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Ramblings on Recession effects on Indie Startups

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There are some people here (not me) who are interested in starting up a small games business. They might be discouraged to do so due to the recent economic downturn, recession. But to me, this is good news for a start up indie games company and start ups in general. Here is why I think such is true.

  • Recessions hit those conglomerates and massive businesses (and those smaller ones dependent on them) hardest. During these times it is difficult to find jobs thus in terms of risk, striking out on your own is less and there is less harm and more opportunity in trying that idea of yours. Who knows, people may like it.

  • Economic recessions are a weeding out period, only the smart, lithe and agile companies survive. As a small developer you will be more situated to have quicker response times and better able to try unique approaches. Now your small size is your advantage.

  • Rates and offers from banks although harder to come by also tend to be more reasonable. Money is also more easily acquired from the government seeking to stimulate the economy. However loans should be avoided unless absolutely necessary - sometimes it pays to grow your business organically (and grow with it too), especially with deflation concerns in the forecast. This whole craze for Instant multi-million companies is to me quite childish and more importantly less sustainable.

  • Recession and specifically deflation means the value of money is increased, the cost of goods is generally less but also money is scarcer. There also tends to be less liquidity in the economy. What this means is that people are tending to save more. Due to having less expenses you can offer games at reduced prices. People will be more likely to thrifty spending and less to luxury spending and more likely to look elsewhere at less pricey items for leisure.

  • Finally and most morbidly, the job outlook for the future is apparently grim. Layoffs and hiring freezes at their highest rate in a long time. More people than ever claiming job benefits. More people at home with nothing to do and less money to spend. Making them more frugal and selective in their spending. Catch their attention and create balance in the universe by turning their losses to your gains.

And as a useless note that sounds like a quote out of a book by Captain Obvious but still worth pointing out: As an indie your chances are increased by making it so your game has mass appeal. The game should be non intimidating/have an intuitive friendly interface and also stand out by having great talking points - aspects which people want to talk about, argue on, comment on and share with their friends. Word of virtual mouth will be your friend there. Generally games which require less sustained time investment, with a brighter palette and 2D more cutesy graphics seem to have that universal appeal.

Another one is to be nice to people who took the time to use your stuff. Feedback is vital in Nature's Evolution and also for your game's. Responding to criticisms and complaints in a balanced manner will polish your product and make it compositionally more appealing further increasing your market base, developing your brand and building a company around it.
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Although I can appreciate your wanting to find the silver lining in the situation, I'd like to make a few counterpoints.

- saying that the massive corporations are hit the hardest because they have more to lose is like saying a 400 lb man is hit the hardest after being deprived of food for 10 days because he lost 100 lbs and lived, whereas the 200lb guy lost 50lbs and died.

- the very best time for start-ups is under a booming economy where people are able to take risks without the fear of being completely ruined. Naturally this doesnt mean people don't or shouldn't take risks at this time, I'm simply stating that on the scale of best to worst times, this is much closer to worst than best.

- recessions do not serve as a weeding OUT period where only the smart and agile survive. Recessions are a weed IN period where the thick ravenous patches of weeds start to consolidate their hold on the entire garden by consuming all the budding flowers until there are only weeds. Turn on the news and look at all the consolidation that is occurring in nearly every sector of the economy. These mega-corporations are responsible for getting us into this mess and the answer seems to be, let them grow even bigger.

- you didn't say deflation == recession but in case anyone else is confused, recession is a certain period of slowing or negative economic growth depending on which economists you talk to. Before I get to "deflation" let's talk about inflation. Inflation is simply the expansion of the supply of money. When the Treasury starts printing more money and when the Federal Reserve puts that money into circulation by lending it to financial institutions, THAT is inflation in action. So for there to be DEflation, money needs to be removed from circulation. That is not happening nor has it been happening for decades as far as I know.

That said, prices can rise and fall for reasons other than inflation and deflation. We already know this. It's called the law of supply and demand. If people don't have money to buy electronics because they need it for food and energy, then the cost of electronics will fall. Demand falls, prices drop because there is excess supply, and eventually a new equilibrium is reached. But that is NOT deflation. That is simply supply & demand at work.


