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[Gamesbriefers] Is mobile over for the little guy?
Kristian Segerstrale was an early investor in Supercell (hey, Kristian). He recently wrote that “Few mobile / tablet games will be made with combined production and marketing budgets below $1M in the future.”
Kristian has form on this topic. After successfully launching Playfish, he said, once Playfish got big, that the competition was too late and it was now very expensive to launch a Facebook game.
Is Kristian right? Is $1 million the minimum entry price? Or is that someone who is successful trying to dissuade new competitors from entering the field?
I am sure there will continue to be new entrants with considerably smaller budgets. People often continue to pour money in a field with no hope of ever recouping their costs, for a lot longer than logic would dictate, usually 8-/ Whether they can succeed is a totally different story however!
By and large, I agree with Kristian and would go even further: the vast majority of people/companies who launch new titles, even those with a budget well above $ 1M, will have a hard time breaking even / having a better than mediocre business going forward, on mobile platforms; even for those in the top 200 grossing games, I suspect this already is the case, and will just be increasingly more so in the next 18-24 months.
Sustainable success will get increasingly harder to get; Then again, as a guy who’s primarily selling cardboard, I am certainly biased.
1: You can buy acquisition, but it’s much harder to buy retention and monetisation. So all the money in the world won’t get you a game that retains and monetises at a world-class level. It will help, for sure (you can hire me!) but those bits remain more art than science, and will likely remain that way for several years.
2: Cross-platform still makes sense. That’s the crux of why King seem a better bet than Zynga did when it comes to a successful IPO and stay on the market. So Mobile can’t be viewed in a bubble in the first place.
3: Development costs drop over time. Marketing costs rise. So sure, $1million might be the figure a large studio might conjure up when making a bet, but more and more of that will be on marketing. And if a small team with no money makes a game that retains and monetises brilliantly, then they will still be able to access marketing spend (acquisition) at a later date.
4: Having a huge hit takes, above all, random chance working in your favour. That is not controllable, so small bets can still result in huge returns.
So yeah. No.
“3: Development costs drop over time”
I see smaller teams (lets call them Indie) still making hits here and there, but the frequency of those will be less. Still smaller teams can be profitable.
In order to make a difference you need to pull in considerable money and $1 million gets you only so far. Considering most of the top 10 grossing games are online games then the costs of the game, server code, infrastructure and operations team alone can eat half of that million fast.
So 1 million isn’t really going to cut it if you are in for the top 10.
Development costs per X drop. We just add lots more X. How long/how much would it cost to make a single frame of Toy Story now, for example?
And I think the idea of AAA/Blockbuster is just plain wrong. The huge hits on mobile/Facebook aren’t like that *at all*.
Candy Crush, Puzzle& Dragons, Clash of Clans – none of them would make me think AAA for even an instant. They’re nice to look at, sure, but they are no nicer to look at than say, Peggle. And it would be cheaper to make even Candy Crush today than it was when it was made. Infinity Blade has done pretty well, for sure, but it’s not exactly carving out a glorious future.
I’d say a big part of the change that mobile and browser have brought is in demographics, and as such, tastes are different. I genuinely believe that character and loop design and far less quantifiable matters are what has powered us along so far, into our once blue ocean, and I don’t see that fundamental point changing.
We play games, not tech. Race if you like, but you’re spending pointless money. […] How much can you spend on a puzzle game designed to be played in tiny chunks?
I’m always an Amara’s Law kind of guy. We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. In this case, the technology has brought demographics and play patterns that just don’t need and, indeed, broadly can’t use huge budgets.
I’m going to double down on the belief that good ideas, well-realised aren’t going to get particularly more expensive, and that it’s good ideas, well realised, plus a lucky roll of the dice that will make it big.
I’m sure there are safer, money based strategies (licensing for example) but I don’t think that’s quite what we’re talking about here.
A lot of those successful players are trying to get third-party publishing schemes rolling, to work with the small-but-talented indie developers who don’t have $1m to spend. Maybe that’s one way forward? Rovio Stars etc. Not sure I’ve seen any huge hits come out of those yet, mind.
I’m sure small shops will continue to make profits on small investments, if they can get a feature or a groundswell of support.
But I think Kristian is probably talking about the higher reaches of the charts – i.e. ‘how do we make a mobile game of consequence?’
We see the cycle on every other games platform. Small company has unexpected hit with massive margins, in order to defend its position, it spends those profits on marketing and production values that few competitors can match, consumers respond, demand that level of polish from everything, only the bigger bets survive.
I think it’s always a mistake to think ‘things will be different this time’ […]
Arcades introduced gaming to a much broader audience than minicomputer games.
