Level 3 of the Los Angeles Film School's Marketing and Monetization class.

1. Level 3
David Mullich
Marketing and Monetization
The Los Angeles Film School

2. BUDGETS

3. How Do You Set Up A Budget?

4. Game Development Budget
Simple Method
Team Hourly Rate x Hours Dedicated To Project
Hard Costs
 Rent
 Utilities
 Equipment
 Supplies
 Insurance
 Taxes
 Etc.

5. Game Development Budget
Alternate Method
 Set your budget (and accept that limit)
 Divide that budget into expenses

6. Revenue Goals
Expected Price x Unit Sales Projections
Deductions
 Channel
 Publisher
 Distributor

7. Marketing Budget
8% to 15% of total revenues
Note: This is typically used for larger
organizations, and you shouldn’t necessarily
spend this limit

8. Mini Financial Model
Notes
Anticipated Game Revenues Recommend
Low, Medium, High scenarios
- Subtract Development Budget
- Subtract Marketing Budget Recommend
Low, Medium, High scenarios
= Projected Profit/Loss
If you are willing to take a loss be clear on the
acceptable loss you can absorb before you get into
your market-budget planning.

9. Where Do Game Developers Get
Funding?

10. Indie Project Funding Options
 Day Job
 Bootstrapping
 Bank Loans
 Friends, Family & Fools
 Festivals & Contest Prizes
 Contract Work
 Reinvesting
 Private Funds & Grants
 Angel Investors & Venture Capitalists
 Incubators & Accelerators
Let’s take a closer look at each.

11. SELF FUNDING

12. Day Job
Earn money from “real work”, but do game
development at night and on weekends.

13. Bootstrapping
Paying for the business yourself, whether it’s through
savings or credit card debt.
Pros:
 Keep your equity and IP
 Greater flexibility to maneuver
 Less dilution down the road
Cons:
 Personal financial risks
 Self-publishing costs

14. Bootstrapping
 Invest no more than you can afford to lose.
 Don’t do it if you can’t handle stress well.
 Invest in a business, not a product.
 It’s best to use other people’s money.

15. Bank Loans
Bank credits or other forms of private loans.
 Very dangerous in the risky world of game development.
 Banks want collateral, so this isn’t much different from self-
funding.
 If you’ve formed an LLC or Corporation, you may be able to
get the loan in the company’s name.
 Unless your company has a track record, you’ll probably
have to personally guarantee the loan and use your personal
credit worthiness to get it.
 In the absence of other sources, though, this may be the way
to go, at least for that initial capital.

16. Friends, Family & Fools
Receiving funding from people who personally
know you.
Pros:
 They may be more understanding than banks
if the project fails.
Cons:
 You may lose Aunt Edna’s retirement nest egg.

17. Friends, Family & Fools
You can receive money as a loan or an
investment.
 As a loan, there is no expectation of profit
apart from interest, so you can avoid any
securities law issues.
 As an investment, they can be made aware
that there is a very high failure risk and they
may not get their money returned.

18. Contract Work
Developing games for another company as well
as your own.
 Sources: Textbook publishers, healthcare
companies, advertising firms
 RFP: Request For Proposal
 Usually work-for-hire, but sometimes you can
get royalties or other fees
 Best when contract work and your own games

19. Contract Work
Pros
 Great way bootstrap a startup as well as to stay fed and
keep a roof over your head.
 Can give steady income, but lasts only as long as the
contracts do.
Cons
 Margins on contract work are very low.
 Contractors may be upset if you are making enough money
off of them to make a game.
 VC’s may be reluctant to work with you.
 have similarities
 Work on your own game will suffer!

20. Reinvesting
Funding Project B with continuous income from
Project A.
 If Project A is your only source of income, this
is the same as self-investing.
 Consider setting up different companies if
these are two dissimilar projects.
 Don’t do this if you’re not good at multi-
tasking.

21. PRIVATE FUNDS AND GRANTS

22. Private Funds
Private funds, like Indie Fund and Sony’s Pub Fund,
help content creators, technology pioneers or
visionaries financially.
 Some give a non-refundable lump sum of money
and some provide low or zero interest on loans
that you pay back if you become financially
successful.
 Others want royalties once game is released.
 Most want to see a prototype before taking part its
development

23. Grants
Getting a portion of your costs back from the government.
 More of a cost-cutting option than a source of funding.
 Sources: non-profit foundations, governmental
agencies, even game development or media funds.
 Hire someone with expertise in writing grant proposals.
 Some grants are awarded only to non-profits and so a
game developer can partner with a university, think
tank, or museum.
 Grants can come also come with strings attached, such
a requirement to make a version of the game free to
the public.

