In 2021, there were over $85 billion in deals invested into the game business. In the first month of 2022, we already surpassed that due to the Activision-Microsoft merger. Games are the biggest media category in history — and now some of the largest technology companies are also game companies.
But the game business is hard, and with all this capital entering the market, it’s getting more competitive than ever.
The ultimate goal of almost any game company is to create a sustainable game business. Why is this so hard?
Making a game that’s fun is one of the hardest things to do. It’s a craft that is mastered over time. And although there are rare exceptions of games built by individual developers (Undertale, Stardew Valley) the norm is that game development is a team sport — which means that you’ve also got to harness and align the creative talents of multiple people. You’ve got to take creative risks, while working within your capital constraints. For all of these reasons and more, most game ideas never even turn into a shippable product, let alone a fun game that people play.
The customer for games has also changed. Gone are the days of shipping your rough beta. Customers are more demanding. Few will tolerate a subpar experience, bugs or crashing servers. Many seek out games that will provide community with other players, opportunities for self-expression and online camaraderie. They’re more discriminating and more distracted than ever before.
When we talk about making a game fun, there’s an important footnote on this: fun for a particular audience. There are not any games that are loved by 100% of humans. The vast majority aren’t even fun for half of people who try them, and lots of game makers would be delighted if even 20% enjoyed their creation. The more niche a game is, the better it will need to be at the other other parts of the business puzzle for it to become sustainable.
If the goal is to create a sustainable game business, then shipping a fun game isn’t enough. You also need a way to grow your customer base. Sometimes this scalability is found through word of mouth, memes and social media. More often, by targeted advertising. At other times, through branding, endorsements from key influencers, and franchise-building — or by gaining leverage through the creation of strong communities.
I say “tolerable” because the truth is that most people don’t want to pay if they don’t have to. So it’s about coming up with a business model that works for your target audience — while also generating enough revenue to pay for operating expenses and generate a return on the development investment.
The earliest video games got you to pour quarters into an arcade machine at an increasing rate. Once people started playing video games at home, they bought games like other pieces of software — and each game purchased reinforced a brand or franchise attachment that increased the likelihood of players buying the next game.
Today, “tolerable” can also include in-game purchases, advertising, subscriptions/bundles and open economies — depending on the audience for your game. These business models have the benefit of recurring revenue— but depend on economies that are hard to design, technologically complex to implement, challenging to operate, and difficult to align with game design and audience.
Whatever the choice, if people won’t tolerate the business model then there is no way to create a sustainable business.