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Games don't need venture capitalism

iatia.substack.com

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Re: Games don't need venture capitalism

#11

Post by klik99 »

5 years ago I would have agreed, VCs invested in games, rather than studios and most games never get released, let alone be successful if they are released. Rovio is a good example of that time period. But so many games people have exited and formed their own VC studios, or hired people who get games, and the focus has switched to investing in teams which is way better.

So while it's true that "games don't need VC", yeah there is a huge market for smaller games, and what success means for 1-4 person team is vastly smaller than a big game, there is also a place for large VC funded teams. I think this article is really saying "games shouldn't be funded by VC" which I think is just wrong.

Just like any VC, you want the VC to understand your industry, which games is hugely misunderstood by people who haven't worked in games. The VC has to understand what's valuable, which is a team that ships and works well together, not a particular game idea. Alternatively invest in a technology that is being built for the game, which is the Tencent approach and either use buy the tech if it works out or sell it. Either way, don't invest in a particular game product. Failures don't mean the model doesn't work, and successes without it doesn't mean it's not needed. VC is one of many ways to get from point A to point B and if depends on the project - if you have an idea that needs rocket fuel and you're willing to take the risk that rocket fuel entails, then it can make a lot of sense. But it's def not the only way.

Re: Games don't need venture capitalism

#12

Post by Gigachad »

jmyeet wrote: post #6

This is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeata…

I think you actually can reduce a lot of it to a formula. Most major games that come out are basically a modern remake of something that already exists and was popular.

Just rehashing the same concepts and improving them is a pretty solid strategy.

This strategy won’t create the Minecrafts and Stardew vallies, but it covers the bulk of game development.

Re: Games don't need venture capitalism

#13

Post by LarsDu88 »

monero-xmr wrote: post #5
larsiusprime wrote: post #3

Earlier quoted context omitted.

Having worked in games for 10+ years, and having recently joined a more traditional VC-backed startup outside of games, I think you are 100% on the money. The VC model doesn't make a lot of sense for games. So many outsiders come into games thinking they know what they're doing and they learn some hard (and expensive!) lessons fast. Thanks for writing this.

Games are a hit making business, much more similar to movies than to product businesses. Sequels and spinoffs can reduce the risk by leveraging the existing IP and fan base, but it's still a hit making business. Indie games are more like self-published novels or youtube creators - you are trying to find a core fan base who will support your artistic endeavors. Sometimes they crossover into mainstream, but 99.99% of t…

This is correct. The distribution of successful games just like movies, youtubers and onlyfans creators is extremely skewed towards a power law distribution.

Games are amazingly difficult to make. Much harder than building web services, but the product success rate is even lower and with much lower stickiness amongst users.

What most silicon valley backed successful VC funded companies fundamentally are, are attempts to get software based network monopolies. Things that users won't immediately abandon for the next new shiny thing down the road.

Re: Games don't need venture capitalism

#14

Post by Gigachad »

raincole wrote: post #9
jmyeet wrote: post #6

This is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeata…

> You cannot reduce them to a magic and infinitely-repeatable formula The formula is: > blockbuster movies every year, 20+ years of superhero movies just rehashing old IP, endless sequelss, annual Call of Duty releases, FIFA/Madden annual micro-transaction hell and so on These are very successful businesses. You might not like them as a gamer, but I don't know why you said it like they're some failures. They're not O…

Games in particular do not have to be that novel. People are still playing chess which hasn’t changed in hundreds of years. There is plenty of money to be made in just remaking the same concept but for the latest hardware with the latest technology.

Re: Games don't need venture capitalism

#15

Post by tasn »

jmyeet wrote: post #6

This is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeata…

Just sharing, as I just looked it up: Rovio was bought by Sega last yeae for $776m. They've had over $300m yearly revenue in 2022, though not profitable.

Re: Games don't need venture capitalism

#16

Post by MichaelZuo »

minimaxir wrote: post #4
kyriefh wrote: post #2

hiya, author here. Palworld is a wild, wild game (think pokemon meets ark:survival evolved, or simply pokemon with guns), and it follows a number of other super-successful indie games that got made with no VC funding. i myself work heavily within the VC ecosystem, so it got me thinking about how games and VC tie together. while the article is written in an opinionated manner, i don't mean to present it as fact - more…

Palworld is an extreme lightning in a bottle and is not a consistent model for game development success. For every Baldur's Gate 3 and Among Us, there are thousands of games that never reach that level of popularity. It's a similar survivorship bias as typical VC.

The world's game industry only needs, at most, about 12 'lightning in a bottle's like this per year, so it seems like a perfectly workable model for such a small number.

The existing game studio system can already handle all other established niches in practice.

Re: Games don't need venture capitalism

#17

Post by HideousKojima »

Gigachad wrote: post #12
jmyeet wrote: post #6

This is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeata…

I think you actually can reduce a lot of it to a formula. Most major games that come out are basically a modern remake of something that already exists and was popular. Just rehashing the same concepts and improving them is a pretty solid strategy. This strategy won’t create the Minecrafts and Stardew vallies, but it covers the bulk of game development.

Even Stardew Valley was basically just improving on the existing, popular concepts found in the Harvest Moon and Rune Factory series (among others).

Re: Games don't need venture capitalism

#18

Post by hresvelgr »

Games in this day and age ideally need generous government subsidy to be successful.

I feel we're a long way off universal basic income worldwide so at the very least, something like an artist's living wage provided by the government is a necessity to produce good independent video games. Most professional indie developers tend to survive rather than thrive, barely kept afloat by money from publishers who also have their own interests and influence which affect the final result.

There would be kinks to iron out in terms of who gets the wage and how it's kept and so on, but the funding really needs to come from an entity that is largely divorced from the "success" of the game. Bit of a pipe dream, but it's nice to think about.

Re: Games don't need venture capitalism

#19

Post by fbdab103 »

tasn wrote: post #15
jmyeet wrote: post #6

This is ancient Internet history at this point but does anyone remember Rovio? In the early days of the iPhone/iPad they made a large amount of money with the Angry Birds franchise, even licensing the IP to a movie (or was it 2?). In 2011 Rovio took ~$40 million in VC funding and I distinctly remember thinking "well, that's over". Creative ventures don't scale. You cannot reduce them to a magic and infinitely-repeata…

Just sharing, as I just looked it up: Rovio was bought by Sega last yeae for $776m. They've had over $300m yearly revenue in 2022, though not profitable.

That is wild to me that they could not be profitable. That is so much money stemming from some mobile games. Games from the outside have limited production values vs AAA titles.

Do they spend it all on promotional material to not get out competed by the next mobile venture? Or is it just ever increasing team sizes? M&A gone wrong?

Re: Games don't need venture capitalism

#20

Post by bidder33 »

hresvelgr wrote: post #18

Games in this day and age ideally need generous government subsidy to be successful. I feel we're a long way off universal basic income worldwide so at the very least, something like an artist's living wage provided by the government is a necessity to produce good independent video games. Most professional indie developers tend to survive rather than thrive, barely kept afloat by money from publishers who also have t…

the “kinks to work out” is a funny way of saying “gaping holes that make this idea completely unworkable”

and given the endless stream of indie games government funding doesn’t seem to be a necessity.

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