Game Finances: Amortization

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What Is Amortization?

This is an accounting term for taking multiple payments over time or spreading a single payment out over a period of time.

Example 1: Taking Multiple Payments

One way you can use amortization to your benefit is to take multiple payments for something. So let’s say you have a yearly upgrade that costs $50. Amortization in this instance means you allow the player to break that payment down into multiple payments. For instance, they might make two payments instead of a single one; $25 for the first 6 months of the upgrade and then another $25 for the last 6 months. With amortization you can brake a payment down into as many smaller payment as you’d like. So instead of taking 2 payments you might decide to take 5 or 6 or 30 — however it best suits your player base and brings you good business. Generally speaking, most people tend to break payments down into no more than 12 just because it makes the accounting practices easier if you have one payment a month. If you broke this $50 upgrade into 12 payments then your players could become an upgraded member for only $4.20 a month.

Why Is Example 1 So Helpful?

Many people are more willing to make smaller payments. This means that even if you don’t get a full year’s upgrade from one member you’re still bringing in income. It also encourages people to try out your upgrade system with a much smaller risk to themselves. If they don’t like the upgrade they’ve only spent half or much less than half the money than if they’d paid for a full year. It also gives them the ability to come and go on their upgrade much more readily than if they had to pay the larger sum each year. They can buy one month and not the other, then come back for the month following that allowing them more flexibility to purchase and keep their upgrade.

What’s The Downside of Example 1?

You may not be bringing in as much money as you like. Because the payments are smaller you also have more online processing fees that are applied, however some payment services will allow you register as a micro-transaction account and will take lower fees since you will be bringing in a higher volume of payments. While payments are likely to happen more frequently they will only be in smaller amounts which may make it seem like your bank account is always struggling to stay at a more comfortable level when you have slower times.

Example 2: Taking One Payment and Spreading It Over a Period of Time

This other example is one that many of you may not know about. It applies the same kind of idea except you only take one payment and you only apply a portion of that payment to your income over a duration. For example, let’s say you got your $50 upgrade and we go back to our 2 payments example. Instead of thinking of that $50 as one payment you apply $25 to this month and then 6 months later you apply the other $25. You may still have the full amount of $50 but you’re not considering it income until a period of time has passed. This idea works best when you break a payment down into bi-annually, quarterly or monthly time periods. So in our second 12 month example, instead of getting $50 for this one payment you apply $4.20 from this payment across every month.

Why Is Example 2 So Helpful?

This is really the icing on the cake and most people don’t realize it! When you take in the one payment and spread it out amongst a period of time it gives you more solid, steady income. Instead of getting $50 one month, and nothing for the next 12 months, you now have a steady stream of income coming in all year long. Generally speaking, with games the upgrade tend to have highs and lows, where people are upgrading a lot and then not upgrading at all. You may get $4,000 in upgrades one month and then nothing or very little for the next two. With this kind of amortization that $4,000 is spread over the rest of the time period. So in our 12 month example you would be bringing in $334 a month instead of $4,000 in one lump sum. This also helps you keep a steady income for the entire year instead of getting less reliable income over the duration of the year, even if the overall total for whatever time period you’re shooting for is lower than what you bring in for a month. It’s great for budgeting and paying your bills and helping you keep your game open even in slower months.

What’s The Downside of Example 1?

This example takes discipline!! It’s a much different way of thinking about the income you’re bringing in because the balance in your bank account may reflect one thing while your calculations reflect another. It is very tempting to just look at your total balance and think I have $4,000 rather than I only have $334 to spend this month. It also requires some math to keep track of how much money you are amortizing over time whereas Example 1 is easier to keep track of because you immediately account for the money from each payment you get.

What do you think about amortization? Do or have you used it? Which type of amortization do you prefer?

I would love to hear your thoughts, comments, questions and experiences!

