Where could 500K + take me?

#1 Dear Joshua Scott,

Could we discuss more through emails?
My email is vice-president alivest.com

Thank you.

Yours sincerely,
Taras Aleksiienko

Alivest Software LLC
Vice President & Co-Owner

#2 It really depends. It could take you to a completed, widely distributed title or it could take you to an unreleased pile of code, artwork, and failed project management. The spectrum is extremely wide whether single-player or multi-player or massively multi-player. It is also nearly impossible to think in terms of profits because you may get one subscriber (or none) or a million at a set price-point that will vary depending on where it is purchased (through you directly, through a publisher, through a brick and mortar store).

#3 I'll go by the same as David already told you but would also add that you should REALLY be careful with who you are doing business and for what. Before you invest into something you should really take a good look on the team, the project itself and maybe first go with something more single player than mmo in my opinion because nowadays there are so many free mmos (with item shops that make a buck or two) that the competition will be very huge and subscribers will be mostly less.

WoW success was more based on the history and base of the game and the fanbase that was dreaming of such a game (even it turned to be a pile of.... you know what at the end....) with the additional promotion investment for over 200k in the first few weeks only to push the product which brought in mmo "newbies" that got addicted due to the fact that it was their first mmo ever and had no insight on others less known.

Anyway, I wish you all the best and I hope you will find something decent and some honest people to work with. :)

Should you be interested on low investment on a sci fi product you can contact me of course as well.
Take care and a happy, successful and most of all healty new year to all of you!

#4 Honestly, $500,000 isn't all that much money. You could hire 4 programmers with it, for a year. With a little bit left over for an office in a modest area, some sort of web server, and maybe even some computers and software for the actual development. Also, hoping for 100,000 users is just that: hoping. In the long run, you may be better off working with people who have experience, but want to do something for themselves and wouldn't require pay. Possibly an LLC with developers being members and one business-minded person being the manager.

Not long ago, it was a sure fire thing to have some investment capital and a big idea. As it turned out, that entire philosophy was wrong because it devalued fiscal discipline and business structure. I'm not saying $500,000 can't get you far, but if you think it's a lot of money you'll burn through it before you realize it. For a seriously alarming story on startups, money, and the gaming industry look to Alien Hominid. They were experienced developers putting their own personal assets on the line.

http://www.gametunnel.com/articles.php?id=364

Another thing to consider is that since somebody else may be interested in financing the project, he has to understand that it might not be enough and you have to understand that they will expect some control over the project. Not only that, they'll expect a tremendous amount of accountability.

#5 A developer with investor capital in his back-pocket is alot like a kid in a candy store. If you don't have experience in game development yourself you have NO IDEA what it takes to find quality help, manage a team, develop a product that will sell on an already crowded market, etc. Its extremely easy to overextend yourself and get into serious financial trouble when the bills start to pile up, your investor is looking for results and your project is only half completed after the money's run out.

Like everyone says on the forum 'start small'. Assemble an experienced team that can produce a small game, sell it and use the profits to pay back your investor AND fund the next game. Your investor will think you're a genius.

#6 Read this!!

http://www.ganked.com/

#7 It really depends on a number of factors. I looked at the market, selling big titles first, and got to know the industry and what people wanted before starting a big project that I did not have any skills in, but it does help if you have an IT and management background, as I feel that you do think more logically about things, and jumping in at the deep end, it was a steep learning curve. To get my project moving I managed to secure an investor from ebay (which was either pure luck, or I pitched it spot on and the timing was right - which seems to be the case for most things today). I then formed a good team of contractors by first finding out what they could do by examining their portfolio, and tested the water with some work on our project before getting them involved further with other work as you never know if the people in your team are a suitable match to your overall project until they have completed the work to your specifications, or if you have given them a free rein, but to a certain extent you need to make sure that the style of artwork throughout matches and it is important to be consistent. I know as a project manager/producer/jack of all trades it is key that you find someone who is reliable and capable of being hands on or can learn each part of what is required for the project in order to know what needs to get done, the style required, the budget and time frame to complete it in, and you'll achieve it. If NDAs are required, contracts signed to ensure you own the copyright to the work they do for you, also needs to be considered. For a budget of 500k this can easily be achieved, as its not always about cost, its more down to your negotiational skills, making sure things are kept on track to avoid the pitfalls, and make sure you have a backup plan (reserved funds always help) and bonuses if projects are completed on time.

