How Companies are Funded and Make Money

Sales:

Initial sales are the main source of income for most AAA titles, big name companies such as Ubisoft and Rockstar will spend millions on developing and advertising their products getting the name out around the world. Rockstar spent well over $250 million developing and advertising GTA V making it the most expensive game ever, however in its first day on sale it hit around $800 million in sales.

Merchandise: Many companies sell merchandise such as shirts, hats, stickers, posters, phone cases etc. Some of these companies have their own stores to sell merch because this way they can decide the price and also how many to print/make but some, like disney for StarWars, sign contracts with websites/companies like designbyhumans.com because it means less work for them.

Publishers:


A Publisher is the company with the financial risk, so if a game flops they are the ones that lose a lot of the money. When a Development team want to make a game to release, the ask a Publisher for the funds to fund their production, if a Publisher agrees, the Publisher will give the Development team a budget to work on the game, while the game is nearing completion the Publishers deal with the commercial side of the game, which includes advertising to help sell the game which is why the Publishers are helping the developers, to make money. Another thing a Publisher does is pays game shops to clear out a section of the shop and fill it with merchandise of the game is the Publishers want to as it could cost them quite a lot of money to do this. So in turn a Publisher deals with the financial side of the game making process whereas the developers deal with the development side of game making.

Advertising and Sponsorship:

In-game advertising-

This is where they will advertise products in the gameplay of the game. This is generally a subtle way of advertising, e.g the product logo may appear on items throughout the game (billboards, posters, in game merchandise etc..) or the player may interact with the product several times in game.

Advergames-

This is where a games company will be paid to create a small game that will advertise the company, these games are generally small mini games on a company's website.

Through the line (TTL) advertising-

This is an uncommon form of advertising, where there will be links within games that will take you to the company's product and website.

FIG:

Fig works with developers every step of the way: from providing development advances funded 

through its crowdfunding campaigns to providing publishing and distribution support when games 

are ready for launch, all the while bringing the community of fans and gamers along the way.

FIG was created to change the way games are made it is a crowdfunding site that was formed 

from some of biggest crowdfunding game makers such as Tim Schafer and Feargus Urquhart. 

They made the syte exclusively for games crowdfunding and will have a board of people who 

review each game to decide whether to approve them.

Creative England:

Creative England has, for the third year running,  partnered with Microsoft to develop Green Shoots, a programme of financial and business support intended to stimulate the commercial development and growth of the games industry in the English regions, outside of Greater London. 

The programme provides investments of between £25,000 and £50,000 to games companies that demonstrate high growth potential.

The CE Game Development Fund is intended to stimulate the commercial development and growth of the games industry in the English regions, outside of Greater London, by providing investments of between £50,000 and £150,000 to game studios that can demonstrate high growth potential.

Through this fund investments of between £50,000 and £150,000 will be made for the development and commercial release of new game IP.  Investments will be made on a commercial basis under a revenue share scheme. 

Contracts:

A natural person, business or corporation which provides goods or services to another entity under terms specified in a contract.

Under a contract, the contractor agrees to give the money and supplies needed to the contracted company so they create a product (or in this case a game) and then gain profit from it to fund the next contract. The game company gains money by being supplied with the required amount to start a project and then gain a profit to support their company.

Patreon:

Patreon is a way to fund your favorite creators e.g. youtubers or twitch streamers, twitch streamers are paid by subscription from fans. The fans basically pay like $5 monthly to support their favourite streamers so they can still stream for your pleasure and some streamers also give the subscribers give benefits like sometimes they will play games with their subscribers and talk to them. Also streamers do competitions giving away expensive goods such as games headsets and even consoles to the winners. 

Crowd Funding:

The company sets up a kickstarter page and people from the public can back the project and pledge money. When the funding goal has been reached the backers credit cards will be charged when the time on the page has expired. If the project does not reach the goal no one is charged. Stretch goals allow more content in the game to be added even after the project has reached its original goal. Another way for the developer to get more funds.

Grants / Tax Relief:

Grant is an amount of money provided by the government, local councils and charities to an individual / business for a project or purpose. Whilst you do not need to pay a grant back, they are often difficult to have accepted as there is a lot of competition.

Advantages

Do not have to pay a grant back or pay interest on it
Do not lose any control over your business

Disadvantages

Locating  a grant that suits your specific project
There is lot of competition for grants
The applicant often is expected to match the funds you’re awarded
Grants are usually awarded for proposed projects, not ones that have already started

Application process is potentially time-consuming

Early Access:

Early access is a funding model used in the games industry in which customers can pay for a game in its early stages of development and obtain access to playable but unfinished versions of the game, while the developer is able to use those funds to further develop the game. Early access is common amongst indie games to obtain the funding to finish those games.

Example Games:

DayZ, A multiplayer zombie based game gained more than 400,000 sales within one week of being in Early Access

Kerbal Space program,  followed a similar model to Minecraft and eventually moved onto the Steam early access program where it sold millions of copies


Prison Architect, which has been able to raise about $8 million in revenue from more than 250,000 sales in early access