An Intro Series into starting a video game-based business venture
(Queue “Flight of the Conchords – Business Time” as background music)
In all seriousness though, the planning, set up and management of a full fledged business is probably the most pivotal part of developing a successful video game franchise, and yet is an area that is often overlooked or misunderstood.
In the next few articles I will be discussing what is needed to successfully set up a video game business, tackling everything from creating a business plan to pitching and acquiring funding. It’s important to know that we are based in the U.K. so some of the specifics mentioned regarding setting up and running a company will not be relevant to all readers, however as much as possible I will try to avoid using nation specific examples and information.
So where to begin?
First off, this article is about the business side of video games and not the design side, so for the purpose of this article we will assume that you already have a game design and a team capable of developing the game. In this first article we will discuss the importance of research and the planning stage of business concepting. Following articles will deal with the specifics of where to find useful business intelligence, how to create a business plan, and how to deliver a successful pitch that is tailored to your pitch audience. Finally we will discuss the various funding and publishing opportunities available to developers in 2017 and how to acquire it.
Ok, so you have a great game design idea, and you have assembled a team. Better get straight to development right?
And this is probably the single biggest mistake that startups make. In absolutely every sector jumping straight into development of a product before doing some form of competitive analysis, market analysis and project scheduling / budgeting is pretty much corporate suicide.
Over the course of this article we will look at what first steps every developer should take when starting a project or business idea, how to go about developing a business plan from concept through to pitching, and a rundown of the many different finance options available to independent would-be start ups. Finally we will look into the many nuances of running a financed project, and (hopefully) how to avoid running out of money before the project is finished.
Why you should know things
Think about it like this; you’re going to invest a serious amount of your own time into the development of this product. It’s likely you’ll also have to invest some of your own money in some form to get the project off the ground too. Rushing straight into development would mean that while you will get the project developed faster, you’re also making the project have a higher risk associated with it from the get go.
Tip #1: “Known unknowns” are unacceptable if you want to run a business.
You might be thinking, what is a “known unknown”? Well when you attempt any project, you have “known unknowns” and “unknown unknowns”.
Known unknowns are the things that you are aware of, but have no data on. An example would be player spending habits. At the start of the project you know that players have a chance of spending money on your game, but you don’t know how often or how much or how many people or what gender they are etc. So you know that you do not yet know this information.
“Unknown unknowns” on the other hand are the things you could not foresee would be important information and is unknown. An example might be that in order to implement a certain feature, you need a piece of software you currently do not own. You couldn’t have known this until you began research & development on that feature. So it is important information that is unknown, and you do not know you need to know it.
Naturally, it’s pretty much impossible to prepare for “unknown unknowns” aside from having a solid risk management plan.
But you’re “known unknowns”? Well this is where a developer’s best friend and worst enemy comes into play: research.
The power of research
Tip #2: Always research everything before attempting a project / business idea. It makes no sense to begin a project with potential pitfalls ahead that you could have foreseen.
And this idea of starting every process with research absolutely is important in the game design side of development too. Discovering important information about your target audience for instance will likely influence the design of your game. Maybe you were making a dark fantasy hack and slash game but discovered that the primary players will be younger than expected. Having that knowledge allows you to adjust your game design to fit the audience, therefore boosting your product’s potential to connect with the target audience and (hopefully) maximise sales at release and post release.
Which leads me onto Tip #3: Design the game for the player, not yourself.
And Tip #4: Know your target audience.
These are pivotal if you want to have a successful release. Assuming that you understand the target audience because you yourself are a gamer interested in the genre is absolutely not a reliable and generalisable way of estimating target audiences.
More often than not, the target audience are drastically different from what you’d expect, both in terms of demographics and in terms of behaviour. Assume nothing, research everything.
Before you start any market research, it’s a good idea to have a good idea of the project in terms of what is required to get it off the ground, both from a financial and a technical standpoint.
Technical Analysis – this is research done into the technical limitations and requirements of the business / project. Usually in this section you would describe all of the game-play and engine mechanisms required, as well as any software or hardware required.
Financial/Budget Analysis – this is a breakdown of potential spending, with research done into the costs incurred by competitors as well as revenue. Its best to do this section after completing the technical analysis, as its much easier to break down a project into time and monetary costs when using the technical breakdown of the project as a “shopping list”.
Target Market Analysis
Once you have a good idea of what would be involved to get the project off the ground you can start to define characteristics and feasibility of the proposed project using market analysis. Market analysis is an umbrella term for any research that is performed with the aim of achieving a better understanding of the market targeted by the business venture. Usually there are a at least two key components:
Competitive Analysis – this is research into the major competitors to your business and/or product. This is important as the maximum and minimum market performance can be estimated based off the back of this research. Usually this is done by taking a sample of games that are similar to the proposed project, gathering stats about them and analyzing those statistics to spot trends. The larger the target sample, the more generalisable and reliable the trends are.
Audience / User Analysis – Research into who the likely target audience will be, as well as their spending habits, product usage habits and any socio-economic metrics that can be ascertained. I usually use the competitive analysis to start and guide the audience analysis, by first analyzing the audiences of the competition.
Tip #5: Learn by doing not by reading
I am well aware of the fact that this information is difficult to process without examples, and we have only hit the tip of the iceberg in terms of how much there is to learn in order to develop a comprehensive business plan, and that is why part 3 of this article series will provide real world case study and examples of market and project analysis, as well as a detailed step by step guide on how the research was gathered and how you can undertake similar research for your own needs. After that we will construct a business plan for the same case study step by step, including an accompanying pitch presentation and financial plan, and hopefully by the end of the series you will have all the tools you need to begin your own venture.