance of creating a successful village game, than creating a financially successful retail title.

Upside
At this point, some of you may be intrigued by the thought of making a village game. There will be some of you that are wondering how much money such a enterprise could gain you. It turns out that regardless of your business model, you still need to make games for love, not money.

Retail games can make over a billion dollars with a single title. That is rather exciting. However, as a developer, you are going to see approximately none of it. Royalties, for all intents, are a myth propagated by those good folks who wish to hire fresh labor at inexpensive rates. If you are a developer on a retail game, the upside of successful title is that you get to keep your job until the title is released. If you do a really good job, your team is signed on for a new title and you have job security until it is released or canceled.

A successful village game will produce a steady profit, but the money never becomes astronomical. Instead, you'll be able to provide above average salaries and many years of job security. This is far better than most games can promise.

Competitive Insulation
The long life of a village game occurs because it is highly insulated from direct competition.

Such a thing is unheard of in the retail market. Since a successful game must capture such a substantial portion of the market in order to achieve profitability, games are almost always in direct competition with one another. The result is a massive arms race that is quite difficult to win.

Village games exist in a far less competitive environment.

  • First, they are able to target themselves at a niche game mechanics. The hardcore Scorched Earth-style gameplay of Gunbound is unlikely to be replicated by World of Warcraft anytime soon.
  • Second, they build strong communities that resist the siren call of external delights. Sure, World of Warcraft has some great content, but is it enough to make you leave your friends behind?
  • Third, they are very low profile. Since these games are often built through low levels of marketing and word of mouth, it is uncommon for their players to even realize that alternatives exist. For a retail game this would be fatal. Since a village game can survive on such a small number of subscribers, it is actually a competitive advantage. In that same population of 3 million WoW subscribers, you could have 300 completely viable village games.

All of this has a surprising impact on innovation. When you only have to worry about satisfying your little niche, it becomes more worth your while to explore local maxima in your game design. Irons Realms sports some of the most intricate political systems ever found in a commercial game. Puzzle Pirates has created a PvP combat system that appeals to 30 to 40 year old women. With innovation comes additional competitive insulation. Go ahead, EA. Just try to clone Gunbound. I would pay good money to see the results.

Wrapping it up
By this point, you should have a good overview of some of the business dynamics behind successful village games. In short, here is a unique business model that provide low entry barriers, low competition, easy access to seed capital and copious amounts of creative freedom. The money is good, but not great. However, the chance to build your very own profitable game company is nearly priceless. That is a dream that was crushed out of most developers long ago. The basic business drivers of small numbers of highly profitable customers make it all possible.

I’ve been looking at game business models for some time. Very few offer an entrepreneur any reasonable chance of success. I understand the retail business and keep my hand in it, but it is often too volatile for anyone except the bright-eyed youngsters and the sharks that feed upon their efforts.

As I slowly grow older and more conservative, I’ve started looking for a way to mixing game development with a stable family life. There are two paths. The first is to become a manager in the upper echelon of the current industry. If you can get to the portfolio management level of the retail industry, a lot of the turbulence lessens. But you lose the daily interaction with the development teams, and for a lot of us, that is what this is all about.

The second path is to go outside the industry and find a new niche for game development where the profit margins are still fat and the role of being an owner / developer is still a viable option. I’ve talked a bit about Serious Games as one option on this path, but to be honest I can’t stomach the steady diet of military and government projects it typically entails. Village games, on the other hand, excite me.

Here is a market niche where a passionate team with a bit of money put aside can carve out a viable, vibrant community that is insulated from outside competition. They can perfect a game over years of face-to-face interaction with their biggest fans. Most importantly, they can own their own destiny, be it success or failure. And to be honest, the odds aren’t bad.

Have band, will travel
Hundreds of bands have tried to make a living touring their local cities, playing gigs and selling t-shirts. Most fail, but a few succeed because it is a real business model that provides a solid service to fans of live music. It is a hard life, but you are your own person and you get to do something that you love. These scrappy little groups are hidden from the mainstream media until one miraculously breaks out to the surface. Maybe they are a Nirvana, or a Beatles, or a Grateful Dead. But when one emerges, the industry is changed forever. And the people in the suits who diddle with the numbers on their portfolio spreadsheets ask, “Where the heck did they come from?”

