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Games don't need venture capitalism
- kyriefh 3y agohiya, author here. Palworld is a wild, wild game (think pokemon meets ark:survival evolved, or simply pokemon with guns), and it follows a number of other super-successful indie games that got made with no VC funding. i myself work heavily within the VC ecosystem, so it got me thinking about how games and VC tie together. while the article is written in an opinionated manner, i don't mean to present it as fact - more some musings and steelmanning of why VCs aren't needed
- larsiusprime 3y agoHaving worked in games for 10+ years, and having recently joined a more traditional VC-backed startup outside of games, I think you are 100% on the money. The VC model doesn't make a lot of sense for games. So many outsiders come into games thinking they know what they're doing and they learn some hard (and expensive!) lessons fast. Thanks for writing this.
- monero-xmr 3y agoGames are a hit making business, much more similar to movies than to product businesses. Sequels and spinoffs can reduce the risk by leveraging the existing IP and fan base, but it's still a hit making business. Indie games are more like self-published novels or youtube creators - you are trying to find a core fan base who will support your artistic endeavors. Sometimes they crossover into mainstream, but 99.99% of the time it remains a niche. At best you can earn a liveble wage that grows over many years. I have seen many VCs dabble in games and they learn their lesson quick. VR / AR / Metaverse attracted a lot of VC investment, all of which is now burned into nothing.
- LarsDu88 3y agoThis is correct. The distribution of successful games just like movies, youtubers and onlyfans creators is extremely skewed towards a power law distribution. Games are amazingly difficult to make. Much harder than building web services, but the product success rate is even lower and with much lower stickiness amongst users. What most silicon valley backed successful VC funded companies fundamentally are, are attempts to get software based network monopolies. Things that users won't immediately abandon for the next new shiny thing down the road.
- kyriefh 3y agothanks for reading and sharing your perspective! i'm arguing against my own interest here as VCs indirectly pay most of my income, but as you also observe the standard playbook doesn't quite seem to copy paste well
- minimaxir 3y agoPalworld is an extreme lightning in a bottle and is not a consistent model for game development success. For every Baldur's Gate 3 and Among Us, there are thousands of games that never reach that level of popularity. It's a similar survivorship bias as typical VC.
- MichaelZuo 3y agoThe world's game industry only needs, at most, about 12 'lightning in a bottle's like this per year, so it seems like a perfectly workable model for such a small number. The existing game studio system can already handle all other established niches in practice.
- Ekaros 3y ago12 sounds a lot, but it is actually not that many. Considering Steam had 14516 games last year. So that would be less than 1 in thousand. And you will also have self funded and games from traditional publishers.
- TillE 3y agoI've seen a couple people refer to BG3 as if it's some out-of-the-blue success. Larian has a strong history of consistent success, and reached another level by licensing an extremely popular franchise. Similarly, nearly every AAA franchise game will do very well. Maybe there are some ups and downs, but overall it's boringly predictable. I can absolutely guarantee that GTA6 will be one of the best-selling games of all time. Among Us is an actual weird indie hit, yes.
- raincole 3y agoPalworld's budget is 1 billion yen (6M dollars). If you're willing to invest $6M out of your or your family's pocket yes you don't need VC. For most people $6M budget means VC.
- nottorp 3y agoAre they even indie or they had a publisher?
- candiddevmike 3y agoPalworld may end up being the first "big" GenAI-based copyright infringement case if Nintendo/Gamefreak decide to pursue it.
- jmyeet 3y agoThis is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeatable formula no matter how hard people try. People try and that's why we get the exact same summer blockbuster movies every year, 20+ years of superhero movies just rehashing old IP, endless sequelss, annual Call of Duty releases, FIFA/Madden annual micro-transaction hell and so on. VC funding works what you're doing is repeatable otherwise it doesn't.
- wodenokoto 3y agoI’m not sure I agree. Disney and Pixar lives and dies on being able to repeat success. And both have lived for quite a while now. Rovio was extremely conscious about not building an empire on top of angry birds, as that dad would eventually fade and they needed a new thing. They were aiming to be the next Disney, but of games and smartphones, not cinema and tv. I’m surprised they took $40 million in VC as that sounds like it must have been Pennie’s to Rovio during angry bird mania.
