There’s more than one way to approach budgeting, primarily depending on how much relevant information we have to base budgeting decisions on. The more relevant information we have, the easier it is to make budgeting decisions. Examples of relevant information would be business info like how much it cost to make and market the previous title, the demographic data on the previous title, current and projected market trends, but also internal info like what our development team wants to do, what our technical expertise is capable of, how much hiring we would need to do for this new project, and so on. The relevant information is used to set our [budget upper bound] - the numbers we can expect to see if we carry the project out to completion.
This means that the easiest projects to budget for tend to be annual release games like Madden and FIFA and long-running lifestyle games like World of Warcraft or League of Legends, where we have a very well-established audience and very well-established working parameters. We have experienced teams that know how to do the work, we have established metrics for measuring success, we know who our audience is and they generally trust us to deliver a consistent product to them. It is very easy to green light another another Call of Duty or Madden game because it is a reliable workhorse that is about as dependable as they come.
On the opposite end of the spectrum are the experimental and brand new ideas that the executives aren’t so sure about. We aren’t sure who the audience is yet, we aren’t sure how much work it’s going to take, we aren’t even sure if we have the expertise to make the kind of game that we’re trying to make. Rather than commit multiple millions of dollars to building and marketing an unknown new game, the publisher often takes a Venture Capitalist-like approach to these experimental games. What this means is that they don’t fund the entire project at once, but instead fund the project milestone by milestone (e.g. build a prototype to show the core gameplay, build a [vertical slice], etc.).
Whenever a milestone is reached, the executives and the team leadership hold a milestone review where the executives can see the progress made over that milestone period and decide whether the project continues. This way they can cancel the less promising projects without spending too much on them. The reasons can vary - it could be that the project isn’t turning out the way the executives expected, it could be that market trends have changed, people have gotten sick of this type of game, or even external events happening like the Russia-Ukraine war, a terrorist attack destroys the world trade center buildings, or a massive economic recession happening. This also means that projects can alter their direction based on feedback from these milestone reviews, like taking on a license, adding major requested features, changing core gameplay, and so on.
As you might guess, most games fall somewhere in between these two cases, usually on the milestone-by-milestone side. Many games get cancelled early on, like when their prototype or [vertical slice] doesn’t turn out to be very compelling. Many others get the plug pulled due to external factors beyond their control, like the company running into cash flow problems or market trends changing. Generally, the budget is mostly locked by the time the game is announced to the public. The initial game announcement is the publisher committing marketing money on top of development money, which means they are pretty serious about it.
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