Why Making A Game Takes the Fun Out of It (and how to fix this)

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I see it all the time, people coming into forums and online communities for games and game developers asking how to make a game or how to get their ultra cool idea that everyone will love and has never been done before off the ground and make it a tangible reality. Let’s get things straight, we love games because they’re fun and entertaining. It drives our creative vision and imagination and offers an escape from the mundane and the boring reality that is our lives. This passion, this drive to express ourselves and have fun is often what leads people to try their hand at making their own games. Many will start this journey but very few will finish it and even fewer will finish it with a successful and positive outcome (and let’s face it, money in your pockets). So why does this happen? Why do so many people start down this path of learning and creativity and adventure for fun that ends up leaving them broken, frustrated and depressed? The reality is that games are a lot of work and the very nature of making a game isn’t even a little bit fun. In many ways it’s the exact opposite of what we’re trying to achieve. So how does this happen and what can we do to fix it? Let’s break it down from the point of view of an Indie game developer whose a one man shop (or small shop) trying to make a game.

Lack of skills

You want to make a game but you’ve never programmed before, you don’t know anything about what’s required to make the type of game you want to create and even if you have those things covered you may not have all the skills you need to make it happen. Just because you can program doesn’t mean you can draw or compose artwork or market your finished product if you ever get that far. As an indie game developer you really have to be a jack of all trades. Think about trying to build a house if you’ve never built a house before. What happens if you only know how to frame the house but not how to do plumbing and electrical and tile work and all the other things that are required to finish the house? You end up with just the shell of a house that is lacking in so many ways you can hardly call it a house. This is one of the biggest problems I see with indie game devs — they lack the skills to accomplish what they’ve set out to do and they’re not prepared to outsource when they need to, which brings me to my next point.

Budget constraints

Making games is inherently expensive. Even if you create your own game framework and develop your own models/artwork, sounds and music you still have to — at a minimum — invest in a computer and dedicate hundreds of hours towards the development of your game. Those hours add up and while you’re developing your game you’re not earning a living that you need to support yourself and/or your family. Yes, that’s right, you still need to eat and buy necessities and support yourself and/or your family which is why even if you do have the funds outsource some of the work you lack the skills for you’re still fighting a losing battle towards my next point.

Time constraints and distractions

Supporting yourself and your family means that you’ll still need a full time job even as you chase the ethereal dream of creating your own game. Your time is precious and what little of it you have left after your regular day job has to be split between your other financial and personal commitments. Your kids need their parents and your house and car need to be maintained and you’ll struggle to find the proper work/life balance amidst all of the chaos that you juggle on a daily basis without adding the complexities of your game into the mix.

Technical problems, bugs, new frameworks and advances

So even if you can overcome all these odds so far you’ll still find yourself stuck hitting roadblocks as your game progresses. Technical problems you didn’t predict or forsee early on (and how could you, you’re still just learning yourself) end up being the bane of your game’s existence. Now you have to go back and re-write and re-factor and debug until you’re so frustrated you could pull all of your hair out and go bald. New frameworks and technological advances will make your second guess yourself or roll back to square one because you really do want to upgrade your SDK and add in the new dynamic system and better bump map texturing because who doesn’t want their game to be using the newest, latest and greatest technology available? No one wants to play a game that doesn’t have the same bells and whistles that their competition does because they took the the extra time/budget/testing cycle hits to go with the greater tech.

Slow progress and scope creep

Ultimately these things combined will drag your game down. What may have started off well and progressing quickly has suddenly slowed to a snail’s pace. Things suddenly feel like they’re never getting done or you have so many issues on your plate that it feels like there’s never an end in sight. Your game has hit a standstill and isn’t advancing like it was in the beginning and this is awfully discouraging and frustrating. The scope of your project has suddenly tripled and your todo list is a never-ending tally of bug fixes and re-factors and speed optimizations that need to be addressed for any chances of your game seeming like it’s something worth playing.

Early demo failures and monotonous repetition

If you’ve made it far enough to put together early demos and alpha access then pat yourself on the back — most people will never make it this far and you’ve just become a member of an elite club that deserves a badge of honor. The only problem is your demo gets horrible reviews, you realize your controls are too hard to use and this puts you into a crazy monotonous cycle of playing a particular part of your game over and over again as you attempt to fine tune it and make it more playable and more fun.

