Tuesday, August 21, 2007

Kongregate Now the Best Opportunity for Bootstrapping a Game Company

Gamasutra recently interviewed Jim Greer about the news of Kongregate getting $5 million in funding. Kongregate plans to spend most of that on Funding the Flash Renaissance, as Gamasutra put it. The games Kongregate will be funding will be "premium games" - those that are a step above most of the current games on the Kongregate website. Staying true to the heart of Kongregate, part of the game will still be free, but part will also be purchasable through microtransactions. This could include paying for levels as stated, purchasing items for characters, or any number of different things.

This just adds more to the cake that is independent game development right now. In fact, based on the numbers Kongregate has released, we think they are now offering the best deal for bootstrapping a game company.

When we decided we wanted to start Intuition, we looked at all of the options out there for bootstrapping a game company with no games in its portfolio. One of the easiest ways to look at game development is to break it down into platforms, which I see as a "horizontal slice":

TV Console
Pros: High sales, high exposure/glory
Cons: High barrier to entry, sparse up-front funding, lose IP with funding?, royalties only likely in download space, harder development

Handheld Console
Pros: High sales(DS especially), medium exposure/glory, low-medium cost
Cons: Medium barrier to entry, sparse up-front funding, lose IP with funding?, no download space yet

Pros: Low barrier to entry, low cost, cult indie glory, some up-front funding, easier development
Cons: Lower sales

If platforms are horizontal, then distribution channel is vertical:

Pros: High sales, high exposure/glory, well-established
Cons: High barrier to entry, sparse up-front funding, (probably) lose IP with funding, royalties extremely unlikely

Pros: Low-medium barrier to entry, low-medium cost, some up-front funding, royalties likely
Cons: Variable sales, no handhelds yet

Web Browser

Pros: Low barrier to entry, low cost, some up-front funding, easier development, royalties probable
Cons: Variable sales, not well-established, only Wii for consoles

When you put these two together, you form a Game Development Bootstrapping Opportunity Matrix.

Based on these, we thought that the cell at PC and Web Browser was the best option for bootstrapping, because it's relatively easy to develop for, the cost is low, and the barrier to entry is low. The only downside is that it's risky; who knows what the sales will be, and it's not a well-established way to make a living. Aside from the couple grand you can get by being sponsored, there's not much living in it at all...until we stumbled upon two options a few months ago that looked promising: Adult Swim and Kongregate.

As we've mentioned before, Adult Swim has been commissioning games for their website. Someday I'd love to devote a post to why I think that is, but for now let's just say they are. Here's their deal:

Funding roughly $15k - 120k
No royalties
Single player game (for now)
Adult Swim owns IP

At the time we found out, all we knew was that Kongregate was sponsoring games. Now, everyone can be sure that funding is available. Check out these recently-announced stats:

Funding roughly $20-100k
70% royalties
Game must support a community
Period of exclusivity (1 year?)
Developer owns IP

So if you agree with the matrix above, getting funding from Kongregate for a premium game is a no-brainer. We've decided to give that avenue a shot; we'll give an update soon on how that's going; suffice to say for now, it's going well. However, Adult Swim is still a good option for getting started. You're getting paid to make a game, after all!


Grassroots Gamemaster said...

The industry needs to let go of the notion that indie game designers should be getting involved with making game companies. It's not their job. They should be doing one thing and one thing only: designing games.

torncanvas said...

Thanks for your input, gamemaster.

First of all, I should make it clear that we started designing games first. Eventually though, for instance right before money comes in, the company thing has to come into play.

Unfortunately for us, and whoever else is making games as a group of more than one person, we don't really have too much choice. We want to make games all day long, and that means getting paid for it. We could just not form a company, and get paid as individuals. However, legally most people agree that's a terrible idea.

Forming a corporation/LLC means you get limited-liability. Plus if more than one person works on the game, it's a really, really good idea to make sure the company owns whatever IP is created.

Two of us in the group have even experienced first hand the pain that can result of ignoring the business side of game development. We took the "make the game first" approach as students while working on a game. The end result was that out of the 12 people who started working on the project, only 4 stuck together (not the same 4 as Intuition) in the end, and the game was never finished. Now technically, all 12 people could say they own a part of the game. But not everyone worked on the game the same amount; how much does each person own? Many abandoned the game to get jobs elsewhere. Do they get a right to claim ownership? What would happen if the development of the game started up again? Who exactly owns it? The whole thing is a mess.

We just want to make games, too. But we want to work on them all day long, and we need to pay the bills with that work to keep doing so. I just wanted to help out those who are in the same boat. Maybe there are some talented people out there who are looking for a way to make games and pay the bills. Hopefully, this post will help them to see one perspective on the matter.

Greg said...

Yes exactly. At first glance it seems contrary to the process of developing games to take time to form a framework and agreement with all parties involved but it's very necessary, per Josh example above.

In a perfect world we could just work all day without worrying about the business side, and believe me I think we'd all agree that would be awesome, but the reality has come back to bite more than one of us, so it's for the best.

Besides, once the company is created, the rest of the business side is simply maintenance. Probably the same amount of maintenance that anyone would care to deal with on their own personal finances regardless of involvement with a partnership or not.

These kind of decisions aren't so black and white as we'd all like them to be, and short of a genius-grant, we and many others to come would do well for themselves and their future to form their own LLCs.