The million units manual

[In which I discuss that it's imperative I manage to guide Larian to selling a million units in my self-publishing model if I want to make my very big RPG I'm dreaming about]

I had a big discussion the other day. Somebody was challenging the entire philosophy behind what we’re trying to do – i.e. taking our destiny in our hands and incrementally earning sufficient profit to make the very big RPG that will dwarf them all.

The road we picked is long, very very long, and maybe we're not traveling in the fastest possible manner, but that doesn't mean we'll not get there in the end.

His reasoning was that that would never work, saying that the profits that can be made by a single game of the type we’re making is limited, and that unless we branch out in a variety of different markets, the reality of our burn-rate would always ensure that our funding would be too limited to achieve the vision behind it all. He also said trying to make a cool game wasn’t really a strategy, and accused me of not having any vision for my company.

Faced with such an onslaught of criticism (he had other issues) and seeing that he was very convinced about his arguments being infallible, I didn’t counter-argue that much, opting instead to think the matter through and do a little bit of introspection.

I didn’t care much for the vision statement because different people have different priorities and mine and his don’t necessarily have to match, but the one argument that hit home was the one that questioned if profit on our future games would be high enough to defeat the realities of our burn-rate, and allow Larian to grow sufficiently to make the game I really want to make.

By coincidence I then met some fellow developers who not so long ago thought they were going to go under, only to find themselves today among the stars of the games industry firmament. They had just visited a smaller developer who does work for hire to fund its own dream game. They told me they had very big doubts about the small developer being able to reach its aspirations, because the work-for-hire the small developer was doing, would most likely never give them enough funds to finish the dream game fast enough to make an impact on the market.

To illustrate the point, here are some simplified numbers. Actual dream games being funded by work for hire will have different needs, but the same reasoning will apply:

If you have a 40 man team, and the employer cost is say 6K€, then one year of development will cost you 2,88M€. Given that most games take a few years to make, this means you rapidly end up with a need of over 5M€ to fund one game. That means that if you want to fund your own game with work for hire, and your game needs 40 people for 2 years at 6K€/month, you need to earn 5M€ before you can afford to spend 2 years on your own game. So, if you do work for hire for 2 years for somebody else with your 40 man team, you need to earn 10M€ to actually earn the freedom needed to develop your own thing.  In the current market, that’s actually a tough proposition and rare are the jobs in the games industry where you are paid double the employee rate, so the reality is that you probable need to do even more work for hire.

It’s the very trap Larian allowed itself to be caught in for many years, and it took me quite some time to muster the courage to try to escape from it. There’s a certain reassurance to be had from money coming in as it goes out, rather than just seeing it go out. To reach escape velocity, I had to attract investor money and draw upon all of the resources we’d built up over the years, and to be honest, not a day goes by without me questioning if it really was the right decision.

And here was a guy telling me that all that wasn’t going to be sufficient, because the burn-rate of my team would continue to burn to such an extent that there’d never be enough profit to fund the next growth step.

The scary thing is that he might have a point. In order to do my thing, I need to get something like a 100 man team for say 3 years. That’s the equivalent of over 20M€ in funding, which clearly is a lot of money. Yet, it’s the type of budget not uncommon for the really big games. These budgets are justified by selling over a million units, so if we actually want to have a shot at making my very big RPG, the shortest route would be for our new games to do exactly that – sell over a million units. Otherwise we indeed run the risk that the funds we generate are sufficient to let us survive, but insufficient to let us grow significantly.

Over one million units really is a lot, and to be honest, I don’t think we’ll manage that, not with the gameplay experiments that we’re doing.  My expectations are that we’ll need to release a few more games before reaching that point, but then again, we just won best RPG of E3 on jeuxvideo.com with Divinity – Original Sin – so that’s a start, right ? We can dream :)

Our discussion was interrupted before it was finished, so I expect we’ll take it up again, but now at least I know what I’ll tell him when he asks me again what our strategic goal is – to sell over a million units using our independent approach in such a manner that it generates sufficient funds to make the very big RPG that will dwarf them all. I doubt it’ll make an impression on him, but really, my roadmap is as simple as that – it always was. And now it’s quantified.

