Blockchain enthusiast developer and writer. My telegram: ksshilov
Have you ever wondered how much money a game developer makes? After all, the gaming industry is huge - it was valued at $151.9 billion in revenue in 2019. Almost 2.5 billion people from all over the world play video games. Game developers should be praised for these astonishing numbers, because they were the ones who made it happen by spending countless hours on development. But do they get rewarded for their hard work? Not at all.
The sad truth is that the only people making money in the gaming industry are the large gaming companies and the platforms that distribute the games - Steam, the App Store, and Google Play. But right now, let’s take a closer look at Steam’s numbers. According to the official numbers, there were 9,050 games released on Steam in 2018. That’s an average of 25 games per day! It’s obvious that there must be some tools you can use to promote your game and make it stand out, right? Nope. Steam doesn’t offer any advertisement tools. You just release the game and Steam gets its cut, that’s it. So is there any alternative?
We’ve already seen platforms like Epic Games store and GOG trying to get a cut from Steam’s monopoly but, despite being around for a while, they are not even close to its current player base. That’s why we’ve decided to look into more different approaches from a technical standpoint. For example, blockchain as the underlying technology allows to lower costs for all market participants and to offer new and interesting ways to reward players and developers alike. Right now, there are several platforms that are taking advantage of blockchain’s benefits, such as Ultra, The Abyss, or Robot Cache.
In the hope to understand if blockchain could become a real competitor to Steam, in this article we've decided to stick with the EOS-based Ultra platform, as The Abyss and Robot Cache are more limited in options since they are niche projects: one aimed to MMO games, while the other comes as a solution to resell used games, respectively, but neither of which aim to be a direct competitor to Steam. Ultra, however, claims to become an enhanced Steam. With our research skills and reaching out to their team to get some questions answered, here’s our conclusion on whether using blockchain for game distribution benefits developers or not.
To develop a game, you don’t need anything other than a computer and your own skills. Maybe you'll need help from other people; for example, you may need artwork or character designs created by an artist, but let's suppose you do everything on your own.
The problem is that you still have to pay the bills (like rent and electricity) while you're developing it. The average cost of living in the USA is $20,194 per person per year according to the Bureau of Labor Statistics (yes, we also suppose that you're living in the US, but this number can be lower or higher depending on where you’re from). Now, a very important metric is how long it takes to develop a game.
Brian Clarke, a former developer of a AAA games, Warhammer Online terrain architect, and former Disney lead artist, has gone the route of developing independent games. He released a game called The Subject that took him seven months to develop. It takes seven months for an experienced developer, but it can be a lot slower or a bit faster, ranging from 2 months for super casual games to one year, if not more. Even for bigger teams, development can take as long as 7 years, as is the case of the game S.T.A.L.K.E.R.
Anyway, even if you develop your game for one year, you still have to cover thousands of dollars in expenses and you don't have any income yet. It’s okay if you have some savings, otherwise you might find yourself in the situation of desperately needing a job. It may help a lot, given that an average salary in the industry is higher than $50,000, but you’ll have less time to work on your game, thus taking you even longer before getting any income from your constant work.
The game is ready... now what?
To launch a game, you have to pay to add it to Steam. It requires paying a $100 fee that will be returned if your game makes $1,000 (that would mean that Steam already made $300 on their 30% cut). As you can remember, there's another option - publishing your game on an alternative platform. It will cost nothing to publish the game on Ultra, which is handy, given that you still haven't made any money so far.
Nowadays, it’s easier to publish the game than it was five years ago, as Steam opened its doors to all kinds of games, even controversial ones. This inevitably resulted in Steam being too crowded; there’s plenty of low-quality games, but Steam gets its 30% cut from all of them regardless of if they even get a chance to be bought. We’re talking about chances because there’s hardly any marketing tools available on the platform, and many games don’t get any attention at all.
In an article titled “Your indie game will flop and you will lose money,” the founder of Positech Games Cliff Ski talks about the chances of getting any coverage on gaming websites. He had 36 years of coding experience, shipped over a dozen games, several of which made millions of dollars, got into indie development very early, knew a lot of industry people, and had a relatively high public profile. And still, almost no one covered his latest game (in terms of gaming websites).
