Costs of Starting Modest Game Dev Studio

I’ve been daydreaming about starting a studio ever since I made an off-hand comment about trying to remake Tribes. I don’t have any real intention to, but it did get me wondering what the average small studio - let’s say under a dozen people - takes to fund, just so every time I or some other armchair designer says they’re going to start a studio and “do it right” I can think “Oh, yes, your Fallout 2 remake will cost you X dollars.”

My guess is something in the 3-4 million range, considering you’d need office space, initial development machines, and then of course good salaries for 2-3 years before you saw any money from a game. Anybody with any experience founding studios know how off base I am?

You can really cut costs down if you and your team are prepared to “rough it” a bit. Having an office and salaried staff is expensive - especially the latter. Pretty much all the long-term cost of a studio is paying the staff’s wages. A simple rule of thumb I heard is to double the salary and that’s representative of the cost to the studio, in terms of salary, taxes, equipment and office maintenance. But if you and your friends are all prepared to live off your savings for a year or two to get a demo going, then pretty much all you need to worry about is gearing up.

But if you’re thinking, “I’ve got a few million in my bank account, I fancy setting up a studio and hiring a bunch of people” then yes, it will be expensive. Assuming a dozen staff on an average of £30k, for two years, I’d expect to have to find about one and a half million pounds.

Yeah, it really depends on the scope and scale of what you want to do. If you can do it with a small enough art and tech scope to do it in your spare time, the hard $$ cost could be as low as 20k-30k in minimal promotion, setting up EDI, doing some basic law-talking-guy stuff like incorporation and tax preparation. If you want to set up a real shop with a smallish 20-person team you are easily talking games that cost $4M to make and that’s assuming things go reasonably well. The real question is how good your business development angle is, since you really want some other source of capital for that sort of investment, whether it is a more traditional publishing model or some sort of VC / angel investment.


If you ever decide to do this and you need a marketing drone, shoot me a PM.

I have also thought of this, and I have fortunately seen a lot of startup developers come and go, learning a few lessons from each.

I have some guiding principals on what I think would work for a developer that will actually do well opposed to hanging on a by a thread for few years as some lame game company nobody that cares about.

Principal 1:
It really is all about the people who work at your company. Good developers (whatever their role) are very hard to find. You can hire 2 dozen programmers in 6 months to a year, but out of that batch you might only get one or two good ones. The same goes with artists, designers, etc… Good people are your most important asset, and the most difficult asset to acquire. Blizzard has spent years being picky and holding on to the very best they can. That is the ‘magic’ they have, that is why they can keep coming out with blockbuster games.

Be careful how you evaluate people as well. Maybe that artist who is grumpy and thinks all the art direction sucks, is actually right. Maybe Mr. Positive thinking who thinks it is all good is just dead weight. People may like him better, management may be thrilled at what he has to say, but unless he speaks objectively and truly, he is a liability, not an asset. Similarly people who have giant egos are usually a bad fit in any team. Even if they are really good at their job, they may cause other good people to be not-so-good.

Principal 2:
Know your limits. Do not over promise to a publisher. Absolutely do not plan on “overtime” or “crunch” time as part of your estimate of when work is going to be done. IE: If you think something is going to take 400 man hours, do not say “It would take 10 weeks, but if we work 60 hours a week, we can do it in about 6 weeks.” I know this is a great temptation by employers, because you generally think you get stuff done faster and since your employees are salaried, you do not pay for the extra 20 hours a week.

The obvious problems, which so many managers overlook are: Burnout, lower quality work, less productivity even with the extra time, and the real possibility of something going wrong which will crank up the hours a week even more. Crunch time should be reserved for unplanned events.

The most common causes for crunch time, even if you do not plan a schedule around it, are: Poor planning, feature creep, and over-commitment. There is not much you can do about the first one, that comes from experience. Just be sure and learn from your mistakes. If in doubt, double your estimate. Its better to be ahead of schedule then behind. You have little control over how productive your team is, but you can control the schedule they are trying to stick to.

Principal 3:
Team cohesion. Even if you have a team of developers, where each individual member is of high quality, there are still a lot of problems with people working together. Maybe Programmer Bob isn’t good at AI and would be better working on a rendering engine. Maybe your texture artist is good, but is really a great animator. You need to know where people best fit. Just because they are applying for job X, doesn’t mean thats where there best at. You may find that programmer Bob may make a fantastic designer and not be a programmer at all.

There is also the tools everyone will need. You might think a computer with the latest 3d studio max might be all that a artist needs, but learn that there are two dozen other things that will help them do their job better.

