Brian hook posted an excellent write up about that start and failure of his own shareware company. It is quite interesting and topical because he was working with RealArcade and GameHouse which I know a lot of people consider.

You can find it at: http://bookofhook.com/Article/GameDevelopment/APyrogonPostmortem.html

I'm very intersted to hear peoples comments.

Cheers!

Jeff

Jeff Thompson
CTO, CodeTek Studios, Inc.
www.codetek.com

Look here (http://www.dexterity.com/forums/showthread.php?s=&threadid=2889) . We get to Hook's article towards the end.

That makes an interesting read, I guess my biggest chance of success is before I get bogged down with a family/mortgage etc. Like he said those with the lowest overheads/responsibilites (i.e. college students etc) have got the longest amount of time to make it work, which is nice to hear:)

I thought it was a great read as well.

Kinda depressing of course, but interesting none the less.

-Joseph Lieberman

Steve's comments on that were kinda interesting --- the article link derailed the thread for a little bit.

Hook's no lightweight in the gaming biz, and I think this article should be required reading for anybody thinking to get rich quick writing independent games. I think Hook still hasn't figured out 'what went wrong' yet - partly because it's NOT an easy question to answer.

Me? I look at the difference between the successful indie players and the ones that fail. To me, it's longevity. Longevity is not just a *result* of their success - it's the cause. By explanation:

The conventional games industry is about short periods of profitability followed by months of trying to live off those profits and praying that their next 'payday' is equal or greater than the last... or they wither and die. In this model, sooner or later the dice roll badly, and unless you've been so phenominally successful in the past that you can survive a couple of flops in a row, you are HISTORY. It's a losing proposition.

It appears to me that the guys like Dexterity, Spiderweb, Pretty Good Solitaire, PopCap, and yes.... RealArcade and BigFish and the others... make money through SEVERAL titles (developed by themselves or by others that they represent and take a chunk from) over the long term. Yes, a single title may be a 'hit' and give you a wonderful spike in profitability for a short time - but even after the spike goes away, it may still chug along for months or even years afterwards generating some residual revenue. Especially if you continue to update / market the thing. So what you end up with a foundation of many small sources of revenue that add up to something reasonable. They've escaped the 'hit-driven' nature of the industry - or at least buffered themselves from it. But that takes time to develop.

It seems to me that going into it with only six or twelve months' worth of funding isn't a winning proposition. You are running the hit-driven treadmill if you do that, and making short-term decisions to survive that may not give you the long-term profitability you really need.

At least that's my humongously inexperienced, under-educated view of things.

Originally posted by Siebharinn
Look here (http://www.dexterity.com/forums/showthread.php?s=&threadid=2889) . We get to Hook's article towards the end.

Thank you for pointing this out. I had read about half that thread and forgotten that I hadn't finished it yet. Sorry for the double post.

Cheers!

Jeff

It's the difference between a pretty girl smiling at you and a naked pretty girl straddling your lap and licking her phone number onto your face.

This has to be the strangest analogy to the game development world I've seen of late. :)

Great read. Thanks for the link.

His experience and his interpretation of what happened and why is very similar to what I have experienced. Both making retail games for publishers and downloadable games. He sums up the current state of both of those markets very accurately.

My favorite quote was “Reality doesn't give a shit how clever you think you are.”

A great read. Thanks for sharing.

My first response was "Uh-huh, if Brian Hook can't make it as an indie then there's no way I can."

But now that I think about it I can't really say I'm surprised. He seems stuck on the retail model and only fell back on shareware to make a quick buck (which he was acutally somewhat successful at!). And on top of that he had a high burn rate.

I'm admittedly inexperienced, but I just can't that kind of business plan panning out in general.

I've already made comments about Brian Hook's Pyrogon postmortem in another thread that brought it up, but one other thing I should mention is that Brian chose to focus his efforts primarily on an indirect sales model (i.e. trying to make most of his revenue from publishing partners instead of direct from customers). I think this strategic decision was largely responsible for Pyrogon's failure. I see Brian's postmortem as an analysis of why this overall high-level strategy failed as opposed to anything inherently impossible about building a successful indie business.

