The Cost of Making a VR Game Part 2

or comments and more breakdowns on common questions and points raised by explaining “no really, we’re actually down $36k”

So, hi again. After my last post (part 1) about the cost of making our VR game, Light Repair Team #4, there was a lot of discussion about the contents of the post. Admittedly, I was pleasantly surprised with the response and a bit shocked at how big it got. However, within the discussion there was some “trending comments” that stood out, comments that I felt could use a little more explanation for education sake. So, I’m going to take some of the major trends that people were talking about, and expand on them a bit more below.

“This guy is just [complaining] about how his bad game didn’t make money”

That was actually said more than a few times, in a nastier tone. Complaining was not my intention and I apologize if that is how it came across. The point of the post was to provide an example of how much a VR game costs, and use my own project as a focal point, because that is the only games budgeting I can actually talk about. I provided a cheap, yet plausible budgeting example and compared it to the more realistic method that you will find when studios, both indie and AAA, budget their games. In addition to that, I outlined additional rough costs that may be incurred for a new start up studio, of which there has been a few created solely for VR. Again, I did not mean to come across as complaining, and apologize if that was the case.

Now, onto the important things.

“$40 an hr is ridiculously low? You’re joking!”

Yup. Most people who freelance anything for a living (yes, you can freelance for a living) know that billing $40/hr is ridiculously low and severely undercutting your skills. However, after using this as an example value yesterday, this shocked some people. Quite a few people thought it was outrageously high for an indie developer. One person even claiming that indie developers don’t deserve this much. I could speculate as to why it’s a shock and why they think but thats not a point I want to make. Rather, I’m going to show how much someone truely makes at a rate of $40/hr and prove that, it really is ridiculously cheap and nothing you can easily live on.

Though, we need to state some things before we begin. First, we will calculate things based on one “man year” which is about 2,080 hrs. Thats 8 hours a day, 5 days a week, all year. This just makes doing math easier. Secondly, we’re going to be using averages for various expenses, such as health insurance and 401k deposit things and taxes! I found these values across various places on the internet. These will vary wildly by state and country, so I suggest you find your our local rates and plug them in yourself.

Alright, a self-employed indie developer working at $40/hr, for 2080 hours a year, income breakdown.

• 2,080 hours * $40/hr = $83,200
• Deduct ~30% for taxes (this can be more, or less depending on income. I may be lowballing the percent a bit) = $58,240

So thats what we get after taxes, but we’re not done yet.

• Health Insurance: $323/month * 12 months = $3,876 (average, lowest price health insurance I could find)
• Retirement: ~$750/month * 12 months = $9,000 (Yes, this important, however payment can vary.)

That leaves us with $45, 364. Thats your income. That is, that is your income before Software licensing fees which as a freelancer, 99% of the time, you must provide yourself (torrented copies, don’t count):

• Unity can be free to $1500/seat/year
• Maya is $1,470/year
• Photoshop is $120/year (I pay this)
• Digital Ocean Server is at least $120/year for smallest size
• Audio tools — Reaper, $225 to Komplete 11, which is multiple that.
• Substance Painter/Designer/Suite Varying prices of $100 flat or $20/mo (rent to own)
• And whatever else you may need to use. You’re the freelancer, you need to pay for this.

But wait, there’s more! You’d also probably be paying for:

• Mortgage/Rent — Varies, but $1,500/mo+ (probably more)
• Utilities — ~$250/mo (not internet included)
• Food — $150/mo (single person, not eating out much)
• Car insurance — ~$75/mo (varies WILDLY per state/country)
• Gas for car — $166/mo (Average in US — varies wildly per state and usage of car)
• Other expenses — $XXXX (Whatever else I can’t think of)

Add in the fact that a freelancer will rarely, if ever work a full 2,080 hours (closer to probably 1600–1800 hours), they will be making MUCH less that 45k. Probably pushing you into the mid to low 30's. You’re worth much more than that.

This is why $40/hr is absolutely outrageously low for a freelancers hourly rate. It’s not sustainable, you can’t easily live independently off this. This is why artists charge over $100/hr or programmers close to $150–$200/hr. There is a lot they have to pay for, that an employer would normally cover AND they need to be able to have enough saved up for dry periods when they don’t have work.

$40/hr doesn’t look that great now for making a living, does it?

10k per dev per month breakdown

On the opposite side of the spectrum, many people were shocked to see that developers budget $10,000 per developer per month. “Wow, they’re hiring at 10k a month!? Are they hiring :D” one reddit user said. It’s not as much as you think. This is what employers plan to spend on an employee and the 10k value comes from deciding an appropriate salary for a developer (again, we’re using averages), and factoring in the cost 401k’s (retirement planning. It’s important people!), health insurance and taxes. So, how does that 10k break down?

• $10,000 * ~30% for taxes = $7,000
• Deduct health insurance, cheapest I could find is $416 per employee
• Deduct 401k retirement planning, we’ll use $750 again

And you get $6,834 dollars, per month. That’s $82,008 a year. Oh look, thats about the same as a freelancer working 2,080hrs a year for $40/hr. BUT this time, it’s after taxes, health insurance and 401k deposits. Aditionally, I did not deduct software cost, or other expenses (like a year long train pass, or parking garage pass. These are sometimes provided at the expense of the employees salary. Yes, really.). So really, it’s under $80,000/year on average. This is also average — certain skills sets make more, other make less. On average, Community Managers make less 80k at around 60k, while sound designers are closer to 110k. You can see various salary offerings here, at OrcaHQ. Just check the category you’d like to see, and check the graph above it. (Also a great place to look for jobs if you’re in Game Development!)