Your programmers might want to write their own engine. This might be good or really bad. If you go with middle-ware, they will need several months just to tinker with it. You can’t just buy the license for the code and expect your code team to hit the ground running.

The final step for this principal is to make a minor game with very little pressure. This will help you find who is good for what, build your cooperate culture, and turn your development team into a well oiled machine instead of a collection of parts.

This, of course, will cost more money to do, but in the long run I am sure it will yield a much better company then if someone with a few million in the bank hires a bunch of people and expect them to crank out a good quality game in 1 to 2 years.

I wouldn’t start a game company with even a penny less than five million. And that would be for a reasonably small and sane project, assuming no more than 20 people staggered over an amount of time. It also leaves a small safety buffer.

Perhaps you could get away with less if you were doing small things, webgames, live arcade games, etc. But if you are doing a full game (ie. something for the 360, or a pc game you are going to sell for $50), you absolutely do not want to over-commit on too little cash.

If I had enough money to start a studio…

…I’d retire.

If your value is 5 million dollars, then you would be foolish to spend 5 million on a game studio. On the other hand if your value is 10 million, and really want to try your hand at it, you should go for it.

I suppose the easy rule of thumb, as with any risky venture, only play with money you can afford to lose.

I only buy lotto tickets for the big ones.

I must be the only person on earth who buys lotto tickets not to get rich, but to start a game studio. I am also probably crazy.

Do they say the same thing about making money with a game development studio as they do with professional racing? To make a little money you have to start with a lot of money (and little sense).

My source-less pseudo-fact for today is that because of people just like you the expected return on large multi-state lotteries has been shown to decrease as payout increases.

Asking how much it costs to start a game company is like asking how much it costs to have a heroin habit.

Take that $5 million and put it in a money market fund making 5%. This gives you just over $20K a month income with essentially no risk and without touching your principle. Use that income to pay staff. Hire contractors, not “real employees”, to cut expenses (but be sure to hire non-dipshits). Work out of your home, so that you can claim power/internet/space as a tax deduction for business expenses.

If we generalize and say that $48K a year is a reasonable salary for indie-funded but high quality programmers, artists, etc. and you’re paying contractors so you don’t have health insurance and SocSec all that, that will cost you about $4000 per month per person. Given the previous money market scenario, you can afford four of them plus yourself, without touching your actual base operating capital.

So, when can we see the Tribes remake? :)

In about $4,999,500 from now.

Thanks for the answers, guys. Sounds like I was in the ballpark, at least.

48k? No insurance? High quality?

Pick two. And they’re probably going to be the first two.

Yeah, 48k is pretty low for a good quality programmer with no insurance and can also vary on based on location. My first fulltime offer was not too far below that and included benefits as well.

48k - lollerskates. Try doubling that for programmers, multiply by 1.5 for designers and artists. That will get you decent, but not really good employees (in $, UK is cheaper).

The initial start-up costs aren’t that bad for a small studio, but the issue is having the money to keep the studio going while you try to finish the game and secure a publishing deal. If your studio principals have no pedigree, publishers won’t touch you until you basically have the game finished already, so you need to fund the entire development yourself. If this is a PC game like Tribes, then you don’t need any expensive dev kit hardware, so its a bit cheaper. If its a downloadable or webgame, then hire 2 or 3 other people and work remotely from your own homes. If its a console game, then you need to get picked up by a publisher before anyone will give you dev kit hardware.

Once you get picked up by a publisher, expect to get jerked around every milestone, and have your payment withheld because some bright spark in marketing/development/PR/management decides that your game would be better with feature X also, so your milestone won’t be approved until you put in another month’s work trying to cram feature X in as fast as possible, against your better judgement.

What I’m trying to say is, its not the outlay, its having a constant supply of money in the bank to keep the company afloat while you finish the game. You would need about 2 years of money saved up IMO. Also, the company founders are the last to get paid. I’m also quite cynical about the feasibility of starting your own studio, having seen first-hand how hard it is, and how royally small developers get screwed over every day. Many less-scrupulous publishers (most of them I’m sorry to say) will do things like break the contract and cancel the game without paying off the developer, because they know they can outlast the developer in court.

Iif you can afford to develop the entire game by yourself and then shop it around to publishers, then that’s a much less risky solution, but of course much more expensive. That is the only way I would consider doing it these days.

Ditto for audio.

According to this article:

You can hire an Indian computer programmer for $8000/year, compared with $70,000/year for an American programmer. (The numbers are down near the bottom.)

Looking at some of the figures on this website:

converted through this one:

It seems possible for the numbers to go even lower. So when millions of dollars in venture capital falls into my lap, as I naturally expect it will, I’ll just move over there…