My advice to you is make sure that the people that you take on are right for the project which will determine its success by covering larger ground, rather than a project staying dormant and not going anywhere at all, so a good project plan with clear goals and what is required to get you there will be your first step.

Good luck!

#8 That's a damn shame.

Obviously, this Damian guy is the type to steal the fruits of other's labor, having not a clue what was sacrificed in the process. In that article there was mention of project leads not having an intrinsic understanding of what it is they're a part of. Sadly and to a large degree that's been my experience too. Dev's out there should draft a questionaire for protential clients to fill out. In this questionaire should be questions like; Do you have a design doc? Do you know exactly what you want and how to obtain? Are you willing to sign contract's and show proof of intent before I even waste my time with you?

#9 I had heard some things about this axiom, though that link truly answered alot of questions.

#10 Thank you for that link Axiom, it was definately a clear reminder of what can happen to honest people and friendships in the gaming industry.

As to the original topic of this thread, as a few here have said, $500,000.00 is not alot of money in todays gaming industry. I've always been a bit leary of outside funding, because you never know what strings are going to be attached to that money. All I can say is, be very, very, very careful and get a skilled lawyer.

#11 When people say things like $500,000.00 is not alot of money in todays gaming industry; it puzzles me. Right here from this community we have members that have published GOOD, high quality, FUN! games for as low as $10,000 budget.

So truly here, one can take an LARGE amount of money and hire a ASS LOAD of inexperienced but enthusiastic employee's and because of bad game DOC design, mis communications and pure lack of experience, they wast the projects budget on something silly.

Like once i experienced first hand; 'COOL headquarters'(over $6000 rent a month +power and +T-line) and NEW computer systems(well over $3000 each for 8 people working on the project and 2 for the "office") with 5x the power they need for the job(Im not listing all the software they had to buy and license but that also was alot of money and each computer had ALL the software, mesh artist dont need to run compilers!). They even thought it was most important to get everyone new ERGO hardware; computer desks($500 each 8 of them) and fancy computer chairs($300 8 of them), the thinking was comfort would equal production, no! wast like this = broken company after 14 months hard work from a FEW of its employees who never made the money to equal the work they did(I took my $300 office chair, and 1 gig a RAM with me when i left without my last paycheck).

There truly is no need for this type of budget spending, sure if you have the cash spend as little extra as you NEED.

From the above example, (and im so very tempted to NAME that company, but i don't want to look petty), if that company had budgeted its cash and time much better, and focused on the GAME not the 'rock star computer game maker' attitude (grow your EGO later when you actually HAVE something to brag about!), it just might have made it 'big'. One truly dont NEED a BIG budget to build a BIG game.

#12 I'm not sure where you live, but $6,000 a month in rent is not much. Payroll for eight people alone would blow a $500,000 budget in under a year. In the older, more dreary areas of the DC suburbs, an office that fits 10 would cost about $50,000 for a year and probably smell like the 70s.

Each guy needs a decent desktop ($1,500), cheap furniture ($300 desk and shelf from Staples) and you're at a per-user furnishings expense of $1,800 (or $10,800) total. You'll need a mail server (Linux & Postfix for about $1,000), a file server (Linux, open source CVS, about $1,000), very modest networking (another $300 or so) and your IT infrastructure comes in about $2,300. A very, very modest office with basic working capabilities will be about $14,000. For the sake of convenience, we'll say it's all TGEA powered with 4 programmers ($1,200), our artists use Blender and Paint.net ($0). All told, with very kind licensing and software restrictions, our work environment now comes to a bit over $15,000. The other two guys are the producer, designer, HR, web development, internal IT, accountant, and probably read a book on business law.

