A word on consequences

Before getting into the core of the topic, it feels necessary to address the human cost that comes with general misinformation or misunderstandings around game development, and why financial accountability matters.

“Things can spiral which can cause additional unexpected costs,” Evan Wolbach says. “Delays on production that crescendo into delays of the product, financial instability, and closure of your studio.

“I don’t have data to back this up, but my money on the No.1 killer of indie game devs is poor project/financial planning that spirals into an uncontrollable state, and they cease to be.”

“There is absolutely no excuse for the level of hurting people that happens in this industry. And all of the hurting people is hidden costs”Rebekah Saltsman

Rebekah Saltsman says you’re never going to get everything perfectly right on a first project (or ever), and there will always be some hard lessons learnt along the way. But she warns of some dire consequences of game dev gone wrong.

“The number of people we know who don’t make games anymore, or a game is not as good as they want it to be, because they just burned out… Games can’t be everything and, as a studio director, if you don’t put in controls for that, you’re just hurting people. We work in games. We’re not doctors. We’re not saving lives. There is absolutely no excuse for the level of hurting people that happens in this industry. And all of the hurting people is hidden costs. It’s because instead of being like, ‘It’s okay to lose a bit of money, and to move this deadline’, it’s, ‘We’re just going to work everybody to hit this deadline’.

“And it’s not that it was necessarily bad planning – because things happen in development – it is an inflexibility and an inability to adapt to an industry that changes every six months. People are always like, ‘Why did Tunic just take so long?’ It’s because we gave Andrew [Shouldice, Tunic’s develoepr] the flexibility to make the game that Andrew needed to make. If we had forced a deadline on him, it would have been a very different game.

“So, yes, the hidden cost is ruining people’s lives in games, and there’s no way around that. You will ruin people’s lives, you will break up marriages, you will remove people from their children if you don’t take this seriously. And we’ve seen it happen all the time, and it’s effing gross. Don’t do this.”

What are some of the hidden costs of game development?

One of the most common answers we received about costs new developers don’t think of is the value of time, and the idea that your own time is costing you money.

“In the indie space, the biggest thing that people don’t think about is that their time is valuable,” says Tony Howard-Arias, co-founder of Scarlet Hollow and Slay the Princess developer Black Tabby Games. “Sometimes you’ll see people posting about [making] a game with a $10,000 budget or whatnot, but then because it’s their own thing they’re making, they don’t assess what their own time is worth.

“If you’re into indie games for the money, that’s a bit of a tough proposition, but you should also probably go into it with the intention of making enough to live. You should think about, ‘What am I giving up by spending all this time working on it?’ Especially if you’re working on it full-time. What is the equivalent salary that I would be earning somewhere else? What’s the cost of my own time?

“If you’re into indie games for the money, that’s a bit of a tough proposition, but you should also probably go into it with the intention of making enough to live”Tony Howard-Arias

“The time that you’re spending as an indie developer, doing the 50,000 things that you have to do, all has some cost, because they’re all things that have to happen. And especially if you’re doing things on a shoestring budget, and you’re mostly doing it yourself, there are trade-offs there.”

Dead Drop Studios’ COO Julia Wolbach says time has a particularly big cost when you are getting started.

“Building your own processes from scratch takes a lot of time just to get set up, and something you don’t get a monetary return on from the get go,” she explains. “We both had day jobs when the original foundations for our games were being programmed.

“Especially if indie development is your only means of support, it’s not the same as having a salaried job. A paycheck doesn’t just show up at the end of the week. There are months where you do really well and months where you can do really poorly – it’s a balancing act to figure out how to support yourself in the meagre times.”

• 
  Human resources management
  

Not having specific people assigned to specific areas of your business (even in a two-person team), and overall not using human resources adequately, can also be a big strain that does relate to our previous point of time being money.

“During development, developers don’t think about the fact that there is a person who should be doing production work,” Saltsman says. “I’m using this [example] because the hidden cost [here] is that somebody is doing that work, even though they have assigned no one to do it. So they’re not using their resources properly, actually developing slower, because somebody is going to do that work, whether they assigned it to them or not. There’s usually a pretty sunk cost in time, where somebody’s doing more management than they initially [thought].”

