#gamesfund

The Screen Australia #gamesfund workshop stopped by in Melbourne yesterday, and a whole bunch of interested folks had a chance to make their voices heard in how the fund should be allocated.

In truth, it was probably more of a brainstorming session than anything else, often veering off topic – sometimes slightly, sometimes into bizarre territories. This is of course what brainstorming is all about, and it was great to see such enthusiasm and hear a raft of different ideas, and to see such a wide spectrum of the industry represented.

The question that the workshop seemed to be trying to address was – “What is best for the Australian games development industry long-term? How can this fund make a meaningful contribution to achieving that?”

The front-runner answers seem to be prototype funding, production funding, and enterprise funding. Nice buzzwords, but what do they actually mean, and how appropriate is each for this industry?

Let’s start with prototype funding. What puzzled me at the #gamesfund forum was that no one questioned what prototype funding means, nor was it ever really defined. Prototype can mean anything from “proof of concept” to “vertical slice” – and these two ideas are extremely different.

A vertical slice of a game is a small chunk of the game, fully complete. In other words, exactly what the final product will be, but much smaller (maybe a couple of levels). Building a vertical slice requires most of the tech code for a game to be fully complete, the gameplay mechanic to be fully fleshed out, and a fair amount of game code and art. As you might imagine, this adds up to a decent percentage of the overall time and budget of the game – probably anywhere from 30% – 80%. The goal of a vertical slice is almost always to secure interest – whether from financiers or the press and general public. Five or ten years ago, it was an appealing model to build a project to the point where a publisher could take over its funding and promotion. These days, however, publishers prefer not to fund development, and instead act as distributors, buying the rights to the final product. So vertical slice funding is not enough any more, and indeed the net result is likely to be sending the poor developer off to end up in years of publisher hell.

A proof of concept is much simpler. This can be a demo of entirely placeholder art, possibly no sound, which only shows the gameplay itself. It proves that the game idea is fun, and worth pursuing further. Proofs of concept are an essential part of game development. But they do not warrant being funded by the #gamesfund. A proof of concept costs virtually nothing to produce, other than a little bit of time, and has no guarantee of any concrete result at the end. It is pure speculation. It is extremely high risk. The #gamesfund has no place funding high risk ventures. Frankly, if a developer is unwilling or unable to spend the time and minimal effort internally vetting unsatisfactory game concepts, it is not mature enough for the #gamesfund. The core business of a good game developer (and good game designer) is being able to sift through the dirt to find the gold.

Enterprise funding seems to potentially have a broad definition. One aspect of it is “slate funding” – where the company would be funded for a certain period of time to work on a number of projects at various stages of completion – kind of like many production funds in one. If any of these projects are at a stage prior to proof of concept, I would have the same reservations as with prototype funding. However, there may be merit in freeing a developer to work on several projects should they be at the right stage and have the capacity to bring them to market. I would temper this by agreeing with what Steve Fawkner said in yesterday’s forum – “(smaller) developers should not be developing more than one project at a time, as this is when the quality drops”.

In its more traditional form, enterprise funding is broadly about putting money into a company over a period of time to help it through a transitional growth period. To use it for this genuine purpose, there are not too many Australian companies that I think would legitimately benefit from this – maybe a handful. My concern around enterprise funding is that a more cynical person may view it as a way to prop up a company in the midst of a tailspin.

Selfishly, I like the idea of enterprise funding – both slate and the more general version – for Endgame. It could certainly help us achieve our goals for the next few years faster. But this is about what’s best for the industry, and the reality is that almost every single developer could benefit from having funds injected to steady their cash flow. Therefore, I think it would be difficult to choose a candidate for enterprise funding and have it be transparent to the industry why this company was selected above all others. It is also likely to represent a significant chunk of the fund – and I think I’d prefer to see at least 10 – 15 companies funded per year.

