How to navigate the costs of setting up a game development studio

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Nine Dots Studios and Playtonic Games share more about the myriad costs involved in the start-up landscape.

It's never been easier to start up a new games studio. Start-ups spanning multiple countries, continents and time zones have become increasingly common, with remote working becoming the new normal for many thanks to the pandemic. However, while starting a studio can be an incredibly exciting endeavour, it's important to be aware of (and plan for) the various costs associated with them - financially, mentally and otherwise.

These costs were exhaustively detailed by Guillaume Boucher-Vidal, CEO of the Quebec based Nine Dots Studio, in a 2014 Polygon article. Financially, founders must consider everything from the cost of salaries to buying hardware, licensing required software, funding PR campaigns, attending events and, if relevant, ongoing costs for renting an office. And then there are a variety of non-monetary ‘costs’ that Boucher-Vidal identifies, like the opportunity cost of leaving a comfortable salaried position, the social cost of having reduced income and free time, and the emotional cost of launching your own business. 

“I've been extremely fortunate to have a supporting girlfriend, family and friends to help me go through this,” Boucher-Vidal wrote in 2014. “To be honest, there have been a few times when I could tell I was on the verge of burning out.”

However, Nine Dots has had good fortune recently, thanks to the success of Outward, its open-world survival RPG released in 2019. Outward was retroactively added to Koch Media’s publishing label Prime Matter in June and the studio currently has 15 employees, almost doubling its headcount since 2014. 

For start-ups, Boucher-Vidal estimates that a group of five or six developers, earning living wage and working within a time constraint of one year for their first game, could be funded for approximately $250,000, increasing this budget for a second game afterwards if they feel that the studio has potential. To give a studio the best chance of long-term survival, Boucher-Vidal notes the importance of having funding to survive multiple failures.

“Of course you want it to be profitable, but the biggest takeaway [of the first game] will be what you learn about yourselves as a team. The second project after that will start trying out a higher level of ambition,” he says.

For example, Nine Dots’ first two games, Brand and GoD Factory: Wingman, were “utter failures” commercially, according to Boucher-Vidal, and sent the studio into debt. However, the team’s experience and track-record helped them to secure CA$50,000 in funding, which kept the studio going for a few months on minimum-wage and bought them enough time to chase down other resources. These were wide-ranging, including sales of their previous games, Quebec’s tax credits for game development, almost CA$1 million granted by the Canada Media Fund, bank loans, Boucher-Vidal’s savings and funds raised during a 2015 Kickstarter campaign.

“I know it’s very cliché,” Boucher-Vidal says, “but [it’s about] finding out whenever a door is closed, it’s not time to shut it down but to find out what other doors are still open.” 

What funding types you pursue will depend on the size of your team and the types of game you want to make. For example, Boucher-Vidal notes that a systemic ‘sandbox’-type game would generally be more suitable to release in Early Access than, say, a narrative-focused experience created by a smaller team. He also advises new studios to self-publish if they have the financial means to do so, but acknowledges that signing with a publisher can both act as a seal of approval for an in-development game and position them for first-party collaboration through the strength of a publisher's catalogue. 

Playtonic Games, a studio founded by former Rare staffers in 2014, opened its publishing division Playtonic Friends in February. As a studio with experience on both sides of the equation, managing director and creative lead Gavin Price advises new studios to take their time and speak to lots of publishers if possible (something we took an in-depth look at recently) saying "don’t let a publisher rush or intimidate you.”

"Every developer's situation is usually as bespoke as their game, but common points for us would be to strive for pre-recoup revenue shares, mutual clauses and clearly defined milestone payments," Price elaborates.

Playtonic raised over £2 million in crowdfunding in 2015 to fund its debut game Yooka Laylee, a spiritual successor to retro 3D platform games like Banjo Kazooie and Donkey Kong 64.

Yooka LayleePlaytonic Games - Yooka Laylee

“Crowdfunding back then was very popular and we’d spotted that devs creating new IP as spiritual successors to long absent IPs they'd previously worked on were doing well,” Price explains.

However, crowdfunding introduced a number of challenges for the team, such as having to focus on non-development tasks like shipping merchandise and writing community updates. We explored some of the best practices for using crowdfunding to finance your project earlier this year.

Additionally, delivering on certain features promised in the Kickstarter campaign proved challenging for Playtonic.

“We made all these promises and trying to keep those in the game in some form made the development quite difficult,” designer Hamish Lockwood said in a 2019 MCV interview.

