Earlier this month Chris Park revealed that his company could be bankrupt by November . His company is Arcen Games , the developer of popular space strategy game AI War . Despite that game's excellence, it wasn't a surprise to find he was struggling: most indie games developers do.
Prompted by the tale of trouble on his site, I sent him an email asking for more information. What are the costs involved in independent game development? What are the profits of a game like AI War? Chris was willing to talk numbers - something no developer ever does - and he kindly replied with a breakdown of the profits and costs of AI War and his latest game Tidalis . I'm reprinting his email in full below with permission.
Regarding the figures on costs and income, that's a bit of a tricky topic -- not because I'm unwilling to discuss it, but because the best answer is "depends on how you look at it." For two reasons:
First, that there was a lot of free labor on my part for AI War, and even that could be quantified multiple ways if you count the years of engine development or just count the 7 months of actual development before the game came out (and actually, I kept none of the profits for the first 6 months after the game came out, too, and instead just reinvested those in the game -- was working another job at the time).
Secondly, in the case of Tidalis, we had three guys who were doing all of their work purely for royalties -- which if you just look at Arcen's expenditure it obviously misses that entirely, but I think it's worth counting in the sense that they invested heavily of their time and efforts; we've got a pretty tight team here.
So it's a complicated discussion, to say the least. I can say the following:
It was in December 2009 that I decided to go full-time, despite some of the risks involved. For health insurance reasons I believed I needed to as my wife and I were trying to conceive, and I wanted the pregnancy to be covered, etc. I also felt that the quality and volume of my output would be increased enough by going full time with AI War, Tidalis, etc that it would help increase profits. Until recently, I was right.
In general, in early 2010 Arcen was hitting a new level of being. Popularity was up, profits were obviously way up, and things were going better than I ever expected. I'd expected to struggle more. We did run into some bumps with having to upgrade a number of our assets, from our development technology to our website hosting, to our increased legal fees for dealing with the regional publishers, to our need to actually buy some used Mac OSX laptops so that we could test the Mac versions of Tidalis (and, as it turns out, develop them at all - long story).
In short, we had around $20k of expenses that were basically one-off growth expenses during that time, which we're still seeing the benefits from now, and which make our net profits lower than they would have been in the second two quarters of this year [if our income had included at the same level].
After April is when things started to change. I sensed it coming, so I'd cut my salary, royalty payments were down, and we weren't acquiring a bunch of new assets or doing any contract negotiation. As far as income goes, looking at my info on that, I see that we made, month by month:
Bear in mind that our income is on a 30 to 90 day delay, depending on the partner paying us, so we have a lot of forward visibility into what future income will be. The figures above are all based on when we received the money, [not when the money was earned] . So far, [projected] earnings for October looked to have been about $5,000.00 at best [this figure has improved since Chris went public with his company's troubles]. Also, the September income also includes the part that went to Child's Play .
Also bear in mind that, while those figures for August and September might look pretty okay, they are actually based on both AI War and Tidalis. So, as you can see, when you look at them, the AI War numbers dropped in July and stayed constant at this new, low value. Then the Tidalis numbers came in and were only about the same, bringing the overall totals up to what you see there.
That, in turn, might not look like all that much lower than our actual income from before, but bear in mind that part of what we set up with Tidalis was royalty arrangements with staff who worked for no immediate money during the Spring. This means that the amount that Arcen actually directly brings in on Tidalis sales gets split back out to the staff immediately, minus about 40% which goes to the longer-term Arcen reserves.
These guys worked really hard - trust me, it's fair from Arcen's perspective. It would have worked out well for everyone if Tidalis had sold even just as well as AI War. Given the larger appeal of a game like Tidalis, we figured that 30k units sold would be trivial, whereas it had been an uphill battle with AI War. That said, it wasn't like we were sitting around waiting for it to sell hundreds of thousands of copies - there's a lot of luck involved in that - but we had all the business partners and positioning we thought we needed to earn back what we spent on making it, to give the staff fair income from the royalties, and then hopefully to have an ongoing small stream of money from it for at least a while.
You know how that's turned out so far.
In summary, how would I characterize the costs of making AI War or Tidalis?
All in all, that leaves us with about $15k sitting in our bank account at the moment, whereas I'd at one time had our buffer up to $60k, and in general had kept it north of $30k since last October, until everything fell apart.