Village game developers are the true touring bands of the game industry. They are at a sweet spot with low competition, moderate returns and the chance to own your own game development company. You’ll need a game designer with a bit of a business head. He’s the songwriter. You’ll need a programmer who isn’t an asshole. He’s the lead singer. You’ll need an artist. He’s wailing on the lead guitar. You’ll need the web / infrastructure guy. He’s in the back laying down the drum line.

Given enough passion, enough skill, and enough years tuning your sound out on the road, and maybe, just maybe, you will give birth to the next great game that shakes the foundations of the entire industry. The simple truth is that the tour is an end all by itself.

So what are you waiting for?

Take care
Danc.


References

Escapist article on Boutique MMORPGs
This was a nice trackback on my article that describes quite a few more games that fit the criteria and also gives some solid numbers.
http://www.escapistmagazine.com/issue/75/15

Examples
Grateful Dead
Retail: Royalty break downs PS: Edited this at 11:36pm, Oct 19th to improve the flow. Edited on Dec 29th to add additional links.


38 comments:

  1. Brilliant analogy Danc. Trying to draw comparsions between ‘thing X’ and the music industry often fails miserably, (mostly due to the fact that people that try to draw these comparisons generally have nfc what they’re talking about) but you’ve hit the nail on the head with this one… Also, good call on the term ‘village games,’ it has a much nicer ring to it than smogs did, heh.

    As a side note, I’d like to mention that I'm also mildly entertained that you are talking about growing older, and more conservative, but you're still dreaming/writing metaphorical juxtapositions that liken you to Curt Cobain and Jerry Garcia. ;)

    Don’t stop with this blog, it’s good.

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  2. Excellent article.

    Achaea just got itself a new player, too.

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  3. I have a good computer, but don't like massive games. I play a MUD, Genesis. It gets very few new players (according to the home page, 68 in the last 30 days). However, most players are old players. I have been there for over 6 years, and some have been for 10 or more. As our CEO puts it, early adopters tend to try new experiences, but once they are given exactly what they want, they keep it for a long, long time.

    Very good article, can be applied to many areas, not just music or gaming.

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  4. Team Shanghai Alice. (One guy.)

    http://www16.big.or.jp/~zun/

    Produces some of the best shmups ever. $20 a pop. People organize entire conventions around this guy's work.

    ---

    On another note, I'm not sure if Gunbound counts as a "niche mechanic" - Eidos/Team 17 have seen success in the commercial arena with the infamous "Worms" franchise, whose core game mechanics (Scorched Earth with movement) are very nearly identical to Gunbound; Sofnyx's only innovation comes in the metagame department, with the item/equipment feature and the associated micropayment model.

    In fact, I strongly suspect that Sofnyx used Worms as the basis for their game.

    I'm sure Eidos is looking at that and going "Hmm, let's make Worms Online and market it in the exact same way"...

    ---

    Plus, I suspect that the risk of failure is quite a bit higher than you envisage. Don't get me wrong; I'm actually working on something (shh!) using this model myself, but I frankly don't expect it to find any sort of commercial success.

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  5. It's also possible to build a community around a packaged product and support it with services. I have a game that has a one-time fee, after which users have access to the online multi-player area. It's not exactly like touring, more like starting a fan club for people who bought the CD. Then those people help spread the word to new people.

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  6. Dustin, I've been looking at Lux for quite some time. Seems like a great community and you've really kept it going nicely.

    The benefit of the village game concept is that you can gain additional revenue from your core fanbase after the initial purchase. It would be interesting to play with a variation on Lux that included a micropayment system for skins, characters, etc. You may be able to maintain your current popularity and increase your profitability.

    take care
    Danc.

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  7. I'm intrigued by the idea that anyone interested in the games industry would not have heard of Three Rings. :)

    At GDC over the past two years, the term "boutique game" or "boutique MOG" has been bandied about. I have personally favoured the term "niche market MOG". There's nothing wrong with the term "village game", and I certainly prefer it over "boutique game"... Something is going to win out as a term for this class of game, and I'm not sure whether or not the term that will eventually win out has been coined yet...

