What Is an Indie Video Game?

An indie video game is developed independently by an individual developer or a small development team instead of major game publishers and studios. Without the support of AAA publishers, indie video games are usually self-funded or crowdfunded projects.

It is no secret that developing a video game is an expensive project to undertake. If game development is so costly, why do so many indie developers still choose to make their own games?

Despite lacking in financial backing and resources, indie game developers are afforded the autonomy and creative freedom to fully convey their vision in the games. In other words, they have control over every single aspect of the creative and development process, from the designs, concepts and stories to the gameplay programming and mechanics, without any sort of interference from a publisher.

Examples of successful Indie Video Games

Successful indie titles such as the boundlessly imaginative sandbox game Minecraft (also the best-selling video game of all time), the outlandish and eclectic role-playing game Undertale, the delightful and zany run-and-gun Cuphead have received universal acclaim and snagged a multitude of gaming awards in various award events and media publications. Oh, and not to forget the punishing yet addictive hack-and-slash rogue-like game Hades too.

Besides the critics, many indie games have been well-received among fans, developing huge fanbases. With critical and financial success, along with their surging popularity, indie games have indubitably cemented their standing in the gaming industry.

To say that indie games have knocked it out of the park is an understatement.

The proliferation of indie games in the past two decades has generated a market in the video game industry with unlimited opportunities for aspiring video game developers to create their own games. However, developing and launching an indie title can be a challenging and arduous process without resources from game publishers.

Indie game developers have to consider the multifarious costs of game development.

Analyzing 3 famous AAA title video games

To put the costs of developing and launching a video game into perspective, we refer to three of the most expensive AAA titles ever made in the history of video games. This would give us a better sense of how extremely expensive things can get.

Call of Duty: Modern Warfare 2

In 2009, Call of Duty: Modern Warfare 2, the sixth instalment in arguably the most popular first-person shooter franchise, was released by Activision. The development of the game reportedly cost $50 million, and coupled with a marketing cost of $200 million, it was the most expensive video game made at that time, costing a total of $250 million.

Grand Theft Auto V

In 2013, the highly anticipated Grand Theft Auto V was released by Rockstar Games with a total cost of $265 million, surpassing Call of Duty: Modern Warfare 2 as the most expensive video game to ever be produced. The development and marketing costs were $137 million and $128 million respectively.

It was a historic launch for the title, grossing over $1 billion within just three days, becoming the fastest-selling game ever and breaking numerous gaming and entertainment sales records (and Guinness World Records). The game eventually became the second-best selling video game of all time, with over 135 million copies sold.

Cyberpunk 2077

More recently in 2020, the cost of video game production would once again be eclipsed, when Cyberpunk 2077 was released by CD Projekt Red with a whopping cost of $330 million.

The development cost was reportedly $121 million and the marketing alone cost $209 million. Major gaffes and glitches aside, the title sold over 13 million copies within two weeks, making it one of the best selling games in 2020.

A break down of the costs involved in making & launching a video game

Making a video game does not simply involve just the development work. The overall cost of video game production also expands to includes the costs for development, marketing, manufacturing and distribution.

Development Costs

Here’s a break down of the development costs:

The purchase of the game development kits, software and equipment
The cost of licensing intellectual property (IP), branding and character rights.
The salaries of the project team members, which could consist of project managers, programmers, designers, artists, audio engineers, music composers and voice actors, quality assurance (QA)/game testers.

Marketing Costs

As illustrated by the large amounts of money AAA game publishers spend on marketing, generating hype and publicity to launch an upcoming title is a key factor in the success of a video game.

Marketing can cost as much, if not more than the game development.

It is essential for game companies to reach a wide audience through various forms of marketing campaigns to create exposure, hype and demand for their games in order to generate sales.

Depending on the scale and depth of the marketing plan, a typical marketing campaign can involve:

Paid advertising on digital marketing channels – Facebook, Google, Youtube, etc.
Paid outreach on gaming websites and publications
Television & radio advertising
Print and billboards
Hosting gaming events and conventions
A game launch party
Salaries of the marketing team

Manufacturing & Distribution Costs

Last but not least, video games go through different distribution channels to reach the consumers. The conventional method is manufacturing and printing physical game copies for sale at brick-and-mortar businesses.

As digitization of media becomes more prevalent, video games are increasingly being distributed through digital game distribution services such as Steam. These platforms usually take a percentage cut of the sales made. All these costs will factor into the manufacturing and distribution costs.

Analyzing 3 famous indie games

Unlike AAA titles, information on the development and marketing costs of indie games is not widely available. This is because indie game developers are not obligated to disclose their financial reports, as compared to AAA game publishers which are publicly traded companies.

Though the figures that I researched and pulled out might not be an accurate representation of the actual costs involved, they should provide a good enough gauge of the costs involved.

