So I managed to get a couple hours of sleep to help me survive the day.  Unfortunately, today was all spreadsheets and numbers as we started going through basic financial projection stuff.  It sounds super nerdy but I actually LIKE making spreadsheets.  It’s kind of like really simple programming when you get the more intricate “this cell is the result of that cell times that one, minus that one, divided by the sum of those ones, and it has a setting on it where if it’s lower than X amount of money the cell will turn bright red” stuff going.  It’s fun to play with the numbers, haha

We’re getting a default template spreadsheet to use, but I think I’ll end up making my own because of the nature of small game dev…I want to be accounting for price changes, the sales curve (lots of downloads the first day or two while the game is on the New Releases list, then dropping down to minimal past there), development costs, etc.  I already know how to use spreadsheet programs so I whipped up a quick test sheet in class to crunch some basic numbers: 

This is the basic chart for 11 games (whoops just noticed I have two Game10s but fuck it this has taken forever as it is, I’m not changin’ it!), the first 6 taking 2 weeks to make (I’ll be making very simple small games, no epic 40-hour RPGs here haha), the next one taking 1 month, the next 4 taking 2 months.  This chart assumes the games will all cost 99 cents ($1 on the chart for easier numbers) and only sell 1000 copies a month, but will sell that each month.  1000 copies a month shouldn’t be difficult, judging by stats I’ve seen around the net.  I’m also factoring in Apples 30% take and the initial start-up $10,000 investment for buying equipment.  And I’m paying the programmer $1,000/week with $1,000 extra for misc stuff (song licenses, advertising, etc.).  I actually think the “misc stuff” will be more expensive, but when I do the real estimates up I’ll figure that all out.

The bad news is I spend pretty much the entire year in the red.  And yet…a glimmer of hope!  Because of the “slow and steady wins the race” concept, by December I’ve pulled out of the red and I’m actually making a profit.  Not a big one, obviously, but that’s all I need to know this could work.  The thing about charting it out on a spreadsheet is that if I hadn’t done this, and just went along hoping things worked out, I’m sure by August I’d be all demoralized and be like “fuck this, there’s no hope, this was a failed experiment, I rolled the dice and bombed and now I have so much debt I’m screwed…I’d better find a real job fast and try to pull myself out of this hole I’ve dug!”  But because I’ve charted it out, I know to expect to spend the majority of the year in the red but that if I stick it out and follow the plan, I can come out alright.

I’m learning that business seems to be about pure logic.  If you follow steps A, B, and C, they result in D.  If they don’t result in D, then you have to tweak A, B, or C.  And as long as you stick to the plan and don’t let your emotions make you deviate from it, then you will get D.  But if you get too involved or scared or panic when things aren’t going smooth, you end up changing your plan on the fly and can no longer expect to get D.  It’s interesting to see how simple this theoretically is.

Now let’s play with the numbers for fun, haha:

The last chart was the absolute minimum I could sell to just barely break even by December.  Now say my games all do consistently decent, with 5,000 sales a month across the board.  Well fuck.  Now I’m out of the red by February, I’m making more than I made working as an employee in the industry by the end of May, and I’m hitting “rich as shit” by December.  Bonuses and steak dinners for my programmer and I haha  But neither of these charts really reflects the way game sales tend to work on the iPhone, so let’s try some more likely numbers:

Now this one assumes each of the games follows the “usual” iPhone sales chart…a big chunk of sales at first from being listed on the New Release store, getting in reviews, etc., followed by a severe drop once that stuff wears off and the game is no longer on the charts.  This is a lot more painful, and I drop in and out of the red, and yet, I still end up surviving by December.

Again though, this isn’t very accurate.  Not every game hits the same sales curve.  Some games do amazing, some do decent, some do terrible.  That unpredictability is one of the reasons I’m attempting to keep my start-up and development costs as low as possible (VS spending 2 years on a game and needing to make like $100k on it just to break even).  So let’s see what happens with a little variation in the success rates:

 Game1 doesn’t really do much.  I don’t know the system well, the game is pretty simple, I haven’t got an efficient marketing strategy so the game doesn’t even get noticed aside from being on the New Apps list.  It fades into obscurity pretty fast.  Game2 I correct some mistakes I made with Game1 and it does pretty decent.  Nothing spectacular, but enough to make up for Game1′s lackluster performance.  But then Game3 and 4 do pretty terrible.  There’s a little more consistent success in the later games because I’m spending a month or two on the games so they’re looking polished up and awesome compared to the 2 week games, I’ve got my shit together, I know the platform better, have my advertising/marketing process down, etc.

