Do you want to start a video game company? If YES, here is a complete guide to starting a video game development business with NO money and no experience.
Okay, so we have provided you an in-depth sample video game development business plan template. We also took it further by analyzing and drafting a sample video game marketing plan backed up by actionable guerrilla marketing ideas for video game development businesses. In this article, we will be considering all the requirements for starting a video game design business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Video Game Development Company?
A video game development company is usually involved in the creation of digital and interactive games that can be played on a variety of platforms from personal computers, video game platforms to cellular phones. The video game industry has been in a state of evolution, giving room for more innovative players since it came into being in the 20th century.
If you have conducted extensive research on what you will need to start this business and if you also have the relevant skill, you might consider starting your own video game development business. If you are still confused on several essentials, then you might need to read this article to gain more knowledge.
Starting a Video Game Development Company – A Complete Guide
- Industry Overview
The video game industry took a leap in 2015, according to the Entertainment Software Association (ESA), when the industry’s revenue in the United States of America rose to $235 billion, representing a 5 percent increase from that of 2014. Part of what the huge jump in revenue can be traced to the increase in sales of software, which amounted to $16.5 billion of the total revenue, representing a 7 percent increase from 2014.
- Interesting Statistics About the Video Game Industry
The average gamer is not a teenager but a young adult, and can be male or female, with 48% of those in the age bracket of 36 plus being identified as women. Globally, Russia which is the ninth largest country according to population, contributes a mere 9 percent to Europe’s digital games revenue market.
Out of all the Russians that play games, 60 percent do so via the internet. In the United States of America, 51 percent of households own at least a dedicated game console. According to the statistics, 68 percent of game console owners own other devices that can play games but prefer to play on a game console.
According to statistics, more than 59 percent of Americans play video games, which mean that over 150 million people of diverse backgrounds, genders, age and socioeconomic status in the United States of America play games. The average age of a gamer in the United States is 31; only about 29 percent of video gamers are under the age of 18, the percentage of those over 50 who play video games are higher than those under 18.
At least 74 percent of K-8 teachers use digital games in order to increase the engagement of students as well as their motivation in the classroom. Also, 56 percent of parents attest to the positivity of video games in the lives of their children.
According to IBISWorld, the video game development industry is worth $22 billion and has seen a 9.1 percent growth between the periods of 2011 and 2016. There are about 29,800 video game developers in the United States of America employing about 114,000 people.
It has also been projected that the industry will continue to experience strong growth over the next five year period. This is due to the fact that operators have not only increased their investments in this industry but have also been able to successfully hype these games in advance which have led to successful franchises and releases.
The social network game industry is also under the video game industry and has generated more than $5 billion in revenue for its sector with a projected growth of 15.9 percent over the periods of 2011 and 2016. The industry is mostly concentrated in the Western region of the United States of America and accounts for close to 39 percent of the industry revenue. California as a whole accounts for 34.8 percent of the industry’s sales due to the presence of technology companies in Silicon Valley.
It has been found that as at 2015, 48 percent of video gamers are women, which is one percent higher than that of 2014. Also, the purchase of video games is split equally between men and women. In the United Kingdom, 52 percent of gamers are women, according to a study conducted. Also, it was found that 56 percent of female gamers in the UK have played on a console while 68 percent have played online.
There has been a rise in video game viewership especially as YouTube gaming channels bring in more than 3.5 billion views each month. More people are now playing video games rather than tune in to sporting events in the United States of America.
Starting a Video Game Development Company – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those in the video game development industry are largely men but are not totally restricted to men as women make up 22 percent of video game developers. Video game developers also cut across race, age and socioeconomic status as more people are looking forward to breaking into the industry and making a name for themselves.
However, while you might be able to successfully define the demographics of the video gaming development company, it should become more encompassing as more business oriented people and organizations are striving to make their mark in the industry.
List of Niche ideas Within the Video Game Industry That You Can Specialize in
The video game development industry is one where operations such as production and distribution of video games are carried out. These activities involve the design, documentation, installation as well as support services. Operators in this industry can decide to be involved in one or several niches depending on the scale of the business and their financial capability.
Small scale companies usually stick to one or two niches, while large scale companies due to their financial capabilities can be involved in all the niches. Niches are usually what makes a company stand out or what they are known for in the industry.
