2D Boy‘s Ron Carmel opened up this year’s Independent Games Summit hoping to somewhat demystify the process of starting your own indie studio (which he summarized with the following three steps: “save money, quit your job, and make a game”), and in doing so divulged their own by-the-numbers breakdown of how their goo-built world was formed.
How much money do you need to start a studio? For 2D Boy, it was $4000 on hardware (including dev kits for the Wii), $1000 on software, and $5000 for a part time QA person. On top of that, though there was another $10,000 in unexpected costs: legal fees, after running into trouble with one of their publishers, and localization costs.
But on top of that, living expenses were about $2000 a month for both Kyle Gabler and Carmel, and their estimated 8 months of development time was a “very wrong” estimate: that ended up being 24 months, for a total of $96,000.
On the upside, they took in $60,000 in pre-orders, so they both contributed $28,000 out of pocket. What to do if you don’t have that? Move in with your parents, and make a smaller game.
Carmel also broke down sales on 2D Boy’s various distribution channels (their own site, Steam, WiiWare, retail and other distribution channels) and found that the vast majority in 2008 came from WiiWare (though at a lower price), then their own site, then Steam, then retail, then various other portals. In 2009, Steam took a much larger slice, but the important stat here was that retail was only responsible for 2-3% of revenues, andn they spent far more time negotiating those deals. Platforms, coincidentally, were broken down as 65 percent Windows, 25 percent Mac, and 10 percent Linux.
Most interestingly, Carmel then moved on to their thoughts on working with publishers versus sticking with direct sales through download sites, and said that choosing a good publishing deal was like picking a good wine: it’s whatever tastes good to you.
When they first started out, they had an offer for a $180k advance and a 10% royalty, but the tone from the publisher (who said their game wasn’t original and was too niche) left a sour taste, so they moved on to another offer of $225k up front and a 20% royalty. They felt a bit iffy about that, and were actually offered a better deal than that just for Europe, but by the time the publisher countered with a $425k advance and 20-24% royalty they’d got an even better offer.
That publisher was willing to put up a $700,000 advance and a 30-35% royalty, which was obviously more compelling, but in looking over the contract, they found the publisher also wanted right of first refusal for sequels and maintained the rights to port the game to other platforms (DS, XBLA), and wanted to keep 65-70% of the net profits for shipping and marketing costs.
Instead, they went to one final publisher and said they didn’t want to give up their IP rights and wanted $700,000 up front, and asked what kind of royalty they could get given those terms, and were offered 15 percent.
In the end, they looked at how much they could possibly sell on Steam/WiiWare and direct via their site and whether that could beat those rates, and concluded that they’d drop everything and go entirely with digital distribution. His all-caps conclusion to other indies looking to work with a publisher: DON’T DO IT.
Other helpful hints for digital distributing indies: “do it yourself, approach all the channels yourself, there’s nothing nothing magical about it,” and “focus on the big boys: steam/PSN/WiiWare/XBLA, and don’t worry about anybody else.”
Finally, he said, don’t bother with DRM. It’s a waste of time, only makes the DRM provider money, any game gets cracked anyway, and the cracked version has a better user experience — 2D Boy saw no change in piracy rate between World of Goo and other DRM’d games.
So what’s next for 2D Boy, one questioner asked? A game, Carmel said, called Sophomore Effect, which they intend to make intentionally mediocre.
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