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How Game Development Companies Are Different (Part 2 - Teambuilding)

Like other startups, game studios have staffing needs. At a minimum, they need a game design, coding, art, sound and music. Each of those assets must come from somewhere.

In part one of this series, I talked about how development studios often get their money differently than traditional startups, but still have all the same expenses. Here, I’ll talk about how their teams are different.

I like to tell entrepreneurs headed into the games industry that they should think about their new studio as a role-playing game. (Bear with me, ‘cause this might get nerdy).

In a traditional role playing game, the player chooses from several different classes. Each class has unique skills and resources available to it. Clerics can heal, but can’t fight as well as a knight. A barbarian can smash things, but probably can’t pick a lock or win the confidence of strangers as effectively as a rogue. And so on.

In a new studio, the founder might be something akin to a paladin – fairly good at inspiring others, good all-around skills but not necessarily an expert. That founder would need to recruit others like a better coder, artist, etc. By contrast, maybe the founder is the expert artist, but still needs to fill in the other gaps on the team. They may even need to bring in a paladin or bard-type that can keep the team motivated.

This is all very similar to other startups. One difference, though, is how these folks are incentivized. This sometimes grows from the differences in capital structure.

In a traditional startup, options or equity can be used to foster loyalty and incentivize performance. After all, when the company does well enough, it will get bought by a bigger company and the shareholders will make out like bandits, right? Many game studios aren’t looking for that big exit, and traditional equity might not be as attractive to a service provider.

Game studios have at least one major asset: their games. They often look to use that asset as though it were traditional equity. Studio founders often divide up profits from a title, allowing service providers to share in the upside of the game. This is done a million different ways, but can often be structured like traditional equity awards (including vesting, service requirements, etc.). Of course, these should be reviewed for compliance with employment laws and tax implications (which can be significant and surprising).

Bringing together a team also has implications for the intellectual property in the game – just as it would in a more traditional startup.

Employees and contractors should have carefully crafted invention assignments to ensure that their creative work belongs to the studio. Otherwise, studios might face a claim down the road from a former employee or contractor claiming ownership rights in the studio’s releases. Because contractors often work on multiple projects at once, they should be made to disclose to the studio any invention assignment or non-compete that might conflict with the studio’s own. The studio (or its counsel) should review the provisions of those agreements to ensure a former employer (or current employer if there is moonlighting going on) won’t make similar ownership claims.

The games industry is also a uniquely close-knit community.

Studios need to take care not to alienate their employees and professionals need to be careful not to burn bridges when they transition. Word travels quickly in this industry, and toxic relationships get talked about. A clever NDA or non-disparagement agreement can help, but they only go so far. When a team member departs, it is important to remember that they might resurface later in another context. When a paladin leaves the party, you should be wary of the blackguard that might return down the line when your back is turned.

In sum, game developers sometimes have to be clever about how they approach incentives. They must work hard to ensure their IP is properly protected, and in a close community they have to take steps to preserve relationships. Of course, sometimes these lessons also apply outside the games sector.

Author: Brandon J. Huffman