Consoles introduced gaming to a much broader audience than arcade games.
Mobile introduced gaming to a much broader audience than console games.
This transition is not unique. There is nothing remotely special about the fact that this transition has increase accessibility and therefore addressable market.
Where is the money going to go? Where did the money go between Pong and Sega Rally? They are both simple arcade multiplayer games designed to be played in tiny chunks.
I think Ben’s point is spot on as we are getting closer to a concept of AAA games on mobile. I say “closer” because the quality, production teams, and budgets of mobile, outside of marketing, haven’t yet hit that of top games on PC/console or top blockbuster movies. I’m quite interested to see what happens as we continue to build expectations of quality and scale in top games. But that certainly doesn’t mean that smaller studios have no hope of success, even if success is measured at a different scale. While we do see consolidation at the top, we can also see continued “indie” success. Indie developers are having a great time on Steam, consoles are starting to court them better, and there are plenty of small teams getting features on Apple’s store. Not to mention the lightning in a bottle hits like Minecraft.
I expect that we’ll continue to see the greatest innovation and disruptive technologies coming out of indie studios, some of whom will make great money, quite a few will make enough to keep developing full time. Few will truly “make it big”, but smaller companies don’t need to be pulling in six or seven figures per day to pay their employees and have everyone be happy with their jobs.
That said, with soaring acquisition costs, I do expect that the persistent top 50 grossing games on iOS will have substantial development and marketing budgets with very few exceptions. I’m not convinced that it’s anywhere near $1M yet though, especially if early revenue can be recycled back into user acquisition.
I like Ben’s echo of Einstein’s definition of insanity being about repeating things and expecting things to be different.
Every time we have a step change we see big studios getting bigger and small studios being swallowed up.
Those who survive tend to either specialise or disrupt…
I’m sure that Budgets will go up for the bigger games and we will see a return of the publisher model (although they also have to adapt to cope with the Curve/Games As A Service)
I also agree with Anthony that not everyone needs to hit the top 100… just under 70% of revenue comes from outside the top 100 and that reminds me of the real power of Games As A Service.
We spread the development risk over time; starting with an lean MVP. We use that hypothesis to test our ideas and to gain some revenue to keep the team working. That’s means we don’t need the 10 upfront… but we will probably spend that if our MVP works… If it doesn’t then we stop wasting money and move the the next project.
That’s why the F2P model is so exciting… Not the extra money… but the extra stability and chance to disrupt
So to be clear I wish the number was smaller – I’m a passionate, active seed stage backer of exciting game teams after all. But just run the numbers for something at the low end of competitive scope today :
1. Team – I think a good size today to go is prob around 6-8 ppl with some mix of coding, art, design and business / quant / ua. You can prob be a bit smaller or a bit bigger depending on talent and type of title which has an impact on timing.
2. Timing – there is no such thing as a man month clearly, but if someone pitches to me they will have a competitive, delightful game done, beta tested, launched and successful on iOS / Android in 6 months after starting with a team of 4 I prob won’t believe them. Someone pitching the same for 10 ppl and 18 months, I think is probably a little pessimistic or overly ambitious for a first title.
Pick the median scenario you are at 7ppl for 12 months (9 months dev + 2 month canada beta + 1 month live to get to a $5k gross / day or top-300 chart position that makes you profitable and no longer in the need of cash.
Assume that you have modest fully loaded average monthly costs (incl office rent, taxes, equipment, expenses, legal fees etc) of $10k per person. You land at approx $840k for operations. Set aside $20-40k for two burst marketing campaigns during beta to tune things and $100-120k for your main burst UA campaigns and you’re at $1M. And that leaves you at zero cash when you are supposed to turn profitable which is not a great way to run a company. I would rather try and get all the above costs down by 20% and buy me 2 extra months instead to tweak / fix things which is prob more realistic.
And still this assumes a home run in the sense of no lengthy concepting phase, no hitches or changes of direction during development, no major issues found during beta or launch. So I tend to think that $1M is conservative. To be clear you can for sure substitute some of that cost with equity – founders take no salaries, you can work from your garage, do an FB publishing deal for revenue share etc. But in each case you’re substituting cash investment to some other form of investment.
I would honestly love to be wrong about this as games company seed funding is quickly turning into project financing which is far less fun. Let me know where you think I’m off!
$1MM seems low to me.
