Small Studio, Big Decisions: OPM = Opium

I was driving down Hastings St. in Vancouver.  I just passed Main St., headed east, and was looking at the people on the sidewalk.  If you know the area, you know it is not a nice part of town.  It is the skid row where all the drug-addicted members of society come together.

I could see all these people at various points in their decline and I wondered, "How does someone end up here? Do they know when they take their first ‘hit’ that this is where they are headed?”

Then I had a shocking realization.  This was me.  This was my company.  My company had become an addict and didn't even know it.  We were not hooked on any amphetamine or opium products.  We were addicted to OPM.  OPM is an acronym for "Other People's Money".  Any time you spend money you don't control, that's OPM.  In the video game industry it usually refers to publisher money.

When making decisions for a young game development studio, the decision to take Other People's Money is one of the most important decisions you make.  It is more important than most people realize at first.  It may set the direction of your enterprise forever, just like drugs can set the direction of a human life.

When you are setting up a studio and wondering where the money will come from, you may consider OPM in any of the following ways:

This is what I thought, but beware!  It is a trap!

In this article, I am going to describe the trap and how you can fall into it if you're unprepared.  Then I will prepare you to recognize the trap so you can avoid it, or jump in head first.

Understanding the Trap

Taking other people's money can trap you by allowing you to build a team and a studio that requires a continuous cash flow to support it.  The cash you make working for someone else will not give you enough freedom to break the habit.  You will always need new sources of income to feed your expenses.  

The process of building a small studio is different every time, but some elements are common.  Presuming you are not already backed by a major investor or publisher then all you have is the money you've been able to save to start your enterprise, and the money of your partners.  For those of you in this situation or those of you who dream of being in this situation I'm going to explore the sequence of events you'll encounter.

If you take an OPM project you will reach the end without much more money than you start with but with a whole studio of employees and expenses.  See this handy table to see how easily this can happen to you!

Now you're at the end of the cycle and you have to decide what to do next. Here is the trap in a single sentence...

You will have to lay-off your friends if you don't get more money soon.

You can't afford to continue to pay the people you hired with the OPM from your first deal.  Laying them off or taking another OPM deal to pay for them are your only options. There are lots of reasons you will not want to lay-off people too.  Some of them were your friends before you started your studio and the rest have become friends over the last year making a game with you. No-one wants to do something like that to a friend.  Laying off people and shrinking the studio to a manageable size will be seen as a failure by friends, family and colleagues.  It will be professionally and personally embarrassing.

On the other hand, you can make everyone happy (except your creative self) by just signing up for another OPM deal.  If you did well on your last project, this one might even be bigger than the last, which will make the trap that much more difficult to escape next time.

So What are the Options?

Now that you understand the trap you can make your own decision.  There are two options available to you.

1. Take The Money
     The risks are lower and you can make a lot of money this way.  Also, you're far less likely to lose your shirt.  Since you know what you're in for OPM stops being a drug and starts being food. There is nothing wrong with using Other People's Money to make Other People's Games.  After all, I did that for years and it got me everything I have today. 

2. Take Independence
     This is a much slower path.  Taking the money is far quicker, easier and more seductive.  Find partners who are financially stable and who share your vision.  Make them shareholders rather than employees.  Keep your team and project scope small.  Only if your games are successful will you make money.  Not only are you free to be creative, but you must be.  You won't be able to compete on anything else.

Conclusion

Ultimately making other people's games wore on me but I didn't see the trap until it was too late.  It's just like a person at a party taking their first hit without knowing that they're going to end up on Hastings St. This is one of those things where knowing really is half the battle and now you know.

Taking Other People's Money doesn't set you up to do your own games, it sets you up to do Other People's Games again.

Keep your eyes open, stay informed and make the decisions that are right for you.

Jesse Joudrey got his start at Electronic Arts Canada in Vancouver before co-founding his first studio in 2004. A.C.R.O.N.Y.M. Games grew from 2 to 42 people before his departure in 2013.  His second studio, Jespionage Entertainment, is focused on mobile development in Unity.
You can follow him on Twitter - @JesseJoudrey or visit the Jespionage website at http://www.jespionage.com