Now, if somebody could just give me a bloody manual how to do exactly that, that’d make my life a lot simpler ;)

 

  • Koen

    Yes, a manual would make life easier, but it would be like a game walkthrough guide; it kills all the fun ;) .

  • AAA

    The world is moving ahead faster and faster. To work on one game for three years may be too much as audience, platforms, revenue channels would have changed significantly in that space, so that you’ll end up with the brightest gas lamp in the times of electric bulbs… Whereas if you’re making lampshades, they are good for any kind of lamp ;) Is Divinity a “PC game” or something larger than just one game for just one platform and one way of consumption (full-price, upfront)? It would seem risky to be an indie studio that dreams of making things that ran all the bigger publishers into the ground, i.e. a €20M single project that will make it or break it.

    • http://www.lar.net/ Swen Vincke

      Who doesn’t dare, doesn’t win is the first thing that popped to mind ;)  

      Look, we are creators. Our main financial interest is that we need cash to make our games. The very reason Larian was founded, was to eventually be able to make that very big RPG, and I’m confident that eventually that’s going to happen. Why ? Because I’m pretty sure there’s always going to be people who want to play strong interactive stories with a beginning, a middle and an end, and Larian’s goal is to serve these people. Every day that we work on RPGs, we’re getting better at this, so every day we stand more chance of serving a larger portion of that audience.

      Unless there’s a massive technology leap which hasn’t happened yet, the  type of interactive stories we want to make will always take several man-years to make. And that’s going to require large budgets, nothing to be done about it. I wished it were different too, believe me :)  

      I’m no big fan of Skyrim, but it does have the benefit that it showed that there still is a large market of people who want to pay for our  type of games, so I’m not that afraid that it’ll disappear. It might transform into something different, but that’s not going to happen overnight, and I’m pretty sure we’ll be able to adapt whatever form it takes.

      Not making it is in any case not an option for me btw :)

      • Arne

        Nothing ventured nothing gained, it could be a naïve CEO if it wasn’t for Lar. As I recall Larian has gone through much much worse problems than it is facing today. Larian is blooming now: better engine, beter publishing, no publisher constraints (more time, more budget, more gains, a chance to prove yourself) and still running on modern technology. So if DKS was able to fund DC/D:OS your studio WILL grow next year. Don’t tell you did’nt know that.

        That’s the reason this blog was started right? Because for the first time in 15 years there’s the chance to make real profit from a really good game?

        Q: suppose you can sell over a million copies next year, would that suffice to make this dwarfing RPG ?
        Q: do you already have in mind what this dwarfing RPG would look like?
        Q: I noticed there’s nothing on GT.com on DC/D:OS since last summer. Why is that? Don’t you believe you can get people’s attention trough GT?

        • Arne

           finally my post is received
          btw this guy saying you should invest in several game branches: that sounds like more investments, more risks,… to me. Like he believes no indie can grow anymore. And than the world would be sad.

      • Sergei

        Heyho,

        I’m not arguing a propos NOT making a bigger, better RPG.

        I’m arguing a propos the fact that if this is the only focus of the company? It may be a head-to-mouth situation for many years, perhaps rewarding in 2024, but so tiring in the process that whatever’s going to be gained, will be bought at the price higher than gold.

        Just recall how everyone was learning the console ropes a few years ago. Even Larian had to go through the (not always pleasant) experience of learning how to develop for X360, given the financial situation and the fact that there’s significant revenue to be made on consoles. The same thing is quietly happening on other fronts: learning how to make an iPad game? Learning how to make a browser-based game? Learning how to make a Divinity game that could run, and earn money, in China? Learning how to work with streaming services like OnLive, where eventually content will not be a $40-game adapted at last moment, but custom-designed, custom-coded game episodes/chapters/whatever?

