This is a very long story, but hopefully, all of our hardships might help other active or aspiring game devs. It's a difficult one to tell, so please make a warm cup of your favourite beverage and sit down with me for a few minutes.
How the release of Recipe For Disaster became a self-fulfilling prophecy.
There’s nothing easy about creating a game. You can learn every programming language, master every physics engine, and download every asset in your genre - and you haven’t even scratched the surface.
Designing, writing, testing, marketing, advertising, selling, releasing, and patching a game requires a broad skill set... too broad for most people. Sure you get the rare gem created by insanely gifted individuals, such as Minecraft, Braid, or Undertale. But more often than not, the game’s ultimate vision requires more hands and minds.
So you set up a team. You assign roles and responsibilities. You forge partnerships. And suddenly you aren’t a bright-eyed loner with a dream. You’re running an entire company.
That means you are responsible for the activities of everyone on your team, and for every partnership you forge. Ultimately, every mistake is your mistake. Sure, you try to correct them as quickly as possible, but sometimes the damage has already been done. And sometimes you don’t even see that the train is coming off of the tracks until it’s too late.
Two of the hardest things to do when you’ve made a mistake are:
Objectively find the root cause of the problem.
Avoid the all-too-human impulse to double down.
The story I’m about to tell is one of gaming failure. And the reason that I’m telling this story is to help the next generation of game developers. If they can avoid even one of the misjudgments or miscalculations that I made when Dapper Penguin Studios was creating Recipe For Disaster, everyone in the gaming community will benefit.
In The Beginning There Was ‘Rise Of Industry’
It was May of 2019, and Dapper Penguin Studios was riding high.
Our new game, Rise of Industry, was an Indie gaming hit. Half a million wonderful gamers chose to buy the game and support our efforts. The game ended up grossing over three million euros. Even after expenses, and after the substantial cut that our publisher takes, there would be plenty in the war chest to work on the next title. We would all have jobs for the next year or so, at least.
We could prepare for a massive, breakthrough project while creating a couple of ‘in between’ games. These fun titles might take six months each to develop since we all worked together before and were already familiar with how everyone and everything fit together. Two or three smaller projects would let us bankroll something big; preparing for an evolution of our talents and an expansion of our audience.
So we created and released a big expansion pack called Rise of Industry: 2130 in order to keep riding the crest of the wave. This had a nice ‘preaching to the choir’ effect since the people reviewing it would be gamers who already loved the original. The great reviews started coming in, even better than the original title. This resulted in more sales, and thus more momentum.
We were happy. Our publisher at the time, Kalypso, was happy. It was time for the next challenge.
Doubling Down On A Loss Is Failure Defined
To understand how things went so wrong, we need to pause our narrative, very briefly. If you want to understand what’s about to happen in our story, and what was going on in the minds of the decision-makers (myself included), we need to talk about human nature and something called the Martingale Betting System.
Vigorously flip a perfectly balanced coin under ideal conditions, placing a bet on ‘heads’. You have a 50/50 shot of being right. If you lose, don’t worry, you can always make a new bet and flip again.
In a Martingale system, this philosophy is taken to the extreme: Every time you lose the coin flip, you have to double down. So if you lose a $10 bet, your next bet has to be $20. Then $40. Then $80, $160, and so on.
The theory behind Martingale systems is that ‘nobody could be that unlucky’. Who loses five, six, or seven coin flips in a row?
This is, of course, a complete fallacy. Nobody has an infinite bankroll. Big losing streaks happen and nobody has enough money to take advantage of a Martingale system in any meaningful way.
Now imagine that every game development process is a coin spinning in mid-air. Of course quality and process matter as far as the odds for success. But particularly for an indie studio, there are plenty of ways to get blindsided: Unexpected competition in your genre, bad release timing, sudden trend shifts as far as subject matter, and even global pandemics can impact the results of a dev and release cycle. Nothing is ever a sure thing.