Supposing all eight guys really believe in this mission and can feed, clothe, and house themselves for $30,000 per year (or about $40,000 after taxes, insurance, payroll), you will pay about $320,000 in payroll for the first year, plus $50,000 in rent for an estimated $370,000 in first-year recurring expenses. Since your revenue will be $0, your taxes on revenue will be negligible with regulatory expenses being mostly limited to filing fees, accountant fees, etc. This company's first year will eat through about 75% of the original poster's budget and most of the costs I've presented are wholly unrealistic.

You're really comparing a modest, home-built game with a budget of $10,000 to a full-blow MMO? The original poster isn't talking about making something modest. You can make a game with $10,000 and volunteers working out of their houses providing their own equipment. All told, our game project is going to come in around five thousand dollars for the budget (legal, hosting, software, etc), but nobody helping has any requirement for getting paid and they are providing their own equipment (and often their own software). The fact of the matter is that you can make simple, fun indie games on the cheap. This does not mean one could really make anything that could be said in the same breath as WOW and EQ on just $500,000.

#13 I never said anything about MMO. The above life situation took place about 8 years ago, At that time one could rent OTHER not so glamorous commercial flats for as little as 1/4 the price( think wide open warehouse).

And still i read that your missing the point, careful budgeting will you get much more return then BIGGER budget.

Also, think about it, its quite easy to take $25,000 to build a quick and dirty game DEMO exemplifying your IDEA and the fact that you know what your doing; take that DEMO and show it to the people that HAVE even bigger amounts of cash. But in this day and age; with every body having a GREAT game idea, and so many people excited thinking that THEY are going to make it BIG, how many people actually DO make it? And would you say its lack of money that pulls them down? If you say yes then you also believe you can buy yourself happiness. Being a happy person same as being GOOD at making computer games is not something you BUY. If your good at what you do it should show.

There are alot more ways to MAKE IT BIG in computer games, then with a big startup budget... $500,000 could get a clever person a LONG LONG way.

EDIT:
Oh and, my folks hardly make $30,000 a year and both of them are in the medical industry with very comfortable jobs. I just got done paying there mortgage off, and you may be thinking WHO IS THIS GUY... Im a guy that did NOT spend $500,000 to make is big in computer games....

#14

Quote:
And still i read that your missing the point, careful budgeting will you get much more return then BIGGER budget.

That's financially questionable and leaves out the budgets discussed in this thread. The best budgeting of your $10,000 wouldn't get nearly as far as poor budgeting of the top-end listed in this thread of $500,000. Skillful budgeting can produce greater results, that's a fact, but it can only go so far. At the end of the day, a software developer's greatest expense is paying their people.

Quote:
Also, think about it, its quite easy to take $25,000 to build a quick and dirty game DEMO exemplifying your IDEA and the fact that you know what your doing; take that DEMO and show it to the people that HAVE even bigger amounts of cash.

This exceeds your listed budget by 150%. A demo doesn't show a publisher that you can run a development studio. People may have a hard time believing this, but a publisher wants to know that you'll stay in business and manage your money well. A demo doesn't do that. All a demo shows is that you can make something, but it doesn't give them evidence that you made it on time or on budget. A demo proves to nobody that you can finish a game.

Quote:
But in this day and age; with every body having a GREAT game idea, and so many people excited thinking that THEY are going to make it BIG, how many people actually DO make it? And would you say its lack of money that pulls them down? If you say yes then you also believe you can buy yourself happiness.

While your on the topic of telling me what I believe, I'm having a terrible time deciding what to have for lunch. It's laughable that my realization that to make a great game, modern game requires some budget means I must think you can buy happiness. Hit me up on IM or in email to explain that completely insane leap-of-logic, it would really add some levity to my day.

