How companies are funded and make money

Publishers: A Publisher is the company with the financial risk, so if a game flops they are the ones that lose a lot of the money. When a Development team want to make a game to release, the ask a Publisher for the funds to fund their production, if a Publisher agrees, the Publisher will give the Development team a budget to work on the game, while the game is nearing completion the Publishers deal with the commercial side of the game, which includes advertising to help sell the game which is why the Publishers are helping the developers, to make money. Another thing a Publisher does is pays game shops to clear out a section of the shop and fill it with merchandise of the game is the Publishers want to as it could cost them quite a lot of money to do this. So in turn a Publisher deals with the financial side of the game making process whereas the developers deal with the development side of game making.

Early Access: Early access is a funding model used in the games industry in which customers can pay for a game in its early stages of development and obtain access to playable but unfinished versions of the game, while the developer is able to use those funds to further develop the game. Early access is common among indie games to obtain the funding to finish those games.

Example Games:

DayZ, A multiplayer zombie based game gained more than 400,000 sales within one week of being in Early Access

Kerbal Space program,  followed a similar model to Minecraft and eventually moved onto the Steam early access program where it sold millions of copies

Prison Architect, which has been able to raise about $8 million in revenue from more than 250,000 sales in early access

Kickstarter: The company sets up a kickstarter page and people from the public can back the project and pledge money. When the funding goal has been reached the backers credit cards will be charged when the time on the page has expired. If the project does not reach the goal no one is charged. Stretch goals allow more content in the game to be added even after the project has reached its original goal. Another way for the developer to get more funds.

Examples

• Double Fine - Psychonauts 2 - Goal of $3.3million reached $3,829,024
• Gun Media - Friday the 13th - Had a goal of £700,000 and Raised $929,513.70

Green Shoots: Creative England has, for the third year running,  partnered with Microsoft to develop Green Shoots, a programme of financial and business support intended to stimulate the commercial development and growth of the games industry in the English regions, outside of Greater London.

The programme provides investments of between £25,000 and £50,000 to games companies that demonstrate high growth potential, and in addition to the funding companies selected for the Greenshoots programme will receive the following additional benefits:

• Access to Greenshoots mentors and associates
• Enrolment on the ID@Xbox programme for Xbox One Development Kits
• Access to Windows 10 devices for testing purposes
• Bespoke technical guidance and support directly from Microsoft  
• Access to select Microsoft tools and services for free,  through the Bizspark Microsoft programme  
• Introductions to investors and publishers

CE Game Development Fund: The CE Game Development Fund is intended to stimulate the commercial development and growth of the games industry in the English regions, outside of Greater London, by providing investments of between £50,000 and £150,000 to game studios that can demonstrate high growth potential.

Through this fund investments of between £50,000 and £150,000 will be made for the development and commercial release of new game IP.  Investments will be made on a commercial basis under a revenue share scheme.

To be eligible to apply to this fund companies must fulfil the following criteria:

• Be based in any of the English regions outside of Greater London
• Have previous, demonstrable game development experience
• Qualify as an SME and be registered at Companies House
• Have been trading for a minimum of 3 years and be able to show a minimum of £100,000 revenue in their most recent company accounts
• Be able to provide a minimum of £1 of private match funding for every £1 Creative England invests  

Contracts: Under a contract, the contractor agrees to give the money and supplies needed to the contracted company so they create a product (or in this case a game) and then gain profit from it to fund the next contract. The game company gains money by being supplied with the required amount to start a project and then gain a profit to support their company.

Advertising & Sponsorship: There are many different ways games, VFX and animation companies can raise funds from advertising. In the games industry there are 3 ways a company may use advertising.

In-game advertising-

This is where they will advertise products in the gameplay of the game. This is generally a subtle way of advertising, e.g the product logo may appear on items throughout the game (billboards, posters, in game merchandise etc..) or the player may interact with the product several times in game.

This is where a games company will be paid to create a small game that will advertise the company, these games are generally small mini games on a company's website.

Through the line (TTL) advertising-

This is an uncommon form of advertising, where there will be links within games that will take you to the company's product and website.

Kickstarter: The company sets up a kickstarter page and people from the public can back the project and pledge money. When the funding goal has been reached the backers credit cards will be charged when the time on the page has expired. If the project does not reach the goal no one is charged. Stretch goals allow more content in the game to be added even after the project has reached its original goal. Another way for the developer to get more funds.

Examples

• Double Fine - Psychonauts 2 - Goal of $3.3million reached $3,829,024
• Gun Media - Friday the 13th - Had a goal of £700,000 and Raised $929,513.70