top of page

The Indie Gaming Gold Rush

Updated: Jun 26, 2020

In July 2008, the introduction of the Apple App Store led to the proliferation of all kinds of smartphone applications, but a commonly overlooked beneficiary of it was the independent videogame (indie game) developer. The App Store represented the first time an indie game developer, one that has significantly less financial backing than the major videogame studios (like Activision Blizzard and Take-Two Interactive), could distribute their videogames to a massive audience outside of one of the major consoles.

Now just over a decade later, with the release of Apple Arcade (Apple’s subscription indie game library), Epic Games slashing their revenue split to 12% (below the 30% industry-standard paid to the stores) for their online store and Google Play’s Indie Games Accelerator going global, it is clear the era of indie game popularity and profitability is just beginning.

Industry History

In the early 2000s, making money as an indie game developer was difficult. The sales and success of indie games were constrained by the size of the mainstream console market and physical retail stores that distributed them. Online stores and platforms like Steam existed, however the cost of bandwidth and the prohibitive expense of computing gear that could provide a quality experience at the time was too high for the majority of people to afford, limiting that market.

In 2009, 23 million PlayStation 3 consoles had been cumulatively sold in the previous three years, while around 17 million Xbox 360s had been sold in roughly the same period. This meant that indie game developers were limited to selling at most 40 million copies of their game at that time, assuming they had spent the necessary effort and resources making two different versions of the same game to be compatible with both consoles. 

Competition with the larger studios and managing supply chains were also constraints on indie developers’ businesses. Indie game developers had to release games into markets dominated by Triple-A (AAA) games (games created by the largest game studios with massive production and marketing budgets). These included franchises like Call of Duty, Grand Theft Auto and NBA 2K.

Triple-A games typically dominated the physical retailers that developers wanted to release their game into. Just to get the games into the retailers, these developers would also have to manage a supply chain to create the physical games (assuming a major retailer would give them shelf-space). The combination of all of this made profitability and survival challenging for many indie game developers.

The Rise of Cloud Gaming and Games-as-a Service

“Cloud gaming” or “Games-as-a-service” are two relatively new business models that are becoming pillars of the global gaming industry. Cloud gaming is where a company, like Valve (Steam), Google (Stadia), Microsoft (xCloud) and Apple (Apple Arcade) allows their users to play games through their servers remotely on any device or computer the person likes. The company providing the service manages the backend of the service and servers, periodically improving them, and charges its users a monthly-subscription fee at its most basic level.

This model of cloud gaming platforms is displacing the use of consoles. “Games-as-a-Service” is a developer-level business model where an established game is maintained, updated and has new content introduced periodically to retain players and monetize the game over a longer period. This has allowed developers to avoid the prohibitive cost and risk of having to launch new games every few years to maintain revenues.

One of the best example of a "games-as-a-service" title would be Grand Theft Auto V. It was first released in 2013 and within a year sold over 34 million units and pulled in nearly $2 billion in revenue. By May of 2019, six years later, the number of copies sold and revenue has tripled to 110 million units and $6 billion cumulatively. Its ability to maintain strong sales so many years after its launch has been unprecedented.

How do these Trends Benefit Indie Games?

With Apple, Google, Microsoft, Epic Games (Tencent), Valve & Sony pursuing cloud-gaming business models, the limiting effects that video game consoles have had on indie game sales are dissipating. The ability for gamers to “play anywhere” and on any device and the rising popularity of games amongst casual gamers has become a tailwind for indie developers who have typically focused on creative, innovative and simpler experiences.

The rise of games-as-a-service is also allowing indie developers to increasingly monetize their existing games instead of having to take high-risks launching new games periodically to stay in business. One indie games-as-a-service developer success story is Ndemic Creations which has maintained an active community for its mobile game “Plague Inc.” years after launch. Most importantly, the dwindling importance of console sales and disappearing distinctions of how the games are distributed is leading to the focus of differentiation amongst the largest gaming platforms falling on the quality of the content they offer. This provides for indie games to attract a huge new market opportunity.

The effects of these trends are already taking shape. Since 2014, Microsoft’s indie games self-publishing tool ID@Xbox has paid out more than $1.2 billion to indie game developers. Apple’s decision to launch its cloud gaming platform being exclusively comprised of indie games is another example. Further proof would be Epic Games’ recent action to undercut the industry-standard revenue share rates, allowing developers to retain 88% of revenues earned on the platform instead of 70%. This was done entice indie developers to either exclusively put their games on the Epic Games Store or put their games on earlier to receive more of the sales proceeds

Final Thoughts

While indie game developers are experiencing many tailwinds, it is still to be determined whether indie developers on these subscription-based platforms will find Bluehole Studio PUBG-like success or face the same fate as many indie artists on Spotify. This will largely be determined on the terms of the revenue-sharing agreement between the videogame developers and the cloud gaming platforms and whether the success of different games forces platforms to make revenue-sharing terms even more favourable to developers in the future. There still has not been a better time in history to be an indie game developer.

bottom of page