Outsourcing Vs Insourcing for Video Games

 I was thinking about this a lot the last few months as some video game companies like to internally develop their own software because they can make video games or prefer to outsource their development because they want to lower their risks. 
There are many ways to outsource or insource and each type has its own factors to consider.  For this post, I will focus on the following:

• Outsourcing Vs Insourcing Development Tools (Game Engine)
• Outsourcing Vs Insourcing Game Development (Full Development of Game)
• Outsourcing Vs Insourcing Asset Development (Art, Music, QA)
• Outsourcing Vs Insourcing Publishing (Self-Publish Vs 3rd Party)

Outsourcing Vs Insourcing Development Tools (Game Engine)
When choosing to outsource versus insource game development, the first question one has to answer is whether or not your company can even develop an engine to use.  For the majority of game developers, the answer would be no.  Remember price and compatibility of the product to your team and game are the most important things to consider when deciding on an engine.
If you can develop your own engine, then you need to consider the following:

• Will you be using the engine you develop for more than one game?  Developing your own engine is very expensive and will cause a delay in the development of your game.  The payoff in developing your engine will come in the subsequent squeals of the product as the engine is continuously updated.
• Will making your own engine give you a competitive advantage?  If having your own engine does not give you a competitive advantage, it is definitely better to outsource it.  Having your own engine may give you a technology advantage, a cost advantage, or enhance the development of your product, but those benefits must outweight the costs of just using someone elses engine.

Outsourcing Vs Insourcing Game Development (Full Development of Game)
There are many things to considered when outsourcing your game development.  In my old company, the plan was too outsource safe development which carried little risks and to insource new risky products.  The argument for this was that since the outsourcer was not 100% owned giving them a low risk product gave them a better chance to succeed.  Keeping the risky product internally helped keep your internal team happy and developed their skills.  Also, because you controlled 100% of the development, it was easier for you to act if any issues arrive.  
Today, many large publishing houses use a hybrid approach.  They outsource development of non-key platforms like XBLA, PSP, or NDS and insource development of titles to low costs regions.  Outsourcing to low costs regions helps develop that team to eventually have its own IP.  For a while, Call of Duty was developed by Infinity Ward every two years while during the inbetween years, another Activision Studio like Treyarch would develop the sequal.  Ubisoft did the same thing with their Montreal and Shanghai studios were the Montreal Studio developed the main game and engine then the next year the Shanghai studio would make the squeal using the engine developed in Montreal while the Montreal worked to upgrade the engine for the next product.  Eventually the Ubisoft Shanghai studio developed their own IP as the studio matured.
Things to consider in any contract when outsourcing development is key employees, milestone, change of control provisions for both parties, the financial terms (Advance / Earnout / Royalties), and most importantly trust.

Outsourcing Vs Insourcing Asset Development (Art, Music, QA)
 Deciding to outsource or insource asset development is more straightforward than the other forms of outsourcing or insourcing discussed.  Please consider the following:

• What is the costs of Insourcing Vs Outsourcing?
• Are you outsourcing anything that is considered a key aspect of your product?
• How trustworthy is our outsourcer?
• How experienced is your team in working with outsourcers?
• How easy is it to find talent to staff your team if you are going to insource?

Outsourcing Vs Insourcing Publishing (Self-Publish Vs 3rd Party)
For many smaller developers, self-publishing vs  using a 3rd party is a very difficult choice.  Many smaller developers only consider the fact that a large publisher will take a portion of their profits to help sell their game when they can just directly sell their game themselves.  With the growth of steam, it is easier for a small publisher to sell their game directly now.  But you should only use this route if your are only selling a PC game oriented toward male users who are similar to those who currently play Valve games.  As many developers have noted, self-publishing on XBLA has many risks because a large publisher can help you get through the certification process and help you find the appropriate launch window.  Also, a large publisher can help get you a more favorable deal and wider distribution.  Self-publishing is only practical if there is a way to directly access your target market or if your brand is already so large that it is easy to sell your product.  If you do use a publisher to sell your game consider the following:

• Minimum Marketing Guarentees (A Must)
• Minimum Sales / Distribution Guarantees (Penalty if game is not sold in X Websites)
• Marketing Plan Approval (Only if you have a strong IP / Product)
• Time Limits / Renewal Periods (Allows you or the publisher to break the contract after X years)
• Opt-Out (In case of contractual breech, Acquisition, or other issues)

There are many  things to considering when choosing to outsource.  It is not an easy decision (unless you have no choice) so please do not only look at the dollars and cents.  Please consider the long-term impact it will have on your business.  Be careful to not to outsource what makes your company great because that will lead to ruin to the creation of a new rival.

Physical Products and Digital Worlds: Combining Toys and Games

Skylanders has been considered by many as one of the biggest innovations of the year.  Combing figurines and a digital world to form one of the years sleeper hits, but is this really innovative?

As some of you know, WebKins, NeoPets, Magic, Pokemon, and many other titles have been able to successfully merge the Physical and Digital Worlds.  For every success, there have been countless failures.

Having studied this market and reviewed many pitches regarding similar products, I would like to give you my opinion on what makes a successful Physical and Digital tie-in.

Let us start off with a recent experience I had.  Someone wanted to make a game that combined selling cards that could be scanned into a game.  The scanned cards would lock in-game objects.  First, this is not a novel idea.  Many games have tried this successfully though most have been failures. 

Webkinz is a great example of a huge success.  Webkinz can be said to be the evolution of NeoPets.   For those of you who do not remember, NeoPetz was a web game that originally made most of its revenue from advertising sales and micro-transactions.  As NeoPetz grew, it expanded into the retail market by selling plush animal versions of the NeoPetz you found in game.  While NeoPetz went physical, companies like Build-a-Bear and brands like American Girl gave their products a virtual world to live in.  Physical Products and Digital Worlds were starting to converge.  WebKinz took this idea and made it so that you bought a plush animal and then scanned it in game.  You not only had a plush animal in the real world but a copy of your pet in a virtual world.   Today, Moshi Monsters and Skylanders capitalize on this idea.

At the same time, many other companies have tried this and failed and the main reason is that they think that being successful in one channel leads to success in both.   What made the brands I mentioned earlier succeed was that both the physical product and the digital world could stand on their own.  The physical products were collectable, trade able, or playable.  Also, the digital worlds on themselves are fun with social features, persistence, and high usability.  Together, both the Physical Good and the Digital World enhance each other!  People must think of the products as separate but equal and create them with that in mind.  This may seem like a very simple philosophy but may people seem to forget this

What are good virtual items or services to sell?

Someone asked me what type of virtual goods should be sold, and I mentioned that it is based on the game.  One of the things that people should keep in mind, is that if your are going to make the majority of your revenue from selling virtual items, you will not be profitable if it is ONLY BASED on decorative items. 

With a lot of successful games in the Western Market and years of games selling virtual goods in the East, there are alot of examples one can draw from to help populate their item store, but keep in mind what works for one game will not work for every game.

I.  Examples of some items that probably will not work in the west due to various laws is as follows:

• Yell Item / Blow Horn:  For a fee, players can spam all chat channels a message.  Because this message may be profane or disturbing to other players, this is probably not a good item to sell in the US.
• Lottery Ticket:  Buy a ticket for the chance to win an item.  The base concept is of coarse an issue as it is considered gambling but there are work arounds to make this feasible in the US.  For example, win X amount of times and get a ticket. 

There are a lot more items that will not work in the West due to legal restrictions.

