First rule: Context is everything
Building a revenue forecast in today’s video game industry is challenging, even for AAA studios with big teams. There are a lot of factors involved, and noise can creep in from anywhere and everywhere.
For indie studios, the challenges are even greater because of the uncertainty that’s all around: in your game, your market, your ability to reach that market, and a million other issues.
Still, having a minimum viable revenue forecast is critical, both for your team and for any potential outside investors.
So here, I want to cover a series of “best practice” steps to help you create a revenue forecast for your PC/console indie game. Hopefully it will help you to see the path ahead more clearly, giving you confidence that your game can succeed and standing up to the scrutiny of outsiders.
<Who are you?>
For the purposes of this article, the answer should be “an indie gaming studio” - not because that’s the only use case, but because that’s what we at Nocturne know best!
Thinking this through, though, is still important because it will impact the data you’re looking for in order to build your forecast.
You don’t want to compare your game to the latest AAA releases, and you probably don’t want to compare it to well-established IP.
Instead, you want to compare your studio to others that have aimed at a similar PC/console market:
- How many wishlists / followers can you get?
- How many units tend to be sold? At what price points?
- How much total revenue was generated?
When looking for data, focus on games that had similar features, scopes, and price points. If you’re creating a 2D city builder with a colony sim component, for example, don’t go looking for data about Anno or Rimworld.
You need to understand your studio identity and realistic goals in order to set the right expectations.
<Who is the revenue forecast being created for?>
If you’re planning on self-publishing (which you should ;), your forecast is going to look different than if you’re planning a roadshow to try to convince a publisher to sign you up.
On the self-publishing track, your revenue forecast is first and foremost for yourself and your team.
So you’ll want to focus on goals that match your studio’s needs: audience building, acquiring player feedback as early as possible, getting on wishlists and visibility, and other self-publishing levers such as platform, revenue percentages, etc.
These are more important for you than a studio trying to sign with a publisher because they’ll help you set useful milestones that can push your game towards a successful production and launch process. It will also help you build the necessary process and skills leading to self publising.
<What do you need to include in the revenue forecast?>
Now, the real details. Let’s start with a series of questions that can help you start putting the proverbial formulas into cells.
1. Comparisons
Start with your game’s concept.
- What are ~3 main titles you’d directly compare it to? Remember to compare to other efforts of similar size; there’s no point in comparing yourself to Total War if you’re actually releasing a $20 RTS.
In that same vein, don’t compare single-player to multi-player, 2D to 3D, cartoon to realism, or your 2024 release to the big indie hit of 2013. Get as much data as possible on those direct comparisons, as they will help give you a realistic picture for your expectations.
- Then, to go further, what are 8-10 references that are somewhat similar to your game? Take a look at their available information as well, as it will help give you a broader view of your reference market, addressable audience.
- Based on your gaming experience, what price do you feel is justified? Why? What do you think is the maximum realistic one?
- What possible competitors are being released in your segment over the next ~6 months? Does your concept have something unique that can boost its performance in comparison?
When you put on your forecasting hat, you need to think like an accountant, which means with precision: use one currency (€ or $, most likely) and stick with it; remember to calculate net revenue by removing storefront fees & taxes; etc.
You can find useful templates like this one from Julien Cotret / Altshift to help you.
2. Costs
While it’s fun to think about successful games and how yours could do even better, it’s not as much fun to think about costs.
But these are essential elements of your initial revenue forecast, and your future self will thank you for being as accurate as possible.
- What is your monthly cash flow during the production period? During the release period (+3 months post launch)?
- Have you thought about all costs: staff, outsourcing, licenses, fixed costs, variable costs, etc.?
- When self-publishing, you have to take into account various needs: FQA, LQA, CQA, translation, community building and marketing, FTUE, UX testing…
Don’t forget you act as your own publisher: what will be the cost of building a demo (testing, translating it maybe?), assets and trailers, being present to shows & actively promote the game, etc.
3. Pricing and volume
Use sources like SteamDB and Game Discover to understand the competitive pricing landscape. This will give you data about initial price points, floors and ceilings for similar games, etc.
You can then use sources like VGInsights and Gamalytic to get a clearer picture on copies sold on a monthly / yearly basis.
Use this information to consider your own release. Where will it be released? Are you on multiple platforms? How does your platform strategy impact your costs?
When will you be releasing your game? Can you avoid bad moments, like Q4 when you’ll be competing with a bunch of AAA behemoths (not to mention the expectations around massive discounting periods like Black Friday)?
Can you reduce costs with a favorable calendar to release, or are you going to have increased costs due to unfavorable timing?
All of this information help you start to estimate performance over time, giving you a holistic view of financial health over the next, say, 3 years. Make sure that you’re using realistic unit / revenue targets.
“But how do I know what’s realistic?!?”
Some indie gaming industry-standard tips to help:
- If your title is released at $29.99, don’t calculate revenue based on the full price. A 40-50% discount (thus a $15-20 range for revenue) is a better starting point.
- The first month of sales is likely the strongest; Month 1 to Month 2 typically sees a ~50%+ drop in units sold.
- Over 3 years, most games will generate 60-70% of revenues in the 1st year. The 2nd and 3rd years are typically marked by discounts and DLC strategies.
<Plan, then execute!>
Video game revenue forecasting is, to say the least, not an exact science.
The landscape is riddled with outliers and specific cases, and there’s pretty much a 0% chance of things going according to plan.
But that doesn’t mean it isn’t key.
- First, a solid forecast should give you confidence that your overall strategy and tactics can produce a financial success.
- Second, the exercise itself should help you think more clearly about what you need to find that success, both in terms of the game itself and the environment in which that game will be released.
By cutting down on noise and understanding the context in which your indie game will find its fans, you’ll be in a great position to start the number one, indisputable, absolutely necessary thing for creating a successful indie game: execute!
Good luck!