Category Archives: Game Industry
The super-successful publisher Electronic Vision is going to release the latest installment in its Call of Honor franchise next month, and the gaming press is predicting that the game will be a monster hit and break retail sales records. So, you think now would be a great time to purchase stock and earn a quick and easy profit when EV’s stock price shoots up as soon as those sales revenues start pouring in.
Sorry, no, that’s not how stock prices work. Stock prices are not directly related to a company’s sales. Stock prices are based on supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall.
What makes people want to buy or sell a stock? A decision like this is based on whether the company has been having good news or bad news. So, wouldn’t record-breaking sales be good news. Well, not really, because it isn’t news. The gaming press has already determined the game would break records, so next month, when the game goes on sales, it is already expected that the game would sell well. In fact, the game was probably expected to sell well when it was first announced.
But even that isn’t looking at the big picture. When you buy stock in a game publisher, you are investing in not just one game but the publisher’s entire business — its assets, its liabilities and potential for future earnings. Stock market investors also take into account the overall health of economy in general and the game industry in particular. The sales of a single game might have very little impact on how well a publisher is considered a year from now — or for investors who are playing the long game, five or ten years from now.
The game industry is a risky one, because there are more failures than hits, and anyone interested in actually earning money through their stock market investments should should minimize their risks by diversifying. If you want to invest in your favorite game company, fine, but spread your investments out across a number of companies in different industries. That way, if some fail to earn you money, others will hopefully compensate for it. But don’t expect to get rich that way. Day traders who spend all their time researching and investing in companies on the average receive only a 10-15 percent return on their investments.
Okay, what about a wealthy individual who wants to put money into a game company as an angel investor or venture capitalist? How much money would he or she be willing to put in? Well, that depends on how much the investor values the game company. This value is not based on how cool the investor thinks the company’s latest game will be, or even on how well the investor thinks it will sell, because investors invest in the overall business, not an individual game.
There are three basic methods investors usefor determining the value of a business:
- Subtracting its liabilities from its assets.
- Dividing its expected earnings by its capitalization rate (net operating income / current market value).
- Comparing it against what similar businesses have sold for.
Of course, an investor would need access to company’s financials or do some market research to value it using one of these methods.
Now, that doesn’t tell you what an investor would be willing to pay, because it depends on an investor’s assumptions, sensitivity to risk, and how much ownership the investor is going to get for that investment. Knowledgable investors want control of their investments so that they can use their knowledge to steer the company away from risk and towards profitability. So, for the small game company that wants to make their mark by making product known for its creativity, giving up any control to an investor is probably not the way to go.
Getting back to the original question, is it worth investing in a video game company. Only if you really know what your doing. As with any investment, do your research and invest only as much as you can afford to lose.
Like many other people, I was shocked when Donald Trump was elected President of the United States. I considered him to be too inexperienced and divisive for the position for him to have any real chance of winning the election. Even when the polls showed the race to be tightening up in the days before the election, I thought that Hillary Clinton had enough electoral votes locked up for a landslide victory. I was so sure that Hillary’s win was a foregone conclusion, that rather than spending Tuesday night watching the election results, I decided to go see Doctor Strange instead. However, when I exited the movie theater, it seemed I had been transported to an alternate universe, because it was Trump who had won by a landslide of electoral votes.
Pundits and Democratic leaders from Michael Moore to Bernie Sanders blamed Hillary’s loss on the fact that Trump did a far better job of appealing to the concerns of the angry and embittered middle-class workers of the Rust Belt states who felt abandoned by the Democrats. Worse, everyone who supported Donald Trump was painted by the Hillary campaign as being stupid, bigoted and mysogynistic. Such name-calling did not attract any Trump supporters to Hillary’s side, but what it did do was make Trump supporters hesitant to admit in polls that they were supporting Trump, and so the polling data was off. Finally, Trump supporters were more enthusiastic about their candidate than were Hillary supporters, who didn’t work as hard at bringing other people to the voting booth with them.
A couple of days after the election, game journalist Dean Takashashi asked in a Facebook post, “What does/should the game industry do in a post-election Trump world?” and I answered with some lessons from the election that might apply to game development. Here is an expanded version of my reply:
- Try to meet to the needs of all your players — not just the vocal ones, not just the hard core ones, and not just what you designed your metrics to measure. Your audience is might be made up of players who spend a lot of time each day playing your game, and more casual ones who only have a few minutes here and there to play; those who play for high scores and achievements, and those who just play for the story or social experience; those who try to dissect every rule and metagame new strategies, and those who are just looking for an enjoyable pastime. If you only pay attention to the ones who post on your forums or social media networks, you may be ignoring problems the vast majority of your audience are experiencing.
- Never dismiss any of your players as being stupid of wrong-headed. If they find your game confusing, they’re right — it is confusing for them. If they find your game boring, they’re right — it is not fun for them. Rather than telling them that they’re wrong, try to see things from their point of view and find ways to satisfy their needs.
- Players will often give you solutions to their problems rather than telling you what their problems actually are, but since they aren’t expert game designers, often their solutions aren’t the best ones. For example, they may complain that your first-person shooter needs more powerful guns when really the reason the game is too difficult is that there isn’t enough ammunition to pick up in the level. So, when your players start giving you solution, try to figure out why they are giving that solution, and maybe you can come up with a better one.
- Your metrics will only measure what you’ve designed them to measure, especially when dealing with quantitative data. Try to get some qualitative data from your players too, because people on the fence could suddenly change their playing habits.
- When answering playtest feedback surveys, players will often tell you what they think you want to hear to avoid hurting your feelings about finding problems with your work or to avoid sounding stupid or unskilled themselves. Where possible, have playtest feedback done by a neutral party, and write your questions so that they are unbiased as possible. You goal should be to learn what your player’s experiences are, not get validation for your existing opinions.
- As screenwriter William Goldman famously observed, “Nobody knows anything.” You can get all the expert opinion and follow conventional wisdom all you want, but nobody knows with certainty what’s going to work. Success depends as much on luck as anything else.
None of this will make you feel better about the election if you were unhappy with the results, but as the dust settles and we get back to our lives, maybe we can take away a few things that will make our work, at least, a little more sane than this crazy election cycle.