Coming from a background of working with retail publishers myself, I spent years running Dexterity under an indirect sales model. We had no customers of our own -- only publishers we worked with. It took me five years of frustration to finally reject this model as inherently flawed, after the failure of our publisher nearly put me out of business. So with the release of Dweep in 1999, I switched to a primary focus on direct sales, where Dexterity acquired its own customers and aimed to be able to sustain itself entirely from direct sales. Other sources of revenue (like licensing) were still pursued, but they were treated only as temporary and unreliable sources of bonus cash.

The direct sales model takes longer to build decent revenue than indirect sales, but the former is far more stable and reliable in the long run.

The major portals certainly attract volumes of eyeballs, but we still have games that are 100% exclusive to dexterity.com and we still have very loyal customers who prefer to buy from us above and beyond any other vendor. Many of our best customers are refugees from RealArcade and other portals who complain about things like poor tech support, impersonal service, and uninspired new releases. Even for games we license from other developers, I think the support we're able to provide our customers is way beyond anything the major portals can do.

I know that licensing their games everywhere possible is a popular model for indies today, but I think it's also a very risky model if you become dependent upon it, since you can end up leaving your future in the hands of your partners -- if you have a falling out with one or more of them, where does that leave you? If Pyrogon had focused on building direct sales instead of licensing, they wouldn't have been hurt when the major publishers began to squeeze developers for better terms.

By focusing on building direct relationships with our players, I think we're far less vulnerable and more stable in the long run than most indies. Granted, we might make more short-term cash if we were more gung-ho about licensing our games to portals, but those kinds of opportunities are more fleeting than the long-term opportunities that come from building a customer base that's delighted to do business with us year after year. Every time we release a new game, I keep seeing the same customers coming back to buy. If a major portal wants to put us out of business, they'd have to pry our best and most loyal customers from us one at a time, which is nearly impossible to do. In fact, I think that we're probably doing a better job of capturing their customers one by one.

So if I were starting a new indie business from scratch today, I think I'd still use the same strategy of focusing on direct sales as the primary business model. I would try to use licensing deals and host-beneficiary relationships for infusions of cash whenever possible, but I wouldn't want to become dependent on those indirect revenue sources in the long run. If they work out, great -- extra cash. But if they don't work out, no biggie -- we don't need them anyway. "One customer at a time" is a slow way to build a business, but once you've built up a reasonable customer base, it becomes a strong asset that provides tremendous long-term stability. You can still do all the licensing you want, but with a business built around direct sales, you won't suffer if your licensing doesn't work out.

So for those of you still reading this long-winded post, try to think 5-10 years ahead when considering what kind of business model you want to adopt. With an indirect sales model, just about anything could happen, since any of your partners could go out of business. But with direct sales, it's easy to imagine that your customers today may still be your customers a decade from now. You'll just be meeting their needs in a different way. This isn't as far-fetched as it seems; we actually have active customers that have been with us for 8+ years. The appeal of the direct sales model comes when you think that each new customer you please today could still be with you in 2015.

I agree fully with Steve P.
You can't hope to make it in 1-2 years, but you should focurs you business to 5+ years. What it means? Simply: don't go with publisher if you can, they can give you even 1000-2000$ /month for the first months your product is on sale. But if they fail or simply if they decide that your game isn't worth any more attention... you're stuck. No customers data = no possibility to relaunch.
Also, going into indie with only 6 or 12 months of funding IS really dangerous. Now I am sure of this myself. The september of this year will be one year since I started indie (I am fulltime from february only though). If I wasn't doing freelance works, and if I had to pay rent (I still live by my parents) I couldn't have make it so far.

