Episode 57: Video Games and Money

Topic: Video Games and How to Make Money

As a follow up to last week's discussion, Mom wondered how people make money in video games, and being the clever nerd that has actually spent along time in the meta narrative on Video Game creation and process, I came back with some information to offer.

What does it cost to make a Video Game?

This namely depends on the complexity of the game.  A game with Side Scrolling or 2D graphics will usually cost less than a game with 3D graphics.  But the nature of the game’s content and desire to fulfill it is also necessary.

Staff
There are a core number of elements you need to make a game:
Game Designers

• Basically the person who designs the world, mechanics, and fun of a game

Programmers

• Individuals that make the Game Designer’s vision possible via programming and developing tools or systems for the game

Graphic Design and Animators

• Video Games being a primarily visual media, requires people who will be able to create characters, worlds, and animate them in a game. It can also include menus, UI layout, and ensuring the game’s information is easy to understand

Sound Designers

• Every good game needs a sound track, or atleast needs to have an audio feedback to express what the character is doing, if it’s a successful fit or a critical miss. Sound Design relies on giving an audio cue to know you did something

Testers

• These are individuals who test your game to ensure that they catch bugs and errors in your game, ensuring that your game is as polished and presentable as possible. Depending on the complexity of game, they can also offer balancing and ideas to further the game.

Producers

• These are people who help keep the game in line: whether they ensure every member of the team has the tools necessary, coordinating deadlines and completed tasks, ensuring the game’s vision isn’t lost during development, being a fellow visionary on the game, and much more

Beyond that, you can have more specialized roles and staffs, including an Human Resources, Sales and Marketing, Integration with various console platforms, and so many more positions.  Some people may have varying roles or multiple roles, but these are the kinds of people you will needs, and each one will need a salary or compensation for work completed.

Technology
Most games are built in various software engines, on various computer products, and may need various tools and multipurpose libraries of useful assets or information.

Software

• Depending on complexity of the game, you may need to buy or license a game engine to run your game and develop for it, which in of itself is not cheap. Some engines are free to use, like Unity, but more powerful engines often cost in the thousands to millions to license and develop on.  This is even before the powerful computers necessary to program in.  Less complex games can get away with reduced costs.

Services

• Depending on your game, especially in an always online world, you may need local and cloud based services like Maps, weather conditions, server space for save data, or a place to host multiplayer games. Services like this will certainly require additional money, especially if your game is popular and takes off.

Templates, Libraries, and Plugins

• Most video game elements are not created in a vacuum. Everything from characters and sounds, to how they and other objects have already been built once before.  So if you don’t need to rebuild the wheel, why not buy the assets you need for your game.  Especially if you’re aiming for certain elements of game play in your game, you can buy assets online that mirror or give you a starting point to develop your own game elements, which can save more time and money down the line.

Time
All games take a period of time to make.  This will always be dictated by the scope of the game and the size of the team.  So the bigger the game, the more staff, thus more time to produce the game, meaning more money.  Some games might also have tighter time constraints, as games based off of movies might need to come out around the same time as the movie, leading to rushed game development.  Games with a smaller scope can get by with less staff, but it still takes time.

Typically, games with bigger scopes and large teams will take around 2-3 years to develop a game, as where games with smaller teams can probably take around 10-12 months.  These can be quicker or shorter depending on the game complexity and scope, along with the team working on it.
 

In Sum
Simple games like Angry Birds as an example, might cost around $10,000 to make, while games like Grand Theft Auto 5 might cost $100 million dollars or more.  Games that cost more are also expected to sell more too, so a game costing a $100 million dollars needs to sell upwards of 2 million copies before it ever breaks even.

How Game Companies Make Money:
While it’s intended that all games are built to have fun, they are also primarily built to make money.  There’s lot of ways game developers and their companies make money off of video games:

Basic Box Retail

• This is the most basic version of how a game makes money. Thinking back to the days of the 80s and 90s, where you went to a store, bought the game, and went home and played it.  Basically, the act of purchasing the game in question. 
• Interestingly, most game consoles sell at a loss in the first few years of production. IE, an Xbox 360 might retail for $399, but the same of its parts and labor to put it together might be around $500-$600.  The logic being that while the technology is expensive, most people won’t buy multiple consoles, thus locking you in to preferred console.  From there, video games themselves can be expensive, $50-$60, and can only be played on that console
• Depending on the platform it will be played on, there will likely be fees/costs associated with publishing the game on that platform. Major Gaming Consoles like Playstation, X-Box, and Nintendo will take a small portion of revenue to be able to be played on their systems, but your game will certain reach a wide market.  Platforms like computers may have platforms like Steam who help sell your game, but take a portion of the profits from you as a result.  If you’re on a mobile platform like Android or Apple, there’s likely a fee to be on the store.