If your team is really small, she continues, there’s a whole layer of business development that sits on top of any development work you might be doing.

“And it’s similar to production where if you don’t have somebody assigned to it, someone is going to do it and be bitter about it, because they could be doing their actual craft,” she continues. This applies to several areas within the wider business development label, whether that’s community management, or building an audience, or planning the next event you’ll be showcasing at.

“If we don’t have somebody planning for the next show, who’s doing that? Those are hidden costs, and if you don’t plan for it, your lead developer, your lead artist, is going to be doing two to five weeks of work on this. And along with that are also external opportunities. PlayStation wants to put your trailer in an indie show. That’s an external opportunity. It’s a hidden cost. You’re losing dev time, if you don’t plan for it in advance.”

“The person whose time is more expensive should really be focused on making the game, because ultimately, that’s how you pay for the loo roll”Alexander Sliwinski

External opportunities leading to hidden costs also include publishers asking for additional details or assets at the pitching stage, for instance.

Bithell Games’ COO Alexander Sliwinski says that, in his experience, most newly established development duos tend to pair one of these three professions: a coder, a designer, and/or an artist.

“And in those relationships, usually the person who’s good at maths is the one who gets stuck with doing insurance and payroll and all of that stuff,” he explains. “And certainly one of the things I’ve become slightly more aggressive about over the last couple of years for my friends who are in those relationships is, with all the respect to the other disciplines, coders are one of the most expensive jobs in our industry, and they probably shouldn’t be the ones doing payroll. When folks start a company, there isn’t really a person at the table whose job was admin previously.”

Who should be in charge of handling admin and day-to-day expenses of course will depend on the company. We joke that the creative director or the coder probably shouldn’t be the one buying the loo rolls.

“It depends on how the studio was formed and what disciplines went into it,” Sliwinski says. “So, for example with us, Mike [Bithell] developed games, I had covered business and everything like that, so it was a very clear delineation between our roles. Frankly, some of these topics never even came up and were never really in debate. I handle the lawyers, I handle the accountants. If we had an office, I would handle the loo roll!

“But when you start a company and you both have creative disciplines, that is a conversation that needs to happen. And then I would personally make the argument of: the person whose time is more expensive should really be focused on making the game, because ultimately, that’s how you pay for the loo roll.”

Speaking of handling day-to-day business tasks, knowing which mundane admin expenses you need to cover is another potential hidden cost.

“The one that everyone seems to forget is insurance,” Sliwinski says. “As a company, you need to have commercial combined insurance, and then directors and officers liability insurance. If you have a publisher, even the smaller publishers, they’ll require you to have insurance in place.”

You should also consider personal accident and travel insurances, Sliwinski says, especially if you’re an indie who travels a lot. He highlights that, in Europe, travel insurance isn’t that huge a cost and might cover things like your bag getting lost while you travel, or your train getting cancelled and having to book a hotel room, for instance.

“You better remember that every physical good that you make costs time to make and costs money to manufacture”Tony Howard-Arias

“Most of these policies also cover employees and, in some cases, freelancers as well,” Sliwinski adds. “Basically our entire staff is covered, and it’s only a few hundred quid a year, which is a hell of a lot cheaper than one thing going wrong.”

Transaction fees is another admin cost you might forget about, Howard-Arias points out, which is especially important if you’re doing a crowdfunding campaign, like Black Tabby did for Scarlet Hollow. Also don’t underestimate the cost of physical goods if you’re including some as part of your Kickstarter rewards for instance.

“You better remember that every physical good that you make costs time to make and costs money to manufacture,” Howard-Arias says. “What’s usually the case for [a Kickstarter campaign] is, you bring in a lot of money, but then a huge amount of it goes immediately out the window to print [physical products] and to ship them. You’re selling hoodies as a tier, but you have to find someone to make the hoodies, you have to pay for the hoodies to be made, and that’s really expensive. And then you have to ship them, and all of this other stuff. So we avoided it. Our only physical goods were postcards, which we could mail ourselves for 20 cents a piece, and pins, which were also very cheap to manufacture and send out.”