I wish I was still a student of 25 years in this moment... :D

Great read Steve! I fully agree. By concentrating on building up a customer base that you have direct access to, you get away from the feast or famine mentality/lifestyle that's so common with retail developers. By building up your own customer base, you get closer and closer to getting that allusive pot of gold called... stability. :)

@Jack:

You can't hope to make it in 1-2 years, but you should focurs you business to 5+ years.

I disagree with you here. I think it's possible to make it within 1-2 years. A lot of it depends on your burn rate, the type of games you're developing, and your business experience.

Burn Rate - If you're trying to support 3-4 people in a team with your game income, then yeah it's going to be tough to "make it" within the first couple of years without significant capital. But if you're pretty much a one-man operation, a student, or live at home, then you have a better chance to make it sooner since your income requirements are less.

Personally, I have a wife, kid, and house, so my burn rate isn't as low as I'd wish. But I only need to be able to support my family to "make it", I don't have other team members who are relying on the game income to live off from

Types of games you develop - If you decide to create games in genres that are overcrowded, then it could take several years before you get a foothold. While it's a bit riskier, if you create games in less populated genres, you have a much better chance of standing out if the game is good. This could lead to better exposure and you might actually hit your sales expectations in less than 1-2 years time.

Business experience - This is a big one and I think this is where a lot of Indies fail. Most new Indies are either fresh out of college or they've been a cog in the corporate world their whole life. They know how to create the product, but they don't have the faintest idea on how to sell the product and run a business. This is why a lot of Indies don't make it their first 1-2 years because that's when they're learning and developing their business skills. So I think there's some truth to what you said Jack.

However, you think the limiting factor is being able to develop a sizeable customer base in that time. Instead I think the limiting factor is the business experience of the Indie developer. If you already have business experience and experience selling products online, then you're not going to struggle and stumble as much on your first couple game releases as another newbie Indie.

I think it comes down to what you bring to the table when you start your Indie business. If you're starting at zero and have no plan or idea on how to run a business, then it might take 4-5 years before you make it. I don't mean to offend anyone, but it always amazes me how someone can complete an entire game (which is hard in itself!) and then come along and say, "Umm, what do I do next?" or "How and where should I sell it?" All those questions should have been answered as soon as the prototype was up and running. Instead, they're doing their market research after the game is done! Often times they find out that there's actually no market or the market is overcrowded for their game, but of course this realization is too late because the game is done. These are the type of errors that cause it to take a long time for many Indies to "make it".

However, if you have some business experience and do extensive research on what it takes to be an Indie, then there's a good chance you can achieve success in 1-2 years.

Allow me to tute my own horn, if I may. :) I have pretty decent business experience (I ran two prior businesses) and selling services online. For a lot of Indie developers, setting up the website is a taunting task, but for me it will be relatively painless since I've done it many times. I also have experience with search keywords, Adwords, and tracking users throughout the site. I already have the knowledge of continueously tweaking page text and/or design to increase click-thrus or CRs. Also, setting up a customer service area will be painless since I've done it before (I could probably use some of my old code).

For some Indies learning and getting the website right will add an additional 3-6 months to their schedule. All the while they could have lost a lot of sales because the website was setup poorly. I feel I have an advantage in this area due to prior web experience, so I won't stumble as much out of the gate as other Indies. Though I definitely still got my fair share of things to learn, the website will at least be one less thing to worry about.

Simply: don't go with publisher if you can, they can give you even 1000-2000$ /month for the first months your product is on sale. But if they fail or simply if they decide that your game isn't worth any more attention... you're stuck. No customers data = no possibility to relaunch.

I see what you're saying, but I don't understand why you can't leverage both? You can have non-exclusive or short-term exclusive deal with a publisher while you develop your first party sales through your website. Most publishers allow you to still sell your game through your website even with an exclusive contract. The problem is a lot of Indie companies who get an exclusive deal with a publisher are so happy with the short-term money, they don't bother to develop their website sales (usually they're already working on their next game). So when the publisher sales drop-off, they're left flat. But it doesn't have to be that way, unless they signed a really bad contract.

