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Judging Judgment: Analyzing Early Access Finances of Our First Indie Game

In a few hours, we’ll be releasing the full version of Judgment: Apocalypse Survival Simulation after two years in Early Access and 3.5 years of development. I took this time to analyze and share our financial data in hopes that it could help other aspiring indies out there who have no idea what to expect in the long road ahead of them.

Note: All sales data presented in this post are summed up values across all stores. At this time Judgment is sold on Steam, the Humble Store, on our website (using the Humble Widget), Green Man Gaming and Fanatical. No bundles, only direct-sales in their stores.

The Price of Being an Indie

Making games is not cheap. There are a lot of different fields involved, and it’s very rare to have a single person that is proficient enough in all these fields, so usually, it involves a larger team or paying for external services. The numbers below include the total development costs during the 40 months in which we’ve been working on Judgment so far, out of which 15 months were pre-release and the other 25 were Early Access. Obviously, there will be more expenses after full release as we continue to improve and promote the game.

Here’s what it cost us to create Judgment:

Total expenses over 40 months of development: $650,000

Programming: $280,000

Game Design: $118,000

Marketing: $94,000

Art: $87,000

Production: $45,000

Writing & Audio: $8,000

Office, Bureaucracy, and Other Expenses: $18,000

Not cheap at all! But I should note that in these expenses we include lost wages (potential income lost due to us working on Judgment instead of working as hired employees elsewhere) in addition to actual money spent.

Employee Costs

The majority of the expenses are employee costs. All of the programming and production costs, most of game-design and art, and a big chunk of the marketing expenses.

Employee costs don’t necessarily have to come out of your pocket, if you manage to gather a dedicated team that covers all these fields whose members are able and willing to work for profit share alone.

As you can see, only $50,000 (7.7%) were external costs. If our team had worked without a salary, we would only have had to spend that much out of our pocket over the entire course of 3.5 years. Plus, many of these expenses were required only after we had started generating income from EA sales.

It is my experience, however, that building such a team is extremely difficult, and unpaid team members tend to lose motivation creating an unstable environment. I would always recommend, if possible, to pay team members at least a reasonable wage in addition to the promise of profit share - which means more starting funds and/or an investment. In our case, team members got a decent salary from the start, in addition to some share of the profits.

Other Expenses

Other than employee costs, there are additional expenses that usually come out of your pocket. For us, these included audio, writing, marketing, software and general bureaucracy such as lawyer fees, accountant fees, and company registration costs.

The marketing costs above include both employee time (we spent A LOT of our time on marketing) and external expenses such as conference participation, paid ads, a PR firms and consulting services. I’ll go into more details on marketing expenses later on.

Income

During the 40 months that we’ve been working on Judgment, the company’s income totaled $560,000. Out of these, $80,000 were earned by providing programming services to other companies during the first year of development, and the other $480,000 were earned through sales of Judgment in EA. The $80,000 were not enough to cover our actual money-out-of-pocket expenses before launch, and we did have to invest and risk our own money before we started seeing any income from sales. That money came from my own savings, after having worked as a programmer in network security for many years.

The $480,000 is the actual amount of money we got in our bank account after the stores took their shares, credit card fees, VAT, refunds, and other such costs. The total amount that players paid for the game was much higher.

Profit

The math is simple - we had an income of $560,000 while our development costs were $650,000 - for a total operating loss of $80,000 during the pre-release and Early Access periods.

Considering this is our first game, and other than money we also earned very valuable experience, reputation, and connections - we are very happy with this result. However, our story is not over yet. We still have the full launch ahead of us, which means more income, and we still plan to keep working on the game, which means additional expenses as well. I do predict that after all is said and done, Judgment will turn a profit.

Sales Graphs

Let’s take a look at how Judgment sold over the Early Access period :

* The last bar in these graphs only includes the first half of April 2018.

In the monthly sales graph above you can see that right after launch, which was one of our strongest months, we had a bit of a slow period. During this period we focused on improving the game, we did not have any discounts - except for the store-wide sales such as Steam & Humble Summer Sales - and we didn’t do much to promote the game.

After a few months, sales increased dramatically, around October 2016. The increase is hard to explain. Our user score rating improved, and we released several important updates, plus we improved our store pages and updated the trailer. We can’t say for sure what facilitated this change, but we do believe it had to do with improving the user-defined tags on Steam, which caused the store algorithm to recommend Judgment to more relevant players.

June 2017 was our strongest month to date, it was the month in which we released German and Chinese versions of the game, combined with a Summer Sale discount.

October 2017 is another interesting month to look at. In September, we increased the price from 14.99$ to 19.99$. As you can see, there was no visible impact on the bottom line. Every sale was worth more, but the total amount of sales decreased - cancelling each other out. Let’s take a look at copies sold:

You can clearly see a drop in October 2017 compared to September, whereas the revenue graph shows more or less a steady number. Increasing the price did not improve or harm our revenue. However, with a higher price, you can do deeper discounts later on. The potential sales at $14.99 that we lost when we increased the price to $19.99 are not necessarily lost, they may just be waiting for a discount.

Now let’s look at the daily sales graph and try to analyze some key points.