    One thing you don't discuss which still fits with the analogy is the burnout one can get being chained to the same game project for a very long time. Like a touring band who is sick of playing the one song that they've had any success with, there is a genuine risk of burnout with this approach to making games.

    Nice piece though; it's always good to have some attention shone upon this part of the market as it has the potential to become a thriving niche market sector.

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  8. I'm constantly amazed at how small our industry is and limited the knowledge at the same time. We'll devour the generic gaming press but otherwise spend 18 months heads in the sand obsessing about our latest creation. It is like trying to write the next great novel while watching a constant diet of Jerry Springer. :-)

    The newest Game Developer Magazine here over in the states has a nice interview with Daniel James, the designer of Yohoho! Puzzle Pirates that is well worth a read. I also ran into a rather indepth interview on IGN that was loaded with interest tidbits on the design their philosophy.

    Terminology for new things is a real bugger. I doubt that village game will catch on, but I was looking for something a bit less geeky than the convoluted mess of acronyms that passes for a typical genre description. If you describe a niche market MOG or a Small MOG (Smog!) to the lay person, you have some serious explaining to do. Village game struck me as more evocative of the concept of a community, the core of the segment's value proposition.

    Team burnout is always an issue with long projects. However, look at the longevity of the Mario team or many franchise-focused teams. In a sufficiently mature MMO there is at least equal opportunity to explore varied game designs. Art and programming are perhaps more constrained. It is certainly a different rhythm than the boom / bust cycle, but with the right personalities at the helm, I'm guessing it would be rather enjoyable.

    take care,
    Danc

    PS: Chris, picked up your excellent book last week and gave it a good read through. I'm hoping to post a mini-review at some point. I apologize ahead of time if it morphs into an editorial piece (as my essays seem to have a habit of doing. :-)

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  9. Great article.

    There are a couple ways to lessen the burnout problem, if your company is successful enough to grow and expand:

    1) Spend at least some of your time building another new game, thus completing the cycle. Anyone burned out on the old game can put some creative energy into the new one.

    2) When you're hiring new recruits, the odds are good that you'll find some great prospects in your existing player community. These people are already passionate about your game, so they're less likely than the original team to burn out.

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  10. One small nit. The word is "eke." The way you have it spelled means "Something my daughter says when she sees an undomesticated rodent."

    I pick this nit only because your writing is generally very literate, and so I thought you would care :)

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  11. Danc, you should do an article sometime on the social perils of doing a project as a hobby. As a hobby novelist, I find telling people about the fact that I'm writing a series of books, is the best way to kill my own productivity... ;) Perhaps a discussion on how one can harness public enthusiasm without it breaking your focus on completing the project... then again, if you knew this secret, you'd have a number more projects completed than you currently do... :)

    --Ray

    PS> Great article... Personally no band is as classic as the Carpenters... err... I mean no game will ever top Master of Magic! :)

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  12. I have also discovered that 'Eek' is a small city in AK. Location: 60.21889 N, 162.02642 W, Population (1990): 254 (80 housing units) :-)

    Thanks for pointing out the typo, MrTact.

    Raymond: My one big hobby project these days is posting a weekly essay on game design. So far so good. Space Crack is the straw man I use to accomplish that task.

    I was recently thinking about the progress on SpaceCrack and was quite happy with it. It's been banged around since April or so. The dirty secret of most game designers is that designs rarely emerge fully formed from their noggins. Many will simmer for years before they are written down. Showing the rest of the world that process in an open manner may be frustrating for folks that want a sense of completion, but it is certainly accurate. :-)

    Happy day,
    Danc.

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  13. Heh. That's the same with writing... though it's not nearly so public a spectacle. (I wasn't complaining about spacecrack... btw... human nature how social interractions affect a person's ability to actually get done just fascinates me, and heaven knows we've got plenty of experience with grandiose game visions with relatively-piddly results... ;) )

    --Ray

    PS> I like your hobby... keep it up!

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  14. So, would Magic: The Gathering perhaps be the most successful example of this? It's really the one that truly did "shakes the foundations of the entire industry." within the table top game market, and shares many of the features you've described.