The simple fact (and it is both simple and a fact) is that if you want to make a great game, you'll need great people. Great people have limited free time and substantial opportunities, so it would reasonably follow that you would have to present to them an opportunity worth their time and effort. The original poster stated in no uncertain terms that the game would be comparable on some levels to EQ and WoW, which were not made by a few guys one or two hours at a time after classes or work.

There is no logical way to progress from the fact that you can make achievable and enjoyable games with limited resources to the conclusion that you can make a game capable of supporting thousands, with large volumes of content, sophisticated AI, complex game mechanics, and varied gameplay with an insignificant budget in a reasonable time. One crippling problem with part-time game development is the time constraints and the inefficiencies introduced into a project by small work blocks. Sophisticated AI is not something that even good programmers can write with just an hour here and an hour there. Artists and programmers have a certain ramp-up time required before they can reach their full efficiency.

I'm not trying to dissuade people from making great, fun games; although I openly discourage people from even trying to make games that are completely beyond their capabilities. It's just shocking how many people think they can make these products which will require tremendous time and effort with almost no resources. Indies should initially focus on games they can achieve, which could be leveraged into generating revenue or funding for the games about which they dream.

Quote:
Oh and, my folks hardly make $30,000 a year and both of them are in the medical industry with very comfortable jobs. I just got done paying there mortgage off, and you may be thinking WHO IS THIS GUY... Im a guy that did NOT spend $500,000 to make is big in computer games....

Not relevant, because you aren't paying them. If you aren't paying them full time, then the budget would be greatly reduced. Also, I wasn't thinking "WHO IS THIS GUY"? Please stop guessing at what I'm supposedly thinking or believing, because your accuracy has been abysmal. You made it quite obvious that you weren't talking about full-time or even worthwhile part time employment when you discussed $10,000 budgets. My whole point in using $30,000 as a starting point was that it was the absolutely lowest point at which I could imagine anybody working as a game programmer.

#15 Im going to stop my side of the discussion after reading this part of your reply; While your on the topic of telling me what I believe, because its plain to me, that you already DO have your opinion of things , and thats whats great about this plaint full of people and people full of opinions, the ability that people CAN have them, and express them for free. I dont recall anyplace I told anyone WHAT to believe, oh well but believe this: Im a purple ape!

#16 For $500k to $1MIL, if you are willing to travel, you can get a team of about 20 to 40 people. If you get 100,000 subscribers multiply that with, lets say $10 a month, that's $1,000,000 gross income a month.

I'm actually working on a demo to get some financing for about $500k and this is exactly what I'm going to do. I already have contacts and I can get a group of 20 people in a short time but have to be relocate for a year or two.

#17 My five cents.

First you need to ask yourself "Do I REALY want to do this?", "Am I willing to relocate abroad?"
OK if both are yes .. your a foot in.

Next you have too decide on one of two paths.
"High risk fast money"
In this scenario you take on a big project (like a mmo, HL2 or similar). your plan is too try and get it out before your money runs dry.

"Start simple and make a name"
In this scenario you make a simple game that you can get out the door fast.
The idea behind the game is not to make profit. But too establish a name for your company.
This project only takes a few months ... and takes up abit of your money. This game can be sold too breakfast cerial companys too stick as gifts in their products (that kind of simple).
next you move on and crank up the size abit. Ether by advancing your first product .. Or by making a new, only slightly bigger project.

Economics!
Ok i actualy made a calculation about what it would cost to set up a studio here in sweden.
Now the original numbers in this equation was SEK (Swedish Kronor) so some discrepencys might be present.