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  Hiring, contracting, freelancing
  

Salaries are an obvious cost as soon as you start hiring people to work with you, but there are other, lesser known expenses that go along with having staff, or working with contractors and freelancers.

“For folks who are establishing a studio, and not just working with freelancers, and have actual employees, whether that’s PAYE here in the UK, or full-timers like in the States, it’s all of the additional costs that go along with an employee,” Sliwinski says. “It’s not just, ‘I pay them £35,000 a year, and that’s the end of the story’. In the UK, there’s National Insurance and, as a company, you have to sign up with a pension provider and have a pension. That is a requirement.

“So you’re paying them £35,000 plus pension, National Insurance costs, any other additional costs that, whatever country you are in, basically makes the employer pay.”

Don’t underestimate how many people you might need to work with either, whether contractors or permanent staff. Thinking you will be able to handle everything yourself is a misconception at best, and a danger to your mental and physical health at worst.

Howard-Arias explains: “Abby [Howard, Black Tabby co-founder] and I are both pretty cross-disciplinary in our skillsets, but neither of us can write music. We needed a composer. Neither of us knows sound design. We needed a sound designer. I finally have learned some After Effects, because I wanted to have more immediate control over the trailer for our new game, Slay the Princess, but prior to that, we didn’t have any animation skills or trailer editing skills, so that was also another person that we had to find.”

“You may have to pay out a lot for a very small return or luck just may not be on your side”Julia Wolbach

And then of course there’s the issue of finding the right collaborator, which can impact your budget quite importantly if you don’t.

“Every time that we’ve hired someone to do important contract work for us, we’ve found someone excellent,” Howard-Arias says. “That hasn’t been the case for me with previous jobs. A huge, huge hidden cost there is if you hire the wrong person. It can slow things down tremendously.”

He continues: “Any single piece of that puzzle, if [they’re] slow, if [they’re] not communicative, if [they] just don’t deliver, can derail the entire project. If you need a trailer ready by a specific announcement date because you’ve planned a whole media campaign around it, and that’s not ready and polished in time, then that derails the entire campaign. And for the games themselves, if there is a single component of what you make that’s noticeably of lower quality or consistency to other things, that can single-handedly sink a project.”

Making effective use of vendors can also be a “learning process,” Julia Wolbach adds.

“There is a lot of time and money spent on finding the right people to buy assets and developing your ideas. You have to pay those people, even if you decide for whatever reason not to use what you bought. This is also something to consider when contracting marketing, you may have to pay out a lot for a very small return or luck just may not be on your side. There is always a risk involved, and it doesn’t always pay off.”

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  Marketing, QA, localisation, hardware: the ‘obvious but hidden’ costs
  

Some costs might seem like an obvious thing once you start knowing the industry a bit better, but marketing is a good example of a misconception around the costs of game development.

“You see this all the time on things like the r/GameDev subreddit,” Howard-Arias says. “It’s just folks who didn’t think about marketing at all, and their Kickstarter’s launching tomorrow, they don’t have an audience, or their game just launched and it didn’t sell. There is a misconception that all you have to do is make a good game and it’ll sell itself. There’s probably some truth there, there are some very, very exceptional games that probably would always be able to find an audience. But those are exceptional. And even if you have something of that level of quality, it would probably sell more, faster, if you invested in marketing. It’s a force multiplier.”

In addition, Howard-Arias says new developers typically don’t spend enough time learning how to market, and then actually marketing, their games.

“There are a lot of game dev forums and Discords I’m active on, [where] people will throw out a general rule of thumb that’s like, ‘You should spend roughly 25% to 50% of your budget on marketing’. And a common thing that comes up is, ‘I don’t have any budget, so how am I supposed to do that?’ Well, the budget in that case is your time, it’s the most valuable thing you’re putting in the company, and if you want to actually sell your game, you should be devoting a lot of time to it. We’re a two-person team; I do all of the marketing, on top of also co-writing our games and coding them, and probably the marketing side of things is 50% of my time, day-to-day.”