I think Kristian’s numbers are fair but I’d add more for the initial global launch campaign. I put together this rough google spreadsheet and came up with about $1.5 million in total expenditure through the end of the first month of global launch, with a few conservative assumptions:
- 4 founders spend the first 3 months of development prototyping for free (after work / on weekends / etc.). Post-prototype development last 9 months through to feature complete, 12 months through to global launch
- 7 FT employees (2 client, 2 backend, 1 art, 1 CEO, 1 UA) by the point of global launch (avg per-employee expense of $10k/month)
- iOS only / US only
- 3 months of soft launch in Canada at $25k/month, large burst on global launch ($300k) and “steady state” marketing after that for about 30k DNU (25% of DNU is paid), which would put the game in Top ~50 Free Downloaded according to Distimo
- $1.5 CPI at the steady state volume in the US, so break-even marketing on a per-user basis with strong virality producing the post-global launch profits
Looking at the headline question here, it’s a definite no. There’s still plenty of scope for the smaller studios to have viable businesses in mobile.
All these numbers being thrown around look to be targeting the top 10 grossing, and as much as smaller devs might dream of that, and the revenue that comes with it – they don’t exactly need it.
If you’ve only got 15 or 20 then chances are you can be profitable on $5k / day, and if that’s spread around two or three games with some ad revenue in the mix too, then you don’t need to be touching even the top 100s of the top grossing, and probably not even the top 200s. A small talented team with a bit of cash could bootstrap to this in a year or two.
This doesn’t account for UA of course, but smaller devs I talk to don’t really do paid UA anyway – they’ll experiment a bit, but then conclude that they’re not seeing a return.
Anyway, as long as there’s a viable business to be had here outside the top end of the charts, there’s always a chance of a breakout hit, without any UA spend.
From an investors point of view though, sure, for a supercell type return you’re going to have to gamble big, but to create a profitable business I believe you can still do it with a good idea, talent, hard work and a bit of cash.
+1 on what Charlie says. We can make games for less, and we do. We are learning how to make F2P games and we believe we have one which will make us some money. Total costs are around £250k with UA. I love being in a job where I don’t get shouted at daily by overlords and have some flexibility in my life and i get to do things I love. Our maxim is to make a profit and make it sustainable. Simple as that really.
Coming down firmly on the side of Kristian & Eric here.
AndyP: your example is, I would guess, the product of an experienced team who are well-oiled, working together nicely for a few years now. Same at Rovio, same at King. Same at Supercell: most of the team came from previous teams under another company name.
So, assuming you have said well-oiled team, and you want into the Top 10, and your game is good, (and it’s not the runup to Xmas), then K & E’s stories definitely apply IMO. Unless your game has such a weird story or content or something that means it travels by WOM. That’s a massive rarity, obviously, and even initial WOM games (CoC being one, Angry Birds another) then require massive marketing budgets to stay anywhere near the top 10, amirite?
Attention is hard, and only gets harder when a platform gets more populated.
Hey Alice – our team are battered, bruised and half cut 😉 but they are now sort of fit for battle. Boot camp did not exist. They have learned their trade in the trenches at great cost….so they went into battle with little experience or even basic training.
Time will be our judge! We haven’t had a real success yet. But everyday we get better.
Yep, that’s kinda what I mean. All teams do that, they have to do that. You can’t put 8 people together who don’t know each other and expect it to work off the bat.
And once the team is working well, assuming you have enough cash to live for a while, I would bet a lot of money that you can find a hit at some point. There are a ton of genres that haven’t even been tried yet, and certainly underserved audiences and all sorts of nice niches to jump into. But this is K’s point: the well-working team will need 12 months and a million bucks to Just Get The Job Done on one game.
Come on Dungeon Keeper. Someone make Dungeon Keeper (yes I know it’s been announced). Or Startopia.
I’m torn on this one. Speaking from the perspective of a lone mobile indie developer, my somewhat biased gut-instinct says there is no relationship between size and profitability. Like Eric suggested earlier, even if you have $1M to spend on a game there’s still no guarantee you’ll break even. There’s also the argument that if you design smart and keep your budget on a leash then you don’t need to break into that top 100 grossing list to make your money back.
However, there are also persuasive arguments on the other side of the story. For one, being bigger is good for acquisition and visibility. The charts in all the app stores are still dominated by a “bigger is better” mentality. More downloads, more reviews and more plus ones/likes all help push your title up the main charts and the top grossing chart is unashamedly skewed to favour the big boys. There’s also a cliff-edge effect when it comes to paying for acquisitions that favours the big budget games. If you can get to the point where, once k-factors are taken into account, your average LTV of a player is above the cost of an acquisition then you can just pour money into the system to get yourself up the charts and then take advantage of the organic acquisitions this will lead to. Given this, consider the following scenario:
Average cost per acquisition $1.50
Game 1 – Cost $100K – Average LTV $1.00
Game 2 – Cost $1M – Average LTV $1.50
Game 2 monetises only 50% better than Game 1 but costs 900% more. However by taking advantage of this cliff edge when it comes to paid acquisitions, it will probably be more profitable.