Finally, there’s production funding, or funding a good game idea to completion from whatever stage it’s currently in. I think this is a great idea, and in my view where most if not all the money should go. The only thing that will drive the recovery of our local industry is strong original IP, Australian manufactured and Australian owned. It creates jobs, it trains workers, it brings in export revenue. At the end of every project, there’s a tangible benefit to the country and to the fund – a game that is ready for retail. That is a huge benefit to the company itself and the broader industry. Even if the game is not a hit it should still generate decent revenue and, as long as it’s critically well-received, will significantly advance the profile of the company and the Australian game development industry. And who knows, maybe the game will be a hit.

One caveat to the production funding is that I strongly believe smartphone/tablet/Facebook-only games should be prohibited. The reason is that these markets are far too fickle and hit-driven. To generate sustainable revenue from an iOS game, with few exceptions it needs to be in the top 20 for months – a virtually impossible feat these days. In traditional game markets – PC, console, handhelds, even a moderately successful game is likely to generate similar revenue to an extremely successful iOS game. I’m not saying iOS should be prohibited entirely, but that any project with iOS should be a multi-sku project, also targeting PC/eShop/XBLA/PSN, to mitigate the risks involved in smartphone.

To me, risk is the key word for the #gamesfund, and specifically how to minimise it while still producing tangible outcomes for developers and the industry. High risk ventures such as proof of concept funding and smartphone/tablet/Facebook only funding should be avoided in favour of funding strong games that have parallel objectives of not only funding the game itself but advancing the studio along its strategic path. The #gamesfund is a wonderful opportunity for our industry to drive its own recovery – let’s do what is best for our industry at large and not allow ourselves to repeat the mistakes of the previous years.

What do you think? Which option is most likely to better the entire Australian industry? Tweet #gamesfund or directly to me at @GrantTheAnt.

12 thoughts on “#gamesfund

  1. Hi Grant,

    Great to see your thoughts on this. We have different business models and it’s interesting to hear how you perceive these funding models.

    I was right behind you until you got to enterprise funding, and then your comment about iOS really threw me for a spin. Here’s what I feel is missing.

    You have misunderstood Enterprise Funding. Slate funding is to take projects to release. I know that much for certain. Furthermore companies with a slate of games that are ready to make (ie beyond proof of concept, beyond prototype) would be much more likely to be recipients than companies asking for enterprise funding to explore and prototype for 18 months. I’d say the later would never get it personally, but I may be wrong. Either way it’s definitely to get titles to market. It’s also meant to be for studios who have the capacity and opportunity to make money from several types of investments, potentially simultaneously. For example diversifying your spend across taking an already successful title to new platforms/adding IAPs… whatever, as well as spending on making new IP, and the idea of supporting growth for contract work was mentioned.

    I believe your comment about iOS is an outsider POV. We’ve been in the Top 10 apps in America for one hour in our entire history, and stayed in the Top 100 for no more than a week at best. Yet we’ve sold 750,000 copies at $1 or more. We’re not the only Australian example, look at Epoch, look at Gesundheit, look at True Skate, look at Cube Men. I could name many more Australia studios who aren’t sticking to the Top 100 permanently, but are making enough money to survive, and I consider them a success. Ruling out the App Store because its competitive is laughable since the point of Enterprise funding is to get Australian companies competitive…

    Your spot on about the difference between proof of concept, you missed the mark on the funding models.

    Simon.

    • Thanks for the clarification on slate funding Simon. In this case I think where the projects are beyond vertical slices it seems reasonable (providing the projects are good of course!). However, if any of them were at a stage prior to proof of concept I’d have even more reservations about this scheme. A lot of my reservations around enterprise funding is that we’re probably talking about a serious chunk of the cash – and it could be disastrous if invested unwisely.

