ITB751/ITN751 Games Production
Lecture 9
Business and Financial Issues
Ross Brown
CRICOS No. 000213J
Queensland University of Technology
Lecture Contents
• Owning a Game Company
• Guest Lecture – Shainiel Deo, CEO and Part
Owner, Halfbrick Studios
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Readings
• Textbook Chapters:
– Chapter 9
• Websites:
– http://www.starfleetgames.com/book/ - useful site on
starting a games publishing company
– http://www.entrepreneur.com/startingabusiness/startu
pbasics/index144024.html - Starting a business full
stop
– http://www.business.gov.au/Business+Entry+Point/ Government Information on starting a business
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Busyness…
• “Perpetual devotion to what a man calls his
business, is only to be sustained by perpetual
neglect of many other things” - Robert Louis
Stevenson
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Embrace the LEX!!!!
• Please do the LEX surveys for the units in the
courses
• I know it is a little painful, but it does help us
present better units
• The guest lectures in this subject are a product
of one of the feedback mechanisms we have
used
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Assignment One
• Specificity – be specific with plans
• Goals are the point to aim for, the tasks should take you
there
– Eg. Communication Skills – how about writing reviews for web
fora
• Please read the specifications carefully – for my
mistakes – but also for the actual things you should do
• A number of people literally missed sections
• Number of tasks was too general and vague
– Eg. Do portfolio – what is going into the portfolio?
• Lack of specific reading plans
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Entrepreneurship
• S: (n) entrepreneur, enterpriser (someone who
organizes a business venture and assumes the
risk for it) - http://wordnet.princeton.edu
• Today we will cover how you start up a business
• And merge that with issues surrounding the
games industry in particular
• Because it is just another business…
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CEO
• S: (n) chief executive officer, CEO, chief operating officer
(the corporate executive responsible for the operations
of the firm; reports to a board of directors; may appoint
other managers (including a president)) http://wordnet.princeton.edu
• Have chosen to focus on starting a business, and not
running it, due to the context of this lecture
• You are in the majority wanting to start a business,
maybe
• Will assume as owner you are also CEO
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Why clarify?
• You can own a business
and not really take part in
its day to day running
• Just like Bono, who part
owns Pandemic…
http://www.leadernotes.com/2006/02/bono_leads_at_the_national_pra_1.html
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Farmer in the Dell
• But, the climate is good,
so should think of trying,
even now – before the
US sub-prime recession
kicks in… 
• Hell, Dell started from his
dormitory in University
www.3d2know.org
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Stats on Business Startups in Australia
[4]
• There were 1,963,907 actively trading
businesses in Australia as at June 2006
• Of the 325,935 business entries during 2003-04,
58.3% were still operating in June 2006. Of the
135,817 which did not survive, 59.1% had exited
by June 2005.
• BEWARE: lots of companies do not sustain past
a couple of years – but not all exits are failures,
some can be take overs
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Ways of Starting Businesses [1]
1. Start with nothing but enthusiasm and some
mates - Halfbrick
2. You have money from another business –
Auran is financed by a property developer
3. Using other peoples money via the use of loans
and equity funding – Pandemic is financed in
the large by equity funds
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Main Processes in Starting a Business
[1]
•
•
•
•
•
•
Business Concept
Business Plan
Marketing Strategy
Getting Finance
Legals
Premises
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Business Concept - Innovation
• What is your game innovation?
– You have to have something that will sell in order to
make money
• Product/Service Diversification
– Developing a new product or service for an existing
market
• New Market
– Develop a product for a new market (highest risk and
return)
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Business Concept - Innovation
• Market Penetration
– Selling existing product or service to existing market
• Market Diversification
– Selling an existing product or service to a new market
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Generating Business Concepts
• Spotting a gap in the game market
– research and lookup stats (www.abs.gov.au)
• Copying a successful concept
– Copy and improve, often an approach taken with games and
genres
• Merging two existing techniques
– Eg. Auran’s Fury – player vs player in MMORPG manner
• Basically you have to spot a good idea when you see it –
easier said than done
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New Idea Assessment Process
• Personal Considerations
– Skill levels? Motivation? Family effects?
• SWOT Analysis
– Strengths, Weaknesses, Opportunities, Threats
• Is there a market?
– Customer value – do they want it?
– Market Size – does the market sustain the idea?
– Nintendo Wii is a classic example here of finding a
new market for casual games
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New Idea Assessment Process
• Financial viability
– Enough capital? Can you cover expenses with
income? Break even point?
• Comparability
– If you have a number of possibilities, which one do
you choose?
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Business Plan [1]
• Outlines business objectives, and outlines the strategy to
achieve those business objectives
• A roadmap for your business
• You have a greater chance of surviving if you have one
• Helps you get funding as you have a plan
– think from a bank’s point of view
• Enables you to clarify the fundamental nature of the
business
– process as important as the plan
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Contents of Business Plan
• Executive Summary
– Brief summary in one or two pages
• Mission/Vision
– purpose, activities and values of business
• Description of Industry
– size and latest trends of industry
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Contents of Business Plan
• Description of Business
– proposed activities
• Products or Services
– what are you going to do?