Now that you understand the mindset, and now that you see the trap, you’re ready to read about how it all went wrong.
A True Recipe For Disaster
There was a minor change on the publishing side - something that shouldn’t have made much of a difference to us as long as business continued as usual. In November of 2019, Kalypso Media Group spun off a wholly owned subsidiary named Kasedo. They were supposed to be specialists in digital-only launches, particularly on the PC side.
In late 2019, I presented three different pitches to Kasedo, allowing them to choose which one would be best based on their market knowledge. They settled on the restaurant sim.
We wanted to get into Early Access within six to nine months. This was supposed to be a small, high-quality game that would continue to build our reputation and bankroll.
Instead, it would take two years before Recipe For Disaster would see Early Access, and even then the timing wouldn’t be ideal (as we’ll get into soon enough). Some of the reasons for the delay are probably obvious to most readers - our development cycle coincided with the rise of a global pandemic. Families and personal lives were shattered in the wake of Covid-19.
But there were additional factors at play, including one that I had partial control over: Feature scope. Given what was going on all around the world, I had the option to immediately cut back on some of the release features. We would need to deliver what was promised to Kasedo contractually of course, but every other feature could be put on the chopping block.
I didn’t do that.
In the end, the 2020 development cycle didn’t cut out as many features as it should have. We had a vision for the game, and despite circumstances, we were planning to stick to it. That vision involved things like multiplayer. We all felt that putting out a high-quality game, one that would be well reviewed and receive a lot of positive word-of-mouth, was key to the future of Dapper Penguin Studios.
Our publisher wasn’t helping matters. We had been locked into a bad deal where they were going to take a large percentage of sales and contribute absolutely nothing towards development costs. As we’ll discuss in a bit, this is highly unusual. One might think because they made seven figures off of Rise Of Industry that they would offer to help out during this crisis. Instead, their demands piled up as if everything was ‘business as usual’.
Everyone was working insane amounts of overtime. There were mental and physical breakdowns. But behind the scenes, hidden from most of our employees, upper management was dealing with an additional hardship:
Recipe For Disaster was rapidly bankrupting us.
Heartache By The Numbers
I cannot stress this enough:
For anyone aspiring to get into game development, this section is perhaps the most important thing you need to consider before embarking on a new project.
Understanding where all of the money goes during a development cycle is vital if you want to have any chance at success. Some of these figures will only apply to small or medium-sized studios. Other numbers will apply even if you’re running a solo project, depending on your publication strategy.
In this business, everyone gets a cut. Whether to do it yourself or you have outside help, you’re going to need ways to advertise your game, distribute it, and communicate with your customers in an organized way so that you can release patches and offer sequels or DLCs.
On the distribution side, Steam takes 30% - which has become an industry norm. There’s talk of slight reductions on some platforms in 2022, but they need to do so while offering a large enough audience to matter.
You need to pay taxes appropriate to your company’s region. Lump other legal licenses, fees, patents, trademarks, and the like into this category. For the moment, let’s assume the break-even scenario in a country that only charges taxes on profits.
The publisher’s cut will depend on how they’re involved, specifically. Most contracts will have them taking a more significant percentage in exchange for helping to pay for development - issuing an advance against royalties as certain milestones are achieved. In a development-assist publishing contract, the publisher typically takes between 30% and 40% of the gross. There are tons of factors that might change the actual percentage, ranging from the royalty recapture rate (often 100% until paid off) to IP and merchandising rights.
Even if you have a publisher that’s helping to pay for development, if for any reason you go over budget before you reach a milestone, all development costs come out of pocket. This means that you need to be quite specific within the contract when it comes to milestones and publisher-required changes. It should be clear that anything outside of the normal delivery requirements is to be developed at the publisher’s expense. Otherwise, your small development company can be bled dry.
You also need to be specific about activity reporting. If something isn’t recorded, reported, or demonstrated in the right way, the publisher might refuse to release the next tranche of development money. Similarly, the publisher needs to have full transparency when it comes to how they’re actually earning their percentage - subject to evidence of ad spends, commitments from influencers and reviewers, and the like. If activity reporting and auditing don’t go both ways, someone is going to get fleeced.
