Running a Game Studio: From Start-Up to Sustainability

Last night, i felt very honoured to be included in a panel discussion at the October IGDA Toronto Chapter meeting. The meeting saw a really great turn-out – a standing room only crowd! The topic was “Running an Ontario Game Studio: From Start-Up to Sustainability”. (Why “Ontario”, specifically? There was some discussion about tax incentives, grants and loans available to Ontario developers).

Grant's Tomb

How much money is buried in Grants Tomb?

i didn’t have the luxury of taking notes because i was too busy yapping, but here are a few insights that came out during the panel that i reproduce here for your edification and Great Knowledge:

Work Somewhere Else First

Of the five panelists, only one started his company straight out of school. The other panelists endured 6-10 years in the “salt mines” of game development. Ryan MacLean from DrinkBox Studios said that he learned a lot about running a business by working at a small studio. i didn’t get to say it, but i had a different experience: the company where i cut my teeth was very large, and the boss’s door was always closed. i didn’t see the day-to-day operations up close, so much of the businessside of things remains a mystery to me. The up side is that i trained entirely on the job. A small studio likely doesn’t have the resources to hire someone who doesn’t know what he’s doing.

MacLean

The MacLean – incidentally my favourite burger at the Golden Arches

Don’t Jinx It

No single panelist was brave enough to say that he’d achieved sustainability with his company. Josh Druckman of Dark Matter Entertainment told the tale of how he grossly underpaid himself for the better part of a year. Ryan MacLean admitted that his team is still earning below scale, while i coughed up an actual figure – i paid myself $20k in 2008, while doling out far more cash to the employees and contractors that i hired over the year. (Note to our readers in Kuala Lumpur: $20k might sound like a fantastic wage, but it doesn’t go far here in Toronto)

Homeless

$20k in Toronto won’t even buy you a REAL cardboard sign. You can only afford one of those synthetic ones.

i was worried at that point that we’d have a riot on our hands – angry attendees demanding refunds for their free admittance because we failed to deliver on the “sustainability” portion of the panel topic. i guess this is how it goes: if you manage to keep a game studio in Ontario afloat for over a year, you’re doing something right. You may not have a sustainable bidness, but you just lasted a year in the industry on your own terms, and that’s admirable, if anything.

Government Cheese Comes in Different Flavours

As at any gathering of Ontario game developers, there was talk of government incentives. Here are a few notable points that were brought up:

  • There’s a difference between loans and grants, as Frozen North Productions‘s Julian Spillane explained. Certain funds, like the OMDC Interactive Digital Media fund, aren’t repayable. They’re grants – free money. Other funds, like the (national) Telefilm fund, are loans. You have to repay Telefilm as you earn money on the project. If you earn no money, you pay no money.
  • Rich Hilmer of Dark Matter noted that the terms the government lays out for its loans and grants are far more lenient than anything you’ll find in the private sector through publishers and other investors, who opt for a “first in, first out” arrangement (ie they get repaid immediately, and in full)
  • Josh reminded us that the government’s mandate is jobs. Repayable or not, a successful applicant is one who can create industry jobs while creating the product
  • i pointed out the obvious: even though the pressure to succeed financially is low, you’re more likely to be funded for successive products if you were financially successul. The funders have their reports to write too, and any degree of success will vindicate their decision to give you money.
  • i assured the audience that the government employees i’ve spoken with don’t have a high tolerance for or high degree of faith in people running start-ups, unless (as Ryan M pointed out) the pedigree of the team members is notable (DrinkBox Studios is comprised of former Pseudo Interactive employees, while Chocolate Liberation Front was founded by Dan Fill and Shawn Bailey, two well-regarded guys from broadcast)
  • Julian let everyone know that the Ontario game industry stakeholders are trying to alter the Ontario Interactive Digital Media Tax Credit (OIDMTC – sheesh!) to more closely match the Quebec incentive. Currently, the OIDMTC is paid out after a project is completed, which could take a number of years. Or, if you complete your project a month after your fiscal year end, you have to wait an entire year to file for the credit. The proposal is to pay out the credit annually, while a project is being developed, so that developers get the much-needed cash more frequently.

Diversify

One important point that came up again and again, particularly in light of the collapse of Pseudo Interactive, is that teams have to be carefeul not to bite off more than they can chew, and not to put all their eggs in one basket. In Pseudo’s case, as Rich explained, they took a large contract that required every single resource to be devoted to it. The company wasn’t able to do anything else, so that when the plug was pulled on that contract, they had nothing on the back-burner, and down they went. For our part, we kept the gene pool too narrow by relying on one or two key clients who fed us a steady stream of work in our first year. When Year Two rolled around, and those clients put their focus elsewhere, we found ourselves flailing. Lesson learned: it may be better to take multiple smaller projects from a diverse swath of clientele than to land that huge honkin’ contract that has you punching above your weight class.