Mobile / tablets also represent a great secondary market for those of us in smaller indie companies making primarily PC games.
If I can bring in around £150 – 200k over the course of a year from a quality mobile port that takes a few months then I’m extremely happy, and it seems that even fairly mouse-driven, traditional PC games can work in that context.
I definitely see a lot of “oh that’s fine for you smaller guys but I’m talking about REAL money” rhetoric from some of the bigger mobile companies and that’s fair enough, but some of us are working very happily on a smaller scale and carving out our own market on mobile. I think, if anything, that’ll grow in future as customers want experiences with a bit more depth.
This part to Paul – what kind of success on PC do you need to ensure that a mobile port will see £150-200k over two years? It feels like you’d need some serious success on PC to guarantee that, in the order of tens to hundreds of thousands of downloads/customers/fans on PC, but I might be way off there.
As for the main discussion, I think the mobile market is changing to one much more like the other markets we all know, and it’s been a while since I can remember seeing a truly ‘out of nowhere’ success like tiny Wings happening on any mobile platform. Doesn’t mean it can’t, just that it’s apparently increasingly unlikely.
For what it’s worth I also think it’s easy to confuse the big boys as people with tons of income versus tons of resources. Puzzle and Dragons is the hot shit right now… how many people were on that project when it tipped over to being profitable? That’s the crux. Any small team can suddenly become huge with a provable model in mobile – if you can buy users in at a lower cost than they return, then it’s not hard for anyone to raise the cash (and then suddenly become a big fish) all of a sudden, but the issue remains can you do it more quickly than it’d take a bigger competitor to copy the game and beat you to it?
That’s a potential downside of being small in this market, as well as the relatively low cost and challenge of bringing a game to market if the design is already laid out for you.
Well, Frozen Synapse has done around 500k units on PC now and obviously you get a spike from the existing community, but I do feel like something perhaps a bit more suitable for mobile could manage those numbers with a smaller PC base.
This is a very interesting question…
I think it has become difficult for many mobile developers making normal games. I’m increasingly hearing stories of an investment climate gone distinctly cold and of terrible terms being offered even in cases where a successful developer can show substantial revenue. I also keep hearing everyone bemoaning the cost of user acquisition, and the increasingly forlorn hopes of those who’d like to be featured by Apple, but think they never will be no matter what they do. I also tend to think of tablet as somewhat behind on that curve, but it will experience the same sorts of pressures (as I wrote last year on TechCrunch in fact).
Everybody knows that it’s because of oversupply. There are tens of thousands of developers all competing for the same eyeballs and – just like any other kind of medium – a curve has formed. A few powers have gotten to their position by skill, luck, timing or financing, and there are many also-rans. Everybody also knows that it’s because of the decline of the novelty effect. That always happens. Where once it was neat to be able to tip your phone and watch a virtual beer drain, now that stuff is jejune.
What less people realize is that it’s also an effect of genre thinking. In most platforms a conventional wisdom tends to form whereby developers/publishers see one successful game of a type and then they replicate it and try to compete on features. The idea here being that since this a type-of-thing, and customers like a type-of-thing, therefore they are type-of-thing buyer.
This rarely proves true however because customers don’t put that much thought into what types of game they like. Nobody’s out there going “I really need more endless runners to get my fix”. They just like Temple Run or Jetpack Joyride. Sure, sometimes it is, for example in hidden object games or the top end of the FPS market. But mostly it isn’t, and in conditions of oversupply and declining novelty chasing after perceived genres is usually unrewarding. Because then the only story we have is my bingo game is better than yours or my endless runner is prettier than yours.
More typically that kind of thinking is successful when game types jump from one platform (my farm game got the attention of the audience on the new platform first, I win) but not within. We are very good at convincing ourselves about lockouts and customer intent, and of looking for edge case opportunities only along the lines of the self-selected qualities of the market that we’ve already assumed exists. We’re addicted to risk mitigation, but that’s what leads people like us to think of platforms as “full” or not, which is a bit like thinking books are “full” because a dozen genres got invented and each has a king.
Somebody somewhere is using genre thinking to convince themselves that their endless-runner-meets-bingo game ticks all the boxes for those two kinds of customer, and so they are guaranteed success! So in those terms, yes you can see how it “big boys” seem to rule the roost. But as ever what they’re ruling is the back end filled-out genre-thunked part.
The question is whether there’s still an opportunity for orthogonal, weird, I’ve-never-heard-of-that games though? And I think the answer is yes.