Shovel Knight

Released in 2014, the critically acclaimed side-scrolling platformer Shovel Knight was developed by Yacht Club Games, an indie development studio and publisher. They had a total budget of $328,682 that was funded through a Kickstarter campaign and direct PayPal donations.

Angry Birds

The all-time popular mobile game Angry Birds, which started out as an indie game in 2009, reportedly cost Rovio Entertainment $140,000 to develop and launch.

Braid

Hailed as one of the best indie games of all time, the puzzle-platformer Braid, released in 2008, was developed solely by Jonathan Blow, who reportedly used $180,000 from his personal funds to work on the project.

An estimation of your video game’s marketing cost

Justin Carroll, who worked on marketing AAA game franchises such as Call of Duty, Mortal Kombat and Tony Hawk’s, suggested that the average cost to market an indie game is $40,000 to $50,000.

According to him, here’s the breakdown:

The branding for a game would cost up to $7,000
Creating a trailer to introduce and showcase the game would cost about $4,000
Building & maintaining a website would cost $7,000
Content creation & engagement on social media would cost $11,000
Running a development blog would cost $9,000
Public relations & outreach at $9,000.

Monetary costs aside, there are emotional costs too

Developing an indie game comes at a price. There are many risks involved, such as the possibility of a financial loss, if the game underperforms in sales. Beyond managing the finances, indie game developers also need to manage their emotional costs.

As Nick Padgett, the developer of the indie puzzle game Irritum, stated, there was “constant nervousness” about his game failing, describing the development process as “stressful”, “depressing”, “frustrating” and “emotionally traumatic”.

Game development is a lengthy process that is physically, mentally and emotionally draining. Without the help and support of others, developing your own game will undoubtedly feel like an impossible and daunting mission.

With so many aspects of the game to work on, countless hours, possibly even sleepless nights, will be spent grinding away on the computer. Developers might feel that since a great deal of their time, effort and money have been channelled into developing the game, it will be a waste of resources to slow down or take a break.

Such self-imposed pressure to finish developing a game by a certain deadline might cause them to experience stress and an inability to disengage from the project. Overworking on game development beyond their capacity might cause burnout, resulting in frequent frustration or a loss of motivation.

Self-doubt might also arise, especially when developers feel overwhelmed by the sheer amount of work and start to worry about whether the game would be decent or successful, or if they could even finish making the game.

It is important, as an entrepreneur, to manage the emotional toll that tags along with striking it out on your own.

Not forgetting, social costs

Besides financial and emotional costs, social costs can potentially be incurred in the process of independent game development.

The social life of these indie developers might be compromised, as the majority of their waking hours and energy would be spent on developing the game in isolation, instead of socialising with their families and friends.

In business terminology, social costs of failure refer to the penalties imposed on unsuccessful entrepreneurs by other members of society, including the stigma of failure and the visibility of failure among the broader community.

Social costs in the gaming industry are high, especially for indie game developers, who usually invest most, if not all of their money, time and energy into their games. If an indie game is critically panned or performs poorly in sales, the developers would have to pay the social costs of failure.

For instance, they might be subjected to ramifications such as being perceived as a ‘failed’ developer by the gaming industry. They may also encounter difficulties in getting support from investors and crowd funders for future projects due to their poor track record, which hinders their game development career.

How to plan your startup budget for your video game

As what you have read so far, game development is not a walk in the park. For aspiring indie game developers, gaining knowledge of certain aspects in the development process and learning about costs and budgeting are imperative.

To help you with this, I’ve formulated 6 strategies to plan the development and marketing processes for your video game.

Or as I put it, the ABCDEF of video game development (not necessarily in sequence).

Acquisition

Learning is a never-ending journey. As an entrepreneur, you should aim to end your day smarter than when you first started it.

Here are some essential skills that you should pick up as an indie game developer/entrepreneur:

Game development
Game design
Programming
Digital Marketing
Equipment know-how
Game development kit and software knowledge

Budgeting

Every single cost involved in developing and marketing a game should be researched on and listed down clearly.

By doing so, you will have an indication of how much money is required to fund the development and marketing of your game. Depending on the scale of your game, your marketing budget can be adjusted according to your game’s development cost.

4 ways to estimating your game’s budget

There is no standard way of estimating your game’s budget here. I’ve listed down the 4 ways game studios typically do so for your consideration.

The Quarter-half Rule

One estimation method commonly used by indie developers is the quarter-half rule, where your marketing cost should ideally be within a quarter to half of the development cost.

For example, if your development budget is $10,000, your marketing budget should be $2,500 to $5,000.

The 50-50 Rule

Another estimation method used by indie developers, as well as some AAA publishers, is the 50-50 rule. This estimates your marketing budget to be the same as your development cost.

For example, if your development budget is $10,000, your marketing budget should be $10,000 as well.