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  15. I agree with Destil in that Magic: The Gathering is a great, albiet non-videogame, example of a small product that became a larger success. I became casually involved about 2 years ago and was suprised to find the game was in existence since the early 90s. Its regular expansions generally fail to bring in new people, but continue to cater to old fans.

    I think something else to add to your article is that with the current "village game" design and important step can be left out: Distribution. Most (If not all) of the examples you gave are distributed online. Major retail games are all packaged, distributed and sold it stores. I this is an additional burden on the publisher.

    Anyway, you have a great site here. I just discovered it about a month ago and this is my first time posting. I look foward to more.

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  16. Very well-thought out article. Your knowledge of the gaming industry is everything I pretend to know. I'm so glad I got directed here, for now I can learn what I've been previoulsy imagining.

    Please keep up the good work! Teach us the ways of the gaming world, oh master!

    (Haven't done a search or anything, but was wondering if you've written about any game development schools and what your thoughts are. I'd be interested to know)

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  17. Hey Danc,

    I've read through your entire site since the Penny Arcade link. Excellent stuff.

    My current project -- Pirates of the Burning Sea -- is a good example of a Small Multiplayer Online Game. Published via Steam, it's a niche MMO with unique (and fun) gameplay. Break even, payback, and sources of equity are all different since we have subscriptions.

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  18. crankyuser: Your game sounds interesting. I'm curious about your business model. If you (or anyone else who is seriously working on a game of this sort) wants to chat further, drop me a line at danc [at] lostgarden.com.

    take care
    Danc.

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  19. Just for info about Worms, the Worms franchise has actually been sold in Korea on similar lines to Gunbound (i.e. micropayments and other payments forming the main revenue), I think it was via wizgate.

    I can REALLY relate with Dan's idea of us being a very similar thing to indie bands (in the uk there are indie bands, dont know if thats the same in the US).

    In fact, I seem to recall saying the same thing a LONG time ago in my posts on flipcode.

    I'd much rather make a reasonable living from a dedicated fanbase than make either a huge profit or a huge loss from something less honourable.

    So yayy! I agree completely! Of course, most of the industry will disagree with us on this one.. but they all have thier reasons to want things to maintain the status quo.

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  20. It's worth pointing out that some games like this, such as Sulake's Habbo Hotel or Jagex's Runescape, can't be called villages anymore. They operate outside the standard game biz structure, but they have millions of users and derive "mainstream" sorts of revenue.

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  21. As someone running one of these types of games, allow me to add a bit more insight.

    First, for a graphical type game of this scale, you're looking at an investment closer to $1 million instead of $250k. That's the numbers that the developers of Puzzle Pirates and A Tale in the Desert have quoted to me.

    Also, you can survive on a much smaller subscriber base. My own game Meridian 59 has about 1,000 subscriptions and manage to avoid starvation with a crew of 3 people. Of course, we work from home, don't have health insurance, etc.

    However, besides these few details your writeup is very insightful. We resurrected Meridian 59 after 3DO had shut it down in 2000. We've been able to run it as a very small game, mostly out of love and an interest to see the game remain available.

    One thing you didn't mention is that running a game like this gives you a lot of experience. I am intimately familiar with what it takes to keep a game like this running; I know a lot more about the nuts and bolts than I did while working on Meridian 59 at 3DO. I've actually been able to turn this into consulting opportunities, helping other people improve their games.

    I'll also agree that burnout is a big issue with these games. I love M59 and I've sacrificed deeply to get it running again, but I am eager to work on a new project when I can. After starting work on the game back in 1998, it'll be nice to get a bit of variety going.

    Anyway, good post. Keep up the fine work.

    -Brian 'Psychochild' Green
    Developer, Meridian 59

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  22. Lotsa truth in the article above. Outstanding. Found it from another one of the examples of a "village" game that I play frequently. http://www.vendetta-online.com/x/msgboard/1/12031

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  23. Having played Achaea, Imperian, Lusterina, and Aetolia, I highly suggest Imperian if you decide to play an IR game.

    The aesthetics and attention to simple things like being able to disable annoying things is incredibly better.

