The real cost of making games

The last time I talked about inaccurate estimating, and the dangerous road publishers and developers are heading down by lying to themselves and each other about the real cost involved in making their games. To me, the arguments about crunch and contingency are looking in the wrong place. They’re a symptom, not the root problem in themselves. Crunch happens, because there aren’t any tenable options left to the developer that is mid way through a title, and has a fixed deadline to hit. To appreciate why it’s the only option left, you have to step back a bit.

Most developers are pitching for business from publishers. A few get their finance from a non-publisher entity, but the relationship is effectively the same. Publisher-owned studios are in much the same situation, it’s just that the pitch and negotiation stage isn’t between two distinct businesses, but between units in the same business; so the negotiation is less antagonistic, but the basic relationship is the same. One side provides the finance, and gets the revenue/profits from selling the game; the other provides the game for some cost. The financier is buying a title that it can sell on for a profit. The console market has moved to a place where to make a profit, you have to hit a certain level of quality and have a game of a certain level of scope. So there is a minimum viable product for the financier, and an effective market size that means it’s not cost-effective to make a title unless it costs little enough that it can make its costs back. Most titles cost is proportional to the number of man-months involved, so shifting a deadline out doesn’t really save any money, quite the opposite – the developer staff need paid more for that extra time. So generally, the deadline is fixed.

It’s with that price in mind the only variable left gets decided: scope. How big a game will it be? How complicated? Will it break new ground, or go with a safe mechanic or style that the developer is confident of delivering for the budget? Here’s where the problem comes: how big does it need to be to make its money back? I think we’ve got to face the very real possibility that the effective cost of making the games the console market expects outstrips the likely revenue you’ll get from those titles. If it does, the difference has to come from somewhere.

From the developer’s point of view, it is hard to get a publisher to sign on to what you think is a reasonable price for making the game they’d like. Of course they want more for less; their margins have been squeezed to the bone as it is. But if you have a team of staff waiting to make a game, the cost of refusing to make a game because the publisher is only prepared to pay 80 or 90% of what you think it will actually take to make their game may be that you fold altogether. At least if you take the 80% deal you can argue the scope down later, or find some other way of making it work.

That’s where the trouble kicks in. If your company is bidding low to get financing, then making up the difference through crunch (which is effectively asking the employees to subsidise the project cost through ‘free’ labour), then it’s screwed. But the alternatives aren’t much better for the company, although they’re clearly better for the staff:

  1. Don’t make the game at all. Company has no business, shuts. Financiers get no games, can’t make a profit.
  2. Make a smaller game. Market rejects it due to unrealistic expectations, financiers lose out, next title doesn’t get funded, company shuts.
  3. Bid low and try to make the game for less than it costs, through crunch. Company and financiers do okay on this title. Staff get burnt out, next title costs even more to deliver (through reduced efficiency/quality), repeat this choice scenario again but with worse numbers to start with.
  4. Bid low and manage to raise the price later. Company does okay, but financier loses out when revenue doesn’t match cost. Next title doesn’t get funded, company shuts.
  5. Bid realistically, financier knows the numbers don’t work. Company loses out, shuts. Financier either gets no games, or finds some company willing to choose scenario 3.

You can probably see why companies choose option 3, even when they know what the consequences are. Because it’s the least-bad option available to them. And they can persuade themselves that this time will be different, this time they’ll work smarter, and they’ll hit those lower costs without crunching, because they’re good at what they do. When that works out, everyone’s happy. When it doesn’t, there are lots of factors they can blame. NB: “Bid realistically” here means hiring great planners, and adopting a sensible, reactive planning approach like I described last time. A company can be bidding low without even realising it, but that doesn’t make their situation any better.

When the fundamentals of it are that it costs that particular developer more to make that particular game than they thought, that’s a business doomed to extinction. Crunch is a side issue, one of many symptoms, of which the root cause is denial about how much it actually costs to make the games we are building. The only way out is to make different games, maybe in different markets, which actually cost less to make than they take in revenue. Maybe I’m wrong, maybe the console games business is eminently viable. But the reality of difficult financial conditions and the developer’s strategy for dealing with that is the core problem underlying crunch. Railing against crunch is going to do little to help us, if we don’t address the underlying business conditions that cause the unrealistic expectations in the first place.

One Response to “The real cost of making games”

  1. Black Company Studios » Blog Archive » Crunch vs. Contingency Says:

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Last modified: February 02 2014.