The Correlaton Rule

Another estimation method based on the number of copies that should be sold in order to break even and achieve a good profit margin is the correlation rule.

Under this rule, an estimate of the amount required to market your game to a single buyer is multiplied by the number of copies needed to be sold to break even and profit.

For example, if the estimated marketing cost is $2 per buyer and 20,000 copies of your game need to be sold to break even and profit, your marketing budget would be $40,000.

The Time-Invested Marketing Rule

In spite of all the rules mentioned, it is possible for video games to achieve decent sales without a marketing budget. It does not imply that marketing should be neglected.

Instead, time-invested marketing rule focuses on spending an appropriate amount of time, as opposed to money, to develop and execute a marketing plan to create awareness for your game. The strategies adopted in this marketing plan are zero cost marketing activities.

For example, for every hour spent on development, you should spend 15 to 30 minutes reaching out to game publication websites about your game.

Conceptualisation and Creation

Conceptualising your ideas is extremely important for the groundwork of a game. What genre should my game be? Who are the characters? What story am I trying to tell? Who is my target audience?

A developer should tackle these fundamental questions before starting on the development. The type of gameplay experience should also be clearly defined in order to design a fun and unique experience for players.

After conceptualising, prototyping is the next key component in the game development process. It allows the developer to test his or her concepts and gameplay mechanics to determine if they work, before deciding to put in more time and effort to continue with the development.

After prototyping, a demo or launch trailer can be created and published to exhibit the game’s concept and gameplay. This would fall under marketing, as you would be introducing your game to a wide audience for the first time.

A tentative release date and a call to action (such as a request for crowdfunding) should be included at the end of the demo or trailer. The demo may also serve as a premature quality assurance (QA) test where bug reports can be generated to fix the issues in the game.

Development plan

Before fully embarking on the development work, a timeline and the milestones should be mapped out to provide a development framework or structure.

Tasks should be clearly defined on when or who (if working in a team) to work on the various aspects of development and production.

Some examples include:

Designing
Modelling
Audio and visual effects
Gameplay mechanics
Rendering

Funding

Other than self-funding, many indie game developers have successfully secured funding through crowdfunding campaigns, such as on Kickstarter and Indiegogo.

Another way to get starting capital would be through angel investors and publishers through business plan presentations. The viability of such funding methods largely depends on how well-received your ideas and concepts are, as well as the feasibility and appeal of your game.

The costs involved in setting up a video gaming company

Setting up and running a video game company takes time, expertise and money. And I mean, A LOT of money.

Here is a breakdown of the various costs involved:

Team Salaries

Assuming that a small indie game company consists of 6 development team members, their average salaries could look like the following:

Game Developer: $7,000 per month, or $84,000 per year
Game Programmer: $5,420 per month, or $65,000 per year
Game Designer: $5,500 per month, or $66,000 per year
Game Artist: $4,833 per month, or $58,000 per year
Game Animator: $4,583 per month, or $55,000 per year
Audio Engineer: $4,417 per month, or $53,000 per year

In total, the monthly cost of salaries for the indie development team would amount to $31,753 and annually, you would need to fork out $381,000.

Rent and internet

A team of developers would require an office space and equipment to work.

An approximate rent for an office in a co-working space (inclusive of furniture) would cost an average of $505 per person, amounting to $3,030 per month. The internet connection would cost an additional $60 per month.

Equipment

A mid-range laptop or computer would cost at least $1,500 per unit, while monitors cost $150 per unit (2 unit per person). Mouse and keyboard would cost about $20 each.

The total costs of equipment are:

$9,000 (computers) + $1,800 (monitors) + $240 (mouse and keyboard) = $11,040

Game development software

Fortunately, there are many free, open-source software that are widely used in game development:

3D modelling and animation software: Blender

Image/graphics design and editing software: GIMP

Audio editor and recording software: Audacity

For game engine and software development kits, Unity is royalty-free for personal use but is only available for users with a revenue or funding less than $100,000 in a year. The Pro version for companies costs $150 per user every month.

This brings the total monthly cost for game development software would amount to $900, or $10,800 per year.

Digital distribution

To sell games on Steam, the leading digital game distribution service in the industry, it would cost $139 per game. Besides the submission fee, Steam will take a 30 percent cut of the game sales.

In total, the approximate monthly costs of setting up a game company, inclusive of the equipment and digital distribution fee, would amount to $46,922.

Everything summed up

To sum the costs up, here is the annual breakdown:

Salaries: $31,753 x 12 = $381,036

Rent: $3,030 x 12 = $36,360

Internet: $60 x 12 = $720

Unity Game Engine: $900 x 12 = $10,800

The total costs per year to run a video game company would amount to at least $428,916.

As illustrated, the costs of setting up and running a video game company, albeit a small enterprise, are exorbitant. That is not including the marketing expenses, which can easily cost up to $40,000 per game.