Therefore some of the niche areas where a video game development company might decide to major on are;
- Action video games
- Shooter video games
- Sports video games
- Adventure role games
- Role playing video games
- Racing video games
- Strategy video games
The Level of Competition in Video Game Development Industry
The video game development business is one that is stiff with competition in order to gain the attention of gamers as well as other operators such as publishers in the industry. However, in competing with others in the industry, one must not be located in a particular location, even though this sometimes might be of a huge advantage
When it comes to the video game development business, all one needs is to create a video game that will get the average gamer hooked and make the game become viral or popular. This is why a serious game developer must get a serious and proficient programmer as well as a good graphics designer no matter what their prices are in order to enable them deliver an excellent result that will be pleasing to customers.
There are several video game developers all over the world that are not even based in the United States of America but have a lot of Americans hooked on their game. Therefore, if you choose to start your video game developing business in the United States of America, you should be aware that you will not only be competing with players in America but all over the globe as well.
List of Well Known Brands in the Video Gaming Industry
Every industry has brands that stand out and this is due to various reasons such as their publicity strategies, how long they have been in the business, their investment portfolio, or the number of games they have developed that have made a success. Before starting a business, it is best to understudy the best in the industry as this will help you up your strategies and game plan.
Therefore some of the leading video game development companies in the United States of America as well as globally are;
- Electronic Arts
- Nintendo Co. Ltd
- Activision Blizzard
- Sony Corporation
- King Digital Entertainment
The major operators in the video game industry are the developers, publishers, console manufacturers and distributors. The video game developers are those that do all the basic and major work such as designing and coding the games.
The cost of developing a game for PS3 and Xbox 360 for instance is above $10 million dollars; and because only a small percentage of the games are profitable, the rest are usually financed by the publisher who is usually responsible for not only manufacturing but also marketing the games. This makes the role of developers to be very limited and subsequently make them earn very little from the value chain.
According to a study by an entertainment analyst group, M2 Research, the average cost of developing a game for consoles of this generation is pegged at between $18 million and $28 million. It should however be noted that larger games are usually developed higher than the amounts previously mentioned.
In order to ensure that the business continually remains a long-term success, the video game development company usually has to ensure that it introduces new intellectual properties on a continuous basis. However, continually creating new intellectual properties can be quite expensive and if gamers do not like your game, you would need to ensure that you have a strong existing franchise with which to cushion the financial loss effect.
Many video game developers nowadays are turning to economists for help as a game’s economy can go awry especially as the development of video games on consoles have gone up to an alarming rate. Even though a lot depends on the game, publishers who are working on titles can use the mainstream license to cut corners and lower costs. It should however be noted that while this can be done for mid to low level games, it cannot be done on huge games that are a hit amongst the gamers.
Most companies sell their consoles at a loss initially in order to lure customers into buying them. They then usually try to make up for the losses from each game sold as well as via online subscriptions. However, as more units are manufactured, the costs start to decrease and this is due to economies of scale.
Starting Your Video Game Development Company from Scratch versus Buying a Franchise
Starting your video game development business from the scratch or buying a franchise will depend a lot on what goals and objectives the entrepreneur has in mind as well as the financial capability of the business. Starting from the scratch might look more difficult especially as the industry is dominated by strong players who have taken a huge share of the market.
However, starting from the scratch allows you to be in control of your business as you are able to decide what strategies would best suit your business. Most video game developers that start from scratch are usually sure of the potentials of the game they are developing.
Possible Threats and Challenges You Will Face When Starting a Video Game Development Company
The video game development business is just like any other business that faces threats and challenges. If you are going to be starting your own video game development business, then you should be prepared for any threats and challenges you are going to face especially in the presence of already established video game developers in the industry.
Therefore, some challenges and threats that you are likely to face as a video game development business in the United States of America are; unfavorable government policies, global economic downturn which will affect the purchase of new games by customers who might opt to stick with their old games, and also the arrival of a competitor into the industry. There is nothing that can be done about challenges and threats that a business faces, however being proactive will go a long way in ensuring that the business stands firm against any challenges.
Starting a Video Game Development Company – Legal Matters
- Best legal entity to use for a video game development business
In starting your own video game development business, it is very important that you choose a legal entity that is right for your business. A legal entity should be one that will provide the necessary benefits for your video game development business such as limited liability whilst also ensuring that your business looks professional enough when dealing with video game publishers and or investors.
Before choosing a legal entity however, you should ensure that issues such as the organization of the business as well as legal issues concerning the intellectual and physical property has been settled. There are however four entities (sole proprietorship, partnership, corporation and Limited Liability Company (LLC)) that you can choose from. It is however best to seek the counsel of an attorney or even an accountant to help you decide on which legal entity would be best for your video game development business.