Never good enough

Unfortunately the truth is that your game will never be good enough. Someone will always find something to complain about even if you see some great feedback and helpful critiques that, if implemented, could really take your game to the next level and set you apart from your competition. Your controls will never be 100% perfect, your menu system may be too hard to read or too complex to navigate and you’ll never quash all the bugs that have been reported partly because you can’t re-create them all because your game is being run and tested under hundreds of different environments and hardware and operating systems that you didn’t have access to (and probably never will) as you were developing. If you’ve made it here this might just be the time for you to throw in the towel and say goodbye to all the blood, sweat and tears you succumbed to in order to make it this far.

Overcoming It All

If this has discouraged you against making your own game — good. Making a game isn’t easy and it’s not something for everyone so don’t waste your time early on if you’re not prepared to go through everything I’ve already mentioned and be able to walk away without anything to show for it. However that doesn’t mean you shouldn’t make a game or that it’s impossible to do it either. Where there is a will there’s a way and let me show you how.

  • Map out your game design, features, characters and how the game works. Now create lots of small, easy tasks you can accomplish in order to see your core game mechanics to completion enough that you could play a simple version of your game without any extra bells and whistles. Set yourself up to do as little as you have to but as much as you need to in order to get a completed version of your game.
  • If you lack the skill to do something you have two options. The first is that you resign yourself to taking the time to learn this new skill and the next is that you can outsource the skill to someone who’s already achieved it. You don’t have to be an expert programmer to make a game, just an adequate one. If you’re going to invest time into learning a new skill don’t dwell on it for too long, learn enough that you feel confident you can accomplish the task at hand and then move on. Investing too much time in learning a skill will start you down a path that walks further and further away from working on your game.
  • Sit down and map out all of the expenses you foresee as being necessary to complete your game. Now triple it. If you can’t afford to spend this amount of money into your game then you need to go back to your concept and re-work it until you get a budget that you can work with. If you’re really determined you can look for some outside investors but don’t count on this — ever. Most investors want to see a fully working demo before they’ll even consider opening their pocketbooks and investors will demand more than 50% of whatever profits you make from your game when it’s done.
  • Your time is precious when you have so little of it to devote to your game. Start by mapping out a timeline of your game features/assets and how long you think it will take you to accomplish them. Now double that. Now compare that to how much free time you really have to devote to your game. Will this game take you more than a year to complete? Do you have the dedication to spend more than a year working on a single project? If the answer is no then you need to go back to the drawing board until you’ve come up with a reasonable timeline that you can work with. Keep your game as small as you possibly can by focusing on the core mechanics and leaving out any fluff that you could add at a later date. Now stick to your timeline. If you budget 2 weeks to work on a character and by the end of the second week the character isn’t done don’t dwell on it — either move on to the next item in your list. Don’t adjust your timeline and don’t spend more time that you budgeted on this part of it. Sure, your ultimate goal is to have a working character with great animation but if you can’t ever get a game working with a broken character then who cares if your character’s animation is jerky or unrealistic? Think about the big picture because you can always circle back later.
  • Invest in a good debugger and testing tools. Do whatever you can to automate this process as much as possible because it will give you more time to work on trivial issues when you can quickly address and fix the larger ones. If you run into a bug that makes your game do something funky but it doesn’t prevent the gameplay from continuing table it and work on something else. Try not to get caught up in the more minute issues and focus more on the big picture. You can always circle back and fix bugs later but if you spend all your time bug quashing you’ll end up with a pretty interface or character or scene that doesn’t let interact and play with it. Pick a version of a framework and stick with it, don’t upgrade it unless you absolutely have to. The more you upgrade and update to the latest and greatest the more issues you’ll run into and the more refactoring and scope creep you’ll run into. It’s okay to build a game that isn’t using the latest and greatest version of your frameworks or 3rd party integrations. This will also give you a chance to work with and around the quirks in the version of the framework/software you chose to use instead of having to re-work around these every time you upgrade and re-factor.
  • Get the core mechanics working version of your game finished as early as possible no matter what it looks like or how bad it is. A crappy, ugly, glitching yet working version of your game is better than a pretty, perfectionist, bug free version of your game that isn’t at all playable. Don’t wait until the last minute or the week before it opens to get feedback on what you’re doing. Feedback is a great way to find issues you hadn’t considered and it will give you an idea of what other people think about your game. After all, no one wants to play a game they don’t think is fun. Don’t ignore constructive criticism even if it’s not what you want to hear. That doesn’t mean you have to change or add anything anyone has ever asked you for — it means that you need to take those things into consideration going forward. See past the reviews that focus on your aesthetics — at least initially — because you can always change and fix those later, core mechanics and gameplay are much harder to tackle once you’ve invested lots of time and energy into them.
  • Your game will NEVER be perfect. You will always be tweaking, adding, adjusting and fine tuning it. Instead of wasting your time doing this early on and ending up with something that isn’t a viable product devote that time to your game after you have something you can put out there. Don’t be a perfectionist, no matter how many bugs you quash and features you add or tweak there will always be another bug or problem coming down the pipeline. Try to prioritize the most important ones and tackle those first. Ultimately you want to get something up and working no matter how good or bad it is and then build upon it from there. Rome wasn’t built in a day so don’t expect your game to be. Get a working version up first and foremost and then add on to it and enhance it over time, your customer base won’t hate you for that, rather the opposite — they’ll appreciate your continued efforts to improve upon what you’ve done so far.