This time I’m out of the red by May, just barely.  By December I’m not doing anything amazing but I’m surviving.  Most people would probably just look at the December figure and say “$14k for a year of work??  That’s ridiculous.  This is a failure, quit now.”

The catch is that digitally distributed games are a passive income stream.  Once you put a game out, you can theoretically ignore it and it’ll slowly bring in bits of money, like the peons in Warcraft mining for gold.  Even one peon mining means if you wait long enough, you’ll be able to afford a Barracks.  So let’s assume the sales in the last month continue at a minimum…any game making more than 700 sales/month drops to 700, and any game making less than that stays at it’s low-ass number.  So let’s look ahead 2 more years:

Also I completely stop developing new games, or promoting my current games.  I basically go sit around in my underwear eating cereal and watching YouTube videos for 2 years.  I come back and check the numbers and what’s this?  I’m almost $95,000 up??  Because my only expenses each month are my rent and food now, as long as I make even one dollar more than the total of my rent/food, I’m making a profit.  If my rent/food total $800, and I have 10 games out, I only need them to each sell 80 copies a month.  Some games may sell 200 copies while others may sell 0, but it’s not a horribly impossible number.

But even then, I’m still using pretty optimistic numbers.  Let’s say things go even worse, and in January after the first year, every project drops to only 30 copies sold a month.  That’s like 1 a day basically.  Ridiculously low amount.  What happens 2 more years of YouTubing in?

Bam, $20,000.  For doing nothing.  I’m making about $230/month without lifting a finger.  That’s not enough to pay my rent/food, but I could get a part-time or full-time job and just have a nice $230/month extra supplement on the side with no maintenance at all.

But I have a lot of free time, and so let’s say I decide to do a little bit of marketing every few months for the hell of it.  Advertise a bit on Twitter, re-bundle games together, offer a free Lite version, try to get a few extra reviews, pay for a banner ad somewhere, etc.  Nothing excessive, a weekend of work here and there.  So keeping the same brutal sales figures up above, let’s throw a few spiked sales in there throughout the 2 years:

Now these aren’t even big spikes.  There’s no 500,000 numbers in there.  most are tiny 1,000 sale spikes.  And they’re not very frequent given the time-span of 2 years.  Now I’m looking at $42,000 by the end of the 3rd year, for doing almost nothing at all.  I forgot to throw in a few marketing/Lite-developing/etc. expenses in those months with the spikes but even over-estimating those expenses I’m still going to be sitting around $30,000 – $35,000.

So what’s the lesson I’m taking from all this number crunching?  Digital distribution is essentially like playing a videogame where your health-bar regenerates over time.  Even if you take some pretty critical hits, as long as you can find a place to chill and kill some time, you’ll recover and be back in business.  I don’t want to say it’s impossible to fuck this up, but I think the way I’m going about it (small projects, focus on marketing, etc.) it’d be pretty damn hard to fail in an epic way haha  Worst-case either I just don’t make as much money as I could, or I end up back at $0 and I go find a real job.  Unless I take some ridiculous gambles or stray from my plan, there’s no way I can end up financially crippled by this venture.  That’s pretty damn comforting haha

There will be fluctuations of course…a new iPhone will come out and need higher res games on it.  Another phone may become decent competition.  The PS4 may have an App Store.  But the point of this whole thing is that this isn’t nearly as “cross your fingers and hope you get lucky” as a lot of articles make it sound…you just need a combination of patience, a focus on marketing and re-marketing, and an efficient development strategy that keeps your expenses low.

whew…this took forever!  I actually had to re-write the thing a few times and I fucked up some charts originally with bad formulas in them that made it look like I was going to be a jillionaire in year one haha

- Yarr