Marketing is very expensive nowadays. It can cost you around $50,000 for branding, creating trailers, building social networks, a website, and doing public promotions. Other sources say that a small game requires anywhere from €10,000 up to €80,000 spent on marketing in Europe. Keep in mind that you need to pay this money out of your pocket while you’re already paying your other expenses. What if you don’t have this kind of marketing money?
That’s why, contrary to Steam, Ultra chooses to offer effective marketing tools to promote games. It has the ad toolbox that allows to target various users that might be interested in the game.
More marketing, more sales, more money, right? On Steam, payouts may take up to 30 days. According to their official FAQ: “We payout by the 30th of the month following sales. For example, we will pay you for calendar February month sales by March 30th.” A very delayed salary. At the same time, the platform gets its share faster, right after processing the payment from the user. That doesn't seem even remotely fair.
Ultra comes with instant payout for sold copies. Developers receive their portion of each transaction the moment the transaction occurs. Only 10% of the revenue is reserved for refunds, but this money also gets released after two months. This also allows developers to double down on that “more marketing” and drive sales momentum at launch by reinvesting in their campaigns directly from sales – all in real time.
The fact of the matter is that to get money, you have to make sales. But here comes the most interesting part; how much money can you make after all this hard work?
Mike Rose, the indie publisher behind the downhill biking game Descenders, says that in February 2018 around 850 games launched on Steam. That’s about 40 a day. About 82% of those didn’t even make American minimum wage. The money that came out of 82% of the games that came out on Steam would not support a single person’s expenses.
According to Rose's estimates of sales on Steam, once he removes games he thinks never had a chance of selling at all, the average game on Steam will sell about 2,000 copies and make $12,500 in revenue in its first month. The average game will make $30,000 in its first year. Let’s remove the 30% that Steam takes - that leaves us with only $21,000. If we cut taxes, that leaves us with a very grim, uninspiring number.
Cliff Ski, who wrote the previous flop article, has an even worse estimation. The top indie game on Steam he looked at had over 3,500 owners, its top price at $9.99, and it’s been out for 9 months. The maximum conceivable income is $20,979 to the developer. That’s the revenue for the top indie game. Don’t forget to cut those 30% (Steam doesn’t forget it too). Only $14,685 is left, minus taxes.
Brian Clarke, the developer of The Subject, earned $5,071 as revenue in the first four months, and after all cuts there was only $2,915 left in his pocket. Not that much for 7 months of work, right?
Recently, Steam changed its fee policy. It takes 30% only from the first $10 million in sales. For all sales between $10 million and $50 million, the split goes to 25%. For every sale after the initial $50 million, Steam takes just a 20% cut. As we already know, an indie game won’t make it past $10 million, right? This policy is beneficiary for AAA games only; it doesn’t make any difference for small developers. There should be a change to let smaller developers make more. As Mike Rose said, “I do think in the next couple years there's gotta be space for [another platform].”
Well, here it is, the Ultra platform. They only take a 15% fee, and that means that any developer will be able to make 21% more just by listing their game on Ultra instead of Steam. Also, don’t forget about all the marketing tools and the instant payout.
When you get no help from Steam, why stick with it? Placing your game on Ultra seems more like a win-win deal. It rewards developers fairly, it offers the same features, and it also rewards players with Ultra Coins, the native token on the platform, for all kinds of activities. Playing and streaming, watching ads, writing game reviews - all these actions get rewarded. Ultra could achieve Steam’s player base in no time. Large partnerships are on the way and with each collaboration millions of players are going to try it. Don’t you think that its unique rewards would incentivize players to stay?
The gaming market has grown quickly. Even the largest platform, Steam, has only 14% of the sales revenue of the industry. At the same time, only 31% of gamers use their Steam account for playing and that number is decreasing. There’s a lot of room to grow for any decent gaming platform, and a new platform might take its share of the market quickly.
The most important thing is providing developers with the opportunity to receive their fair share of their hard-earned money and providing them with the tools to promote games without feeling that they work for an evil corporation that mistreats them. Let’s not demonize Steam here, as they also do their job of providing people with a platform for entertainment, but Ultra shows us that there might be an alternative for developers to earn more. Let’s hope for the best!