Facts About Video Game Funding and Financing

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Facts About Video Game Funding and Financing
source: finance-monthly.com

There are several types of investors for video game development. A non-specialized investor focuses on a specific market, focusing on a quick return on investment. They have a limited understanding of game pricing and are more concerned with the final result.

It takes work to fund your game; this content guide from the professionals like Xsolla explains everything you need to do to get started.

Table of Contents

Subscription streaming services

Subscription streaming services are a new way to watch and play video games. In theory, subscription services could be a more cost-effective way to distribute content than traditional methods. Original content is significant in this context, as it can lock down exclusive titles, allowing for a more competitive market. Sony and Microsoft have subscription streaming services, while Alphabet, Apple, and Amazon are all rumored to be working on their subscription services.

Major game publishers are jumping on the subscription streaming bandwagon. Amazon’s new service will make modern games available for less powerful devices. And Google is rumored to get top-tier games to run on the Chrome web browser. If these services continue to evolve, subscription gaming may be the future of video game development.

Equity financing

Obtaining video game development funding is a challenge. Unlike other businesses, video games are high-risk investments and often unsuitable for conventional financing. Traditional funding focuses on companies that can generate income immediately. However, video game development requires innovative solutions that take years to create. As such, it is essential to seek expert advice to secure the best funding.

Depending on the type of video game development, you may want to consider either debt or equity funding. Although debt financing is a better option for mobile games, equity financing allows game developers to keep creative control and intellectual property. In other words, an equity-based funding model is a long-term partnership.

Debt financing

Video game developers often use debt financing to fund their projects. However, these loans are not without their risks. They come with interest charges and arrangement fees. These charges can significantly reduce the available cash for the game’s development.

Additionally, debt financing is more challenging to secure than equity funding, as it is often considered riskier for game developers.

In some cases, developers use publisher financing to fund their projects. This type of financing is usually better suited to PC and console games as these games require a substantial support infrastructure after release. However, publishers prefer developing social games in-house rather than hiring outside developers. In these cases, a development studio without access to alternative funding sources will not be able to take advantage of the burgeoning market for social games.

Grant funding

The National Endowment for the Arts has expanded its video game grants to include interactive works of art. These programs aim to harness video games’ power to address pressing issues. To this end, the organization sponsors ongoing programs, workshops, and consulting services that assist game developers in developing social issue games. It also maintains a social and material-world network for regional funders to share ideas and collaborate on projects. At its flagship annual festival, the group organizes a session for game developers to seek grant funding.

The gaming industry provides much of the funding for these programs. The funds will also support education, media creators, and tool developers. To apply, game developers should follow the easy and detailed application process.

Self-funding

Video game development is not cheap or easy, and even a modest game requires much attention, hard work, and funding. Thankfully, there are many ways to finance and get your game out into the world. Self-funding is one of the most common ways to make a game, but there are also disadvantages to this method of funding.

First of all, video game development is a risky business. It requires careful planning, development, and marketing. As a result, most video games are unsuccessful, despite the significant investment they need. In the past, big studios such as Sega and Nintendo would provide funding, but now developers have to find their budget.