How Much Does It Cost To Create A Flash MMO?

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Are you thinking about making a flash MMO? Want to know what it costs? Then you’re in the right place. I’ve been working on an MMO for the past two years and I thought I would share for anyone who is considering making their own. There are a lot of expenses I didn’t think about or plan for so maybe this will help you budget for your game’s future.

Flash Server

These range from about $500 to over $25,000. The cost depends on if you buy a commercial one, how many users are on the license, and how many developer seats you need. I chose a middle of the line, out of the box, software called SmartFoxServer 2X. It has many of the features I need/want for my flash MMO already built into it therefore saving me development time. It’s about middle of the line in terms of price and has been used successfully by large multiplayer games (Club Penguin, YoVille, PetPet Park). An unlimited user/developer license is a one time fee of $5,500 (and yes, some servers charge yearly fees or a % of profits).

Domain Names

This is probably one of the things you’ll overlook. Many games only buy a .com domain name when in reality you should have multiple variations on the name, .nets, .orgs, and other domain extensions. This helps ensure someone looking for your website can find it. A domain averages about $20 a year per domain and I have 5 of them, so $100 a year in domain names.

Web & Database Servers

While you probably won’t overlook this you certainly won’t plan for as many as you really need. For added speed you should cluster your servers and keep all your databases running on their own, separate server. You want top of the line servers to support the amount of traffic you’ll generate. Expect to pay over $300 a month for every two servers up and running. Some places offer packaged deals so take advantage of that if you can.

Graphic Artists

Unless you’re an artist yourself you’ll have to spend some big bucks to have someone start generating the art for your game. The price of graphics will vary depending on the size, DPI, detail and quality of the artist’s skill. It will also vary depending on how many images and artists you need. For fastest turnout you’ll need at least three or four artists and trying to hire artists with similar graphic styles is a must for a cohesive looking game. Expect to spend at least $5,000 a year per artist, or more if your budget allows.

Animators

Every good flash game needs animated graphics. Not only do you need artists you need animators too. Many of the freelance animators I’ve found are willing to be paid per frames on an animation. Costs per frame vary from $5 – $25 a frame. Expect your animations to have at least 8 or more frames per direction/action. So for a single walk animation, that has 4 different directions (north, south, east, west) you’ll have 4 animations * 8 frames each * $5-25 a frame for a total of $160 – $800 an animation sequence. Chances are your game will have more than one animated character or graphics.

Programmers

Whether your program it yourself or hire someone to do it for you programming is a large part of any game. There are a few tools out there to help if you want a quick “out of the box” type approach like OpenSpace and other game engines but these will cost you a small fortune. OpenSpace runs about $4,500 a license. Hiring a programmer, on the other hand, will cost you anywhere from $25 – $75 an hour and the amount of work they can do depends on their skills, speed, and turn around times. I do most of my own programming for my games but I’ve hired outside programmers for a few smaller pieces to save some time. Expect to pay out at least 4+ hours of work each time you use a freelance programmer at their hourly rate.