- jmyeet 3y agoPixar is a perfect example. They had a focus on technological prowess, pioneering animation and storytelling under Steve Jobs that became part of their DNA. There was huge cultural inertia. Since the Disney acquisition it’s mostly been recycling old IP into sequels.
- gamblor956 3y agoEverything you gave Jobs credit for was actually the work of John Lassetter. Pixar was floundering under Jobs' leadership. Lassetter had the Disney connection that saved the company. Jobs nearly killed the Disney deal many times, and due to his abysmal negotiating skills Disney ended up owning the rights to all of the films and characters made by Pixar (i.e., essentially everything of value).
- klik99 3y ago5 years ago I would have agreed, VCs invested in games, rather than studios and most games never get released, let alone be successful if they are released. Rovio is a good example of that time period. But so many games people have exited and formed their own VC studios, or hired people who get games, and the focus has switched to investing in teams which is way better. So while it's true that "games don't need VC", yeah there is a huge market for smaller games, and what success means for 1-4 person team is vastly smaller than a big game, there is also a place for large VC funded teams. I think this article is really saying "games shouldn't be funded by VC" which I think is just wrong. Just like any VC, you want the VC to understand your industry, which games is hugely misunderstood by people who haven't worked in games. The VC has to understand what's valuable, which is a team that ships and works well together, not a particular game idea. Alternatively invest in a technology that is being built for the game, which is the Tencent approach and either use buy the tech if it works out or sell it. Either way, don't invest in a particular game product. Failures don't mean the model doesn't work, and successes without it doesn't mean it's not needed. VC is one of many ways to get from point A to point B and if depends on the project - if you have an idea that needs rocket fuel and you're willing to take the risk that rocket fuel entails, then it can make a lot of sense. But it's def not the only way.
- Ekaros 3y agoWouldn't the traditional publisher model somewhat modified be reasonable solution? They have been around for decades and they know the industry, have the connections and so on. Just have to leverage it right way. Real issue with VC money in games is that returns most of the time just aren't big enough. And picking the winners is very hard.
- klik99 3y agoThis is a good question. Publishers typically invest later in a project to help finish get it over the finish line. They used to invest earlier but over the years started investing later and later - as game engines got better and better, teams could do more with less funding so they stopped doing as much. IMO VC entering the picture was a reaction to less early funding from publishers - it's filling a need for larger more ambitious projects.
- hresvelgr 3y agoGames in this day and age ideally need generous government subsidy to be successful. I feel we're a long way off universal basic income worldwide so at the very least, something like an artist's living wage provided by the government is a necessity to produce good independent video games. Most professional indie developers tend to survive rather than thrive, barely kept afloat by money from publishers who also have their own interests and influence which affect the final result. There would be kinks to iron out in terms of who gets the wage and how it's kept and so on, but the funding really needs to come from an entity that is largely divorced from the "success" of the game. Bit of a pipe dream, but it's nice to think about.
- bidder33 3y agothe “kinks to work out” is a funny way of saying “gaping holes that make this idea completely unworkable” and given the endless stream of indie games government funding doesn’t seem to be a necessity.
- bhb916 3y agoQuite the contrary, the world you envision isn't nice to think about at all. It's impractical, inefficient, wildly haphazard, and, worse than that, would produce the exact opposite of what you're looking for. The profit motive might not be aesthetically pleasing to you but it provides the vibrant indie marketplace we see today.