With all that in mind, let’s run the numbers in a perfect world. Let’s say you have a nine-month development cycle that costs £250k. You hit all of your benchmarks, and your publisher releases the development money on time. Let’s say MSRP is £15 (rarely the case, taking into account the various bundles, sales and promotions the game will be in). When will you start seeing a profit?
£4.50 of each sale is taken off the top by Steam or whichever platform you’re using.
That means each sale that isn’t returned is £10.50 towards your £250k advance.
So 23,810 sales need to happen before the advance is paid off.
After that, each sale is split between the publisher and the developer. Let’s say a 65% / 35% split has been negotiated. That’s £6.82 for the developer and £3.68 for the publisher.
That’s assuming you have a clean, uncomplicated development cycle. Recipe For Disaster wasn’t either of those things.
In our case, the initial two-year development cycle cost approximately £600k. Without getting into specifics that cannot be disclosed at this time, we did not have a standard development contract as depicted above. That meant Dapper Penguin Studios - and ultimately myself - was on the hook for the complete development cost.
This is not normal. It might be something you do if you’re working with an elite publishing company with a ton of clout. But as we’re about to discuss, that didn’t turn out to be the case with Kasedo.
By late 2020, it was clear that the cost of the development cycle wasn’t viable anymore. But our contractual obligations meant that if we didn’t deliver, we would have to cover Kasedo’s costs… which they estimated to be an additional £200k. We had no immediate way to challenge that estimate, and time was of the essence.
Our options were to fold the studio and end up owing a massive sum of money with no hope of making any of it back, or pull some desperate maneuvers to self-fund the balance of dev costs until release.
This is where the Martingale effect kicked in. The logical move would have been to cut my losses, cut the studio’s losses, and explain the whole unfortunate situation to my team. The war chest from Rise of Industry’s profits might get completely drained, but we wouldn’t take on any additional debt or risk. We could continue to collect residuals from our two released titles, even though those were dramatically slowing down, and try for a slow rebuild.
Instead, I doubled down.
In 2021 I mortgaged my house. This raised £150k to keep the debt-wolves at bay. It would buy us a couple more months towards milestones and the release date. Dapper Penguin’s coffers would be completely drained and I’d be in a massive amount of personal debt, but my team would still have jobs and there would be a glimmer of hope on the horizon.
Ultimately, it wasn’t enough, however. That summer, Kasedo offered to buy the rights to Rise of Industry for a pittance. My refusal was answered by asking for more and more features in Recipe For Disaster. Trying to accommodate these requests pushed back release even further, and led to an even more dire situation within Dapper Penguin. I felt like I was being manipulated by my own publisher so I’d be forced to sell our existing IP.
This was another crossroads where I could have shut it all down and walked away. This time it was pretty late in the process, so there would be more lawyers involved. It was a nightmare scenario.
So I doubled down again.
I begrudgingly sold the IP for Rise Of Industry. It was a final, desperate attempt to keep people employed throughout 2021. The source code, art, music, sequel rights… everything was transferred to Kasedo in exchange for the five-figure amount that we needed to keep the lights on through Christmas of 2021.
That’s the financial reality of the situation… but it was a situation that could have been mitigated somewhat if pure, cold logic had been applied to the situation earlier on.
For example, if I had been willing to drastically simplify and pare down Recipe For Disaster’s feature list in early 2020, the numbers would have changed. But that would have meant firing people in the middle of a worsening pandemic, just about the most heartless thing I can think of. Still, maybe that would have been better than the far broader downsizing that eventually happened in January 2022.
When faced with the prospect of releasing a far more simple game, putting the studio’s reputation at risk, and throwing the lives of several team members into chaos, I chose the emotional path instead of the financially sound path. I stuck to my guns. I doubled down.