Catchy Business Name Ideas Suitable for a Video Game Developing Company
Choosing a name for your business is very important as this will go a long way in affecting how your business is viewed by your potential target market. When it comes to choosing a name for your business, you will need to ensure that you create something unique, creative and easily memorable for your potential target market and even your competitors.
If you are therefore considering what names to choose for your video game developing business, here are some catchy names for you;
- Arise Arts
- Grandular Entertainment
- Supercorp Ltd
- Orangescope Group
- Space Dane Gamers
- Triple Power Ltd
Insurance coverage in the United States of America is a must have for individuals and especially businesses. Therefore in starting your video game development business, you will require some insurance policies that should help protect you from any sort of liability during the course of running your business.
Knowing the right insurance policies to choose from can be very confusing which is why you would need to seek the advice of an insurance agent or broker in order to help you pick which insurance policies will best suit your video game development business.
Below are some of the basic insurance policy covers that you should consider purchasing if you intend starting your own video game development company in the United States of America;
- General Insurance
- Liability Insurance
- Errors and Omission Insurance
- Workers’ Compensation Insurance
- Data Breach Insurance
- Overhead Expense Disability Insurance
- Payment Protection Insurance
- Employment Practices Liability Insurance
Intellectual Property Protection/Trademark
In the video game development industry, data breach and theft can be regarded as a very serious issue, which is why video game developers usually seek to protect their intellectual properties. Even though applying for an intellectual property protection can take very long and become a stressful venture, if you are keen on protecting the works you have developed, then you would take whatever means necessary to ensure that your property is duly protected by the relevant authorities.
Asides from protecting your data, you can also protect the logo of the company, the software used in developing your game, your jingles and even your media production concepts, anything that you feel if used by your competitor will give them an edge over you should be protected.
Filing for an intellectual property protection will require you contacting a lawyer who understands the kind of industry you are in, and who is well versed in intellectual property protection to begin the process for you. The lawyer will need to file an application with the USPTO and will also let you know all that will be required of you in order to have a successful application.
Is Professional Certification Needed to Run a Video Game Development Company?
The video game development business is one where creativity and technical skills are needed in order to create edge cutting games that will help attract the right target market. In order for your business to stand out and to ensure that customers get the needed confidence in your abilities, you should work towards acquiring the right certifications in your areas of specialization. These professional certifications are not compulsory but they will help your company move forward.
Therefore some of the professional certifications you should work towards acquiring for your video game development company are;
- Object Oriented Programming (OOP) languages e.g Java. C and C++
- Software product development
- User Interface and User Experience Design (UI/UX)
It should be noted that the more qualifications you acquire, the higher your client’s confidence and the easier it is for you to partner with mega games corporations.
List of Legal Documents You Need to Run a Video Game Development Company
You cannot start a business in the United States of America without having the proper documentations in place. Even if you are lucky to start a business without the proper documentations, it won’t be long before the law catches up with you and you might not be allowed to go into that business anymore no matter how much you generated.
However, there are some basic documents that you will need to have in place to be able to run your video game business successfully in the United States of America and they are;
- Certificate of Incorporation
- Operating Agreement for LLCs
- Business License and Certification
- Business Plan
- Insurance Policy
- Non Disclosure Agreement
- Employment Agreement
- Contract Documents
- Employer Identification Number (EIN)
- Federal Tax Identification Number
Financing Your Video Game Development Company
While your business remains a concept, it takes financing for it to become reality, which goes to show how important finance is to your business. Seeking for start-up capital might be unduly stressful but it is a task that an entrepreneur cannot avoid, which is why it is necessary to have a business plan. A business plan is a document that shows your investor what plans you have for your business and how serious you are with the business. This document is used in convincing investors to invest in your business.
Some of the options that you might need to explore when seeking for start-up capital for your video game development business are;
- Raising money from personal savings and sale of personal stocks
- Sourcing for soft loans from friends and family members
- Applying for loan from the bank
- Pitching your business idea to angel investors for seed funding
- Raising money from crowd funding sites such as kick starter
- Raising money from investors and business partners
Choosing a Suitable Location for your Video Game Development Company
Choosing the right location for your video game business is very relevant as you do not have to physically be with your clients all over the country as well as across the international borders.
However, before you decide to run your video game developing business from home, consider the fact that other already established and successful video game developing businesses are willing to lease a facility in order to ensure that they are located close to the hub of activities.
In summary, choosing a suitable location for your video game development business means getting a place that is visible and convenient for your employees and clients; one that is within the video game industry and also one that is within your budget.
