[MUD-Dev] Evolutionary Design

Jeff Cole jeff.cole at mindspring.com
Sat Jun 15 10:14:22 New Zealand Standard Time 2002


Let's start with the end of your post.

From: Dave Rickey

> The Themis Group estimates $400,000,000.00 dollars of revenue in
> this space next year, and I would say that's conservative.  $400
> million dollars a year, and no way to explain to the un-initiated
> how it works?  ...  But Lineage, EQ and UO, measured on gross
> revenues, are right up there with The Sims and Myst as the biggest
> franchises ever.  Why can't we come up with an explanation of why
> that makes sense to anyone besides ourselves?

The venture capital entities (juridical and angels) I have dealt
with (7 pitched, 5 funded, 3 still operating), would take a very
suspicious eye toward a pitch founded on *gross* revenues.

Your focus on gross revenue immediately raises two concerns: either
(i) you intentionally omit the costs required to realize such
revenues--i.e. you are trying to distract me from the fact that to
realize that $400M gross revenue, the industry will spend $360M; or,
(ii) you unintentionally omit such costs--i.e. you do not realize
that such information is necessary to evaluate an investment
opportunity.  Both options reflect poorly on the business plan.

Further, in a forum where people are, to varying degrees, aware of
the different business models, you look for support in the
similarities between two different business models that are much
more distinguished by their differences.

I very dubiously consider Jessica's assertion (see: most recent BTH
http://www.skotos.net/articles/bth.html) that games are not
cannibalizing each other, yet.  While perhaps semantically true, it
is not substantively true-- the statement implies growth that simply
isn't there.

> There's a crapload in the $20,000-$200,000 monthly revenue range,
> but I can still count the games making $1,000,000 a month or more
> on one hand without running out of fingers.

Therein lies a problem.  Those five or fewer companies better be
grossing significantly more than $1M per month in order to provide
an appropriate ROI-- that is, enough to warrant the
five-divided-by-a-"crapload" risk associated with investment.

> Which doesn't answer the question, merely re-phrases it.  Why are
> they failing?  I'm a bright guy, you're a bright guy, we work with
> some bright people, but the games business has a *lot* of bright,
> motivated people in it.

With apologies to Raph, because different aspects of the business
"privilege" different types of "bright" (bright-ness? 
bright-ocity?).

Investment is never a "no brainer"--the extent to which an
investment seems so is likely directly proportional to a potential
sentence in a federal penitentiary. Heh.

Yes. Affcty,
Jeff Cole

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