Mike Tyson's Punch-Out

Cover the ears, Mac. Cover the ears.

Everything is a Red Flag

Someone in the audience asked which red flags you should watch out for when taking on a contract. The panel unanimously declared that when you’re green, everything is a red flag. Julian admitted that his team may have given up too much in their excitement to sign a deal with Majesco for their Wii game Flip’s Twisted World. He said that if you’re a new team and it’s your first contract, expect to get screwed. Good negotiation is learned through experience.

The Godfather

You’ve got to work your way up towards making them an offer they can’t refuse.

For my part, i offered up three deal-breakers: salvage jobs, rush jobs, and bank jobs. If a company says they’d like you to work on a project that’s 50% complete, it’s because the original programmer ran out on them. If you really want to take the job, multiply your rate by five, because you’re in for a world of hurt.

If the same potential client says that the first guy got four months, but you get four days, that’s a rush salvage job – the worst of all worlds. Multiply your rate by ten.

And if that same job is for a bank, head for the hills. We actually took a job during our Year of Famine last year that had all these red flags, but when you need the money, you’re willing to grimace and bear it.

Too Cool for School

All in all, i worried that the panel was playing it too coy when it came to the admission of fault and error. i find that people in general, and especially in bidness, like to pretend everything is rosy when it isn’t. We had a terrible year last year, partly due to the economy, and partly due to my own bidness mistakes and growing pains. i admitted as much during the panel. When i watch panels like these, it’s of no use to me to watch a bunch of CEOs spout off about how great they are and all the awesome things they’ve done. i want to hear problems. i want to focus on flubs, so that i know what pitfalls to avoid.

Pitfall

Don’t avoid THIS Pitfall. It’s AWESOME.

i would have liked to have seen a less guarded panel. i think a more human approach would have provided the crowd with more take-home tips that they could put into effect. The numerous panels i’ve seen with this very same topic, seeded with CEOs of multi-million dollar companies instead of us small-time Ontario studios, yielded far different advice … and not coincidentally. The points i’ve taken from those more high-profile panels still resonate with me today:

  1. When building your team, surround yourself with senior-level talent first.
  2. Your company’s reputation and potential for success is due in large part to the team you assemble to found your company.
  3. If things aren’t working out, nip the problem in the bud. Fire early, and fire often.

You're Fired!

“Your position in this organization has been terminated, effective immediately.” (What a catch phrase!)

If you were at the panel last night, i’d love to hear your opinion about how it went. Was the information useful? What would you like to have seen more or less of? Did the talk encourage you to follow your dreams and start your own studio, or did we scare you off? Let me know!

15 thoughts on “Running a Game Studio: From Start-Up to Sustainability

  1. Dave

    Great writeup, Ryan. You provided a contrast to the others on the panel, that’s for sure – though a side effect may have been that your area of the industry is an excercise in frustration and hobo-courting. While there wasn’t a whole lot of detailed stories of failure during the talk, I hope if someone came in with an unrealistic/idyllic conception of starting a games company they got their perspective tweaked a bit.

    The impending local Ubisoft studio may have been the invisible elephant in the room. Some in that audience might appreciate a deeper discussion of employee vs. entrepreneur career paths.

    Reply
    1. Ryan

      Thanks, Dave. If i gave you the impression that the Flash industry was all frustration and hobo-courting, then MISSION ACCOMPLISHED. :)

      We touched on UbiSoft a little … it was interesting to me that the room was projecting doom and gloom, but that the panel was not. All in all, a favourable forecast for Ontario’s gaming future.

      Reply
  2. Rob Segal

    Ryan I would definitely say having you speak on the panel made it worth the effort to attend. You are unmatched in your talents as an entertainer here in our fine city. I could have sworn you were staring me down half the time of that panel but I can’t say for sure.

    I agree with you it would have been great to have heard more of how things failed for people. Those failures were kind of touched on at a higher level but I don’t recall many specifics being pointed out. It’s tough to have an in depth conversation because of the amount of people on the panel, in the room and the length of the conversation. Only so much can be done in an hour and a half.

