Unit 13 - Understanding the games industryAssignment 2 Task 1 - Financial Issues
In this report financial issues that can affect the sales (whether good or bad) as well as, how and why they may will be covered. These issues can cause the game to be successful or a failure to the gaming industry.
There are many costs towards creating a game whether it be successful or not, if not then the possibility of making their money back is a lot lower. When creating a game you would need to consider setting a sensible budget as the factors of pre-production help prevent the risk of overspending. For a small company the cost breakdown may include; staff, programmers, artists, QA etc, need paying; advertising and marketing; clearances, like copyrights and age ratings and rent and bills for the locations used like offices. Others could be; the creation of hardware peripherals; supporting different languages and regions; catering to different platforms and IP (Intellectual Property) Licensing costs. One of the most well known financial disasters in the gaming industry was a big part of the video game crash of 1983. It is the game E.T. for the Atari 2600 released in the December of 1982. The cost to develop the game was over $125 million with $20-25 million of that was just for the rights to make the game. The game itself had 4 million copies while only selling a total of 1.5 million however, 3.5 million of all the copies were sent back as returns or unsold stock. This meant that only an eighth of the copies had been sold, meaning a large loss of $536 million for the company leaving it to be divided and sold in 1984. This was not helped by Atari's Pac-Man for the same console in March 1982 which produced 12 million copies, (despite this being more than how many consoles were estimated to have been sold at the time) however, they did sell 7 million copies. The estimated profit was $200 million but that was for selling 9 million. Sonic Boom: Rise of Lyric was released by Sega for the Wii U on November 11th 2014 in North America and was announced as the lowest-selling game in the franchise by only selling 620,000 copies. It was also stated as the worst game of 2014 by David Jenkins from Game Central and multiple accounts of repetitive level design, dull combat and and serious bugs.
There are multiple ways a game can get funding, the first is Self Funding. Self funding is pretty much as the name states with you funding the game yourself. The advantages of this are not having to pay back anything and being able to make your own deadline. The disadvantages are that you most likely do not have that kind of money of you are an indie developer and the pressure to not go over budget must be very high. The second are Bank Loans, although they are not the most appealing they are certainly a good option when all else fails. The advantages for this are because you must create such a detailed business report that the chances of things not working out are very slim. Another advantage is that it the amount of funding you could get is very high however the amount of interest of you have to pay back may make the overall payment a lot higher and could unfortunately be very hard to pay back. You also would have to come up with a convincing, detailed and stable business plan that could mean whether or not the loan goes through. The third option is finding an investor, they are keen to find to find ideas that they think may draw up a profit. The advantage to this is like one from the bank loan, in that the funding you get should cover everything needed. However, the disadvantage is that the pressure you have to handle would be very high, as the investors personal money is at high risk and is trusted in you.
The fourth and final way of obtaining funding is through crowdfunding, it is where you can ask a large group of people for a small amount of money in hopes you can reach your goal on websites like Kickstarter. Some positives for this way is that you would not become in debt and it is a good way of gaining an audience. However, if the game becomes a flop you would have a lot of angry backers. As well as this, there are so many games trying the same thing out there and many people who have put their money in have also had it taken away so, they are very selective with who they entrust their money in (much like the investors).
There are many issues that are facing small and indie studios with the first one of course being funding. The most common way of gaining funding as an indie developer is crowdfunding, as spoken about above, and this can take a long time even with friends and interns working alongside you. They are also low on resources, offices and equipment. Not only this, but the fight to keep your work as your own and not have it stolen is much more harder. "Copyright can protect artwork in a game, or the specific code behind a game, but game mechanics cannot be protected," said Rodain Joubert who is the developer of a game called Desktop Dungeons. Taking legal action can cost a lot of money which is hard to find for most people. The market is full of so many indie games that flood the market, with most of them being the same thing over and over again, making it hard to get noticed. Small studios find it a lot harder to gain publicity and a following because of their ability to market is restrained by costs and lack of audience.
In summary if I was to create a game and need to find the funding I would definitely use crowdfunding as, it's the least likely to leave me in debt however long and how much effort and work it may take to get there. After doing this research I learnt a lot about the struggle that goes into creating a video game and especially the issues that face indie and small studios.