      Interesting stats about iOS – although I was aware of much of this (I’m not that much of an outsider :)). I think in the few cases where a studio has proven success on the App Store (genuine financial success) it would warrant investment in another of their products. I think you’d probably acknowledge that most games developed purely for smartphone would be lucky to make even a few thousand dollars let alone enjoy the success you guys are having on Train Conductor. I’ve seen so many good products on smartphone go nowhere, through no fault of the developer nor their marketing strategy. I stand by my comment that the App Store is very hit driven compared to other markets – and this makes it a much higher risk proposition – unless there are specific factors in play such as the studio already having success and therefore a following.
      If the fund permitted multiple production investments for a company in a single year, would this address your concerns? I think I’d prefer this because each project would be evaluated on its own individual merits.

      • Yeah prototyping is a waste in my opinion too. I think that’s a general consensus, except for maybe student outfits? Not sure.

        Look you’re right, not every app will make money on the App Store. Most never make more than $1000. We witnessed that on our first app. But the games industry as a whole is hit driven. Look at the Wii if you want the worst example outside the App Store.

        I think the fund would allow for multiple production investments for a single company in a single year if they had the capacity, talent and right projects to do so. But then why wouldn’t you want Enterprise Funding with one lot of paperwork for your multiple projects? The advantages are obvious in that scenario.

        • It’s true that there are other markets outside of smartphone that don’t do well. In fact, when you consider the industry at large, there are plenty of them. What I’d like to see more of is people do due diligence about which markets and platforms hold the best opportunities. This is one aspect of the fund that could be useful – to help projects/teams transition across to more viable markets. Markets change, and there are certainly markets that are far less hit driven right now than the App Store. Do you think you’d enjoy the same success with Train Conductor if you guys were unknown right now and launched it today?

          As for enterprise funding, I’m wondering what level of funding would be useful for something like this as against the track record of the company. Because as I understand it now, the concept is rather than “this game is great” as in production funding, it’s more like “this studio is great”. I think it makes sense as long as all the projects that the company intends to work on are disclosed and evaluated on their merits. What happens in the case where the panel feels like one or two projects aren’t that strong but another one or two are? Maybe that’s just the risk you take in applying for enterprise funding?

          • Sorry to spam your comments, but I keep finding things I want to comment on :)

            I don’t think the selection panel at Screen Australia want to position themselves as the king makers, and I think there is a strong sense of letting the companies do what they do best. Ultimately, it is the market that decides whether an idea has merit, not an evaluation panel, so Screen Australia picking and choosing from a company’s slate of projects is unlikely to happen.

        • I agree that the entire games industry is hit driven, no matter which platform you look at. This is an entertainment industry after all.

          I do think, however, that success can be judged in many ways. The goal of the games fund is to create a sustainable and profitable games industry in Australia. For a lot of smaller indies, you don’t need a Fruit Ninja level of success to be sustainable. If you are smart about your scope and your budgets then you can create quite a successful business without ever entering the top 100.

          I feel that the longer these indies can stay alive and the more content they produce it will only be a matter of time until we get the next big success story.

  2. I agree that prototype funding is pointless, for the reasons you pointed out and more, but I disagree with your take on enterprise and project funding.

    All forms of game development are risky, and there is no way anyone can predict a hit. We can use our past experience to guide us, but no one knows what the special sauce is for creating guaranteed hit.

    What enterprise funding should do is provide a company several rolls of the dice so that they can find that hit. I don’t think it should be as simple as a blank cheque, but it needs to give them the confidence to try new things, generate new IP and grow their studio without the risk of a single failure bringing down the company.

    For me, per project funding fails for the same reasons that prototype funding fails; it puts up barriers where you need to stop development while you wait to see if your application was successful. If you were trying to recruit staff around that kind of stop/start, yes/no/maybe process you would find it really difficult!

    The goal here is to create sustainable games businesses in Australia. Project funding my create successful games, but that doesn’t necessarily mean a thriving industry.

    Enterprise funding, done correctly, would provide a business with a predictable cashflow, allow them to complete multiple projects, and allow them to hone their internal processes so that they create a profitabel, sustainable business.