    I don’t know how to say this without kind of sounding like a dick but I would’ve liked to have seen less first timer type questions like “Do you think its a good idea to work on a mod?”. The answer to this came up indirectly by I think almost every member of the panel. Make something you can show to people don’t just talk about it. That is a key point I think should be really hammered home. Everyone talks about making games just get out and do it! Doesn’t matter if its good, bad or ugly. On that line of thinking have more discussion on how to properly achieve that would have been great. How do you stay motivated to achieve your goal? Tools, mentors, websites, etc.

    Reply
    1. Ryan

      Rob – Thanks so much for your warm words! i actually was staring at you most of the time, because yours was one of the most familiar faces in the crowd.

      And sexy. Dead sexy.

      Re: First-timer questions … i would have liked to have had the moderator survey the room so we knew who we were talking to. i didn’t know if it was mostly students or professionals. i didn’t know if we had mostly console-focussed folks or casual developers. First-timer questions might have been appropriate – who knows? But to put your mind at ease, it’s the mandate of the IGDA Toronto Chapter to increasingly target its discussions to working professionals in the game industry. The students can come and glean what they can, but they’re not the focus, so your beef is valid.

      And i totally agree with you about making a game. He who executes, wins. i’m glad to hear you guys are so far along on your first project! Upcoming discussions will focus on exactly the types of topics you listed. i hope to run one in April about pipeline management, tools, and streamlining.

      i shall call it “On the Pipe.”

      – Ryan

      Reply
  3. Bwakathaboom

    But when people ask “How do I get in the business?” don’t you just want to yell at them “DON’T!”?

    I’d probably be happier videotaping weddings. I’d certainly be making more money.

    Reply
    1. Ryan

      Bwakathaboom – TOTALLY wanna yell “DON’T!”, but it would be completely unfair. i wouldn’t have wanted anyone yelling “DON’T!” at me back when i was starting my bidness. But i think it’s crucial that people go into it with realistic expectations and an appetite for failure. The start-ups that make the news are the ones that are started by an under-25-year-old prodigy in the Valley that start churning out millions within six months. What you DON’T hear about are the start-ups that grew slowly into viable businesses through hard work and effort. That’s a story i think we need to tell more often.

      Reply
  4. Jason Krogh

    Sorry I couldn’t make it out to this (too busy learning how to pee while consoling a newborn with one arm). So many panels along these lines are populated by people determined to talk up their success. It’s a natural tendency, but doesn’t serve the audience very well. One also have to remember that some of these people may have walked into their business with a big bag of money and their only success is that they haven’t managed to lose it all yet. Success for me means years in business and successfully completed projects. Anyone who has paid the bills for a few years or who hasn’t delivered at least a handful of consistently above-average projects can go sit in the audience with the rest of us.

    Starting a business is brutally hard. There are just so many fun ways it can blow up in one’s face. For what it’s worth a few things that worked for me:
    – keep costs low and only spend what you can afford.
    – stick to small projects at first and exceed expectations.
    – expect to get paid a fair wage. if you don’t charge market rate people will treat you like dirt.
    – don’t be afraid to turn down a job if you don’t think you can do a great job of it.
    – reduce your workload by using tools like unfuddle, basecamp, mailtrust, mailchimp, pingdom etc unless you have a damn good reason for rolling your own solution.
    – try to main redundancy in expertise. do what you can to make sure more than one person has the info in their head.
    – Labour is the mother of all expenses, everything else is minor in comparison so make sure you are getting your money’s worth.
    – Your time is often the limiting factor. Once things are rolling start asking yourself ‘do I need to be the one doing this?’.

    Reply
    1. Ryan

      Jason – glad to hear you’re not learning to console the newborn with one pee.

      These are excellent tips. We’ve broken a few of these rules, and have kept others. i’m going to research your list of technologies – i know basecamp and mailchimp, but i haven’t heard of the rest of them.

      It’s a good point that some people have gone into business with a big bag of money and haven’t burned through it all yet. This is the feeling i get about people who are VC- or Angel-financed. It’s easy to stay afloat when you’re bankrolled, but try starting from scratch. Now that i’ve come to understand what it takes to run a shop, and i see all these bizarre stores with downtown Toronto storefronts and keep wondering how they even keep the lights on, i come to understand: it’s likely Mommy or Daddy’s money. What does Joe Average audience member stand to learn from that?

      i like to be transparent with how we got the money, how we spent it, and how we hope to find more. That’s a lot more useful than “Step 1: Win the lottery.”

      Reply
  5. Ron

    Ryan:
    For a guy who wasn’t taking notes, I’d say that’s a mighty fine recap. I got alot out of the evening, even if several of the plotlines were all-too-familiar from my illustrator’s viewpoint. Your teeter-totter/balanced bucket analogy might be the way to go–a mix of paying jobs and love jobs.

    Reply
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