Game Designers

If you’re not the brains behind the design of your game then consulting a designer may help your game from “flopping” before hit the market. An experienced game designer can quickly point out obvious flaws in your economy, level/questing/rewards systems, and more. Usually you can find someone on a forum to bounce ideas off of but that also means the potential for Intellectual Property (IP) theft and possibly opening yourself up to outside competition before your game has even hit the market. I would recommend hiring an experienced game designer and having them sign a Non-Disclosure Agreement (NDA) before you give them any access to your game’s inner workings. Expect to shell out a couple hundred bucks for a consult but it’s well worth it.

Level Designers

If you game has multiple levels you may want to consider a level designer, or level design software. This makes it easy to implement new areas of the game and can possibly leave you free to do other things while your level designer slaves away at the more mundane stuff. Even though my game doesn’t have levels this is an expense you may want to consider if yours does. Having customized software developed for your game (or buying some) and/or hiring a level designer is another chunk of change out of your pocket.

Writers

You might have a fighting game but that doesn’t mean you won’t need a writer. Even if it’s things as simple as a user interface (UI), instructions, or start menu or little road signs a writer can help you use language that passes the Flesch Kincaid Readability Test and other readability tests. Did you even know these existed? A writer can also help you check for grammatical errors, succinctness, third person passive voice, and many common writing mistakes. For instance, does your children’s game use words that children in your target age group won’t understand? Hiring a writer to come up with all the text in your game is more expensive than hiring someone to edit it. Expect to pay a few hundred for a writer and prices for an editor vary based on word counts.

Background Music

Sure you can go the Facebook games route and have one background song that drives people nuts because it loops over and over again. Or you could purchase main stream music and/or have music composed specifically for your game. Prices vary drastically depending on your choices here. Custom music typically costs based on the length of the song. Quotes I’ve had for a one minute song are typically over $600 for a full license. Royalty free music costs twice as much as mainstream music and usually has other license limitations that must be followed but once you’ve paid for it it’s yours — even if it’s not unique. Using main stream music means you need to get a license from the BMI or the ASACP. While this might seem like the cheapest option at first (heck you can download a ton of songs for only .99 a piece) it’s also the most expensive ones. The BMI and ASACP charge depending on the number of daily listeners, number of song plays, and whether or not your users can select the song they want to listen to. On top of that they typically take a % fee of your yearly revenues.

Sound Effects

Most people remember the background music and forget the sound effects. A fighting game just isn’t the same without the punching and kicking sounds. While these are small sound files you’ll find that they add up fast. The better quality the sound effect the more it will cost. You may be able to save money by recording your own sound effects but that also means you’ll have to budget for buying sound equipment or paying for some sound studio time. Expect that your sound effects will cost anywhere from $5 – $25 each.

Language Filter Software

If your MMO is geared towards children you may want to consider purchasing language filter software. This may or may not be more expensive than writing your own language filters depending on the nature of your game. Third party language filter software typically specializes in stripping other suggestive/violent language which may also cause problems with children, as well as a bad language filter.

Marketing & Advertising

Most of your budget will probably be spent here. Unless people know about your game there’s no way they’ll visit and try it out. Online advertisement is probably your best bet and your costs will vary depending on what kind of advertising service you use. Pay Per Click (PPC) in my experience yields the best results. Pay Per View (PPV) may be more costly depending on the type of exposure you want your game to receive unless you’re using a fairly high bid on PPC advertising.

Newspaper and magazine advertising is also expensive. Expect to pay as much as $1,500+ for one large ad to run in one issue or as little as $200 a month to run a small (really small!!!) color ad. The cost depends on the magazine you advertise in and how much it’s in circulation. You can typically get a cost break if you decide to advertise in the magazine for the whole year.

TV and Radio advertising is even more expensive than print advertising. The costs are at least double and depends on the length of the commercial you’re running, the time slot it’s running in, and whether or not the station is creating the commercial for you.

Customer Support

Despite your best efforts your game will bring in a slew of emails. If you expect to answer all of these yourself you better have a programmer working for you. Sometimes I receive as many as 80 emails a day. There just aren’t enough hours in the day to answer all your email and program/manage your game. Hiring someone to answer email for you is an easy solution but it will cost you as well.

Payment APIs

While payment APIs like Paypal and 2Checkout are great sources of revenue they also cut into your profits. Expect that any payment API you use to process payments in your game will take 2-5% of each transaction you’re generating. If your game uses micro-transactions make sure you check with your payment API to see if they support specialized plans for such cases — this will save you some money.