– NB: does not have to be games per se
– check the Digital Labourers Foundation www.dlf.org.au/
• Identification of Market
– size and nature of the market
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Contents of Business Plan
• Competitors
– Who are they, and what market share can you get
• Marketing Plan
– How will you market your company to consumers?
• Business Goals
– Objectives of business
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Contents of Business Plan
• Directors and Management
– Experience and capabilities of staff
• Corporate Structure
– Business structure, including shares and options
• Risk Assessment
– Assess potential problems
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Contents of Business Plan
• Implementation Schedule
– Timeline for key milestones
• Financial Forecasts/Statements
– Projected profit and loss statement
• Terms of Investment
– How much are you seeking to raise?
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Marketing Strategy
• Product
– Make sure the product works – game quality factors
• Promotion
– Make sure people know about the product – heard of Halo 3?
• Place
– Where are you to place a distribute the product – publishers do
this work, but you may have to do the publishing
• Price
– What price will the market support – balance of cost of game vs
retail price
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Getting Finance
• You have to create a financial model of the
business to communicate the requirements
• You will need a detailed plan for the operation of
the business
• Working capital
– day to day money, eg. printer paper
• Fixed capital
– for things in the business to be used for more than
one year, eg. premise lease
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Sources of Finance
• Via Debt – loans
– Banks – provide them with a complete business plan and finance
history and forecast income
– Associates – colleagues, friends and family
• Via equity – gives the financiers part ownership of the
business
– Venture Capitalists – professional investors who put money into
more mature ideas
– Angel Investors – wealthy individuals who seek to mentor
businesses early on
– Associates – colleagues, friends and family
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Legals
• Once you work as a business there are legal
requirements
• Registering business names
• Australian Business Number (ABN)
• Retention of business records
• Running your business in a legal manner
• So you need a good lawyer
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Legals – Business Structure
• Company – is a separate entity to its owners
• Sole Trader – is a person doing business in their
own name
• Partnership – legal structure that allows people
to do business collectively
• Trading Trust – When property is placed in trust
the owners are legally bound to certain uses of
property
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Premises
• Need to lease a location, with adequate floor
plan size for good price
• Lease equipment such as PCs, printers, other
consumables…
• Appropriate software tools – development
environments, modelling systems…
• and of course espresso and coke machines
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Running a Business – CEO Roles
• You are the highest ranking director of the
company’s board of directors
• You have to tell people what to do by managing
the company
• As a CEO you seek to implement the vision for
the company at a strategic – high level long term
manner
• As compared to tactical work done to solve
particular problems implemented by other staff
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CEO Oversight Roles [2]
• Board Administration and Support - Supports operations and
administration of Board by advising and informing Board members,
interfacing between Board and staff, and supporting Board's
evaluation of chief executive
• Program, Product and Service Delivery - Oversees design,
marketing, promotion, delivery and quality of programs, products
and services
• Financial, Tax, Risk and Facilities Management - Recommends
yearly budget for Board approval and prudently manages
organization's resources within those budget guidelines according to
current laws and regulations
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CEO Roles
• Human Resource Management - Effectively manages the human
resources of the organization according to authorized personnel
policies and procedures that fully conform to current laws and
regulations
• Community and Public Relations - Assures the organization and
its mission, programs, products and services are consistently
presented in strong, positive image to relevant stakeholders
• Fundraising - Oversees fundraising planning and implementation,
including identifying resource requirements, researching funding
sources, establishing strategies to approach funders, submitting
proposals and administrating fundraising records and
documentation
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Game Specific Roles
• You will be seeking to get contracts from
publishing companies if you are a studio
• Or you will be developing your own Game IP
within the company
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Skills
• Strategic Planning Skills – you need to be organised if
you are to lead others
• Strategic Management Skills – you need to know how to
deal with managing other people and the processes
within the organisation
• Motivation – you must be motivated to succeed at this
level
• Visionary – you must see where to lead the organisation
in the long term
• Able to delegate and communicate that delegation
clearly
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Technology
• In short, you need to have the
business information about
your company at your
fingertips
• A lot of the IT innovations in
the past have been about
fulfilling the needs of
management in obtaining
information about their
company
• A good company needs a good
IT section
http://www.gratisguidance.co.uk/www/?cat=105
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Guest Lecture
• Shainiel Deo
• CEO – Halfbrick Studios
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References
1.
2.
3.
4.
Humphrey, N., The Penguin Small Business Guide, Penguin,
Melbourne: Australia, 2004
Basic Overview of Role of Chief Executive,
http://www.managementhelp.org/chf_exec/chf_exec.htm#anch
or380290, accessed, 03/10/2007
Secrets of the game business / edited by François Dominic
Laramée, Hingham, MA : Charles River Media, 2005
Counts of Australian Businesses, including Entries and Exits,
Jun 2003 to Jun 2006,
www.abs.gov.au/Ausstats/abs@.nsf/39433889d406eeb9ca257
0610019e9a5/4b58cf00cd15574fca25728b000ceede!OpenDocu
ment, accessed, 03/10/2007
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