Number 197 - October 1999

The Business of Computer Video Games How Computer Games Are Made From a Developer's Point of View
by James C. Smith - NOCCC - Director - Software Engineering Reflexive Entertainment Inc., - Jan 1999
Introduction     When I was a kid, I used to play a lot of video games. I always wondered how they were made. How many people worked on them? How long did it take? Who came up with the ideas? How did the game actually work inside? Did anyone actually make any money off making a video game? Why do they cost so darn much money? But most of all, I really wanted to know what actually made them work. What language did the programmer use? How many lines of code did he have to write? Did he have to go to school to learn how to make games? What art tools did the artists use? Was it 3D renders, painted in a computer paint program, or drawn on paper and digitized? How did a level designer lay out the levels? What kind of logic is really used in the computer enemy's artificial brain?     Eventually I grew up, went to school, learned to program, and got a job as a computer programmer. I went from job to job writing business software, educational software, industrial software, and eventually video games. After several years of writing video games for a living, I know the answers to most of those questions I had as a kid, and I have a whole new perspective on games.     So, now I want to share some of my experience with you so you can get a better idea of how video games are made. I am sure a lot of you are curious about the technical details of what makes games work and how the creators make them. I would love to tell you all about that aspect. But, there probably isn't enough room here to go into that. Besides, it is a lot easier to show you how some of the process works, rather then write about it in an article. Maybe I can do that as a meeting presentation sometime. What I am going to tell you about now is some of the business and politics involved in making video games. There are a lot of aspects that I never even considered when I was imagining what it must be like to make games.     I always imagined that some guy (or gal) had a cool idea for a game and decided to make that game. I had no idea how he made it, or how she got it to market, but I always figure the person that made the game probably came up with the idea, loved it, made the game, and got rich if the game was successful. That is rarely the way it works these days. I Don't Claim To Know It All     First I have to tell you that I do not consider myself an expert game designer, project manager, or business man. I don't know exactly how all companies handle these issues. But I have worked in the video game industry for three years as a programmer and have observed how the business and political aspect works at several different companies. Maybe they don't all work this way, but I am sure most are similar. Most Games Are Not Made by Publishers     Almost all games are published by a big game publisher such as Interplay, Blizzard, Electronic Arts, Sierra, Activation, or GT Interactive. The publisher is usually responsible for funding the development of the game, marketing the product, manufacturing the disks and packaging, placing the product in retail outlets, and handing technical support for the product. In some cases, the publisher also makes the game, but that is usually not the case. Most games are made by game development companies that focus on making the games and then let a publisher handle the rest. The publisher usually gets all the recognition and the developer is often lucky just to get their name on the box. For example, Descent and Redneck Rampage are both published by Interplay but were developed by Parallax Software and Xatrix Entertainment. Quake II and Heretic II are both published by Activision but developed by ID Software and Raven Software. Monopoly and Frogger are published by Hasbro but were developed by Westwood Studios and SCEE Cambridge. Most people that are familiar with video games recognize the publisher names but very few people recognize the names of the game development companies that actually made the games. Publisher's In-house Development     Some publishers do have in-house development teams that make some of their games. Interplay, Activision, and Sierra all have large in-house development staffs that created Fallout, MechWarrior, and Leisure Suit Larry. But they also publish many other games made by outside developers.     A few publishers, such as Blizzard Entertainment, do not use outside developers at all and develop all their games in-house including Starcraft, Warcraft, and Diablo. Contract Game Development     Most games are created by a small game development company that is under contract with a big publisher. Often the game idea comes from the publisher. For example, Hasbro decided to make a computer version of the their popular Monopoly board game. So, they wrote up a game design, a marketing proposal, a budget, and took bids from development companies who would contract to make the game. Or, Fox Interactive decided to make a computer game based on their popular movie Independence Day so they took bids from game development companies. Or Psygnosis wanted a new 3D-action game based on their popular Lemmings puzzle game. Or Atari wanted a new updated PC version of the arcade classic Centipede. In all these cases, the publisher had a particular game in mind based on a movie, toy, novel, or previous game. Then they found some one else to make the game for them. So, the people that ended up making the game, the people that work at the game development company, got stuck making a game that someone else thought up. Every step along the way, the developer had to send the game in progress off to the publisher for approval to make sure the publisher liked the artwork, the story, and the game play. This type of contract game development work is often done in desperation. When a game development company doesn't have funding for any of their own game ideas, they have to take any contracts they can get to pay the bills. Signing a contract to develop a publisher's game idea is usually a last resort. A developer would rather be working on their own game idea. So, that type of game is created by people that would rather be working on something else.     