Line of Business
Canadian video game makers find new, creative ways of making money
Traditionally the video games industry has required lots of upfront investment. With funds drying up in these tough times, many video game makers are experimenting with other ways of making money, especially as new business opportunities emerge online. INCLUDES VIDEO.10/30/2009 7:00:00 AM By: Brian Jackson
If the traditional method of making a buck on video game sales is like producing a blockbuster movie hit, then the new models of making money are more like selling TV episodes over iTunes.
Representatives from Canadian video game shops met at the GameOn Finance conference in Toronto Oct. 27 to discuss the challenge of finances.
In a $27 billion worldwide market that's reaching more demographic groups than ever before, making big bucks on video game sales should be a piece of cake, right?
Wrong.
Developing a major video game can often be a multi-million dollar endeavour. For independent developers making content out of their garage, it's not easy to come by that sort of cash, especially in the middle of a global recession.
That's why some game developers are experimenting with new financing models, says Jason Della Rocca, senior consultant and founder of Montreal-based Perimeter Partners.
He said the coventional model that requires you spend all of your money to develop the game is very risky. "You have a lot of gatekeepers controlling what gets on the shelf and who gets funding.”
Once it's on the shelf, you hope your game is the odd one that is a hit and sells a lot of units, so you make up your costs plus earn a profit. But developers are finding alternative and less risky models driven by access to an online audience.
“You spend a little money developing enough of the game to release in beta form,” Della Rocca says. “You can start generating revenue and gaining traction for the game, then further spending development money that matches revenue for the game.”
Having good metrics about who is playing the game and how much is the first step, he adds. Then developers can determine if it's worth developing more content for the game to keep a large group of players interested -- or stop spending on the game if it isn't very popular.
Page Navigation 1) "Many gatekeepers control what gets on the shelf and who gets funding." - Page 12) The video game industry has a one in three hit ratio. - Page 2
3) Microtransactions - the $100 bowling ball. - Page 3
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