Building value as a game developer


You build games, right? Of course you do! So let me take you out of your comfort zone and suggest that you build games AND value. Whether you like it or not. The question is, do you nurture that value and make it grow or let it go to waste?

A story about value creation

A lot of game developers bank everything on one game release. They pour passion, time and money into a game and then hope for the best. If the game succeeds, amazing! If the game fails, well, too bad. This might force the developer to make drastic changes, or even worse, close down the business. But let me yet again challenge that perception. I built a game studio along with a few other co-founders several years ago. We released very few games that generated more revenue than the cost of development. In fact, we were more than once close to going bankrupt. Even so, in the end we managed to sell the company. All founders got a nice payback for the time, passion and money invested, even though the company never really was financially very successful! So, while we never created short term value (a hit game with great sales) we did create long term value which was realized over time.

So, my statement is this: A game developer does not have to create a hit game to create value for its founders. Sounds weird? Not really.

Someone’s sitting in the shade today because someone planted a tree a long time ago.
— - Warren Buffett

How to create and grow your value

To an experienced entrepreneur the following advices might seem like no brainers, or just plain silly. But to an indie game developer with more passion for games than business development, the points below should be a guide for simple ways to build additional value besides the actual games.

Keep your contracts in place

Make sure all assets created actually belong to the business and not the individuals working on the game. Keep an NDA as a standard part of the employment or freelance contracts. Fight before you sign contracts, not after. If you get an opportunity to sell your business, merge with a larger entity or need to buy a partner out, your papers need to be in order.

Maintain ownership of your assets

This means all assets, such as code, art and IP. If you work with a publisher it is not certain you can retain all rights. But, you always need to negotiate to get your part of any deal as reasonable as possible. Perhaps retaining your code ownership is ok with a partner if you sign a perpetual license for them to use the code? Keep in mind that a publisher often ask for more than they really need, just for the sake of not missing out on any potential upside. But they can often be persuaded to step away from their standard contracts.

Say no to bad deals

This kind of relates to the point above. You'll always have to ask yourself: What is my dream of making games worth? I've turned down several high budget projects simply because I felt the other part was asking for too much. Furthermore, when potential partners start to play tricks and show poor manners already when negotiating, it is in my experience a sign of worse things to come. Getting stuck with a shitty contract is a painful experience and will keep your focus in the wrong place.

Maintain low costs, when possible

Keep an eye on all your costs and always negotiate. If you can lower costs with 10% and increase income with 10% it adds up nicely. Keeping a low cost profile is generally the way to go. However, sometimes you need to make investments in order to scale up. As an example: My old studio developed an online game that grew exponentially and caused our servers to crash three times in three weeks. Instead of putting in the cash for additional server power we opted for cheaper solutions. In hindsight it was a waste of future revenues to NOT invest in hardware at that time.

Diversify your revenue streams

Relying on only one source of revenue is risky. If you can place your eggs in several baskets instead of one, do so. This isn't always easy as you might focus on developing one game. But you should at least consider what options you have to generate revenue from several separate sources.

Take care of what you create

In my experience, developers often love to build specific solutions to all problems. It is rarely worth it from a business perspective. But lets say you do build solutions for specific problems, because you can't find an out of the box solution. Then you are building something that others potentially could be interested in. You should recognize this as a value. Perhaps you could sell or license the solution to others?


Keep in mind that business deals are made between people and not the business entities themselves, regardless of what the contract says. In order to boost your value creation you'll need to get out and meet others. Building a reputation and getting to know the right people is a great way to increase your chances of growing value.

Take reasonable risks

I basically mean that you don't always have to stay on the treaded path. The road to success is rarely straight and more than often you can find value in places you'd never imagined.

In the end, it comes down to having a mindset. Building value is not really hard, certainly not harder than making a great game. So, why not do both?


Investment vs. publishing

Ever since I started in this industry (about 10 years ago) there has been talks about both the demise and rise of the publishers. It seems that when a new platform comes around developers tend to see it as a solution to a problem of independence. Or even more specifically, a way to self publish. During my time as a game developer those revolutions have been the digital channels for consoles (Xbox Live Arcade, etc), Social networks (Facebook mainly), the smartphone/tablet Appstores and now the talk is all about VR/AR.