Marketing is just one example of the issue, but there are many other costs that may seem obvious but are often widely misunderstood or underestimated. Julia Wolbach, for instance, says they spent around $50,000 on hardware in the first four years of Dead Drop Studios’ existence.

“It wasn’t like ‘playing around hardware’, it was business critical stuff to be a multiplatform dev,” she says. “General things like computers, dev kits, peripherals, retail consoles for testing, and so on.”

Other examples include QA, localisation, porting, all these costs that can bring a game from ‘good’ to ‘excellent’ and that are mistakenly tacked on at the end of the cycle without much thought.

“There is a misconception that all you have to do is make a good game and it’ll sell itself”Tony Howard-Arias

“When we get closer to the end of development, localisation costs money, and you can’t just use Google Translate or something,” says Saltsman. “Nobody knows what [localisation] is, unless they’ve done it once, and has any idea who can actually do that work for them, which is why we end up with really bad story translations. Everyone underestimates the amount of QA a game actually takes. They think, ‘I’m done with it. Let’s just hit the ship button’. Please stop doing that. It will cause a whole world of hurt afterwards, which is another hidden cost.”

She continues: “No one knows what it takes to port a game. I’ve had this conversation at least five times in the last [few] months as we’ve been onboarding people, explaining the process of how we take games from PC to console. And the number of times they’re like, ‘I had no idea it was that kind of process, and it took that many people’. Well, yes. It can take anywhere between six weeks to six to ten months. All of the consoles have different requirements.”

Preparing for unforeseen challenges

As prepared as you think you might be, there are always going to be things you didn’t account for. So for these expenses that are truly hidden, Sliwinski advises to keep 20% to 30% of your budget aside. And depending on your bank, you might be able to set that up easily.

“For example, if you’re using Monzo Business, you could always create a pot and have 30% of all revenue just go into that pot or something like that,” Sliwinski explains, saying it’s built into him to put money aside, “just in case something goes wrong.”

“The perfect example is your prototype or your vertical slice is doing incredibly well, and a publisher is interested in your game, and you get that terms sheet, and you have to pay for insurance. And you’re like, ‘Do what now?’ That’s going to be a few grand right there that is coming out of your pocket, because the last thing you need is for them to audit you on where their money to you went, and they basically find out you paid for your insurance out of development money. That opens up a whole can of worms that you don’t want to deal with.”

“Document them, so when you go to seek or determine funding you can provide evidence to justify the costs”Julia Wolbach

Evan and Julia Wolbach say they put together a “warchest” when creating Dead Drop.

“[It was] the most important thing for us,” Evan Wolbach says. “We didn’t know what challenges would pop up, but we knew they would be there, so we had a good amount of savings.

“[We made] sure not to try everything all at once. Building up the business started in incremental steps, where we only took on a few risks at a time. We started small, with 2D games, and over the course of five years we’ve learned enough to feel comfortable doing next-gen games.”

When seeking investment or working with publishers, potential unforeseen costs should be factored in as well.

“Try to determine [hidden costs] as early in the development process as possible, and document them, so when you go to seek or determine funding you can provide evidence to justify the costs,” Julia Wolbach says.

Sliwinski adds that publishers will typically advise to add 10% to 20% to your budget if necessary, to account for things that might go wrong, especially if you’re a new team that hasn’t shipped a lot of titles.

How can you more precisely assess development duration and costs?

One of the best ways to prevent surprise costs is to try and plan your development journey as precisely as possible. Of course it would be foolish to expect that journey to go smoothly and according to plan, but there are tools you can use to more easily assess what’s ahead.

“I will say that something that has always been helpful is that we write out an outline of the project at a high level to understand what it is, how to build it, what features are needed, what are the expected costs we’ll need to handle, what types of partners we need, etc,” Julia Wolbach says. “Looking at the big picture helps us identify risks faster and more easily.”

“Budgets aren’t aspirational”Alexander Sliwinski

Sliwinski jokes that assessing development duration and costs is a “controversial subject” and says that setting up a budget is the first step.

