Risks versus Returns


This is the single most important consideration, and one of the cornerstones of any business. The higher the risk, the higher the expected return must be; the larger the investment, the more important it is to keep risk low, or at least manageable.

All investors will need to evaluate the risks associated with your project. Provide them with the right information to allow them to evaluate the potential risks versus the potential returns of your venture.

In general, videogames are considered a risky investment. Compared to some other domains, they carry a relatively low cost in equipment and a very high cost in human resources, which is what investors tend to shy away from. While it is possible to recover assets from a failed project and re-use them or re-sell them, the money gone in salaries is a loss; when making videogames it represents the largest chunk of the budget.

Another concern is that many games lose money. A good product is not enough: you also need good marketing, because companies are competing for shelf space in retail stores. Generating expectation from the customers, as the movie industry has done for years, has become indispensable. From an investor's point of view, there are many ways that this process could go wrong.




Secrets of the Game Business
Secrets of the Game Business (Game Development Series)
ISBN: 1584502827
EAN: 2147483647
Year: 2005
Pages: 275

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