Category Archives: Game Production
Much of my time these days is devoted to teaching game production at The Los Angeles Film School, as well as giving live talks and virtual lectures on the topic of game design to everyone from boy scouts to industry professionals. Still, I was absolutely thrilled when Amy Jo Kim invited me to be a coach at her Game Thinking Live training event being held March 31 to April 1 in San Francisco.
For those of you not familiar with her work, Amy Jo is an accomplished social game designer, community architect and startup coach. She is well known for her 2000 book, Community Building on the Web, and her 2012 TEDx talk, “Collaboration & Community-Building”. In addition to earning a Ph.D. in Behavioral Neuroscience from the University of Washington, her expertise is based on her work on such products as Rock Band, The Sims, Ultima Online, Happify, eBay, and Netflix.
Amy Jo has drawn upon her experiences of creating innovate products to develop an integrated system for accelerating innovation and driving sustained engagement. Called “Game Thinking”, it is a powerful blend of game design, systems thinking, agile/lean practices, and design thinking built upon the following development pillars used by game designers when making games:
- Build a community of Super Fans — your most passionate, early customers — to provide early feedback on your product and then later expanding your playtesting from that base to a larger group of target customers.
- Build and test your core product from the inside out by first focusing on the product’s core interaction loop.
- Tinker and prototype without assuming that your first idea is the right one.
By leveraging Amy Jo’s Game Thinking system, entrepreneurs have learned how to innovate faster and smarter, and to build products that people love to come back to.
Amy Jo is now putting together as high-impact two-day training event to teach entrepreneurs the tools and techniques of Game Thinking, and give them a blueprint for building products that are as engaging as games. The event will introduce participants to the designers and innovators who’ve created successful businesses with Game Thinking, and provide hands-on training and support that will super-charge product design.
A ticket to the event provides a package of benefits that includes:
- An introductory online course before the event, with short videos and step-by-step templates that take you through the basics of Game Thinking at your own pace.
- The two day-event, where on Day 1 participants will learn the foundations of Game Thinking through real-life Case Studies, and on Day 2 apply the Game Thinking Toolkit to your project with coaching and support from guest experts & peers.
- After the event, continue learning and stay in touch with the people you met in the Game Thinking Academy — a curated learning community of experts and enthusiasts.
Sound interesting? If you’re a startup CEO, game developer, UX pro, design leader, product manager, agile expert, or innovation executive, this event may be just right for you! To find out more, visit Game Thinking Live.
Many game studios develop games for publishers through an early stage development agreement: the studio pitches a publisher on a game that it wants to make and if the publisher greenlights the deal, the publisher funds the game’s development by paying advances to the studio in addition to paying royalties from sales of the game. Now, when negotiating the terms of such an agreement, a studio might be tempted to think, ““We’ll cover all our costs with the advance and then wait for profits when the royalties come rolling in.” Well, here’s a dirty little secret of the game industry: most developers never receive a dime in royalties.
Consider a AAA console game that players buy at a retail store for $60. Let’s say that the studio negotiated a 20% royalty. That royalty is computed after a number of expenses are deducted from that sale.
- Around $12 going to retail store (GameStop, Walmart, Best Buy, etc.)
- Around $12 going to the console manufacturer (Sony, Microsoft, etc.)
- If the publishers used another distributor for selling the game, a cut for that distributor.
- 5% or whatever was the cost of goods were for manufacturing the box, manual, disk, etc.
- Freight and insurance for shipping the product to stores.
So, when all is said and done, the studio is not receiving 20% royalties on $60, but maybe on $30 or less. So, in this example, the studio is receiving only about $6 on that $60 game.
But wait! Usually the publisher paid the studio advances against royalties to fund that game’s development, often millions of dollars in advances. So, the studio doesn’t receive royalties until the publisher recoups the advances from the royalties.
So let’s say a game cost $10 million to develop. The the game must sell enough for the game to earn $10,000,001 in royalties (not sales) before the developer receives their first $1 in royalties.
The reality is that most games never sell enough for a studio to see any royalties. They earn money through the advances to cover their development costs, but rarely do they generate any profits for the studio that made it.
So, what’s studio to do? One thing is to try to negotiate sufficient advances so that the studio can survive long enough to gain another development contract just to stay in business. Or it can try to negotiate an escalating royalty based on sales so that the better a game sells, the higher the royalty the studio receives.
Another approach is to try to develop as much of the project as it can on its own dime; the more complete a game is when a studio approaches a publisher, the better the terms it can negotiate. Of course, the ideal situation is for the studio to publish the game itself.