One of the biggest challenges for a social or mobile game company is managing the challenges of an industry that is hit-driven. Understanding the laws of probability is a good step in overcoming this hurdle. Since the beginning of time, game companies have been struggling with the hit-driven nature of our industry. Although new markets and technologies (e.g., casual, social, and mobile games) held out the promise of not being as hit-driven, they all ended up having a few titles drive the majority of revenue. The number I use is that 25 percent of games will break even or make a profit after launch (without accounting for development expense); this means that there’s a 75 percent failure rate. (I have heard estimates that as many as 90 percent of game projects fail and I would not argue strongly against that number, but for the sake of analysis I will use a success rate of 25 percent.)
The argument for taking a portfolio approach
Basic probability theory shows the importance of having multiple independent game projects to improve your company’s chance of success (more on independence later). By using probability, the benefits of taking a portfolio approach become clear. Continue reading “Using probability to build a game portfolio likely to succeed”