That being said, Price still considers crowdfunding an option worth considering for start-up studios, saying it "can help by being one of many sources used to de-risk development.”

“At the time we also applied for government grants and loans via regional growth funding linked to employee growth and as match-funding,” Price says. “Developers should look to investigate all avenues.”

When hiring, Playtonic focused on multi-skilled individuals, rather than people with highly specialised skillsets, in order “to have more broad coverage,” according to Price. 

“This also had cost savings of not having to hire or employ an individual we weren’t 100% convinced were needed,” Price explains. “We were happy to discover this as we went along.”

While Boucher-Vidal advises that a start-up should have someone dedicated to chasing down funding, he cautions that spending so much time on non-game development tasks can lead to loyalty issues amongst a team, something he’s personally experienced. However, having a voluntary mediator between Boucher-Vidal and the rest of the team was the solution.

“That saved us,” Boucher-Vidal admits. “There was this dissent among the team, but [the mediator] realised that the problems that we were talking about and they were blaming me for were problems that were not being communicated to me because I didn’t have time to listen to them. [It was because] I was putting out these external fires.” 

He also stresses the importance of proper budgeting for start-ups - irregardless of whether you're paying full salaries yet. Budgeting is done by breaking down every task needed for a game, estimating how long they will take and multiplying this time by the market values of your developers’ skillsets. Knowing your project’s value helps you when deciding how much to invest in a marketing campaign, whether to keep or cut features, working out fair salaries or evaluating a publisher’s offer. £250,000 might sound like lots of money for a new studio, but not if you’ve valued your game at, say, £2 million.

“You can save a lot of time, a lot of money, and increase your chances of success significantly by going through that excruciating process of identifying every single small thing,” Boucher-Vidal advises. “It's very granular, it’s very methodical, but that’s what being a professional is about.”

Leasing a physical office comes with a variety of costs, which Boucher-Vidal catalogued in his 2014 article. For example, ongoing costs for rent, bills, bank fees and insurance totalled over $1,200 per month for an eight-person setup at the time, not counting salaries and miscellaneous fees for things like a printer ($200), a company laptop (about $1000) and business cards ($80).

Some new studios operate completely remotely, with staff members working from home rather than in a physical office, like UK studio Silver Rain Games. Founded in late 2019, the studio of approximately 30 employees is fully remote, which provides flexibility for staff and potential hires, as explained by studio head Melissa Phillips in Barclays’ “Reaching the Next Level” industry report

"When you’re a small team it’s very easy to identify a drop-off in productivity [when working remotely], and we’ve been very fortunate that it has positioned the studio very well,” Phillips said.

This move wasn’t without difficulties, namely making sure employees had a healthy work-life balance and good general wellbeing, leading Silver Rain to limit video meetings to three hours a day. Playtonic has a physical office, having started small and scaled their operations up as necessary. 

For software licenses and hardware, Playtonic mitigated costs by using "some of our own bits and pieces where we could”, with Price adding that “[certain] engines can be licensed on free terms and the barrier to entry has been relatively low for a while.”

“At different ends of the scale setup costs can be as simple or as complex as you make them,” he concludes. “There’s so many ways to do things - some require office [space], some prefer globally distributed individuals working from home. Ultimately, do whatever it takes to succeed and remain flexible.”

Finances aside, it's important to monitor the impact that starting a new studio has on your mental wellbeing. Boucher-Vidal strongly advises against crunch, the widely-reported industry practice of working excessive overtime on a project, even though it might be tempting when you're trying to keep a new studio afloat. Nine Dots instead encourages staffers to invest themselves into side projects, and this has been vital for the long-term sustainability of the studios and its employees. For example, the bones of Outward came from a separate hobby project worked on by programmer Pierre-Tuan Vallée and 3D artist Étienne Vanier during the development of GoD Factory.

Of course, no matter what you try, sometimes new studios simply don’t work out. This can be a good thing though, giving founders a huge amount of practical industry experience.

“Eventually you might get to the point where you’re like ‘there is no next step’ and then, ‘okay, it’s time to call it a day, throw in the towel.’ It can happen, and it’s useless to feel shame for your failures if you’ve really done everything you could have done,” Boucher-Vidal says. 

“No matter what, even in the case of a failure, you’re still building yourself and your career and getting very valuable skills. The failure of a company is not the end - for some people, it’s a glorious start.”

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