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Monday, May 21, 2012
Games and game studios
38 Studios released Kingdoms of Amalur: Reckoning earlier this year, and some preview material of their MMO project Copernicus recently. 38 Studios is also broke, unable to pay back a loan from the state of Rhode Island, or to make payroll. Most of the blogs I have read make a connection between these two things: Bloggers who like Amalur or Copernicus express their support for 38 Studios, others who didn't like Amalur are more into Schadenfreude. My thought on this is that there is little or no connection between the quality of 38 Studios existing or upcoming games and their financial state.
Making games is one of the most risky businesses to be in. A company making a game has to pay development cost first, and receives revenue later. If that development cost was a guy or two making an indie, iPhone, or Facebook game in their spare time during a month or two, the risk is manageable. But if you have a large team developing a game for several years, the risk is in the millions of dollars. If you run into delays in the development of your game, or you release it and it doesn't sell quite as well as hoped, you can lose your shirt.
Surviving this process as a young game development studio depends on your funding sources, and the management skills of the people running the company. It does not so much depend on the quality of the game you are making. Certainly not as long as the game isn't released. And even if you release a game, you still face the risk of getting good review scores and lousy sales. Finding good sources of funding and being able to keep a game development project on schedule and in budget is more important for the survival of a game studio than having extremely cool preview material. From Looking Glass Studios to Zynga the history of game development is full of examples of studios where the quality of their games had no relation whatsoever with their financial success.
It is always sad to see people get laid off and promising games get cancelled before release. But I wouldn't read too much into it.
Making games is one of the most risky businesses to be in. A company making a game has to pay development cost first, and receives revenue later. If that development cost was a guy or two making an indie, iPhone, or Facebook game in their spare time during a month or two, the risk is manageable. But if you have a large team developing a game for several years, the risk is in the millions of dollars. If you run into delays in the development of your game, or you release it and it doesn't sell quite as well as hoped, you can lose your shirt.
Surviving this process as a young game development studio depends on your funding sources, and the management skills of the people running the company. It does not so much depend on the quality of the game you are making. Certainly not as long as the game isn't released. And even if you release a game, you still face the risk of getting good review scores and lousy sales. Finding good sources of funding and being able to keep a game development project on schedule and in budget is more important for the survival of a game studio than having extremely cool preview material. From Looking Glass Studios to Zynga the history of game development is full of examples of studios where the quality of their games had no relation whatsoever with their financial success.
It is always sad to see people get laid off and promising games get cancelled before release. But I wouldn't read too much into it.
- posted by Tobold @ 11:45 AM Permanent Link
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Claiming that the fate of a company is unrelated to the quality of its product is a bit weird.
Obviously they can't make profit from a game they haven't publish yet and need to put in development resources.
However the investors will surely look into the half-completed product, check the concept arts and try to guess how good the game will sell when they make the decision of giving further funding or cut the losses and close the shop.
Obviously they can't make profit from a game they haven't publish yet and need to put in development resources.
However the investors will surely look into the half-completed product, check the concept arts and try to guess how good the game will sell when they make the decision of giving further funding or cut the losses and close the shop.
However the investors will surely look into the half-completed product, check the concept arts and try to guess how good the game will sell when they make the decision of giving further funding or cut the losses and close the shop.
I severely doubt that the government of Rhode Island who gave $75 million to 38 Studios would be able to make that guess with any degree of accuracy.
I severely doubt that the government of Rhode Island who gave $75 million to 38 Studios would be able to make that guess with any degree of accuracy.
The scary thought is that state government funded a game company. Why? Sounds like a story of influence peddling and corruption at worst, imbecility at best.
# posted by 
: 21/5/12 15:06
: 21/5/12 15:06
You've sort of missed the entire story, which is that a very famous right wing baseball player who's been publicly outspoken against any sort of social safety net has used his fame to put taxpayers on the line for between 50 and 110 million dollars in order to make a vanity game.
It's not Kingdoms of Amalur that sank them, although if they were relying on stupid high sales then producing only a moderately successful game won't have got them out of trouble. It's the MMO development that has been sucking cash, I bet.
# posted by : 21/5/12 15:39
: 21/5/12 15:39
It's not Kingdoms of Amalur that sank them
As I said, it's not the games that sink any game development studio. But I think they thought that Amalur would finance Copernicus, and pretty much anybody could have foreseen that this would never work.
You've sort of missed the entire story
What makes you think that your rather left-wing political interpretation is "the entire story"? I very much doubt that any political interpretation of any event can ever be an "entire story", as there is by definition always the other half that is missing.
As I said, it's not the games that sink any game development studio. But I think they thought that Amalur would finance Copernicus, and pretty much anybody could have foreseen that this would never work.