  3. Well said Phil. My thoughts exactly.

    And that’s exactly where we’re at. Predictable income would mean we could invest much smarter than living month to month. And our experience with government funding by project has been that we apply, we finish making the game, we sign, we release the game, we get paid. There’s many months in between each government stage and it doesn’t give you money to fund the development of the game when you’re in the heat of it.

  4. I agree entirely with Simon and Phil, I think that you misunderstood the purpose of enterprise funding. I don’t think it was necessarily covered very clearly in the forum per se, but in talks with the Screen Oz people both before and after it is pretty clear that enterprise funding is more about giving some medium-sized studios the stability they need to be able to grow more quickly than they would be able to otherwise.

    Also, I think that your comments iOS/handheld stuff is simply wrong. As a studio that does multi-platform development I can say without hesitation that the best games are going to be games that target a single platform and cater to that platform’s strengths and target market demographic. Games that work the best on mobile/handheld generally don’t work very well on desktop/console. Similarly, games designed for console are often super shitty on PC and vice versa. There are exceptions to this, but because the player interaction mechanics are so different from mobile to console to PC that it is a bit crazy to think that you are doing yourself any favors by trying to stretch a game mechanic across all platforms.

    I would actually be less likely to support funding a game that was trying to be across such disparate platforms from the very start. Too many design considerations pulling you in opposite directions.

    And to add to what Simon said about sales on mobile, our games rarely crack the top 100 mark in RPG let alone ‘top games’ but we target a small but active niche who are incredibly loyal. We don’t ever need to get into the top 100 to keep our numbers up. (though I wouldn’t be opposed to that :-)

    I do agree that we shouldn’t fund mobile/handheld to the exclusion of all others but the fact of the matter is that iOS/Handheld is a huge market with very active niches, and if you can find a niche and service it then you can make a fine business out of that.

    However, I totally agree that prototype funding is a waste of time. The business model of: build a vertical-slice to get publisher funded development is dead.

    • Thanks for the feedback Ben. I’ve updated the post to reflect Simon’s clarifications on slate funding, hopefully it’s more on-base now.

      I’m not sure I follow your thoughts on multi-sku games. Many developers are making a lot of money in putting their games on multiple platforms. Why would you want to exclude yourself from potential revenue streams? It lowers the risk across the board and increases revenue particularly in project gap times. I’ve spoken to a number of iOS developers looking to use our services to get their smartphone games onto other platforms like 3DS, PC, XBLA/PSN. It does make sense.

      I don’t think you need to let it pull you in different directions. You can identify your lead SKU and put your creative direction behind that, and as long as you’re open to the idea of other platforms, they are revenue streams that can be opened up down the road.

      What platforms is the Game Book Adventures on now? Seems like it could fit on numerous platforms without diluting the player experience? Personally I’d be much more likely to fund a proposal that had considered the full potential exploitation of an IP.

      With iOS, there are probably a handful of studios succeeding in Australia to various degrees, and understandably they tend to be the ones that are most vocal in support of the platform. What do you think of the many other developers that have released iOS games in the last few years in Australia? My experience from talking to them is that very few are successful (i.e. they make about $100), yet quite a lot have decent game ideas that have been executed quite well. In these cases do you think you could have predicted their failure? I certainly could not have, and on a different market, a good game means at least some success, insofar as it seems a lot less volatile about the revenue that a project will bring in. So my point about smartphone projects is that they’re entering a highly volatile and saturated market, and personally I’d prefer for them to have an exit strategy if their idea is good but fails to rise above the noise on the App Store.

      • For me, it’s a question of how much funding there is available and how widely you want it distributed. Multi-platform releases are more complex and more expensive, so if they were to be funded by this grant, there would be less successful applicants. Personally, I would rather see more releases, targeted to single platforms than fewer releases on multiple platforms.

        If a game is successful on iOS, Xbox or whatever, then the question about porting to other platforms is moot; the money is there and the market is proven. If your game is a flop, it doesn’t matter how many platforms it is on.

        Any requirements that prefer multi-platform projects aren’t increasing the chances of that game’s chance of success, but they are adding additional cost and complexity to the development.

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