We can see the same trends as in the monthly sales, but there are some more specific spikes to take a closer look at. The first one was a small spike about a month after release, in May. That was a 2-million subs youtuber that posted a video of the game. We sold around 400 copies just due to that video, which was a lot given that it was in our low-sales period.

Next, there is a mini spike on Black Friday 2016, and a larger spike in Dec 2016, due to our participation in the holiday sales. Usually, the first few days of a discount show a taller spike, with a 400% increase in sales, but towards the end of the sale, it slowly decreases to 50-100% higher than normal. The daily increase in sales of a discount was around 150% higher on average throughout the entire sale.

After the Holidays, you can see a very tall spike in March 2017. That was our first custom sale. We only discounted the game by 10%, but being on discount was enough to get increased visibility across all stores and higher conversion rates.

The next spike starts around May 2017, when we released the German and Chinese versions of Judgment. The peak of that spike in June 2017 is the Summer Sale discount. You can see that releasing new languages created not just a single tall spike, but an entire elevated area in the graph. This explains June being our strongest month to date, an entire month of better than average sales + a taller spike during the summer sale.

After that there are several more spikes, most of them are either large youtubers posting videos (Thanks Quill18), or discounts, be they seasonal store-wide sales, or our own custom discounts.

Conclusions from Sales Analysis

My main conclusions from the sales chart analysis are as follows:

Discounts are profitable. Even a 10% discount, if you don’t want to devalue your game, still has a large impact on sales.

Increasing price towards the end of Early Access did not seem to have any effect on our bottom line. It may have other effects further down the road - such as allowing larger discounts or more negative reviews due to a higher price setting higher expectations.

If at first you’re having a rough patch - do not despair! Hard work and dedication CAN turn things around. After launch, our monthly sales were very low, we had an income of under $2,000 per month, not nearly enough to cover our costs. However, several months later we were earning more than $10,000 monthly without discounts, and as much as $30,000 in months with discounts.

Supporting new languages can create a spike in sales. Ticking that new language in the store pages seems to generate increased visibility for a time, and increases conversion rates in those countries.

Marketing Expenses

Depending on your situation, marketing costs can be minimized and allow for a more bootstrapped approach. I would not recommend, however, to skim on marketing. Unless you already have experience releasing and promoting a PC game, or know someone that does and is willing to guide you, I would highly recommend using a marketing consultation service for as long as you feel you can benefit from it. If you are incapable of having a team member spend a lot of time on marketing, then you should also consider hiring a PR firm to do the legwork.

We used a consultation service for almost a year before launching EA, which proved very helpful. We then did the EA launch ourselves, spending a lot of time doing all the hard work. The main reason we did it ourselves was avoiding the expense at that time when our cashflow was rather low. Later on, when we were too busy working on the game and felt that we were neglecting marketing, we hired a PR firm to do much of the work for us, and a few months ago we hired a new team member who spends 50% of his time on marketing and community management (150% of his time since we announced the upcoming full release).

Conferences

Participating in conferences we classified as a marketing expense. I highly recommend participating in some of these. Seeing and learning from other indies is the main reason while staying in touch with the industry, meeting with press/influencers and having a great time are a few others.

It is our experience that showcasing in a conference - in our case the ndie Arena Booth @ Gamescom - is not directly profitable. We spent far more than the extra sales we got. However, I still strongly recommend it, because it helps with all the other benefits I mentioned, especially getting to know other indies and learning from each other. It’s also a great opportunity to have strangers playtest your game.

Paid Ads

As for paid ads, it was my impression that like showcasing in a conf, they are not profitable. We paid around $0.75 per click on average, and less than one of 50 page views end up in a purchase, making the cost of every purchase 0.75 * 50 = $37.5. Considering our game sells for $19.99 of which we get around $12 - we paid more for each purchase than we earned from it. The exception was reddit ads in which we managed to create a very targeted audience and reach a price per click of 0.12$. However this was not scalable, and the maximum we could get with such specific targeting was around 100 clicks per day, no matter how much we were willing to pay.

Some things that are important to keep in mind:

I am no expert. While I did my research before setting up ads, an expert may be able to get better cost-per-click ratios by setting up better targeting or a more appealing ad.

PC game stores do not provide accurate measurement of conversion rates. I manually calculated the ratio by dividing the total store page views by the total sales. This ratio may be better or worse if you only consider visits originating from ads.

There may be hidden benefits other than immediate sales, such as stores preferring to promote your game due to external traffic, the mere exposure effect, or influencers seeing your ad and promoting your game.

Stay in Touch

This is our story so far. A small team of two-become-three working for three and a half years, and finally releasing a full version of the game. We love chatting with other indies, so you’re all welcome to contact me on Twitter and discuss our story or tell me your own. I’ll try to post some more of our experiences during Early Access in the future.

Update - Nov 2018

About half a year after the full release, we finally made it into the green zone, and the game is now officially profitable. It took us longer than I expected due to continued work (hence expenses) on the game post-release, and our full version launch, though good, was a bit weaker than I expected - with around 15,000 copies sold on all platforms, but less than 2% of our wishlists converting to sales on full release.

After the full release, there was a 50-60% drop in sales overall. At first, I thought this was due to the game no longer being in Early Access, but as it turns out, many indie developers are suffering from similar drops combined with drops in visibility. As it seems right now, the main cause is Valve tweaking Steam's store algorithm.