24. Grants
 Development Grants: Outside the United
States there are various programs to
underwrite games in small amounts from
$50K up to $1M.
 Research Grants: Most commonly
awarded grants for game development, but
funding is in the name of accomplishing the
research objective and not creating a
complete game.

25. Grants

26. Grants
National Endowment for the Arts (NEA)
 Added games to their list of eligible
projects in 2011
 Interested in developing work that has a
broad public impact, can reach a lot of
people, and is accessible
 Grants are awarded by a panel of experts –
including a “layperson”

27. NEA Grant Winner
Games for Change's Half the Sky

28. NEA Grant Winner
City of Sacramento Art Project

29. NEA Grant Winner
USC Experimental Game Division's Walden

30. Grants
National Institute of Health (NIH)
 Largest funder of health focused research in
the United States.
 Ro1s: Large multi-year grants which can be in
the $millions.
 R34s: Offer smaller amounts of funds
(perhaps $1M over a few years) but act as
stepping stones to higher-end grants.
 Health & Human Services and Center for
Disease Control also offer grants

31. Grants
National Science Foundation (NSF)
 Major funder of game-oriented work
 Focused on discovering how to improve
learning outcomes, as well as artificial
intelligence, crowdsourcing, and much more.
 Majority of their grants are multi-year efforts
with good-sized funding that must move
through major research universities and
established non-profit research labs and
centers.

32. Grants
Department of Defense (DOD)
 Longtime commitment to simulation and
interactive-based training.
 Funds game-based work in a variety of ways
either through direct competitive contracts or
SBIR/STTR grant programs.
 America’s Army: First-person shooter franchise
designed as both a recruitment and a training
tool.

33. Grants
Small Business Innovation Research (SBIR) and
Small Business Technology Transfer Program
(STTR)
 Used by a number of government agencies to
award grants
 Open to businesses with <500 employees
 Awards $2B/year for research
 Developer retains full rights

34. Grants
SBIR/STTR Process
 Agency will list challenges under its domain
 Developer will respond with ideas for proposals
 Reviewers will score submissions
 Submissions that score well may be funded
 Funding begins as soon as contract is negotiated
 Phases:
1. Feasibility test (<=$150K)
2. Prototype (<=$2M)
3. Commercialization (not funded)
 Developer retains full rights

35. Grants
Public and private foundations like Robert Wood
Johnson Foundation or MacArthur Foundation to
improve areas like education and healthcare.
 Mix of open-invitation call for proposals and
private invitations to submit ideas
 Rarely don’t accept unsolicited submissions
 Program managers at these foundations act like
scouts
 Study their sites and understand their submission
process

36. Grants
 Cultivate partnerships with groups that can submit grants
 Build useful core technologies
 Attend events and meetings
 Understand applied games and challenges
 Understand how funding generally works
 Plan and write well
 Don’t depend on grants for the majority of your income
 Don’t use a square peg as a round hole solution
 Don’t turn away consulting or testing opportunities
 Read papers, news Web sites, science magazines, and play
serious games

37. OUTSIDE INVESTORS

38. Angel Investor
An affluent individual who provides seed (or front) money for a
business start-up, usually in exchange for convertible debt or
ownership equity.
 Usually offer some seed money and consulting for the start-up.
 Prefer to be near you to offer their business know-how and network
easily while also keeping you under radar.
 Find an Angel willing to stay in for more than a year and has game
industry knowledge.
 Best to approach with your concept and use their money to make a
prototype.
 This type of investment does invoke securities laws, so the counsel
of an attorney is strongly recommended.

39. Incubation Centers
Support startups until they produce something marketable or at
least get an investment for a longer period of development.
 Access to mentors, seed money, office space and investors.
 Most offer a support for a limited amount of time (usually
varies between 6 months to 1 year).
 Quality of the center depends on mentors and the investor
network.
 Some require an equity around 3-20% and provide seed
money, some require a smaller equity 1-5% in return of
mentorship and office space without making any cash
injection

40. Venture Capital
Provided by firms or funds to small emerging
firms that are deemed to have high growth
potential.
 Rarely fund companies in initial stages
 Interested in huge profits, so they look for
scalability
 Approach with high risk – high profit proposal
 Be aware that relevant pitch decks, doing
forecasts, revenue reports will take away from
your development time.

