Funding Models - Part 1

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From the course by Michigan State University

Business of Games and Entrepreneurship

660 ratings

Michigan State University

Business of Games and Entrepreneurship

660 ratings

Course 3 of 5 in the Specialization Game Design and Development

As well as a form of art and entertainment, games are about business. Whether you want to work at a game studio, start your own business or make games as a hobby, recognizing the dynamic landscape of the videogame industry is critical to finding your place. This course will introduce you to game production, project management, teamwork skills, and how to position your game ideas and yourself in the broader marketplace. By the end of the course, you will be able to develop an impactful portfolio of game work to get noticed and/or develop an effective business plan to bring your game to market.

From the lesson

Show Me the Money!

The reality is that making games isn't just about art and creativity, though sometimes some of us wish that were the case. All art has economic considerations. Creative people need food, shelter and safe creative spaces to work within. Thus, one way or another the question of the economics of games is going to prove important. So understanding the flow of money in the game industry, as well as how to protect your own ideas will prove paramount in being able to make the craft of making games an economically justifiable activity.

The Business of Videogames6:27

Funding Models - Part 16:31

Funding Models - Part 28:56

Where are Games Sold?12:10

How do You Make Money?5:24

Meet the Instructors

Casey O'Donnell
Associate Professor
Media and Information

[MUSIC]

All right, so let's talk about some of the funding models that exist in games because

the reality is there's lots of different ways that you can make a game and

actually get paid for it.

So, how does a game get funded?

Where are you gonna get money to make a game?

That's a really good question because the truth is,

you don't actually just have to bootstrap it, right.

There are ways that you can make money ahead of time.

So, one of the ways that you can fund game development is work for hire, right?

So you get contracted to make a game, right?

So you or your company, so the question becomes,

well, whose game are you making, right?

And are you really passionate about that person's game?

And those are important questions that you'd wanna ask.

So who owns the game?

That's a really good question as well, right.

How much ownership do you have, right?

And these are all things that get negotiated as contracts get negotiated and

we'll talk about that in a little bit.

So let's talk about the first, right?

That most people will use which is self funding,

which is that you're going to fund the development of your game right now.

I mean, certainly that's probably how you're funding your activity even

here on Coursera.

You're taking your hard earned money and investing it in learning something.

Well, you might take that money and invest it in making a game, right?

So, this is what a lot of people,

when they're talking about startups, are talking about when they say sweat equity.

So, you've heard that word before, right?

That you're putting in the labor and

the time and that's your investment in your company, in your game.

And really,

that's where a lot of games come from is some from sweat equity, right.

Some people will call this bootstrapping, all right,

where you're taking your money and you're investing it in a project.

And hopefully, you'll see a return on that later.

So we might refer to this as OPM, right.

And the idea is that you're going to trade equity, and

control of your company, of your game for money, right.

And so traditionally, this would be where you're going and talking to either

an investment firm, maybe an angel funder, or a venture capitalist.

And so the question becomes, like what are they in it for?

And the answer is they're looking for a return on their investment as well.

They're looking for money.

And the truth is, a lot of investors are pretty risk averse.

Right?

So this can be really difficult money to get.

Oftentimes, you've already had to bootstrap a company or

find other forms of money before you can even get here right?

The idea that an investor's just gonna come along and

can plunk a bunch of money down on a game is pretty slim.

We're also talking about, there are other opportunities here, right?

And so, often times people will talk about the three Fs,

right, the FFFs of funding, friends, family, and fools.

All right, so friends and family, you can ask them to help fund your game.

Say hey, I've got this great idea, I'm really working hard and sometimes,

that just comes in the form of living at home, not ideal.

Or asking a partner, say hey, I'd really like to do this creative thing,

I think there's a chance I can do it, I think I'm really good at it,

will you give me the time to do it, and let me do it.

Things like venture capitalists, I'm not calling any of those people fools,

but right?

There's a lot of risk that goes in this kind of thing.

So, another opportunity and actually this is one that I've made quite a bit of

use from, right, is that you can get funding from grants.

That there are agencies out there that will give money to make games.

So, for me, that money came from largely from the National Science Foundation,

National Institutes of Health and

they come in the form of what are called SBIR or STTR grants.

You can go google those if you want to but the reality is hey, they do fund games.

Other countries may actually have other funding formats as well.

Sometimes it's military, sometimes it's non profit ,maybe theyre are foundations.

There are actually foundations that fund very specifically, creative endeavors.

I don't know if you played it but the game Fez for

example, was funded by a Canadian grant.

Wasn't to say that it paid for the entire development, but

it certainly enabled that game to be made.

And so that's an important source of funding, right?

And so you'll see things that come out that are called call for proposals.

And you can put your proposal in there, right?

But writing grants is a very particular kind of skill.

And it's not all that much fun, I must say.

But hey gotta say, if somebody's giving you a lot of money to make your game,

of course you're gonna have to jump through some hoops to get it.

And the other piece of this is that oftentimes the game is just one part

of a large sort of research or outreach component so you end up partnering

with people and so it may or may not work for something you might be interested in.

You've got things like government seed money, right?

Some governments are interested in seeding money to help grow particular industries.

Some states will actually have incubator programs, right?

And some of those incubation programs may actually target specifically things like

entertainment technologies, some places will have what are called incentives or

incentive programs, right?

Tax breaks, tax credits.

You can look at the state of Georgia, for example.

The state of Michigan used to have them, right?

Lots of places do these kinds of things as a way to grow industry, to make jobs.

So, all right, that the reality is that you sort of need money to make money,

and that takes time, and it's either gonna be your money, or somebody elses.

So, another option, that's a relatively recent one,

would be something like Kickstarter, which is called crowd funding.

All right, so kick starting a project.

The nice thing about this is that hey, it's free money for

you to make your thing.

The difficult part is that it's difficult.

There's a whole lot of barriers to entry right?

You've got to figure out how to make a good looking video.

Get people excited about your game and often times people

are the most excited about people who have already been making games right?

If you don't already have an audience,

those crowd funding projects can be really difficult, unless of course you manage to

do something that sort of sets you apart and gets you to kind of go viral.

Right, that's the point of crowd funding is getting the one to five dollar

to $20 people to invest in your project.

So next I am going to talk about some more models because there are a lot.

I will see you on the next clip.

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