Hope can be one hell of a drug. It makes you do whatever you need to do in order to flip that coin just one more time. Surely it will come up heads this time. Surely everything will work out in the end. Eventually, we have to win.
But as I explained, that’s not how numbers work. And that’s not how the real world works either.
Failure Defined By The Clauses Of A Contract
When someone tells you to ‘read the fine print’, it’s often used to comical effect. But when you’re signing a business contract, it isn’t the fine print that gets you. It’s a sea of normal-sized print. Everything is the same font size, with one boring paragraph seamlessly washing into the next for pages and pages.
When it’s your company and your dream on the line, you should never sign an agreement before a qualified lawyer who is exclusively on your side reviews the terms. Their ability to boil down that wall of text to vital terms is invaluable. Their ability to envision both the typical and the worst-case scenarios, and codify what happens in each case, is well worth any comparatively minor cost that you pay.
What might be missed if a qualified, industry-specific lawyer doesn’t review the contract first? Let’s start with auditing.
Let’s say Dapper Penguin wanted to make sure that Kasedo was living up to their contractual obligations. In a fair, balanced, sane contract, we would be able to execute a standard auditing request and be provided with proof of work and effort. If Kasedo refused to be audited, there would be real penalties and real means of assessing penalties and forcing compliance.
Rejecting a notice to audit would be ludicrous under such circumstances. But that’s exactly what happened in June of 2022. Dapper Penguin Studios issued a request to audit Kasedo on Rise of Industry’s sales figures, and it was flatly rejected. Of course, auditors and lawyers become involved when something like that happens. But with a more firm contract clause that automatically issues penalties for a refused periodic audit, things likely wouldn’t have ever gotten that far.
Part of the auditing process on both sides should be the right to record evidence. Otherwise, any party could promise anything they want, or even misrepresent the current facts, and there would be no penalty or possibility to enter such a conversation into evidence.
But in Q4 of 2021, a senior Kasedo representative refused to allow the recording of video calls. This meant that auditing what was said or what was promised during such calls became impossible. The only choice at that point was to restrict communication to formats with a paper trail, such as E-mail. Limiting the ways in which you communicate with your own publisher in order to secure a proper audit trail is less than ideal, as you might imagine.
Whenever one side of a contract takes actions that significantly increase the risks for the other party, there needs to be compensation. There was none in this case. This is yet another reason why getting a lawyer to review a contract before you sign it is critical: Vague phrases can be made more well-defined. This helps not only the auditing process but what defines a completed benchmark or a finished game.
Results Matter
One would think, given they were taking a massive percentage of gross and offering zero development funding, that Kasedo would produce results. Our games directly under Kalypso sold fairly well, after all, and Kasedo is supposed specialists for digitally released games.
Instead, they scheduled the Early Release of Recipe For Disaster right into several competing titles - including the release day of Forza Horizon 5. We were completely lost in the chaos.
In the same month, Kasedo’s City of Gangsters released its DLC simultaneously with its biggest competitor, Empire of Sin. It was like they chose to do no research whatsoever. When Dapper Penguin called them out on this comedy of errors, we were reprimanded for questioning their competence.
Eventually, Recipe For Disaster got noticed by the algorithm. Opening sales were brisk, but there was one repeated request from our customers: Introduce a Freeplay mode!
Kasedo had previously held several playtests and conducted many surveys. There were supposedly polls, focus groups, and internal discussions. None of Kasedo’s feedback included any mention of Freeplay as being a desirable feature. All of our focus had been on the original game mode and arc, and now our skeleton crew would have to scramble to get this new feature added.
Their handling of negative reviews was robotic, almost comical. Rather than addressing the specific concerns of the Steam reviewer, the general line was “We’re working on patches and hope you give the game another try soon!”
Reporting of sales during Early Access was irregular and chaotic. It should be a simple matter - share the Steam statistics weekly, and pull together any additional numbers we need to be aware of from time to time. Instead, I was begging for numbers in May of 2022, because we’d seen no updated sales figures for over a month. Why would this not be automatic? What kind of preparation or manipulation needed to be done before we saw the sales figures, exactly?
