Inner workings...
I have had several e-mails, most notably from people who want to invest in gaming companies but are not sure who to plump for, asking me about game company finances – namely do they make money from selling games and if so how much. While I hesitate to advise investment in any company based on this column (had to say that!) I am more than happy to give you a sense of how these companies operate and how your purchase of a game affects their bottom line. Before we get under way I must add a couple of caveats (Jeepers, this sounds really pathetic!): first of all while we have access to financial records and the like released by these companies it is very hard to divine from those which of their products made that money (or indeed lost it) – therefore it is hard to judge the precise performance of any game. This is made evern more difficult when you consider that games are very rarely the sole profit-making centres for many of the big corporates – almost all of them have other revenue-generating interests other than games which must be sifted out before you evaluate the performance of any game division. The second caveat is this: NEVER INVEST IN A GAMES COMPANY BY PAST PERFORMANCE ALONE. While track record is important always examine what the company is working on for a years time rather than what it released a year ago. If they had a mega-smash two summers ago that it all very well and good(for a start it will mean that you will have to pay more for than shares!) but if their major forthcoming release is a hugely expensive simulation of the Macedonian political system circa. 1992 then you should stay away at all costs! Now let’s get on with the delving…
First up, as an investor you must switch off your critical brain and boot up your commercial one. In gaming quality of product sometimes bears little relation to number of sales, and the fact that you and the gaming press liked “Spanner Simulation V1” does not mean you should invest in the company that made it. Because it is likely to sell all of three copies. Games which have received great press but not sold have been numerous, including such classics as Terra Nova, I-War and Imperium Galactica whereas Who Wants to be a Millionaire has had some excoriating notices and yet has made megabucks. Also games which sound unbelievable (“we will literally simulate the entire world so that you can undertake any profession, sleep with anyone and quite literally spend forever in a videogame!”) usually turn out to be just that. They eat development money, take years to arrive and when they do inevitably fail to meet their lofty goals. Be warned of people who promise the world and deliver Rwanda.
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