Whenever a new platform comes around there is generally a window of opportunity for smaller developers to reach an audience without the need for publishers. It works well for a while, but as the competition stiffens and the amount of content grows, the sales decline. And, yet again, the publishers tend to move in and establish themselves as sort of gatekeepers. With access to capital, marketing channels and good relations with the platform holders, they have the business tools that a developer often lacks. But, should a developer have proper funding and a long term business perspective, there is no reason a developer couldn't manage to gain all those tools themselves. Trying to get signed with a publisher isn't much more different from getting an investment from a venture capitalist. So, let's compare the two and consider the pros and cons.


What do you give up?
More often than not, you have to give up your IP, and if not that, at least a rights of first refusal to publish any sequels or derivative works. You also have to consider working in a way that might not suit you, but rather the publisher, as most publishers pay on a milestone basis. Meaning that for a certain chunk of work done, they pay you a chunk of money. You will also share the revenue of the game with the publisher and those terms will vary greatly. Getting a 70/30 split (with 70% going to the developer) is quite good, but then again, it comes down to a lot more details such as if the publisher can deduct costs prior to sharing the revenue, etc.

What do you get?
You should be getting funds to develop your game. Feedback and support during the development process. Marketing budget and strategy executed by the publisher, often along with yourself and your team. Furthermore, the publisher should have access to gatekeepers at whatever platform you are targeting, to make sure you have potential for being featured.

you often end up in a weird “work for hire” kind of relationship

My experience
I have heard about a few developers who had great relationship with their publishers. I've heard way more often about developers who disliked their publisher. This is most likely not because the publishers always suck, it more likely has to do with different expectations. In my experience you often end up in a weird "work for hire" kind of relationship where the publishers only leverage towards the developer is the payments of milestones. As deadlines slip, the developers goal changes over time, from creating the best possible game to just staying in business. The publishers goal is to release a great game on time for a low budget. But as time progresses, if the development is on track, the power balance skews from the publisher over to the developer. The developer sits on the code, art and know how to finish the project. The Publisher might refuse to pay a milestone, but will then not get to release a finished game.

Developer vs. Publisher balance of power


What do you give up?
You give up equity. An investor will get some of your company shares. Many investors will want to have a seat on your board and the opportunity to influence your business decisions, or at least stay closely informed.

An investor often invests as much in you as your company

What do you get?
Cash in the bank. Freedom to make your own decisions (mostly). The ability to build something from the ground up. What it really gives you is time. Hopefully enough time to go to market, make some mistakes, adapt, improve and overcome. An investor often invests as much in you as your company

My experience
When I sold my game studio some years ago the buying company had several investors. I went from presenting monthly revenue and financial situation to my buddies over lunch, to travelling to London and reporting to a board of venture capitalists from various funds. A bit of a difference. While the access to the funding was great, it was really problematic that the investors didn't get the games industry. They had little understanding of development cycles, iterative/agile process and why the hell we weren't making millions of dollars yet.

As for Lavapotion, we have an amazing investor. The fine folk at Coffee Stain Studios understand exactly what we are working on. They attend our sprint reviews, give great feedback and advice, but never interfere with what we do. It is a relationship built on mutual respect. The funds give us the security to take long term decisions and always keep whats best for the game in mind. With that said, we are still open to work with a publisher, should we be able to find a great win/win-scenario.

To sum it up
In the end, it all comes down to how you want to work. Remember, many publishers started out as developers. What ever they learnt, you can learn too. But it takes time and effort. If you aren't interested in business development and marketing then a publisher is obviously a relevant option for you.

Whatever you do: Only sign contracts with people you could see yourself working with for a long period of time. Trust your gut feeling and consider how the other partner would react in stressful situation, because they will inevitably appear down the line.

And finally, here are some publishers that in my opinion really care about the process and developers:

Coffe Stain Publishing - Coffe Stain have created quite a few hit games themselves and are now taking on publishing with some very interesting titles signed. Lovely people to work with.

Raw Fury - Run by a savvy team with industry veterans. Offers very reaonable deal terms to the developers and really care about each project.

And, some investors who really gets game development:

London Venture partners - I've met these guys at lots of dev conferenses, they have been around for a long while and they get game development.

Indie fund - While I've only met a few of the people behind the fund, they have a transparent and very relevant business model, which I greatly appreciate.

Nordisk Film Games - Last, but certainly not least, these guys know game development, they know how to spot good teams and has already made some interesting investments. As a disclaimer I should mention that I have worked for them, helping them with analyzing potential investments.

And finally - Feel free to reach out if you want some friendly advice :)