As a general rule, I don't like any game based on a movie or other existing products. There are some exceptions, but usually these games are just something a developer was forced to make even if they didn't like the concept. And the original concept usually isn't a unique game play element. It is usually more like, "how can we take these characters, or this story, and put it into a video game." None of the most successful video games were based on a movie or other existing story or character. The most successful video games end up having movies, toys, and board games made based on the video game. Contract Developer's Idea     Another common game development process involves a developer coming up with their own original game concept. Most developers don't have the budget to support the full development cycle, so they need to sign a publisher to help fund the development. Even if the developer could afford to fund the full development cycle on their own, they still need a publisher to handle the manufacturing, marketing, and product placement. So, the developer will write up a game design, build a prototype, and start looking for a publisher. This is how most of the best games are made. The developers are excited about their game idea so they put more into it. Plus, it is an original concept rather than a video game version of an existing story. The end result is often a much better product. Unfortunately, it is very difficult for a developer to convince a publisher to publish a new game. The publisher would rather make a new version of some proven concept. A sequel to a successful game is less risky than a totally new game concept. Or a game based on Star Wars is easier to market than a game based on some new characters no one has ever heard of. To make matters worse, the publisher receives dozens of game designs from dozens of game developers every month. It is very difficult for a developer to get noticed by a publisher and make his game design stand out compared to all the other options the publisher has. Publisher Has All The Control     There are hundreds of games released each year. Not very many are profitable, and a huge percentage of them are never even finished. Games are often canceled halfway through. So, a publisher is taking a big financial risk when they agree to publish a game. In exchange for taking that risk, they take most of the profits. And to help protect their investment, they take most of the control of the creative design process. So, no matter who came up with the original game idea, the publisher usually ends up with most of the control and most of the profits. Obviously, this can be very frustrating to a developer. Then again, I see this from a developer's point of view. I am sure a publisher would give you reasons why they feel like they have no real control, huge risk, and the bad end of the bargain.	Play Our Own Game     There have been some games I played that I absolutely hated for one reason or another. Even though those games were not fun for me to play, I used to think that some one must like them. If no one else, at least the guy that made the game must like to play it. Right? Wrong! It turns out it is very common for the people making games to not like the game they are making. Their boss told them to make it because the marketing department said there was a demand in the market place for an xyz game. Some games are simply bad ideas, and all the people making the game know it, but they have to follow orders and do what the marketing department says to do. Even if the game is a good idea, it isn't necessarily going to be made by someone who likes that kind of game. Obviously someone has to write the games that 4-year-olds like to play and the 4-year-olds don't know how to program or model 3D artwork. A less extreme example is when a programmer or artist is assigned to work on a role-playing game but he or she prefers to play action games. So, programmers and artists often have to work on a game they will never play themselves. This can really hurt the developer's motivation and affect the overall quality of the game. Milestone Schedules     Developers usually work on a milestone basis. Their contract says they get a check from the publisher each month only if they deliver an updated version of the game with specific features implemented. The game development process often turns into a push to simply meet the milestones on-time rather than trying to make the best game possible. As soon as feature X is good enough to meet the milestone requirements, the developer has to move on to the next feature so they can meet their next milestone. There is no incentive to make feature X a little better or a little more polished. Features Y and Z are waiting to be done and have payments attached to them. So don't spend any extra time on feature X once it is good enough. And don't even think about that extra feature that isn't in the contract but would make the game really cool. There is no time to work on features you don't get paid for no matter how cool they make the game. Of course, not all developers work this way, and royalties are one incentive the developer had to make the game better. But many game development companies are underfunded and must do whatever it takes to pay the bills. There simply isn't time to do a great job when a mediocre job is good enough. At least that is the way some shortsighted game development companies think. I no longer work for companies like that.     