SXSW Interactive has just begun and I'm sitting in a panel with a group of rock star game devs (well, some are more designers, and Alan Knitwoski is not a dev, but a business guy): Stephen Broumley, Peter Franco, David Kalina, Heather Kelley, Alan Knitowski. They will attempt to answer the question of whether independent game developers can still make games profitably.
First question: What is indie? If you are a small shop and acquired by EA (as happened to Franco), are you still indie?
Jeff Broumley defines it as "funded yourself." Part-time developer David Kalina says it means you are in control of your own decisions (as opposed to a publisher or investor). Heather says it also represents a spirit -- being able to do what you want to do and having financial control. For Knitowski, it's also about being in control, although he veers into a comment about Rovio (Angry Birds), and the "Silicon Valley" style of starting indie and being funded later once you've grown to a certain level. Heather objects to his comment that "you inevitably grow into what you hate," which reminds me of when an indie band would "sell out" to make millions.
Next round of questions: How do you fund and structure your companies?
Kalina said they bootstrapped with severance pay. The key to their success, he said, was reaching out to a group of freelance contractors and giving them some equity and clear direction, but freedom to express themselves. Starting with 10 part-time contractors who still get checks as part "owners" of their first game. To this day there are still only 2 full-time employees at his company, Tiger Style.
Knitowski adds a bigger picture of "there is always room for great ideas." He says the business side of how you get to the business via marketing is where the experience comes in (business experience, not user experience).
Kalina counters that Tiny Wings came out of nowhere to be a big hit without all the business experience Knitowski says is critical. "You don't have to fight this arms race with people who have more money than you."
Franco asks Knitowski about team size. He says they have about 35 people to support what they do, not all full-time. He says the fastest app they've turned over was 2 months. Franco says indie development tends to go slower because you're doing this in your spare time (sometimes).
Kelley was inspired by Tiger Style and started with 3 people: her, a programmer and an artist. The app was created over 4-6 months but the developer has already created. Her app? The "OhMiBod" app, which controls a vibrator (and yes, it is on the App Store).
We transition to the monetization question because Kelley's app requires hardware. After she made the app, she approached the developer of the hardware and they offered to buy it. She wanted creative freedom up front, and got lucky with the hardware manufacturer -- who was happy to buy it. She's still working with them to add features and had "a very quick exit strategy." Ha.
Kelley said she was glad she priced it at $3.99, but because it is an "adult" app, it won't be featured by Apple. It's easier for her to get press otherwise, however, because of the novelty.
Broumley made the Sega Genesis emulator app on contract, which gave him the money to do Hi, How Are You? app. He says that pricing was experimental -- at higher prices you do well, but you move more units at $0.99.
Knitowsky says they've moved (on different apps and at different times) from cost center to profit center apps -- meaning some will go free just to move them, and some will be priced. "If you want to make a business of it, you have to focus on P&L's." He's also talking up in-app purchases and affiliates.
Franco asks how ad buys go. Knitowski says $15 CPMs! Premium brands will be in $40-50 video pre-roll CPM range. Admob is down to $75 whereas iAd is $500, but then you have to consider fill rates. It's a balancing act.
Kalina notes that there are plenty of models. "We make a game and ask people to buy it -- sort of old school." He says Tiger Style doesn't put ads in their games, and they have a strong opinion on it. As well as in-app purchases, which they avoid. "If you want to make a lot of money in this space, it seems like a mix of ad-supported, in-app and subscription will squeeze money out of people." Apparently their free app didn't see a lot of uptake.
Franco says freemium was a huge topic at GDC, and ngmoco has made a lot of noise (and profit) with that model.
Next topic: How are you marketing?
Kelley jokes that to get noticed, make an app about sex. But really, the point is that you can't rely on the App Store for your marketing.
Kalina says "you need a hook." For his team, it was the story of a group of indie devs making a cool iPhone game (seems like a familiar story). For them it was having a belief in your product and going out into the world to talk about your product. Kelley adds that you have to allow the time -- if you only budget time to publish you're screwed.
Kalina says it is key to develop relationships with websites who will pick up on your cause and product.
On the flip side, Knitowski says they had iPad hardware before others and helped Apple beta test the software that powered it and the SDK. Not very indie, I'd say, but his business is very lucky to have connections to big brands, and they can leverage those brands for good business practice.
What Knitowski found is that the product makes the difference. If it is good, Apple will feature it. He then describes scaling, and the profit comes from the same things that drive profits online and offline -- you have to be focused on the profitability as well as the game experience. How much money are you putting in? How much can you expect to get back? Marketing, for Knitwoski, is key -- he cites Discovery featured an app on their site, at first buried on the page, later moved to the top. Of course, downloads more than doubled. Once it was featured by Apple, that number doubled again. But he also notes that you can't rely on Apple for your marketing.
Broumley chimes in with some more indie ideas: OpenFeint, for example, can help with cross-promotions. Facebook Connect is another way to freely market your game as is Game Center. Kalina integrated leaderboards, Facebook Connect and other low-friction promotional tools.
Next question: How have you asked users to help promote your app?
Kalina says Facebook Connect had a pretty low uptake. "Only about 9% shared." He says you have to let your software reach out a bit...
"How about Twitter?" asks Franco. Unsurprisingly, Knitowski uses everything -- Facebook, Twitter, etc. They try to do it tastefully, he says, but you're trying to make a great experience that people care about, so if you don't bait-and-switch them, and you make a good product, people will talk about it. He cites Showtime and Walmart apps as some of the worst-rated free apps in existence.
"What you're trying to do is maximize your yield off those marketing interactions," says Knitwoski, which makes sense.
Now it's time for Q&A!
Question: How do you support your app?
Kalina says their forums are overrun with spammers, but they try to deal directly with customers.
Question: Can you speak more about press coverage and who you should talk to and in what order?
Kelley says OhMiBod went to CES this year, and she was there pitching it. Apparently Jay Leno mentioned the app in his opening monologue, but he never said the name of the app or the company! It had no impact because no one could find it.
Kalina says online press tends to be more important because you have to be able to click on something and direct customers to a place where they can actually BUY the app. Kalina's team used Alexa (oh jeez, really?) to try and rank outlets for coverage.
Question about localization... Kalina did in a few countries, and Kelley did as well, but neither feel it had much impact because the US is still by far and away the largest consumer of apps. Knitowski notes that many countries are still dominated by feature phones.
Last question: for bootstrappers, where do you place features like leaderboards, etc. versus just getting the game out there?
Kalina says, "those things do take time, so consider how important those features are to your app's experience and your ambition." Broumley adds that they started with Facebook then later switched to OpenFeint, but neither seemed like huge features nor did it make a big impact. Kalina does point out that Game Center is default installed and enabled, and it might help more than others.