I personally would have no problem signing a short-term contract with a publisher as long as I still have the right to market and sell the game through my site. And if they're threatened with my relatively small marketing budget, then there's a real problem.

PS. Sorry for the long post, thanks if you made it this far. :)

Steve,

Great minds think alike.

I posted my thoughts on the Pyrogon postmortem on my blog yesterday, see

http://www.asharewarelife.com/2004_04_18_archive.html#108276107361227120

It appears we pretty much came to the same conclusion.

Steve, I agree 100% that to be successful long term you should sell games direct to your customers and build a relationship with your customers. You go into great detail about why this is important. But you don’t explain specifically what it is that Pyrogon should have done but didn’t. What makes you think they weren’t trying to build direct relationships? In the postmortem, Brian mentions struggling with different ecommerce providers. If you go to www.pyrogon.com you can buy Candy Cruncher and NingPo MahJong direct from Pyrogon. Are you saying that also making their games available on GameHouse, PopCap, and Real was taking away from their direct sales? Did they need to make the games exclusively on Pyrogon.com? Or could they have done some publishing/portals deals and stepped up their efforts with the direct sales by having things like a newsletter and more postings on download.com and shareware sites?

That's funny, Tom... when I was typing up my post last night, I was actually thinking that you would notice the same pattern if you read Brian's postmortem. :) I like how you abstracted out of it the fact that Pyrogon had no real long-term plan to build a business; at best they just had a short-term plan to develop games.

I think Brian should have joined the ASP (http://www.asp-shareware.org) and become active in the ASP newsgroups. If he had done that, he would have seen just how many people are succeeding with direct sales and direct marketing.

Quote from article... "the sweet spot for starting your own company is when you're single with almost no living expenses and responsibilities".

Other option is do it on the side and have no life. Did it for years, worked butt off, almost lost the lady numerous times, lost some hair, etc. but paid off in long term. For first few years no way could have paid the bills by this so only got that time leftover from grind contract/fulltime jobs and side contracts. If had focused on it exclusively from beginning bet would have grown much faster but had mortgage, etc so wasn't an option.

I disagree with you here. I think it's possible to make it within 1-2 years. A lot of it depends on your burn rate, the type of games you're developing, and your business experience.
Well you have to define "make it" :)
My goal is simple, make at least 1000-1200$ / month.
I've made 7 games so far, 3 Mac and 4 Pc (even if the mac ones are just port from pc games) and still I am quite FAR from this amount (my last boxing game is doing very well though).
You can judge the quality of my games yourself, I don't think they're particularly good, but neither so bad.
Two of them are sports games and quite original in the shareware market, so I must confess that so far I am a bit disappointed by sales !

My problem, as you said, can be the marketing thing (in fact I tried Terin services with UBM and I've noticed the difference). I surely need to experiment more about that... :)

Jack just did a press release, well written (if I do say so myself) and distributed.

The difference you NOTICE is due to a flash in the pan scenario a press release creates. You get a big boost in download and coverage, and then it should fall off. What you should be hoping for is that you gained a couple sales and a couple long term customers, not much else. A press release is just a scratch on the surface of marketing efforts.

One of the things in hindsight I noticed about pyrogon is he didn't mention anywhere in there about his direct investment in his own publicity.

I'm a strong believer in investing money in publicity. You can do some things, like press releases for free, but $20 a month or so is all you need to setup advertising/publicity that will drive more conistent traffic. Maybe you wont even make that back instantly, but over time by collecting e-mails and collecting long-term customers your business will grow much faster.

So where in that post mortem was this concentration on investing in his OWN company, rather than investing in creating more products.

Thats my 10 cents, because investing 2 cents wouldnt be enough. (Man, I am so funny!)