“Budgets aren’t aspirational,” he clarifies. “It’s not like, ‘We can cut this here, and cut this there’. It’s: ‘Well, in reality, could you do that?’ Of course not. Then don’t put it on the page. We have always had budgets and timelines. This is certainly a more complicated conversation for folks starting out. In most cases, they’ll go to a publisher with a one-sheet, and, ‘This is how long I think it’ll take’, but they haven’t actually sat down and done a budget.”

He points to budget templates that are available freely on gamedevbizbook.com, the website for The GameDev Business Handbook – Michael Futter’s essential guide to games business development, published by Bithell Games, and an invaluable resource for new devs. Taking the time to sit down and put together a budget using these templates is worth doing, Sliwinski continues, because ultimately “a publisher is going to ask you these questions.”

Tony Howard-Arias admits that assessing development is hard and advises to “take your initial assessment of what you can produce in what amount of time, and double it.” The reason for that is that people typically don’t account for time off, for example.

“Something that can be helpful is also being proactive about how you chunk your project,” he continues. “One of the reasons we decided to do an episodic release for Scarlet Hollow was understanding that if each episode [has] a start line and a finish line, and that’s a sixth of the game, and we have to release it to people, it keeps us from having too much feature creep. It keeps us focused. It does get to the point where we can start estimating things.

“I will say our estimate for Scarlet Hollow’s delivery cycle was still 50% off per episode. We thought it would be about six months each, and it’s been closer to nine. And I think, if we were in a complete vacuum where all of our needs were accounted for, yes, it would be six months an episode. But life happens a lot. We moved to another country. Stressful world events happen, and you lose a week of time anxiously doom-scrolling through Twitter. And those things add up, and suddenly those six months become nine months. No matter how well you know yourself, always just add an enormous buffer to your estimate, because it’s going to take that long.”

Rebekah Salstman also adds that, whatever your time and budget estimate is, make sure you regularly revise it. If you got the big picture clearly established, do also take the time to go into more granular details so it, step-by-step, paints a clearer picture of the actual costs.

“Your month should be pretty set. Your three months should be close. Your six months, a little flexible. Your year, very flexible”Rebekah Saltsman

“How is this game going to play? You can visualise [it],” she explains. “We do this exercise internally. We write down how we think the player is going to interact with our game, because that answers a lot of weird questions. Are they going to play it with a controller, or are we expecting this to be a PC game? That changes UI, it changes game feel, it changes the markets that you’re targeting. What do you want to see on the screen? That will change so much technology of what you use, your cameras, etc. How do you want animations to trigger? How do you want your AI to work? You can think through all of this by just doing a simple exercise at the beginning.

“This isn’t an exercise you just do once, it’s a train of exercises that you keep doing to make sure that you’re still building the right layer on Unity, or Unreal, or whatever it is you’re using. It’s not a ‘one and done’ thing. There are a lot of constraints that you can put down on your project, and once you have those constraints, you can just map it out. And keep revisiting the production schedule and the map, because at certain points, you’re going to work ahead. At certain points, you’re going to fall behind. You’d be surprised at how many people just don’t think through even a month of work, let alone three months of work. Your month should be pretty set. Your three months should be close. Your six months, a little flexible. Your year, very flexible.”

Concluding our chat, Evan Wolbach says it eventually all comes down to doing as much pre-planning as you can.

“It’s the whole ‘measure twice, cut once’ thing,” he says. “Don’t just start making, make sure you have a written plan and you’ve thought out all the angles and how you’ll accomplish them. And have contingency plans for when things go wrong. Maybe you get sick. Maybe your house explodes. Maybe a partner you’re relying on goes out of business. Plan for failure.”

And to finish, Alexander Sliwinski wants to remind devs of a crucial aspect that is not a hidden cost but that you’d be very ill advised to forget: “Pay your taxes. I know that seems silly to say out loud, but there are plenty of devs I know who do well, and then don’t put any money aside for their taxes, and then are hit with a tax bill. And they’re like, ‘How was I supposed to know? Doesn’t my publisher handle this?’ No! They’re not your employer, they just give you money to go do things.

“What are you doing? These are very real things. I would never call it a hidden cost because I would think paying your taxes would be a clear cost, but since it is something that comes up after the fact, some folks might perceive it as a hidden cost. Pay your taxes!”