- hresvelgr 3y agoMy inspiration for the idea was VicScreen[1], an Australian Victorian state government agency that funds film and interactive media projects. In the past they have funded half of a project's development budget but I'm unsure of their procedures as of now. Cult of the Lamb[2] was partially subsidised by VicScreen as an example. There is a selection process but the money comes with few strings attached, mainly attribution. > The profit motive might not be aesthetically pleasing to you but it provides the vibrant indie marketplace we see today. At what cost? My main point, ignoring my objectionable proposal is that video games could use better patronage from actors that aren't entirely profit driven. Having spoken to indie developers myself, there is a palpable constant stress living proposal to proposal with their business hanging in the balance at all times. That may very well be the nature of the market and some might say, so be it. I feel removing that stress to perform would probably offer better results, but who knows. I am idealistic and I don't think art should be subject to the same conditions as the average business because the inherent value proposal is intangible and varies wildly to all that experience it. [1] https://vicscreen.vic.gov.au/ https://vicscreen.vic.gov.au/ [2] https://www.cultofthelamb.com/ https://www.cultofthelamb.com/
- Madmallard 3y agoThey need something. I've been trying to crack into this space for a better part of a decade. Ideas that come naturally to me that I spend hundreds of hours on end up being limited by ludicrous amount of art requirements to be considered acceptable in my mind to the public audience. I'm not interested in releasing an 8-bit (but looks worse somehow) pixel art clone of a popular genre. I want to make something truly interesting. Well, do you have a studio of artists ready to work for the next year or two? No? Well, good luck then.
- nottorp 3y ago> ludicrous amount of art requirements to be considered acceptable in my mind to the public audience Do you want to do the next Carmack game? Not even Carmack is doing Carmack games any more :) > releasing an 8-bit (but looks worse somehow) pixel art clone Good pixel art is harder than it looks and I'm not sure it takes less time. But there is a middle ground between fake 8 bit and high budget with hundreds of artists.
- Madmallard 3y agoI was talking specifically about indie games that have obviously not very high quality pixel art with my statement.
- mckravchyk 3y agoI never did any game development but I feel the same way. I never pursued this path but I kinda wish I did in some way and the idea that maybe it's not too late to switch comes back every so often but the scope feels impossible. I wonder if AI tools making the art would be a big enabler for small indie studios. Still, it does seem like 10 - 100x effort required to make a good 3D video game that sells vs. making an even somewhat complex app.
- orbital-decay 3y ago> the all-time concurrent user (CCU) record on Steam was just claimed by Palworld Was it? PUBG had > 3.2 millions concurrent players at the peak, and it's about 1.3M for Palworld. Sure it's growing faster but it's still nowhere near that.
- zokier 3y agoIsn't the traditional publishing model essentially same as VC? Publishers invest in game projects, acknowledging that many will be duds but some will be hits?
- meheleventyone 3y agoThe significant difference is the way the investment is recouped. Publishers take revenue directly whilst VCs take equity in the studio. VCs also expect a much larger return so they’re primarily interested in finding the next “forever game” like League or WoW and money printing businesses like F2P mobile studios.
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- meheleventyone 3y agoThis article is a bit stating the status quo because games have largely not been funded by VC for most of their lifetime. Although saying that I’ve worked at three venture backed studios in two decades. Although these have all been focused around ‘bigger ideas’ rather than a single game. I would say the days of crowdfunding being a sensible strategy for early stage funding isn’t true anymore. Rather it’s a great way to spend money to help build a community early on. You need a lot of work and good production value to attract attention. Games funding itself feels like it’s in a tricky place. Even “indie” titles are getting up into budgets of $1-2 million and obviously on the other end of the scale there’s non-stop complaining about how AAA costs are out of control versus the money consumers are willing to spend. Then there feels like a scattershot of smaller publishers that are to an extent preying on starry eyed kids making their first game where budgets offered are unsustainably small and promises to help with discovery never happen. From a developer perspective VC seems a lot more attractive as well. Typically less onerous to get, different kind of working relationship, doesn’t eat into revenue and the numbers are higher! But you have to be making something very specifically interesting to the people investing and have a team pedigree they recognise.
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- spacemarine1 3y agoI think early equity funding has a role to play in video games… a role that’s very similar to YC. So I started EGG: https://www.elbowgreasegames.com/ https://www.elbowgreasegames.com/
- meheleventyone 3y agoYou need a lot more information on your site to give this idea credibility.
- spacemarine1 3y agoYou’re right. Though I haven’t formally announced yet. I’m more lurking in the shadows talking to studios quietly than trying to be noticed by the public at large. I will post more info soon.