And before you go “THATS STILL A LOT OF MONEY” take note that the most of these game companies are in cities like Seattle or LA or San Francisco — some of the places with the highest costs of living in the US (With San Francisco being the highest, Seattle behind that)

Also, it’s been asked I mention scaling — games not only take a lot of money, but they also take a lot of people. Sure, you could have a small team of say five developers. Thats still at least $50,000 a month in just employee salaries for the development of a game. And some games can take over 12 months to make. Thats $600,000 in employee salaries for each year you’re in business. There’s VR teams of 10, 20 or more people. Thats $1.2 Million for a 10 person team and $2.4 million for a 20 person team per year. Thats a lot of money.

“But, you made money because you didn’t spend any!” (or how I value my time and billed myself.)

This came up a few times and people seemed to be confused that since I didn’t physically pay myself any form of salary, I really only made money! There was no loss and no way I could be down $36k! This is not the case. If you’re legitimately working on a project that you hope to release some day, you should absolutely value your time and bill yourself. Under no circumstances, is your work worth $0.00.

During Light Repair Team #4’s development, I never received a paycheck. However, I still charged myself a rate for working. I kept an running total of how much my work would cost, as if I was billing myself hourly. In addition, I managed my personal savings so that I never spent more than I would have been earning. Seems a bit confusing? Lets try an example -

Say I worked on Light Repair Team #4 for 500 hours. At the ridiculously low rate of $40/hr, I would have charged myself $20,000 for all the work. However, even though I didn’t actually pay that to myself, it’s still an expense, as it’s an expenditure (a cost) of my time. As such, I need to factor this into the initial and final budget of the game.

I was an investor to myself. As the investor, I didn’t make money back.

So why though, why do I charge myself for my own project? Because I value my time, even if it’s for my own projects. I could have spent the time working on LRT4 doing another project that does have funding, or would pay me an appropriate rate immediately, or was more secure. This is called an opportunity cost. Even though I could’ve worked on a project with guaranteed or fixed income, I didn’t.

“If you make a game for an unpopular genre, of course you won’t make money”

I don’t disagree, but I don’t agree.

Right now, the most popular game genre is Action FPS — Call of Duty, Battle Field, Overwatch, DOOM, Quake— are all very popular and successful franchises and games. The gaming public eat up Action FPS games and this so far has shown to be no different for VR. Many of the most successful VR games are Action FPS games. This isn’t bad, by the way, I’m just pointing it out.

However, just because they’re the most popular genre mean I should make them — there’s a LOT of “shooty-shoot” games as some people call them. I’d have to compete with all the other VR FPS games that came out, which would already be difficult with such a small market. Most importantly though, I really don’t like FPS games that much, especially when designing them. I spent 6 years doing level or game design for FPS games and really, I’m not that happy working on them anymore. I mean, I’ll work on an FPS game if I have to and, but generally if I’m in charge of designing the game from the ground up, it won’t be an FPS.

I like puzzle games, so I make them. Thats it. I’m not going to make a game that I don’t enjoy making or playing just because I might get a ton of money. Admittedly, there’s been many popular and successful Puzzle games in history. The Talos Principle, Portal 1 and 2, the Witness, all some recent notable ones. They’re just outnumbered by all the other genres.

“If you can’t pay for developing a game, don’t f*ing develop a game”

Or the another comment “If you can’t afford to develop a game. You can’t afford to develop a game. I don’t give a shit about any justification for anti-consumer behaviour.” [Talking about exclusives there at the end]

These were actual quotes to the article.

I didn’t see this very often, but I wanted to talk about it anyways. Developers can not make VR games right now that will make them money back. Even the most popular games haven’t turned a profit from their initial investments. You don’t get into VR because you want to make some quick money over a month of sales, you get into it because you have a passion for it. Everyone in VR knew going in that we were not going to make a profit for a few years. And since I know someone will mention it — even Raw Data hasn’t. According to SteamSpy, theres approx 52,091 owners. At the full price of $39.99, that means at best they made $2,083,119.09 gross revenue. Cut out taxes, Valves cut and the 5% royalty paid to EPIC and it’s much less. The argueably most popular and best selling VR game hasn’t even recovered the four million they got in funding. As far as I’m aware (since no one talks about money) no one has made a profit back yet on their games. No one feels entitled to make money back on their project immediately, no matter what that project is.

*(I would like to point out that Survios is working on other things besides Raw Data, but I haven’t heard anything related to that yet. Additionally, SteamSpy is inaccurate, but it’s not $2,000,000 inaccurate)

And this is why developers aren’t blaming consumers for not making a profit on their games. We can’t; we knew that was going to happen anyways. It’s actually the opposite, we’re happy there are people who are buying our game, it means that the risks we’re taking are going to pay off some day. We can’t blame you.

Developers from all over the world working in VR, doing our best to turn it into a living. Why? Because it’s fun as hell and we loved it. Maybe we’re being idiots, maybe we’re betting on the wrong horse. We’re definitely being reckless and everyone working in VR knows this. And thats still okay.

You can follow me around on twitter @fr0z3nR for other game and VR development shenanigans.