II.   Items or services that should definitely be looked into by RPG based games:

• Character Name Change
• Character Gender Change
• Character Race Change
• Character Class Change (may be abused if players play an easy class to level then switch to a more difficult class to level)
• Server Transfer
• Additional Character Slots
• Additional Bag Slots
• Additional Bank Slots
• Premium CS Support (normally added as part of being a premium or paid member)

III.  Items or services that are offered in the east which should be evaluated for the west:

• In-Game Character Wedding Services:  Yes players do spend money to have their virtual characters wed.
• In-Game Location / Facility Services:  Players sometimes reserve or rent a area for their guild friends or others to get together.

There are a lot more services sold in the East that may translate well in the West but they are currently slipping my mind.

IV.  Game altering items need to be considered with the following mindset.

• Money Vs Time:  Many games that do well allow players to buy items that they could otherwise earn in game after playing for multiple hours.  For example, would you rather spend an hour killing mobs to gain a access key to the next area or would you rather pay $5.  Some games I have worked at allow you buy items that give similar benefits as an item 2-3 levels higher but only for a short duration. 
• Duration:  I believe that most paid items should be limited duration based on usage or time because of various tax laws in the West.  Also, this helps enforce the Money Vs Time value as players can "earn" the permanent item or pay for the limited use item.
• Separate but Equal Catalog:  Due to tax and other legal issues, it maybe a good idea to keep virtual items and paid items separate.  For example, both items may have the same bonuses but will have different colors and requirements.  If the same item can be paid by both cash or in-game earned cash, then the tax laws change.  Businesses need to keep this in mind if they want to recognize the cash up front or as it is spent or over the life of the customer. 
• Do NOT BREAK the Game:  Some companies and the west have had failed micro-transaction games because they have an ultimate weapon or item that breaks the game.  Make sure that even if an item gives a competitive advantage, it is not an insurmountable advantage.  Items should help players level fast, access items faster, get better skills, or look cooler, but they should never be required to win.  Players need to know that skilled players can beat a character completely upgraded with cash items.  Remember they need to think that it is fair, it does not need to be fair.  An example is if players can buy health pots during a match.  If the health pot had a cool down to begin with and health pots already randomly drop, why not allow for an instant transaction to buy a potion?  Now if players can buy unlimited potions and used them without any delays then it would be unfair.

V.  Personalization items should always be include any item catalog.

• Character modifying items help players be more unique and more attached to their characters.
• Fun items such as emotes, dances, and other help their character be more fun without playing the games.

Items should be planned out with the game design so that the games and the items are self reinforcing.

New Anime Season (01/01/2012)

Happy New Year!

I have always been a huge fan of the website random curiosity.  Below is a link to their Winter 2012 preview:

http://randomc.net/2011/12/26/winter-2012-preview/

Last season had a lot of strong anime and it seems that the winter season will also have a good line-up.  A lot of these anime look like they will do well in the US.

As I wrote before, anime that does well in the US must be easily translated and understood by US culture.   Also, Funimation is doing a good job of helping bringing anime directly from Japan to the US online.

Since I have had a break from work due to the holiday season, I watched some older anime that did not receive good reviews or are on my list of anime to watch.

One anime that stood out because of the horrible reviews and formulaic plot was http://en.wikipedia.org/wiki/Linebarrels_of_Iron.   Linebarrels of Iron was interesting in that it was created by Gonzo, Published by Funimation in the US, and still had manga series.  As a Mech anime by Gonzo, it had a lot of potential, but most people reviewed it based on the first few episodes and those reviews were just for the first few episodes.  The anime started off with the main character being extremely egotistical and not someone a typical person would like as a hero.  Because of this, most people gave the first few episodes horrible reviews.  In most US Media, the main character is designed to be liked or if he is disliked originally has potential to be liked and has a catharsis early in the series which sets him to the right path.  In this case, Hayate, the main character, was a horrible person throughout the beginning of the series which led many people to stop watching the anime.  Something as simple as this should be factored into cultural differences when selling the anime in the US.  Of coarse, this anime was not for TV because it was it would have done very poorly.