You've sort of missed the entire story
What makes you think that your rather left-wing political interpretation is "the entire story"? I very much doubt that any political interpretation of any event can ever be an "entire story", as there is by definition always the other half that is missing.
I live here. This is literally front page news, not gaming news. The guy is beyond famous because he's (rightfully IMHO) held as the one who finally broke The Curse. And he has a very very big yap and can't stop preaching the far right gospel.
If there's any "other half of the story" to his actions other than hypocrisy, it's hard to imagine what it would be.
If there's any "other half of the story" to his actions other than hypocrisy, it's hard to imagine what it would be.
If there's any "other half of the story" to his actions other than hypocrisy, it's hard to imagine what it would be.
You don't watch Fox News much, do you? I can imagine a right-wing version of this story easily. It would probably blame business taxes and excessive labor cost due to Obamacare and welfare for an honest entrepreneur failing to succeed with a brilliant game.
I don't say I would agree with that right-wing version, but claiming that there can't be one is certainly wrong.
You don't watch Fox News much, do you? I can imagine a right-wing version of this story easily. It would probably blame business taxes and excessive labor cost due to Obamacare and welfare for an honest entrepreneur failing to succeed with a brilliant game.
I don't say I would agree with that right-wing version, but claiming that there can't be one is certainly wrong.
Barring absolute turkey or lucky "going viral", the quality of the software is but one component of the financial success.
As a software developer, I think speed of development is often overlooked. It's why I may look at Rift at some point; Trion seems to have an aggressively quick development process.
Longer development is much riskier for at least two reasons. The first is that markets and taste change: markets: presumably CCP had more options of funding during the Icelandic boom. Globablly during the boom there was more money than sense and investing in the next WoW killer (or worse the "we only need a quarter of WoW subscribers...) was easier. If development takes so long that when hard times hit there is a recession, tight money and MMOs are a declining business, it's tougher.
There is also the customer expectations and the evolving marketplace. If you start designing an MMO in 20007/8 (e.g. SWTOR) but deliver in 2012, you get something quite competitive with 2008 but a bit out of sync with 2012. There are technical issues - WoW's lfg, perhaps lfr, and especially cross-realm zones are features that future MMOs will see on their forums.
The biggest example of a business issue is perhaps subscription versus F2P: what serious developer would consider F2P in 2008? In 2012, it would take a very big or egotistical company to start development of a $15/month subscription MMO.
As a software developer, I think speed of development is often overlooked. It's why I may look at Rift at some point; Trion seems to have an aggressively quick development process.
Longer development is much riskier for at least two reasons. The first is that markets and taste change: markets: presumably CCP had more options of funding during the Icelandic boom. Globablly during the boom there was more money than sense and investing in the next WoW killer (or worse the "we only need a quarter of WoW subscribers...) was easier. If development takes so long that when hard times hit there is a recession, tight money and MMOs are a declining business, it's tougher.
There is also the customer expectations and the evolving marketplace. If you start designing an MMO in 20007/8 (e.g. SWTOR) but deliver in 2012, you get something quite competitive with 2008 but a bit out of sync with 2012. There are technical issues - WoW's lfg, perhaps lfr, and especially cross-realm zones are features that future MMOs will see on their forums.
The biggest example of a business issue is perhaps subscription versus F2P: what serious developer would consider F2P in 2008? In 2012, it would take a very big or egotistical company to start development of a $15/month subscription MMO.
Well if you want the actual bona fide whackadoodle from the right wing, if you go back to when he got the loan guarantees, his company was located in Massachusetts and he tried to shake us down to match or better RI's offer or else he'd move out of the state. When we didn't do so, the conspiracy theory was advanced that this was because the democrats who run the state were discriminating against Schilling because he's a conservative straight white male.
One can make an argument for keeping government small here. All the venture capital companies laughed at Schilling when he brought his proposition to them. So he went to the government who were happy to give him a huge wad of taxpayers' money.
We all know the troubles we have with corporate governance when the directors and management get big rewards and bonuses and not enough oversight from shareholders. Well, governments tend to be exactly like that...
We all know the troubles we have with corporate governance when the directors and management get big rewards and bonuses and not enough oversight from shareholders. Well, governments tend to be exactly like that...
@gevlon - that is a weird claim, but i still think it is accurate. reckoning was a successful game, not activision/blizzard successful, but still a success. but how much could that game have cost to produce? and realistically how much did they plan to make from the game? surely selling 300k copies met or exceeded their forecasts. how then did they fail to financially prepare? did they go into this knowing they would fail financially and only cared about producing a good game come hell or highwater? no probably not. surely the mmo is draining the back account more than they anticipated.
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