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Are Indie Games the Next Best Investment?
It seems like all of the old school, sure fire investments seem to be a bit iffy these days. The stock market, land, and cold hard cash in the bank aren’t making money like they used to. Technology and Gaming Industries, however, are continuing to rise in profits. So isn’t that the place to invest?
The realm of indie video games is a rising genre in video games. Ten years ago it was hard to learn about small developer’s games. But now, with tons of outlets like Steam and the App Store, it’s easy for the everyday consumer to stumble upon independent game developer’s products. Tons of people have already made their fortunes from the video game market.
If you’re an avid gamer then you already have most of the knowledge you need to start investing. Unlike investing in stock or real estate you already know the market. You know what makes a good game. You know what kinds of games are selling millions of titles, and you know what kind of games aren’t going to sell more than a couple hundred.
Indie games aren’t as cheap to make as you’d think, either. The majority of successful indie games that flipped a good profit were well funded. Indie developers need to invest more than just their time in order to make the next bestselling title. Software licensing, contractors for specific game components (like music and trailer producers), marketing, and traveling to gaming expos all begins to add up. Add this to the cost of living for each of the developers and you’ve got quite a budget on your hands.
Not every game is going to be the next Minecraft in terms of sales. But even a relatively successful game is going to flip a profit. Let’s take a look at a hypothetical indie game. A team of two people are making their dream game and need your financial aid. They need $30,000 each to live on, $5,000 for development (the software and contractors), and $15,000 for marketing and game expos. Basically $80,000 to make a game. With your investment you’ll get your money back plus 25% of the sales.
It’s being released on Steam and direct download from the developer’s website. The game’s producers have gone to some of the major gaming expo’s like PAX and E3 and have a small following. It’s enough to get them featured on Steam, but not with very much homepage space.
The first week has great sales, after the first month they begin to drop off. After six months the game is pretty much run its course and is put up for Steam’s Summer Sale in order push the game for everything it’s got. At the end of the year you’ve managed 10,000 sales at $20.00 each. 10,000 is by no means a huge success, considering the millions of copies other indie games are selling. $200,000 minus Steam’s cut (which is an unknown number publicly, I’m just guessing it’s around 25%) turns into $150,000.
You get your initial investment back and the game makes a $70,000 profit. Your profit comes out to around $17,500 dollars, an over 20% return on investment. And while this might not seem like a huge profit, it’s not bad for sitting around doing nothing. Especially considering your other options for investing. A game that sells 10,000 copies on Steam isn’t even a big release. Look at games like Limbo or Braid that were selling millions of copies at $20.00 each. If you’re just getting 20,000 sales you’re making $55,000 profit. Become a million copy best seller and you’ve just made over $3,500,000 in one year doing nothing!
This isn’t a new idea either. Indie Fund is an investing company that finds successful looking indie games to invest in. Their model takes 25% of the profits just like our hypothetical game does, except theirs ends once they double their investment or two years go by. It’s run by some big names in the indie world, like the creator of Braid and the creators of World of Goo. Obviously there is some money to be made investing in indie games.
There are creative people out there with the ideas and talents to make a great game. Indie studios are almost always started by game designers and programmers that worked at large companies like Bethesda and Ubisoft making AAA games. They have all the knowledge needed to make a bestselling game. If you’re looking for an investment the next time one of these studio’s is looking for an investor, then it’s time you seriously started thinking about investing in the indie video game market.