Joe

Originally posted by Terin
I'm a strong believer in investing money in publicity. You can do some things, like press releases for free, but $20 a month or so is all you need to setup advertising/publicity that will drive more conistent traffic. Maybe you wont even make that back instantly, but over time by collecting e-mails and collecting long-term customers your business will grow much faster.


Could you elaborate on the specifics of what you are thinking of for a $20 a month advertising/publicity campaign?

Thanks,

Jeff

$20. It ain't much.

Option 1, you could find good advertising sites. Many good deals out there if you take the time to look (or hire someone who knows). Plenty of sites out there for the 20-40 per month range.

Option 2, you could 'save up' that 20 per month for a bit and then approach a mid sized website and say "wow, ive got this 100 dollars for ads, I would love to advertise at the same time as some editorial content could come out." (something to that effect at least). Often times publicity isn't as free as it seems.

Option 3, You could save up that money to hire someone to improve something. For instance, hire a pro (yet cheap) web designer to redo your page layout and entice people to download or buy more. Hire someone to redo some art on your page. Hire someone to redo some art in your game and then re-release it as version 2.0...

The importance isn't really the $20 (or more). It's putting aside some cash for a marketing endeavor. Maybe you can't do anything with 20 dollars in one month, but you could do 1 thing with 80 dollars every 4 months or 60 every 3.

But, uh, thats off-subject to this post. The point was he didnt mention it anywhere in his site and it leads me to believe there was no marketing budget and no marketing work. No marketing = no sales, no customers, no improvement, no publicity.

Joe

*edit* For instance, I came across a website today that had featured downloads listed for 50 dollars. Not a GREAT deal, but after researching each item listed, each had about 5,000+ downloads. Would you pay .01 per download? If I had a good product I sure would!

Originally posted by Terin
I came across a website today that had featured downloads listed for 50 dollars.

And the site was...?

- Roulette

Steve and Thomas,

I just want to say it is a great pleasure to read insights from successful vetrans like yourselves. Thanks for sharing your experience and wisdom related to indie/shareware business with us.

Joseph..

They obviously had the developer/publisher typical thing in mind when starting out. They sort of accidentally became "indie" like. But in the end, they were using real instead of say activision.. same thing.

Alright, places like real, gamehouse, popcap or whoever can be a great driver for mass sales. But that still means that its not YOUR sales its THIER sales.

I'm definitely going down the "build your own customer base" route.

Takes a long time, but I'm in no hurry.

Be sure to catch Hook's rebuttle to Thomas's Blog and Thomas's response in the comments of Scott Millers Blog.

http://dukenukem.typepad.com/game_matters/2004/04/pyrogon_gone_a_.html#comments

Originally posted by Dan MacDonald

"Without passion you get postmortem" - Thomas Warfield
LOL,

I had cut and was ready to paste that great line here, but I see you beat me to it :)

David

It really is the perfect indie sound "byte", great work Thomas :)

Ok, I may be shooting myself in the foot here, but is there a way to combine the direct and indirect models? Basically, instead of giving your customers away into the hands of publishers, use the portals to funnel customers to you. This is pretty much the host beneficiary model Steve was speaking of but another way to look at.

For instance, the portals have the exposure and traffic you need. Give them a commission (even a recurring commission on all repeat purchases for that customer) but ensure that YOU keep the customer. Treat the customer well, build them into your growing user base, follow up with them well and so on. You can then possibly have the best of both worlds.

The problem with most of the big publishers is that they want your game, they want a huge cut, and they want your customers, leaving you with 25% or less of revenue and no customers. That sucks - you are getting the worst of the whole deal.

Affiliates like myself take 30% standard commission and let the developer keep the customer. I just wish most developers would take care of their customers and market to them like Steve mentions - I would love to refer customers to a company like that and work out recurring commission models. To me, that is a true win win situation that meets the needs of all involved.

As far as commissions go, I hardly ever ask for more than 30%(unless the developer wants more exposure) because honestly I don't think I deserve it. The developer is the one who has put all the sweat equity into the game - not me. After all fees, I believe developers should keep 40-50% (or more) of the profit. This lets them succeed and focus on building more great games which benefits everyone.