        If the studio is relying solely on one source of income, and is banking all of its money just on the few current releases, a failure may kill not only the project, but also the company. It takes three years to make a game – great. But in the three years, the world move on, and so the studio would be well advised to develop property first, product second, wouldn’t you agree? If you’re looking to engage the community of modders, it will take months of building the right community management team in advance of that event. Can you do this in the back corner of the office, on the basis of nothing, just theory? I don’t think so. Can you do this on the basis of another, smaller Divinity game(s) that would come out while the BIG game is being developed, allowing the studio to always remain in active contact with the audience? You bet.

        If the developer you refer to in your original post is CD Projekt, then it is worth saying that CD Projekt has a DNA of a publisher. They originated as a publisher and by the time of their stock exchange listing, have been a conglomerate of a) Polish distribution business; b) localization services – work for hire! – team called Porting House/CDP Loc Services; c) digital distribution platform, GOG; and finally, d) development studio responsible for The Witcher 1. If CD Projekt would rely solely on the strategy of focusing on development only, and going from TW1 to TW2 and then to TW3, the company would most likely be dead by now. In my humble opinion, it is exactly BECAUSE the company was multi-faceted and had multiple sources of revenue, that the company managed to keep focus on making TW into a product they’ve been dreaming of, because the money made porting for THQ, distributing for Disney, and selling for Ubisoft, allowed the flexibility of doing whatever they wanted on the development front.

        I was looking for an example of a studio that would grow organically from a 100.000 unit RPG to 1.000.000 unit RPG, and I could not find anything in the recent history. Bethesda, Skyrim you say? Well, it took them a number of years, and it took them being owned by ZeniMax to make their dreams come true. If Todd would be waiting to bankroll his new games from the success of his old games, and not from money made on such a wide array of products as Brink, Hunted and Fallout, as well as raised from the investors, then he perhaps would be still making much smaller titles with a lot more limitations. Just my two cents, from the publishing perspective.

        • Arne

           That’s a very interesting thing. I’ll keep it in mind (it’s still no proof though)

        • Peter

          Maybe Bioware is an example of an independent studio that managed to be largely (but not excessively compared to Ubisoft or Blizzard) succesful and do its own thing for over 10 years until they were bought (and subsequently greatly declined) by EA?

  • Sergei

    “Privately held video game maker Zenimax Media has received a big $300 million investment from Providence Equity Partners through a convertible stock offering (via Gamasutra). Founded in 1999, the company will use the funds to increase game development, hunt for acquisitions and finance the creation of multi-player online games. The company already makes games for PCs and the major gaming consoles; among its titles is Oblivion, a product of its Bethesda Softworks unit. In August, it announced the creation of Zenimax Online Studios, a devision specifically focused on MMOGs.”

    - that’s the news report from 5 years ago. maybe there is a connection between being able to afford the dev budget of Skyrim, and being able to raise $300M *before* making that game happen? ;-)

  • Paul

    Divinity brand has a very good name. I would not be surprised if even Original Sin sold a million or more.

  • Scott Kolakowski

    It’s kind of sad, really.  The first Divinity game was magical for me when I played it, and I ran through the entirety of it probably 3-4 times when I was a kid.  Something about it was just so perfect, regardless of how flawed any of its mechanics ever seemed at one time or another.  The overall concept and implementation of mechanics were perfect enough for me to fall in love with it as a game and an experience.

    Did you spend such a huge amount of money on the first Divinity game?

    It always depresses me when game development turns into a discussion about business and finances and marketing.  I just wish the industry wasn’t so ridiculously bloated, and run less like an investment bank or movie company…

    If I had the know-how and the skills, I would honestly probably work in a games studio for much, much less pay than the average person makes, because it would be something so important to me as an art form.  But I’m sure that’s just me. :)