In this blog post I am going to give a very brief overview of our "business model". Hopefully it will be interesting to see how we run the company and how we manage to pay salaries and such.
Frictional games was properly started 2007 (although part of the team has worked together before that), meaning we will celebrate 3 year anniversary next year. During this time we have paid salary to all employees ranging from 2 - 4 people. As far I can recall, we have never missed a month (jens: as the one that pays the salaries - no we have not!). We have been very lucky in this regard as the income can be quite unstable, with periods of very meager cash flow. Our salaries have not been all that good, often around what we had as students (right now I am below that!), but I guess that is what you have to deal with when running your own game company.
During the entire duration of the company we have always been working at home and so have all employees. Even though we have this very bedroom-coder approach, I do not think we live up to being "indie". This because we have relied on publisher support to some extent, especially with Black Plague and Requiem. However, now we have managed to be get enough funds to become completely self-supporting and will finance the upcoming game Unknown all by ourselves. Does this mean we are indie now? I have no idea.
Now a bit on the cashflow and a brief explanation on where we get our income. In the past we have gotten most of our income as pre-payments from publishers. The reason why one wants to get advances is because it can take a long time before publisher money arrives from the actual sales of a game (at least 6 months) and it is also a proof that the publisher is serious.
For Overture, we got the money a few weeks before release of the game and a bit afterward. A great deal of the money never reached us (the bit that did was thanks to the "give us the promised cash or you will not get the promised game" method) because of the not-so-honest Lexicon Entertainment (now out of business I think, go figure). But that is another story.
For Black Plague and Requiem we got a good deal of the payments several months before release and the money acted as a kind of funding. It is important to point out that an advance is more like a loan though, and must be paid back using royalties before we get anything more. So far we have not reached this limit even though it has been over 1.5 years since release (we are very close though). By not having pre-payments you can usually get a higher royalty rate, but in the case of Black Plague and Requiem, it would not have been possible to create the games without being paid in advance.
Another source of income are the online sales. The major part of this are the titles that we own digital rights to (all mac/linux versions and windows version of Overture). In the past this have not been a huge amount of income but have still made it possible for us to keep alive during some harsher months and we would probably not have survived without it.
Recently with the weekend sale on steam, and later in our own shop, this have changed. These sales have shown us just how lucrative online sales can be and is also the reason why we are now able to finance the upcoming game ourselves.
Apart from the income of online sales and publishers we have also had a few other lucky extras. Last year we were awarded funding from the Nordic Game Program. This was something arriving just at the right time and kept the company alive. Another stroke of luck was our cooperation with Reachin and the development of the haptic version of Penumbra. This project was a financial boost right when we needed and also a very exciting thing to be involved in.
Looking back at the past I think we have been very lucky and it still feels a bit strange to be able to make a living out of making games from my living room. Sure we have had our bad times too and there have been plenty of times when I thought it was time to look for a "real" job. We are still alive and kicking though and are extremely excited in seeing what the future holds.
Finally thanks to everybody that have supported over the years! It would be fun to hear what company aspects you are interested in hearing more about.
In my experience, working at the same place (an office or similar) increases the effectivity of internal communication with roughly 700% compared to people working at different places. How do you manage this if you're all working from home?
ReplyDeleteObviously you're able to produce quality content anyway, but it seems a bit... impractical.
Tobias:
ReplyDeleteWe are planning on writing more on this, but in short:
- Some type of things, like helping each other when a problem arises, debugging, etc, are really hard when working at distance. We try to find ways around it but it is hard.
- Not having an office saves a lot of money. If we had gotten an office at the start, we would not have survived.
- We try and layout the work in a way that works over a distance and it often involves very careful planning.
I have been "working" (lots of hobby hours included) like this for over 10 years now and Jens has too. So I guess one learns tricks along the way as well :)
I went out and purchased your Penumbra series when I heard (1) All three were $11 CDN and (2) The games ran on Linux!
ReplyDeleteThat made me estatic so I purchased a copy immediately.
I know you guys didn't get much money from me, but I just want to say, directly to the owner of Frictional games: I absolutely love your games (I play them quite often) and I'm so thankful for you releasing the game on Linux.
Thank you!
This was a very interesting post from someone who owns their own company too (Linux administration & programming).
Please keep us updated and best of luck in the future!
PS: I sub-contracted for a company that worked completely from home and I ended up waking up at 4PM and going to sleep after the Sun came up.
ReplyDeleteIt really messed with my internal clock.
I couldn't do it so I resigned.
Well, it's good to know that you guys are still alive and doing well, although how do you guys manage to survive the long development periods between games, in which I'd imagine little money is coming in?
ReplyDeleteThe good news is that with the succesful Penumbra Trilogy, your name is already out there, which means that your upcoming game should generate a lot more interest (actually, that might not be good news for you guys... high expectations can be bad things sometimes.)
Anyway, good luck. It's a rare feeling to actually like a game company, as it seems most of them don't seem to care about their consumer base at all (*cough* Ubiso-*cough*)
P.S.- By the way, I can't find any recent news on Lexicon, but it seems like they are out of buisness seeing as their website lost it's lease. There's some good news for you guys.
I bought all your games, the first in retail and the rest online and i must say i love all them. So I'm happy that you guys are going well financially and i desire all the success in the years to come.
ReplyDeleteNow I'm a litle concerned about your decision to finance the game your selfs, i hope you don't run out of cash and so the game comes out unfinished or not at all just like 3DRealms that would be a blow to me and others.