My advice to people and one I think you would agree is to work smarter, particularly if you're working full time and trying to finish an indie game project in your spare time. If you have a dream project that's going to take years to finish, maybe put it on the back burner and work on something that's going to be completable in a 6 to 12 month time frame. Use middle ware and 3rd party libraries wherever you can. Remind yourself (if it happens to be the case) that you want to be a game designer/developer and not an engine developer or a scripting engine developer, or a network library developer, or a database developer, or a web developer. In other words, focus your energies on those aspects of your project that only you can work on. So put your MMO aside for now; be smart and plot a practical path to success.

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- saying that the massive corporations are hit the hardest because they have more to lose is like saying a 400 lb man is hit the hardest after being deprived of food for 10 days because he lost 100 lbs and lived, whereas the 200lb guy lost 50lbs and died.


They are certainly hit harder than the smaller companies that target local economies or niche markets where the effects of a global recession are not as pronounced and also having more exposure points and being more susceptible to risk based mass psychology are a number of reasons why I will hold my point.

Quote:
- the very best time for start-ups is under a booming economy where people are able to take risks without the fear of being completely ruined. Naturally this doesnt mean people don't or shouldn't take risks at this time, I'm simply stating that on the scale of best to worst times, this is much closer to worst than best.


I disagree. While credit is more easily gained in a booming economy there will often be over-saturation [of supply] and false evaluations of worth due to speculatory run off effects and basic human psychology - everything is great, what could go wrong?! A company started during a recession tends to have a more sound and sustainable culture about it and not some trend following, bandwagon jumping - lets get on before it too late that occurs at the peaks of booms; hence [IMO] a recession started company will more likely stand the test of time. Due to the abundance of credit and over optimistic evaluations of worth the risk and loss during a boom is far greater than during a recession where scarcity is such that you are not losing much anyways if you fail. And you ignore my second point of the fact that the saturation of the job seekers market implies that the risk of *the individual* trying to strike it out on their own is much less than when there are many job oppurtunities in good supply. I am not alone in having this opinion.

Quote:
- recessions do not serve as a weeding OUT period where only the smart and agile survive. Recessions are a weed IN period where the thick ravenous patches of weeds start to consolidate their hold on the entire garden by consuming all the budding flowers until there are only weeds. Turn on the news and look at all the consolidation that is occurring in nearly every sector of the economy. These mega-corporations are responsible for getting us into this mess and the answer seems to be, let them grow even bigger.


In my opinion those companies doing the acquiring are proving their business acumen. Any company that can keep its balance books above the red and avoid acquisition is clever and deserves to survive. All those companies foreclosing and being acquired? Dumb. heh.

Quote:
- you didn't say deflation == recession but in case anyone else is confused, recession is a certain period of slowing or negative economic growth depending on which economists you talk to. Before I get to "deflation" let's talk about inflation. Inflation is simply the expansion of the supply of money. When the Treasury starts printing more money and when the Federal Reserve puts that money into circulation by lending it to financial institutions, THAT is inflation in action. So for there to be DEflation, money needs to be removed from circulation. That is not happening nor has it been happening for decades as far as I know.


Deflation also occurs when there is reduced liquidity due to people saving and not spending as much reducing demand and overall capital and leading to job loss, further leading to more saving and less spending. If a liquidity spiral is entered into then we may enter into deflation for the first time since GD. Many prominent economist and indeed the fiscal policy of both your country and the UK implies the risk of deflation is worth taking defensive measures against. The expected inflation of 2009 has already been marked down by alot. Fiscal policy here in UK is no longer trying to target inflation but avoid deflation. On a side note, while inflation may be a good thing for our current way of doing things the very the fact that it is required speaks poorly of humans.

Quote:
My advice to people and one I think you would agree is to work smarter, particularly if you're working full time and trying to finish an indie game project in your spare time. If you have a dream project that's going to take years to finish, maybe put it on the back burner and work on something that's going to be completable in a 6 to 12 month time frame. Use middle ware and 3rd party libraries wherever you can. Remind yourself (if it happens to be the case) that you want to be a game designer/developer and not an engine developer or a scripting engine developer, or a network library developer, or a database developer, or a web developer. In other words, focus your energies on those aspects of your project that only you can work on. So put your MMO aside for now; be smart and plot a practical path to success.


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