I think if most developers who are making quality games were to say no to some of the deals from the big publishers they could focus working out more beneficial deals like I mention above. The publishers think they have you, that you need them in order to succeed. I think Steve has proven this isn't true and you don't have to play by their rules - set your own goals that meet the objectives you have laid out for your business.

There are lots of different ways to structure host-beneficiary deals. You can get as creative as you want. What I generally consider first and foremost when thinking about how to structure deals is what the customer will actually experience. Some deals look really great for the two main parties involved, but they aren't so great for the actual customer.

I could have designed our publishing service to be a passive affiliate-style relationship where we pay out 50% or more in royalties. And that probably would have worked fine, but it would have taken Dexterity in a different direction.

I wanted to have more control over the games we release and the way our customers are treated, and from the customer's perspective I felt it was important to have a consistent ordering system. So I decided we should handle QA and tech support for every game we publish. That is a good deal of extra work for us, which is why we pay 35% royalties instead of 50% or more. Even if a game we publish has already been released by the developer and selling for a year or more, we do pretty thorough QA and always find new bugs, sometimes even things like an unsolvable level or a crash bug. And this is great for developers too, since having us publish a game means we'll find bugs they missed. QA and support go together. The more we sweat in QA, the less we bleed in support. :)

The advantage of taking on these extra burdens, even for nonexclusive deals, is that our customers can order several different games in a single purchase, and they always get the same consistent support from the same company, no matter who developed the game. If we didn't do it this way, then we'd actually make it hard for our best customers to do business with us. If a customer buys 4 games in a single order (we get orders like this all the time), and all the games are from different developers, who does that customer contact when there's a problem? In our case they always come to us, and we handle it. High volume customers will often bring up support issues for multiple games in the same support request. And whether they have an ordering question or a technical question or both, we handle everything.

Having worked with this style of publishing since 2001, I think I made the right decision. I think that leaving support and QA in the hands of developers would have ultimately hurt our brand and frustrated our best and most loyal customers. It's not without drawbacks of course, but I'm pleased with the way it has worked out so far.

As both a developer and a publisher, I can see both sides of the fence in terms of who should get the most money. To me it's a partnership. The developer has to sweat the development of the game, but the publisher has to sweat the customer relationships, and both of these are hard. When Jay Abraham talks about host-beneficiary deals and how they were structured, it's usually the party that owns the customers that gets the bulk of the money, often 80% of the profits or more. And the reason is that while it's hard to build a great product, it's even harder to build a great customer base.

When Dexterity publishes a game, do they keep the customer, or does the developer?

We keep the customer. Note that most of these sales for games we license are to customers we've already acquired who buy from us again and again. Publishing games nonexclusively the way we do doesn't bring in many new customers. It mainly just gives us something new to sell to our existing audience.

I think what Jim was referring to is that there could be another kind of entity other than Publisher and Developer. An Affiliate could refer customers to the publisher (or to the developer of a self published game). The affiliate would get a referral fee and but the customer would be owned by the publisher. Ideally, the affiliate would get recurring referral fees (a.k.a. royalty) if that customer continues to buy more game in the future even if they are direct sales from the publisher to the customer without the affiliate getting involved.

In other words, affiliates could hand over customers to the publisher and let the publisher take ownership of the customer.

In the case of a self published game, substitute developer for publisher in all the above. Therefore, affiliates would hand over customers to the developer and developers would have direct relationships with the customer even through they were referred by an affiliate who gets a commission /royalty /referral fee for every sale.

Hey James, good to see Reflexive in here (shameless plug - one of my favorite companies to deal with :))

That is exactly what I was thinking. I assume you could carry on Steve's model via custom builds that an affiliate can link to. The only difference is that the publisher and/or developer benefits from the affiliate's traffic. Everything else stays the same, ordering system, support, etc.