Starting a Video Game Development Company – Technical & Manpower Details
When it comes to obtaining enough finances for your video game development business, you might need to consider keeping a steady job and use that to finance the team till the first product makes a hit and starts generating revenue that would finance the business.
The business model of a video game developing business requires that the business possesses a sizeable capital and labor before it can market its products to the public.
Choosing to lease a facility for your video game development business must be dependent on the scale of the business and the budget at hand. If there is enough to lease a facility, you must not only look at renovation but also at structuring and possible expansion as well.
The employees that would help you in starting your video game development business are; chief executive officer, an admin and human resources manager, business development executive, marketing manager, customer service officer, accountant, graphic artists, game developer and programmers.
This means that you would need a minimum of 9 key staff to be able to effectively run your video game developing business effectively.
The Service Delivery Process Involved in a Video Game Development Company
The video game development business is one where a video game is created by a video game developer (which may either be one person or a group of people). PC and console games are mostly always funded by a publisher and might take several years before it is developed. Indie games on the other hand take less time and are often produced cheaply by individuals and small developers.
The continuous increase in the processing power of a PC coupled with high expectation from consumers have made it impossible for a mainstream game on PC or video console to be produced by a single developer. The average cost of producing a game as at 2010 became $20 million.
PC and console games are usually developed in phases such as preproduction, high concept, pitches, concepts, prototypes, game design documents and finally production. Design, programming and level creation are then focused on after the first phase.
Starting a Video Game Development Company – The Marketing Plan
- Marketing ideas and strategies
As a video game development company, what people want to see is the success of your product and so before you engage in any sort of marketing for your business, ensure that the game you have developed is working very well and has been tested for bugs and other defects. If it is released into the market and a bug or any other defect is noticed, it will have a serious impact on the marketing of your product.
Marketing your product is a major way of not only generating revenue but also increasing awareness for your business; which is why it is necessary that you conduct a thorough market survey that will help you determine what the average gamer wants to see in a game before developing it.
Your marketing success will be based solely on what channels you were able to use and how much of a budget you have. In the video game industry, competition is very intense and to be noticed, you will need to deploy some marketing strategies that will increase awareness for your company and also allow you to stand out. Getting proficient marketing executives who fully understand the industry is very important so you don’t go wasting money trying out strategies.
You might need to try a combination of several strategies to be able to penetrate the market and compete favorably with your competitors. Some of the platforms you can use to market your video game development business are;
- Introduce your product and company by sending out mails and news releases to several stakeholders in the industry.
- Attend video game seminars, conferences and expos in order to network with gamers and market your product as well.
- Advertise your product in video games magazines, in local and national newspapers as well as on radio and television stations.
- Ensure that your video game business is listed in online directories and that your website is search engine optimized.
- Leverage on the internet (your social media platforms such as Facebook, Twitter, Google Plus) and other platforms (popular gamers forum and blogs) to advertise and market your business.
- Engage the services of a creative marketing executive to conduct direct marketing for your video game business.
Strategies to Boost Your Video Game Brand Awareness and Create Your Corporate Identity
The video game industry is one that thrives on publicity as well as corporate identity in order to attract the right target market. To excel in this business, you have to be deliberate in picking strategies that would boost your brand awareness and create a corporate identity for your business.
One thing that is highly prevalent in this industry is that companies are willing to spend a huge amount of money yearly to boost their brand’s awareness and also positively communicate their corporate identity to their target market.
Every video game developer’s intention when starting a business is to ensure that their games become very popular and operate beyond national boundaries to an international level; and to achieve this level, it is necessary that a huge amount of money is spent in promoting the business or the game developed.
In promoting your video game developing business, you will need to ensure that you leverage on conventional and unconventional means of business promotion. It is often wise to create a budget as this will force you to stick with only necessary and effective publicity strategies for your business.
If creating the right publicity strategies might be a bit overwhelming considering the fact that you are in an industry that is stiff with competition, you might decide to engage the services of a publicity consultant who is well versed in the industry to help you create effective publicity strategies for your video game developing business.
The platforms that you would therefore need to boost your brand and promote as well as advertise your video game development business are;
- Ensure that you create an interactive website and place free versions of your games where gamers can download and play and if they like it, purchase the whole game.
- Go to gamers and developers forum to create an awareness about your new game.
- Leverage on your social media platforms such as Facebook, Twitter, Linkedin, Google Plus, Instagram and YouTube to create an awareness about your video game.
- Send news releases about your new game to video games magazines, local newspapers as well as on radio and television stations.
- Create a contest about your new product and get various people to participate in it in order to raise awareness.
- Network with video game stores and retail outlets and paste the fliers of your products there.