The ABC’s of Running a Development Project

and

The ABC’s of Running a Development Project
By Perry Rodgers and Marc Mencher

3. Executive Summary
This document should convey an overview of the business points of the deal. This should include the name of the developer, the development costs and royalty rates, marketing commitments, the anticipated Gold Master date, the results of a ROI (return on investment) analysis that notes the breakeven point and potential profits for moderate, good, and great sales, and data on competitive titles. Though beyond the scope of this article, you may want to include the actual calculation of the ROI that accounts for development costs, marketing costs, costs of goods, overhead, etc. for support. TRST sales data is useful in compiling data for competitive titles.

Let’s look at an example:

BIG TIME RODEO

Executive Summary

Developer:
BestDigital

Deal Points:
- $200,000 prototype fee advance against $5 royalty for 3 month effort

- Additional $1.5 Million advance against $5 royalty per unit for full development assuming $32 wholesale.

- Marketing guarantee of $500,000

- Gold Master target: September 15, 2001

ROI:
75,600 units breakeven
100,000 units + $250,000
250,000 units + $1,750,000
500,000 units + $4,000,000

Competitive Analysis:
Direct:

None

Indirect:

Rumor that Company X is making a 3D Wild West adventure title.

TRST data:

Bronco Bust Up 431,230 units
Company Y
PlayStation
1998

THE DEVELOPMENT COMPANY AND TEAM

Whether you are looking for a team to develop your concept, or a team has come to you with an intriguing idea, it is essential that the developer and team is thoroughly evaluated. Think of this as an interview. The company and team is, of course, just as important as the vision -- it will bring the vision to life. Find out how the developer is financed. Are they going to be living paycheck to paycheck, or do they have some reserve cash? This will be important when considering milestone descriptions and the accompanying payment schedule for the developer. It is also important to spend quality time with the team and individual members of the team. Know each member’s strengths and weaknesses. What drives them? How do they work together?. In getting to know the team, you can assess potential risks for the project. See that the team is passionate about the vision and have the skills to execute it. Technical considerations are significant as well. Will the team be able to use an existing engine to develop the game? Do they have adequate tools?

A key at this point is to define the roles for the team, including that of you, the Producer. Good communication is more than essential. Each member of the team should have a clear understanding of who is responsible for each task on the project and who has authority in a time that a tough decision needs to be made. Discussing this up front and having this understanding will help to prevent conflicts throughout the course of development.

It is recommended that the following information about the developer and team be obtained as part of the evaluation process:

1. History and Interests of the company
When was the company founded?
What products has the company developed?
Which companies/products did they enjoy working on most and why?

2. Assets and Intellectual Properties
Does the company own assets (building, equipment, etc.)?
What Intellectual Properties does the company own? Game engines? Characters?

3. Financial Matters
Financial statements and accounting processes are useful in gaining an understanding of the developer’s monthly costs and to determine the financial security of the company. A good developer will not resist supplying a breakdown of the monthly cost for a development team. Also inquire about long and short term debt.

If there are external investors, determine their interest and expectations in the company. Are they knowledgeable of the industry? Do they believe in quality product?

4. Legal Matters
Determine if there is or has been any litigation between the company and other companies or former employees.

What is the company’s lease agreement? You do not want your team looking for a home at the end of the project.

5. Team a. Size of team
Is the size and constituency of project managers, designers, programmers, artists, and musicians sufficient to realize the vision on time and within budget?b. Capabilities of the team members
A resume or detailed profile of each team member can be useful. Determine how each team member will contribute, their strengths, weaknesses, interests, etc.c. FMV and Music
Does the developer have internal resources to develop these assets or will they contract this work out. With whom have they worked with in the past? If music is to be licensed, who will be responsible for the costs?

6. References
Ask for references, especially those of other Producers that have worked with the team. Then call each and find out what you can about the team’s interaction with these Producers, their work ethic, how they are motivated, etc.

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