Making games is a very creative process. It is not unlike musicians writing and recording CDs. To get the best results, you need to let the creative people create, innovate, and take the time to make the product the best it can be. Contracts, milestone schedules, and budgets all get in the way of the creative process. But, in the real world all those things exist so we have to deal with them. The Money     Typically a developer works for royalties. After the retailers take their cut, the publisher gets most of the money from the sale of the game. A developer will get somewhere around 12% royalties on the wholesale cost of the game. If a game is selling for $40 at Comp Superstore, chances are Comp Superstore paid the publisher about $28 for the game. The developer gets %12 of that $28. So, the developer ends up getting $3.28 for the game the consumer paid $40 for. The store kept $12 and the publisher got the other $24.72. To cover the developer's costs during the production of the game, the publisher usually pays a lot of money up front to the developer. This money is made in payments approximately once per month on the condition that the developer meets specific milestones. All of this money paid to the developer during development is typically an advance on royalties. So, if a developer was paid $700,000 to develop a game, he or she won't see any more royalties until the game sold enough copies to pay back that advance on royalties. In our previous example, over 200,000 copies of the game would have to be sold before the developer would receive any royalty payments. In most cases, the developer does not receive any royalties beyond the advance unless the game is a huge success.     It is not uncommon for a publisher to give a developer an advance on royalties in the neighborhood of one half million to one and a half million dollars to create a game. The publisher will usually spend at least another one million dollars in advertising and retail slotting fees. Bigger games that include a lot of digital movies or other content can be much more expensive to develop and advertising costs can be much higher for games with TV ads. Many games cost publishers several million dollars. Of course, there are plenty of low budget titles as well. I worked on one game that the publisher paid only $30,000 to the developer and did not spend a dime on advertising. The game was very well done (in MY opinion) and managed to sell 40,000 copies. Not great, but better than expected for such a small budget. This type of game is really hard to get placed in the retail stores. Retail Shelf Space Is Very Limited     It is surprisingly difficult to get a game product on the shelves in a retail outlet. Most retailers are flooded with more product then they have room for on the shelf. Before retailers will stock your product, you need to convince them it will sell. The retailer wants to see the box design and will reject the product if the box doesn't look attractive enough. The retailer also wants to know what kind of advertising budget you have, if there is a free demo version of the game on the internet, how many times the demo was download, and any other information that will convince them your game will sell. It makes sense to me that a store wouldn't buy your product unless they thought it was a good product, but is most cases the store isn't buying the product. They only take it on consignment. If the product doesn't sell, the retailer can send it back to the publisher. The retailer almost never pays for games until after the games sell through to the consumer. In addition to being extremely picky about the games they will stock, retailers also charge huge fees to get a game placed on their shelves. These fees are usually called "advertising fees" or "slotting fees". If you want the game put at eye level or in a display at the end of an aisle you have to pay even more. So, Comp Superstore won't stock your game unless they really like the game, and you pay them $50,000. Then they will take a few thousand copies of your game without paying you for them, put them on the shelf in a bad spot for a few weeks, and pay you if they sell. If the game doesn't sell right away, Comp Superstore will pull all the copies from all the stores and send them back to you. Paying them more money will get you a better spot on the shelf and even more money may convince them to keep it on the shelf a little longer even if sales haven't gotten strong yet.     Most game developers can't afford to deal with the retailers in this way. That is why they need publishers. This is also why publishers are extremely demanding when it comes to developers completing a project on time. The publisher has to develop a strong marketing strategy including adds in magazines, reserving shelf space in stores, creating a buzz on the Internet, convincing game magazines to write previews about the game, and in some cases even radio and TV advertisements. All of this is designed to come to a climax just before the product is released. This way, consumers will be waiting to grab the product off the shelf immediately. If the product is released late, it misses the marketing window and the hype will die down by the time the game makes it to the retailers. Then the retailer will end up pulling the product from the shelf in a matter of weeks if the sales aren't brisk enough. It's Not All Bad     I have mostly been focusing on some of the more negative aspects of the video game industry. Obviously it isn't all bad or no one would be doing it. It can be very exciting, challenging, fun, rewarding, and profitable to work on video games. But it isn't all fun and games. There is a lot of hard work involved and many things about the process are frustrating and sometimes seem unfair. These are the aspects of the industry I have focused on because I think they are the parts most people don't know about. And find most interesting.     I have been working as a programmer for more than ten years. Most of that time was spent developing business, industrial, and educational software. I have only been working on games for the past three years. I am honestly not sure what I want to work on in the future. When it comes to developing video games, there are plenty of pluses and minuses that cancel each other out. The two things make me want to stick to games rather than going back to other types of programming are the challenge and the wide distribution. Creating video games is far more challenging than any other type of programming I have done in the past. And creating a product that is purchased by thousands of consumers all over the world is very satisfying even if they all know the name of the publisher but not my name or my company's name.     To see my latest creations please check out my company's web page. http://www.Reflexive.NET
Number 197 - October 1999