41. Venture Capital
To attract interest:
 An experienced team of developers and business
people.
 Helps to have a management team experienced in
start-ups.
 Data showing real users are addicted to your
game.
 Plans for leveraging your first hit for future
success.
 Should be scalable to ramp up quickly
 Product can’t be easily duplicated

42. Shark Tank Pitch
Spy Escape And Evasion

43. Why Did This Pitch Get Funded?

44. Four Pillars To A Great Pitch Delivery
 Clarity
 Simplicity
 Passion
 Practice

45. Six Steps To Success
 Hook
 Problem
 Unique Solution
 Team
 Traction
 Close

46. FUNDING MODELS

47. Funding Models
Model 1
 Find an angel investor for the first 6 months
of your development.
 Build a demo.
 Apply all the available festivals.
 Get noticed and start seeking a publisher.
 If that doesn't happen quickly, try staying
alive with contract works.

48. Funding Models
Model 2
 Make some little savings from your other
projects.
 Apply for a technology grant.
 Develop something innovative.
 Start seeking a Venture Capitalist

49. Funding Models
Model 3
 Start contracting art assets.
 Create a concept and go seek
crowdfunding.
 If successful, apply for Indie Fund.

50. Practice Round
Come up with a Funding Model for your
game.

51. CROWDFUNDING

52. Crowdfunding
The practice of funding a project or venture
by raising many small amounts of money
from a large number of people, typically via
the Internet.
-OR-
Preorders, with incentives.

53. How It Works
Developers
 Set funding goals and time limit
 Countdown clock starts
 All-out social media PR blitz
Funders
 Select a contribution tier
 Pledge the amount stated
 Become entitled for the tier reward

54. Top Crowdfunding Sites
Rank Site Fee Notes
1 Gofundme 5% Over $2 Billion raised for personal fundraisers.
Processing fee of 2.9 + $0.30 applies
2 Kickstarter 5% Personal fundraising not allowed. Creative only.
Processing fees between 3-5% apply.
3 Indiegogo 5% 3% processing fee. $25 for international wire.
4 Teespring 10%+ T-shirt crowdfunding site.
Fees vary based on t-shirts selected for sale.
5 Patreon 5% Must pledge an on-going amount. Creative
projects only.
Additional processing fee of 4%.

55. Crowdfunding
Extra Credits, Season 4, Episode 10 – Crowdfunding (7:29)

56. Pros and Cons
Pros
 Keep your equity and IP
 Money is used for development
 Focus on project
Cons
 Less flexibility to change direction
 Funding project, not company
 Specific projects get funding

57. Kickstarter Games Funded
Only about 38% of all Kickstarter campaigns get funded!

58. Why Makes Some Campaigns
Successful?

59. Crowdfunding Is NOT “Free Money”
Running a
Kickstarter is like
having a full-time,
unpaid, difficult job
for 3 or more
months!

60. Do Your Research
 Look at other, similar Kickstarters
 How did they raise?
 Where did they raise it?
 Ask developers about their success and
failure stories

61. Legal Liability
This type of fundraising is not considered an
investment and avoids any securities law
issues.
BUT.. You are entering into a contractual
agreement with your backers to deliver the
promised rewards. Because of this, you need
to get your project planning together before
entering into this type of relationship.

62. Form A Business Entity Before
Starting
Benefits
 Avoids the personal income hit a tax time
 Protects you from personal liability
 Forces team to sort out ownership issues
A local university business clinic may help
you avoid higher legal fees.

63. Crowdfunding Canvas

64. The Ask
 Think hard about what it’s really going to cost
to develop your game. (e.g., $300K)
 Then think hard about the minimum you need
to make your game. ($130K)
 Now cut that in half ($65K), because there’s
bonuses to hitting your goal in the first week.
 Remember that the Ask should be inclusive of
Kickstarter fees (~10%), federal taxes
(~20%+) and rewards (~10%).

65. Build An Audience Before Launching
 Build a Twitter following
 Build an email list
 Attend conventions

66. The Copy
It has to look good. It has to appear
professional and eye-catching.
But no one is going to read it.

67. The Copy
 The body copy is your store window, so
window dress.
 But don’t expect people to do a deep dive and
read every single thing. Communicate as
much as you can visually.
 Motion! Excitement! A static page is for a static
project and your project is EXCITING. Be
confident!
 Watch the character limit!

68. Example of A Well-Design Page

69. The Video
Your video is a commercial for the rest of the
page. If it’s a bad commercial, potential backers
‘change the channel’.
 Take time to do it right.
 Keep it short: less than 3 minutes. 2 if you can
swing it.
 Get to your gameplay footage fast. (Secret:
Most gameplay footage is faked)
 No talking heads. Your game is more
interesting than you are.

70. Example Of A Successful Kickstarter
Video

71. Too Much Story

72. Gameplay Too Late

73. How About This One?

74. Let’s Go Viral

75. The Rewards
They have to be cool enough that people want them
BUT they have be cheap enough that you can fulfill &
ship them.
 Find items that are valuable to your audience, not
just expensive.
 Get quotes on EVERYTHING. Call up multiple
print shops or shirt printers.
 SHIPPING! Take your hypothetical package to the
post office website and see how much it’s going to
cost you to send.

