Note: This is the second post in a series. If you’re new, start with the intro post.
Since its birth, the videogame industry has been going through 4 phases. Let’s have a look at them.
The First Era of the video game industry began in the first half of the 1970s, with the introduction of Transistor-Transistor-Logic-Circuits (TTL). During this phase, the market was still virgin and there was hardly any competition. Video games were created with Electric Boards, and their developers were usually electrical engineers, who possessed the creativity and competence necessary to program the boards.
The Second Era started with the introduction of microprocessors. Of the four, it is the longest era (I date it from the second half of the 1970s to 2013). In this phase, the creators of video games were mostly computer programmers, artists, and designers. The instruments used to develop a video game were programming languages and proprietary game engines (mainly used by medium and big companies).
Competition started arising in this period, and the successful video games were those able to create new categories. We will talk in depth about this concept later.
The Third Era started in 2013 with the arrival of video game editors (in primis Unity and Unreal), and with the establishment of digital distribution platforms (Apple Store, Google Store, Steam, PlayStation Store, and others).
During this phase two major changes have occurred:
- Developing a video game doesn’t require to be an expert in programming anymore.
There are tools such as BuildBox and GameMaker that provide all the necessary abstraction with which one can develop a video game. Professional engines like Unity and Unreal have plugins that allow you to create a video game without any knowledge or competence in programming. Good examples are Blueprints for Unreal and Bolt for Unity.
- Engines and distribution platforms have brought another and more important change: the lowering of the barrier for development and distribution of a video game.
Not only it is much easier to develop a video game, but it is also easier to distribute it.
These two changes have provoked a market saturation and a war of depreciation without precedent.
Take Steam as an example. As you can see from the above graph, from 2013 the average price of a game has gone from US$9.99 to $4.99. Basically, a reduction of 50%.
A similar situation has occurred on Apple Store. Games initially became ‘Lite’ then, with the introduction of “Game As a Service” business model, completely free. And with the new Apple Arcade subscription service, the future doesn’t look good for independent game developers.
Within the contours of a larger marketing strategy, free games can be a very powerful weapon with which a company can fill up with cash. However, it must be a clear and well-defined strategy, otherwise a bloody and competitive downward battle towards lowering prices will take place, bringing advantages only to big companies. In the next articles, I will show you some case studies on the topic.
A war on price is substantially an example of bad marketing. In this blog, you will learn how to overcome such burdensome problems and avoid your software house bleeding to death.
As if that weren’t enough, in 2018 we entered what I define as the Fourth Era of the video game industry.
The Fourth Era: Blood and Pixels
We are currently witnessing unprecedented change.
The major video game developers have realised that producing a game with good graphics and original gameplay is no longer enough.
Since creating a game that sells is becoming more and more difficult in an over-saturated market, many software houses have decided to use their brand name to set themselves up as publishers, in the hope of remaining in the game.
What does it actually mean? It means that big software houses have started to shift entrepreneurial risk onto indie companies.
In general, publishers accept to publish games that are completed and potentially successful. Publishers also usually ask from around 30% up to 50% for publication and distribution of a game under their brand.
They will try to convince you that it is better to publish with them because they have more experience and the right contacts to make your game successful.
But at the end of the day, what is left to you and your company? Only crumbs.
Let’s do some calculations:
- Do you use an Engine developed by a third party? Almost certainly, you will have to pay royalties or a monthly subscription.
- Are you distributing your game in a store? You will have to pay from 12% to 30% of royalties to the owner of the store.
- Do you use a publisher’s services? You will have to pay, as already mentioned, from 30% up to 70%.
You are then left with 20%, maybe 25%, in revenues, from which production costs must be detracted.
Do you think this is fair?
After all, you are the one who took all the entrepreneurial risk and made sacrifices. You spent a fair amount of time at your computer, maybe also doing another job, depriving yourself of time with friends and family.
The reality is unless your video game has been designed with a careful analysis of positioning, no one can guarantee you it will sell and be successful. Why do you think many publishers decide to reduce the price of a game by 30%, or even up to 80%, only a few weeks after its launch?
Marketing is no longer something to start doing after the game has been completed, but the fundamental first step a video game company has to take in order to succeed. Marketing is now the company tool for producing a successful video game. Today, those who know how to do marketing take the biggest slice of the cake hands down, leaving the crumbs to the competition.
The Truth about publishers that you are not told and that will save your game
Your video game is a flop because you have no experience in Marketing.
You put yourself in the hands of a publisher, and you have no clue whether they are doing a good job or not.
Marketing cannot be blindly left to others. You need to study Marketing, otherwise, you won’t know if what they are telling you is true or not.
Your Marketing decisions (that is, finding your positioning, choosing your target audience and your distribution channels) cannot be empowered to external sources (publishers).
Now, listen carefully to what I am about to tell you: the business interests of a publisher are not your business interests. Publishers are interested in publishing as many games as possible under their brand. They are interested in selling their services (to people like you).
What you pay a publisher, whether in terms of royalties or lump sums, is part of your costs. These costs are part of your investment and should have a return.
If you are using the services of a publisher, ask them to:
- Measure your returns.
- Understand from which platform or through which advertising campaign new players arrive (if new players who download or buy your game do arrive).
- How much return you will have for each dollar/euro/pound spent on their services.
- How much it will cost you to acquire a new player.
These are your business interests!
In 99% of cases, you won’t receive a response, because for a publisher Marketing means mostly doing communication. If you knew the truth, that without a correct positioning their services are useless and you are wasting your money, you would immediately stop using their services.
The truth is that today there is no need for a publisher. You can directly distribute your video game yourself, without their services.
I have been working as a professional in the video game industry for more than 15 years. Do you know how many games I have published with an external publisher? Zero.
Those who seek the services of a publisher are either not capable of doing Marketing themselves or prefer to delegate Marketing to external companies.
Both choices will lead your video game and your game company to failure.
Who are the real video game developers today?
My mentor, Frank Merenda, use to say that an entrepreneur is a marketing expert who knows how to read a financial statement.
I say that, in the Fourth Era of the Video Game Industry, a game developer must be “a marketing expert who knows the process of developing a video game”.
“A game developer is a marketing expert who knows the process of developing a video game.”
Graphics and gaming features are no longer determinant factors for the success of a video game. These factors have become the minimum and necessary condition.
Today is essential to know about Brand Positioning, which is the most important discipline when it comes to Marketing. Without correct positioning, even the development of a prototype is useless.
In this blog, we will see together, through examples and case studies, what steps to take for designing and launching a successful video game. You probably won’t like the idea, since it might force you to revise your beliefs. But as someone once told me:
“Things are the way they are, whether you like it or not. Do you want to succeed or keep complaining like a loser?”
You have some work ahead of you and there are no freebies involved. If you think downloading a couple of Assets from Unity Store or cloning a successful video game will be enough to make money, well, then this blog is not for you.
We have no space here for opportunity seekers, only for developers with balls, willing to work hard and sweat blood to make their names shine in the Hall of Fame of Video Games.
You will be the next Minecraft or the next Monument Valley?
Buckle your seatbelts, we’re off!
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To the success of your video game.