SSL Certificates

If you want to seamlessly integrate payment APIs into your game you’ll need to have SSL certificates in place. SSL certificates are a yearly fee and who you purchase them from makes a difference in their safety assurance ratings and encryption levels/techniques. Expect to spend anywhere from $100 – $800 for one of these.

Traffic Reporting

Sure it seems mundane but you’ll want to know how long your members are playing, where they play the most, and how active they are on the website. With a flash game it’s harder to track these things because a lot of the code runs client side. There are several good traffic reporting APIs available for flash software that will save you time of creating something yourself. In addition resources to compute the traffic aren’t done on your servers, freeing them up for your members to use.

Site Maintenance

You might design your game to pretty much run itself but there will always be some type of maintenance involved. While this may not cost you anything if you’re programming the game yourself it also means money out of your pocket while you’re fixing things instead of adding new features, maps, characters, items, quests or events.

Video Game References: 3D Models, Degrees, Associations & Other Useful Links

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I find that I visit so many different sites I can’t keep them straight and I can’t remember to update my delicious account. So I started adding them as resources on my main website when I found one I liked or wanted to go back to someday in the future. Here’s a list you may want to check them out for yourself. I’ve added my own comments and knowledge thrown into the mix:

Game Engines

Crystal Space 3D

Dark GDK

G3D Engine – good tool libraries, large free model collections

jMonkey Engine

Panda3D

Torque Engine – popular with independent developers

Unreal Engine – it’s a classic… now available for free.

MMO Specific

Unity 3D – in browser 3D MMO games, quickly gaining popularity as an engine. Has iPhone and Wii capabilities.

Big World Technology

Byond – not really an engine so much as a point and click game maker

Hero Engine

Irrlicht – i really like this one, runs fast, lightweight, nice toolset. Free. Showcase includes

Multiverse

Ogre 3D – i found this one to be way too complicated and not very well planned out. API was hard to use and understand if you want something you can just jump into and start programming.

Realm Crafter

Flash Specific

SmartFoxServer – Specifically for Flash MMOs.  I’ve chosen this one for an MMO I have in production. Free for up to 20 users, license required for 100, 500, and unlimited users ($300 – $3,000 dollars). Showcase games include Club Penguin, Atlantas and facebook’s app YoVille, and Build-a-Bear Workshop.

Red5 Server – Completely open source and free. If you’re looking to build on your own functionality this one is for you

Electro Server – Haven’t had a chance to play around with this one but it has a free 25 user version. Licenses for up to 500 – 200,000 users ($700 to $4,500+) — no unlimited license that I could find.  Showcase games include WebKinz, Nickeldeon and Barbie Let’s Chat.

3D Models

3D Cafe

3D Links

3D M3

3D Revolution

TurboSquid – largest collection of models made in Maya

WireCase

Quality 3D

Poitra – expensive but nice stuff

Exchange 3D

DAZ 3D

Archive 3D – all free models

3D Extras – free models

Amazing 3D

3D Software

Maya – industry leader, costs a fortune though

3Ds Max – also an industry leader but cheaper than Maya. Owned by the same company.

Blender – free, can integrate python and lua scripting. Good support community, so-so documentation.

Drawing & Art Software

Photoshop -leading graphic art software, if you don’t have this you might as well quit now…

Painter – exclusively for people drawing with tablets

Gimp – essentially a free version of photoshop

Associations

ECA – Electronic Consumers Association

ESA – Electronic Software Association

ESRB – Entertainment Software Rating Board

IGDA – International Game Developers Association

Artists

Geninne – artist in Mexico, I want her on one of my projects one day

Creative Thursday – artists post to a new topic every thursday, great way to find a diamond in the rough

Illustration Friday – same as Creative Thursday with a bigger following

Simon Reeves – freelance 3D artist. Has done several commercials so I doubt he’s cheap.

Sarah J How – worked with her on graphics for one of my pet games. Highly recommended. She was a texture/character artists for Deep Red Games, looks like she’s running her own studio now.

DeviantArt.com – tons of various artists. As a last resort you can probably find someone here.