76. The Rewards
Physical or digital rewards
given to backers based on
pledge amounts.
Each reward tier usually
includes rewards from
previous tiers
Additional info: Estimated
delivery date, shipping
territory, quantity
available.
Pledge Reward
$5 Exclusive digital wallpaper
$15 Digital copy delivered on Steam
$25 Elite version of the Grappling Hook
In-Game Item
$30 Name in credits under “backer”
$35 Digital Art Book
$50 Closed Beta Access
$65 Elite Avatar Skin
$75 High resolution digital map
$100 Printed art book
$125 Signed printed art book

77. Successful Campaign Example

78. Launch
 The first 48 hours are critical for collecting money.
 Launch on Monday-Wednesday.
 Don’t launch on a holiday or the same day as any
big events or game releases.
 Projects seem to fund more often in the summer,
not so often in the winter
 Tweet and email mailing list as soon as the
campaign launches.
 You’ll know in the first 3 days whether your
campaign will be successful.

79. During Campaign
Running a campaign is a full-time job!
 Answer e-mails, questions on Kickstarter,
Twitter and Facebook.
 Get in touch with the press, bloggers and
more.

80. The Community
Warning: The community will take a sense of
ownership in your game. Be careful about
posting your *ideas* for game features
because they will take it as gospel, and if you
don’t implement them, they will come after
you.

81. Stretch Goals
Additional
features to will
implement once
money is raised
beyond the
original goal.
Goal Feature
$50K Goal Reached
$60K Artbook upgrades to hardcover
$70K 2nd Playable Character
$80K Nightmare Difficulty Mode
$85K Voice Acting: David Hayter
$100K Cheat Codes
$125K Local Co-op
$150K New Boss
$175K Speed Run Mode
$200K Boss Rush Mode

82. Stretch Goal Objectives
 Get new backers to pledge to your
campaign
 Get current backers to pledge more about
your campaign
 Get your backers to talk about your
campaign
 Get the media to talk about your campaign

83. Stretch Goal Types
 Straight Additional Stretch Goal
 Adds value to all backers
 Extra levels, better music
 Motivates backers to spread the word
 Segmented Additional Stretch Goal
 Adds value to only a subsection of backers
 Port to a new platform, additional language
 May bring in some new backers
 Incremental Rewards Stretch Goal
 Adds value to backers who increase their pledge
 Additional content added to a new reward level

84. Stretch Goal Rewards
 Extended Content (Straight Additional Goal): More levels in a
platformer, more campaigns in an RTS, an extra character in
a fighting game
 Exclusive Content (Incremental Reward Goal): Variations of
existing content that can easily be produced.
 Improved Content (Straight Additional Goal): Taking existing
content and making it better.
 Port To A New Platform (Segmented Additional Goal):
Consoles, Mac, Linux, Mobile
 New Language (Segmented Additional Goal): Spanish,
Chinese, Arabic, Klingon
 Physical Content (Incremental Reward Goal): Game box, art
book, t-shirt.

85. Stretch Goal Scenarios
Don’t announce your stretch goals at the start of the campaign!
Scenario 1: Your campaign barely makes it.
 You don’t need any stretch goals (or maybe just one at the end).
Scenario 2: Your campaign is funded mid-way.
 Have relatively small stretch goals, and maybe an ambitious one at
the end.
Scenario 3: Your campaign is funded in a few hours.
 Have some small ones you can meet right away, and then space
out ones of different financial sizes.

86. Stretch Goal Tips
 Treat stretch goals like mini-campaigns in
themselves
 Focus on what the community wants
 Think through how would-be backers
interested in them will hear about their
existence

87. Marketing, Not Just Money
Crowdsourcing is generally thought of as a way
to procure a budget for your game, but it's also a
great way to create awareness.
 Forces you to create a product description and
video
 Can get your website hits
 Open communications with a lot of other
developers
 A lot of other journalists keep up with new
campaigns

88. Common Pitfalls
 Not delivering what was promised
 Underestimating the effort involved in
keeping a community happy.
 Managing expectations.

89. Group Quest
Create Kickstarter pledge rewards and
stretch goals for your game.

90. The Ethics of Kickstarter

91. Alphafunding
Like crowdfunding, except that you provide
fans with an incomplete game, and they fund
its completion.
Mid-sized online distributors like Desura offer
this service.

92. Boss Battle Ahead!
There will be a test on Levels 1-3 the next
time we meet!

93. Away Mission
Analyze a Kickstarter campaign.