In June, lawyers and auditors became involved to answer these and other questions.
In July, the comedy of errors continued. A trailer was cut that used vague language and was missing features. The most requested feature of Freeplay, the one we busted our humps to make a reality, wasn’t even mentioned by name. We had to micromanage the editing to include the details that players wanted to see.
The same month Dapper Penguin was pressured to add Epic Games Launcher’s SDK, only to find out that the platform was going to be closed when we planned to release it.
Then August rolled around. It was supposed to be a celebration of the game exiting Early Access and achieving its 1.0 release. This was a big moment for us. On full release, we should have been able to benefit from a sales surge once all of the promised influencers and review sites got a hold of the game.
But that never happened. The Recipe For Disaster Twitter account had about 400 followers. Only two of the ten promised media sites reviewed the game in the first week. Smaller sites broke the embargo to release their own reviews early. The total follower count for the dozens of influencers that Kasedo had been collecting was under 2 million. It was a fiasco.
But the biggest slap in the face was the Kasedo Twitter account itself. Rather than announce the arrival of Recipe For Disaster and pin the tweet for all to see… they kept up only pinned Tweet about Ixion appearing at Survivalfest. You know, a game they actually had funded and held real stakes in. They didn’t even care enough to pin the announcement of their newest game. Those of us left at Dapper Penguin Studios were stunned. Our publisher was shooting themselves in the foot, and hitting us with the ambulance on the way out.
The end result of all this: 3k to 10k Euros a month of income, which is sure to slow down as time goes on given the publisher’s efforts to date. My hopes of hiring the full team back, which costs 25k to 40k Euros a month depending on the ebb and flow of the dev cycle, is simply impossible.
Caveat Emptor
Caveat emptor means ‘let the buyer beware’. I allowed optimism and prior success to blind me to the things that could go wrong when one gets into bed with the wrong publisher. That attitude, that tunnel vision cost all of us at Dapper Penguin Studios dearly.
When I signed on with Kasedo, I was taking a massive risk. They were asking for more and giving us less than many of their competitors. In exchange, we expected extensive contacts, professional competency, and a healthy amount of industry guidance on the audience testing, advertising, and platform release side.
Instead, we experienced a level of underperformance and ignorance that can’t fully be expressed here. Kalypso, Kasedo’s parent company, did nothing to compensate us for this unfortunate series of events. In fact, they often scolded us for bringing up valid statistics and critiques when it came to Kasedo’s staff and practices. There would be no escalation, and Kalypso had no intention of providing any form of mediation or real oversight.
We were incredibly lucky that Rise Of Industry basically sold itself. And Kasedo knew that as well, given the tactics that they used to acquire the rights to it. Over the past few months, they have milked the Rise Of Industry franchise dry, putting it in sale after sale, bundle after bundle. It was a quick cash grab to them, nothing more. That hurts me almost as much as their treatment of Recipe For Disaster. Almost.
When our luck ran out, and Kasedo was faced with a game that required more explanation, a finer-tuned demographic, and actual marketing talent, the train went off the tracks quickly. But that hardly mattered to them. Because they weren’t helping to pay for development, they had no skin in the game. That meant that if this game was too hard for them to market, they could just find another sucker who would accept a split somewhere between 30% and 40% (typical for the industry if they’re doing the dev funding) with no financial contribution.
Lather, rinse, repeat. It will only be a matter of time before the next young developer comes along, starstruck and eager to sign on the dotted line before they realize that they’ve given away around a third of their profits for nothing but promises.
There are already a lot of ‘lessons learned’ included here, but allow me to end with a final one: Caveat emptor, particularly if you’re talking about taking on a partner who refuses to put their money where their mouth is. Otherwise, you just become part of their numbers game - a lottery ticket that they never paid for. Consider this a cautionary tale and be careful out there.