Im using a company model with 7 employees including the owner.

payroll (before taxes and absolute minimum a employee can survive on)
1750 USDx7= 12250 USD
Office rent ~1120 USD (rent a extra large apartment to live in and have the office there might save abit)
_______________________________
total: 13370 USD
_______________________________
monthly: ~14000

Computers: 2100x7= 14700
(inc Table and chair etc)

Software (the following is converted from the swedish prices):
3ds Max: 7700x3= 23100
Photoshop: 2170x4= 8680
coders:
kompilator: 700x2= 1400
Game engine: 1610
(and associated programs)

______________________________
total: 49490 USD

adding payroll: 168000 USD

total: 217490 USD

now there is unforeseen expenses not included here.
Like insureance... Trademark registration etc. and for a world wide TM registration add about 14000 to 35000 USD more.

insureance is about 2800



Now the wages i put was 1750 USD/employee a month .....now that is not mutch of a payroll after the taxtes are deducted (1272,6 USD), and i would want to be able to put a higher number there.

If i add ~294 USD more per employee that will add ~28000 USD more on the yearly cost.

Putting it at a grand total of 196000 USD


Now ... that is still a rather poor paycheck in sweden. And a more normal payroll would be more like 2520 - 3360 USD a month:
2800x7= 19600
x12 (months in a year)= 235200 USD/yearly


so for a company of this size to go around we would have to pull in a steady 28000 USD every month.
the highest selling game on GarageGames.com right now give about 5000 USD to the owner every month... Now, since GG don't demand exclusive rights there can still be revenue from box sales and other sales

Second Year
Ok first year was depressing. Maby second year will seem brigther?

well we still have the wages for the employees:
wages: ~168000 USD
(but thats low and the employees want more)
wages after rase: 235200 USD
we still got the rent to pay:
rent: 16800 USD

Total: 252000 USD


we need 21000 USD monthly.




Remember this is just a calculation of the costs if you started a studios straight up.


transaction rates:
1 swedish Kronor = 0,11 Euro
1 swedish Kronor = 0,14 USD

Source: Forex.se

List of employees used in calculation:
Company Manager / Designer / Jack of all trades
Graphics Artist
Graphics Artist 2 ( 3d assets and level design)
Graphics Artist 3 ( Character Modeller/animator)
Sound guy/ programmer or Artist
Coder 1
Coder 2


[Update] When this was originaly writen (2007-07-04) the exchange rate for USD to SEK was 0.14 (1 USD = 7,14 SEK)... today 2008-01-26 it is 0,16 (1 USD = 6.30 SEK).

#18 I think the part of Mikaels math that one needs to focus on is the monthly income to float the company. $28000 a month is pretty hefty. The first game won't be released for a year so the owner needs enough cash on hand to support the team without any source of income.

There's just one mistake I see in the math. The office equipment, computers and software would amortize over three to five years, not one. Amoritzation is how long you think something will be used. For example, a $2100 computer would amortize over three years so it's value is paid off over 36 months, $59 dollars a month. After three years, the computer is paid for and worth zero as far as the accounting is concerned.

Now, that doesn't eliminate the monthly costs. The company still needs at least $20000 in revenue each month to stay afloat.

Some time ago I also worked out the monthly cost of a small team (two programmers and two artists, one of the four being the designer and manager), outsourcing audio and things like that. The goal was to sell to a publisher rather than handle sales ourselves. It came to about $145,000 USD for the first year. If the team developed small games and sold them to publishers for $30,000 cash, we'd need to five games a year just to stay afloat.

Clearly, I haven't made the move yet.

#19 All of a company's assets maintain some value on which they are taxed as assets in most jurisdictions. I've never even heard of a place where you could just count something as having no value just because it's paid in full.

#20 The calculation calculates what it would cost to setup the studio the first year ... and then what it would cost each following year (marked with Bold text) ... From year two and onwards (not including equipment renewal years) you would need 21000 a month ... not 28000... 28000/month is only what it would take to stay afloat the first year.

It does not take in to consideration what it would cost too buy new equipment after 2-3 years... But the figures are there .. so you can easyly calculate what it would cost.