    Achaea has the issue that its development was near-null for a long time, but has an ungodly number of players that have invested too much time (and real money- some players have spent *OVER* 200k on it) to switch to another one.

    I don't play IR games anymore, due to just being burnt out of MUDs for awhile, but Imperian definately was the best out of the four.

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  24. Great read even after coming back a second time to finish off the comments. Makes a slow night @ work worth it :)

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  25. I'm with Brian Green on this one. It is a solid theory supported by horrific attention to facts Danc.

    This isn't the greatest way I could introduce myself to a person I don't know :) I run an indie game marketing company (and though Brian Green may not know it, I have worked with several people very close to him).

    As Brian said the figures are off. It is more expensive to produce the kinds of games you are talking about and your required population isn't nearly so high. MMOs I work with range between 100 and 1,000 paying users and do just fine. An example of a game design that is within your 250k price range is Kosumi (www.kosumi.com)

    Now: Where you went wrong was the games you selected as your examples. Only two companies on there are even remotely "indie" in style or method. The two correct ones would be Puzzle Pirates and Three Rings.

    You were WAY off base with Jagex, Simutronics, and Softnyx.

    Runescape currently has nearly 400,000 paying subscribers and a couple MILLION players. Not exactly a "village" given that it is about the same size as World of Warcraft. At their inception it may have been considered an indie movement, but that was so long ago I wouldn't even think it is still valid to compare to modern products. It had 1 million users when Jagex took over Runescape (by the end of the year).

    Playnet, AKA Simultronics, is a dinosaur! They aren't on their way up, they are on their way down. Founded in 1986, Simuntronics was responsible for a lot of the game content on the original AOL Games area. They maintain themselves on old IP (which are good games) primarily. This company played big, won big, and is still milking the cow... and good for them!

    Softsynx is a more modern Jagex. Gunbound, that small under the radar game, has well over 10 million accounts created and while they havent released much in the way of sales data I do know this: Your article is about pandering to a smaller group with higher profit... yet Softsynx prodces "free" games that are played by millions with the hopes of their buying items to aid the playing progress of the game: Aka, it is exactly the opposite of your article. Get millions upon millions of players and try to make a little money off a small percent of them.

    So, in the end you shoot yourself in the foot with bad examples.

    Yes, village games do exist and they can succeed...but I don't think you have the right angle on what these village games ACTUALLY look like. Even the MUD and Puzzle Pirates aren't exactly the right idea for your article

    Here are some that I am aware of:

    Kosumi: www.kosumi.com
    FaitH: www.dragonclawstudio.com
    Star Chamber: www.starchamber.net
    Lunatix Online: www.lunatix-online.com/
    Battalion: www.urbansquall.com

    All of the above games are ones I have DIRECTLY worked with and are all using a price skimming model of business (except maybe Urban Squall and Lunatix to some degree)

    Well, nice meeting you... Oh and I am writing a marketing book for indie games you can feel free to equally trash :)

    Visit it at vgsmart.blogspot.com

    -Joe Lieberman
    Owner, VGsmart Marketing
    Video Game Marketing... smart.

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  26. Wonderful comments. The extra data that Joe and Brian are providing from the field is very helpful.

    What Joe is pointing out is that village games come in many shapes and sizes. He's added some good additional examples.

    Runescape I think is a good example of a potential growth path for an village game. Having millions of customers isn't a bad if that fits your company's philosophy.

    Simultronics is ancient, but they still survive by tapping a smaller customer base.

    Softsynx perhaps makes a different class of game, but one that is highly related. There is no reason why a village game can't use micropayments (or the avatar economy as I've heard it called) to be free to play and then sell items to a small percentage of the population.

    I'm comfortable with a company that starts off small and grows large. I'm also comfortable with a company like Brian's that starts off large and evolves into something smaller. I see being a 'village game' as a potential stage in the life cycle of an online game.

    It also sounds like there is a range of different budgets for these games. $250,000 maybe the low end, with $1,000,000 also being common. Much of this also has to do with factors like whether or not you are using an existing platform or if you are building it from scratch. Scope is also an issue. It sounds like the new Howdy! Bang title from Three Rings will have a budget that is substancially less than Puzzle Pirates.