References:
https://en.wikipedia.org/wiki/List_of_commercial_failures_in_video_gaming#Pac-Man_.28Atari_2600.29
https://en.wikipedia.org/wiki/E.T._the_Extra-Terrestrial_(video_game)
https://en.wikipedia.org/wiki/
https://en.wikipedia.org/wiki/
https://www.microsoft.com/en-
http://www.gamasutra.com/
There are many costs towards creating a game whether it be successful or not, if not then the possibility of making their money back is a lot lower. When creating a game you would need to consider setting a sensible budget as the factors of pre-production help prevent the risk of overspending. For a small company the cost breakdown may include; staff, programmers, artists, QA etc, need paying; advertising and marketing; clearances, like copyrights and age ratings and rent and bills for the locations used like offices. Others could be; the creation of hardware peripherals; supporting different languages and regions; catering to different platforms and IP (Intellectual Property) Licensing costs. One of the most well known financial disasters in the gaming industry was a big part of the video game crash of 1983. It is the game E.T. for the Atari 2600 released in the December of 1982. The cost to develop the game was over $125 million with $20-25 million of that was just for the rights to make the game. The game itself had 4 million copies while only selling a total of 1.5 million however, 3.5 million of all the copies were sent back as returns or unsold stock. This meant that only an eighth of the copies had been sold, meaning a large loss of $536 million for the company leaving it to be divided and sold in 1984. This was not helped by Atari's Pac-Man for the same console in March 1982 which produced 12 million copies, (despite this being more than how many consoles were estimated to have been sold at the time) however, they did sell 7 million copies. The estimated profit was $200 million but that was for selling 9 million. Sonic Boom: Rise of Lyric was released by Sega for the Wii U on November 11th 2014 in North America and was announced as the lowest-selling game in the franchise by only selling 620,000 copies. It was also stated as the worst game of 2014 by David Jenkins from Game Central and multiple accounts of repetitive level design, dull combat and and serious bugs.
There are multiple ways a game can get funding, the first is Self Funding. Self funding is pretty much as the name states with you funding the game yourself. The advantages of this are not having to pay back anything and being able to make your own deadline. The disadvantages are that you most likely do not have that kind of money of you are an indie developer and the pressure to not go over budget must be very high. The second are Bank Loans, although they are not the most appealing they are certainly a good option when all else fails. The advantages for this are because you must create such a detailed business report that the chances of things not working out are very slim. Another advantage is that it the amount of funding you could get is very high however the amount of interest of you have to pay back may make the overall payment a lot higher and could unfortunately be very hard to pay back. You also would have to come up with a convincing, detailed and stable business plan that could mean whether or not the loan goes through. The third option is finding an investor, they are keen to find to find ideas that they think may draw up a profit. The advantage to this is like one from the bank loan, in that the funding you get should cover everything needed. However, the disadvantage is that the pressure you have to handle would be very high, as the investors personal money is at high risk and is trusted in you.The fourth and final way of obtaining funding is through crowdfunding, it is where you can ask a large group of people for a small amount of money in hopes you can reach your goal on websites like Kickstarter. Some positives for this way is that you would not become in debt and it is a good way of gaining an audience. However, if the game becomes a flop you would have a lot of angry backers. As well as this, there are so many games trying the same thing out there and many people who have put their money in have also had it taken away so, they are very selective with who they entrust their money in (much like the investors).
There are many issues that are facing small and indie studios with the first one of course being funding. The most common way of gaining funding as an indie developer is crowdfunding, as spoken about above, and this can take a long time even with friends and interns working alongside you. They are also low on resources, offices and equipment. Not only this, but the fight to keep your work as your own and not have it stolen is much more harder. "Copyright can protect artwork in a game, or the specific code behind a game, but game mechanics cannot be protected," said Rodain Joubert who is the developer of a game called Desktop Dungeons. Taking legal action can cost a lot of money which is hard to find for most people. The market is full of so many indie games that flood the market, with most of them being the same thing over and over again, making it hard to get noticed. Small studios find it a lot harder to gain publicity and a following because of their ability to market is restrained by costs and lack of audience.
In summary if I was to create a game and need to find the funding I would definitely use crowdfunding as, it's the least likely to leave me in debt however long and how much effort and work it may take to get there. After doing this research I learnt a lot about the struggle that goes into creating a video game and especially the issues that face indie and small studios.
References:
https://en.wikipedia.org/wiki/List_of_commercial_failures_in_video_gaming#Pac-Man_.28Atari_2600.29
https://en.wikipedia.org/wiki/E.T._the_Extra-Terrestrial_(video_game)
https://en.wikipedia.org/wiki/
https://en.wikipedia.org/wiki/
https://www.microsoft.com/en-
http://www.gamasutra.com/
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