Subscription

• This is a pay to play model, where you pay a monthly/yearly fee to play the game. The game itself can have an entrance fee to purchase the game, or require you pay just the Subscription to play alone. 
• These are typically games that are intended to be played for over several months/years. These are also games with social aspects, whether working with or playing against other players.  Typically any game with online play will require a subscription.
• Major consoles Xbox, PlayStation, and Nintendo all have subscription services as well to be played to play online with their games. Namely since these companies host the servers connectivity with the games and their developers/publishers, subscriptions to play online are not unusual.  Though if you pay a subscription, you won’t be paying them additionally for each game.

Free-To-Play

• These are games which are free to play themselves, but may require that you watch/view material outside of the game, or pay to progress through it the game quicker.
• Advertisements
  • A game can be free to play, but will require watching or viewing of advertisements.
• Freemium
  • These are games that are free to play, but take a long time to progress, namely due to the gating of content or progression. The gating can be shortened or eliminated entirely by the purchase of game currency or unlocks, allowing progression of the game to continue.
  • Games that rely on this model are looking for gamers they term as ‘Whales’. These are games that will spend lots of money to unlock, progress quicker, or collect rare items in the game.  These are the type of people who will spend hundreds or thousands of dollars on game.
• Free-To-Play are more common amongst mobile games.

Advertisements

• Game development can be expensive in and of itself, so some times game developers offer to include Advertisements in their games. It can a few different forms:
• In-Game-Advertisement
  • Some games may have advertisements built in the game’s world. EX: Grand Theft Auto 5 has some billboards that change throughout the year to advertise new stuff in the real world. 
• Product Placement
  • Because development can be expensive, some games may use Product Placement to help fund their game. EX Sonic Adventure 2 had a Product Placement  with Soap Shoes, which is seen on characters and developed a rail grinding element in the game itself.
  • Most games use fake or ‘Greek-ed’ names for items. IE  It’s not Coca-Cola or Pepsi, it’s just ‘Cola’.  But some Product Placement may request their items in the game, like cars or locations.
• Sponsorships
  • Some games may ask for a sponsorship detail, making it so it’s a preferred game and help with the advertising and marketing of a game. As a result of the company spending money to promote the game, they’ll take a portion of the revenue as well.

User Data

• More common, especially in Mobile Game markets, companies can collect information about you through your phone. They will always mention this in their term of service, but they may collect information on your play habits or even reference the kind of websites you visit.  This data can then be sold to marketing companies as a way of targeting their advertisements in the future.

DLC (Down Loadable Content)

• Typically games with lot of varied items, characters, or content will have DLC. These are usually additional offerings that are not required to play the game, but are purchase-able as a way to enhance or offer new content to a game.  This content can include:
  • Unlocked characters – either new characters or ability to unlock character right away
  • New levels/modes for games
  • Unlock weapons or skins for characters or models
  • Releasing future content of the game – IE, in a chapter based story, the next chapter
• DLC has been seen in big games, as a way to add additional content to the game without releasing a new game. Typically this offers additional content to the game that isn’t included in the base game.

Currency/Unlocks

• Similar to DLC, these are often means to unlock content included with the base game. These are typically used as ways to bypass restrictions or content in a game so that you can progress through it quicker or easier. 
• Example might be unlocking all character in a fighting game, rather than progressing through a story mode to unlock them.
• It might also be a unique currency in the game that allows you to buy the best weapons or abilities in the game, so that you can progress through the game quicker, or make it easier to do so.
• Another names for this is ‘Micro-transactions’ 

How can Gamers Make Money?
Gamers themselves have opportunities to make money off of video games.  In most cases however, the game becomes less about having fun, and instead become about offering/selling a product rather than enjoyment.

Game Testing (Quality Assurance/QA Testing)

• Gamers are in a unique position to Test Video Games, as they’re familiar with games themselves, they can be useful in understand how stuff works and doesn’t naturally, along with being able to explain it easier to a bug reporter.
• While you don’t have to be a gamer necessarily, understanding the logic and inherent controls of video games is a big plus.
• While most people think you might get paid to play video games, what you’re actually doing is testing elements or parts of a game for potential bugs and oversights. Typically, these are unfinished and/or unpolished games that need someone to go in and find where the problems are.  Depending on the game, as well as the culture, some testers will work long hours and overtimes, with some working 10-16+ hours in a day, as well as weekends. 
• The pay model will differ for varying game companies and vendors, with bigger companies offering more pay typically.
• Great webcomic and stories about this found here: http://trenchescomic.com/