    I'm more interested in entry barriers, use of sweat equity and risk. All the companies so far (except for Meridian 59) have started up outside of the traditional publisher structure. My intent is not to define the 'perfect game' but instead make folks aware that this option exists, that it is real, and that it is viable.

    I'll certainly be checking out some of the games you mentioned. What is interesting about this niche is that such games are so far below the radar of most press. It is incredibly difficult to find these titles. I suspect that there are quite a few lurking around.

    take care
    Danc.

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  27. Looks like I am about to pick up another one, slightly older:

    www.starportgame.com

    -Joe

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  28. Hi Danc,

    Welcome to Seattle!

    My 3 partners and I run a small software company building neat apps and selling them to large companies. You can see our latest sale at http://passalong.com/ontour.

    Anyway, I'm working on a game design for a future project, and would love to buy you a coffee sometime and geek out on game design.

    Thanks,

    Chris
    chris@wildsky.com

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  29. WELL I READ YOUR ESSAY, AND I HAVE A MAJOR POINT TO ARGUE. BANDS NEED TO KNOW HOW TO PLAY MUSIC, ACTUALLY THEY DON'T.. SHITTY BANDS STILL SELL RECORDS, AND THEY CAN PAY JOE SHMO WITH HIS 1980S RECORDING GEAR TO RECORD THEIR ALBUM WITH. NO TECHNICAL KNOWLEDGE REQUIRED, NO BARRIERS TO CROSS. GAMES ON THE OTHER HAND ABSOLUTELY HAVE TO BE AT A CERTAIN STANDARD THAT MANY INDIE'S MAY NOT BE ABLE TO ACHIEVE. THERE ARE BUGS, COMPUTER AND SECURITY ISSUES, ETC. ETC. PC'S HAVE ALOT OF SENSITIVE INFORMATION ON THEM AND IT WOULD SUCK IF SOME JACK SUED YOU AND YOUR INDIE GAME COMPANY FOR CRASHING HIS COMPUTER AND LOSING ALL HIS IMPORTANT INFORMATION. I'M SURE JOHNNY ROCK WOULDN'T REALLY CARE OR WOULDN'T BE ABLE TO DO TOO MUCH IF HIS CD PLAYER BROKE WHILE LISTENING TO BAND XYZ'S CD.

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  30. Great (but lengthy). I'm only partway through it, but already want to recommend a post of mine, and the book related to it:

    See book #3 on this list:
    http://www.kimpallister.com/2006/10/books-missing-from-list-of-fifty.html

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  31. Hey Danc. I thought this was great (along with the Nintendo genre innovation article). You've definitely put the MBA to some good use. :) I've always been impressed by your ability to look beyond the simple "wouldn't it be cool if" kinds of discussions to the meatier topics and you're doing it and doing it well. :)
    Hope all is well.

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  32. This has really inspired me. I just started making a game about a month ago for fun. I wanted something to play with family and friends. Now I am going to try to make some money. The game that I am making is rather well suited to this kind of payment. $5/month * 1000 players. That will be my goal.

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  33. I found this article when looking for a term to describe my idea of a "game developer band". Take the same idea as you described, but to the hobby level.

    In other words, lots of people start bands simply to have fun, play music, and learn ... not necessarily to make money. You get a singer, a drummer, a guitarist, and a bass player... and you've got a band! And people are always advertising things like... "band needs drummer".

    I want to encourage the same thing for game developers. For the band members you need ... a guitarist, a sound guy, an artist ... and you've got the makings of a "game band". Imagine hand written poster at the bus stop that says, "New Game Developer Band needs Artist"

    But I need a more inspiring name than "game developer band". Something that evokes how "cool" the idea could be.

    Ideas? Visit my website (my email address is there)
    AlaskaJohn.com or my blog GameDev.AlaskaJohn.net

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  34. Oops, I meant for the game developer band you need "a programmer, a sound guy, and an artist" (not a guitarist)

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  35. Wow, 3 years later and I'm still talking about the ideas in this post.

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  36. Wow, 3 years later and I'm still...

    : )

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