Youtube/Twitch

• A popular model of revenue for people is playing games online for the enjoyment of others. This is often seen live via Twitch, or recorded sessions via Youtube, which some Twitch broadcast often uploaded to Youtube. 
• A majority of these channels that do well offer a unique experience. It can include:
  • Playing a game with commentary or discussions about the game and/or content
  • Playing online against other people, testing your skill against theirs
  • A play-thru of the game, intended to show your progression through the game.
  • Playing Online with friends or fellow games, usually requiring everyone to be able to communicate together
  • Performing unique play-thru. IE Speedrunning, or playing a game with rules, limits or criteria. 
  • Developing or crafting housing/worlds, Minecraft.
• On Twitch, people viewing the content are often asked to subscribe to the channel to help pay for the content, or can cheer for the channel with Bits, a one-time gift of money in the form of a Twitch based currency.
• On Youtube, people viewing the content will be asked to watch the Youtube ads or asked to support via Patreon
• In either case, subscribing via Twitch or through Patreon will gift the viewer with unique rewards or perks, such as chatting in chat, call out in the video, special emotes or emblems, or more depending on the channel
• Popular channels can make millions of dollars a year, however most channels do not make a lot of money, perhaps $10,000 to $40,000 a year depending on their frequency and content.
• Before you can start making money, you need to show either Youtube or Twitch that you have regular/routine broadcastings, you have a certain amount of viewers, and some other criteria. Once meeting these thresholds, you can apply for Partner Status and receive money from your content.
• While it can be lucrative for some, for most it is not. With so many people posting and streaming content, it can be hard to get noticed unless you’re either already popular, or you have a unique experience you’re offering.  The more unique, the better to make yourself stand out.

Tournaments/eSports

• Some games can be played professionally, especially multiplayer games. Tournaments offer the opportunity to show your skill and talents, with the best players taking home money.
• People who play in Tournaments often are people who do it full time, playing the same games frequently and often in order to build skill, tactics and strategies, along with understanding of the game’s mechanics and limitations. This is treated a profession at this point though, with only the best typically making money. 
• eSports are a natural progression of Tournaments, which sees sponsorships taking over potential prize money.
• You don’t necessarily have to be masters of these games though. You can play host to the eSports, offer commentary on matches, Act as a referee, or help with the marketing of a league, team, or tournament.  Advanced knowledge of these games are required through, so you can’t just walk in to it.
• Most of the players for eSports and Tournaments are usually already using the Twitch/Youtube model of making money, and are actually discovered on those platforms by potential sponsors.

Farming In-Game Currency/Services

• More unique to MMORPGs, people will play a game to collect the in-game currency or items to sell for currency from a game. After collecting the currency, they will sell it through website that offer the currency for Cash.  It’s more popular with MMOs because of the ease of collecting the currency or items, as the currency is endless and the transaction can be hidden or obscured. 
• Some players will offer to farm currency for other games that offer unlock/rewards for currency. IE: Overwatch has skins that you can win via-loot boxes, or pay for them via in game currency.
• There are some players who want to play with high level players, and thus will pay another person to play their account to unlock later levels/content, or improve their ranking or level so that they can be match up with higher level players. Some people may just start accounts, level them up, then sell it on eBay or websites, though this is frowned upon by gamers and game developers/publishers, often being against the terms of service.

Journalism

• A way to monetize your game play might be to do so as Journalism. Posting reviews on games you have played or unique commentary on you experience with it can be rewarding.
• Much Like Youtube/Twitch model, there are a lot of people out there trying to do this as well, so it can be difficult to get noticed or being to make money off of it without having a unique hook or reason for people to read.
• Blogs/websites, including Youtube, offer a way to express your thoughts and opinions easily.

Other people who Make Money off of Video Games
Re-selling Video Games

• More so with older games, and less so with more recent, older games can fetch good money, especially if they were popular at one point. Collector’s editions or special type of games fetch more money than others.
• Retail outlets like Game-Stop purchase used games and consoles, reselling them for more than bought in order to make money on them.
• eBay and other online auction outlets can be a good place to purchase and resell gaming media.
• People who can repair old systems are highly valuable as well, as people who can fix older consoles are becoming fewer, along with replacement parts becoming slimmer.

Video Game Merchandise

• While you can’t reproduce copyrighted material, you can pay homage to them. Websites like Etsy and eBay offer to sell gaming merchandise for people.  This can include one off bags or accessories, cosplay and props, along with trinkets and home furnishings.  It’s not unusual for people to take their love of gaming into crafts and create stunning objects for collectors.