Game and Fortune

Score big with a video game company.
Magazine Contributor
8 min read

This story appears in the November 1999 issue of . Subscribe »

You've seen it a million times. Three teens huddle around a video game in an arcade. A young girl on tippy-toes plays Ms. Pac-Man. You relive your youth as you watch an 11-year-old boy destroy invaders from space on a GameBoy. A tear comes to your eye. You sniffle.

"I want a piece of the action," you say. "That should be my video game that little brat is playing!"

OK, so you're not that sentimental. But you've probably noticed the $8 billion video-game industry (and that's just the PC and console markets), and you want to play video games for a living. "See, Ma?" you imagine saying on your cell phone from Bermuda. "I can get paid to do this!"

So turn off your Sega and start asking some serious questions. Like, what's your definition of a video game? Are you talking about arcades? The kind played on your Mac or IBM? A video game on a console? Or the kind offered on the Internet? If you're going the Internet route, do you want it to be advertiser-supported, or free, or a bit of both?

Geoff Williams ( is a newspaper reporter and freelance magazine writer. He estimates that as a kid, he spent $27,311.92 playing Pac-Man and Ms. Pac-Man.

High Score

If you want to start your own video-game company, you need money and talent--or at least experience in the industry. You'll also need the proper tools to start a successful business, and one of the first tools you'll need is $1 million to $2 million.

(Wait, where's everybody going?)

Yes, it's true: What's good for the gamer isn't necessarily good for you. "The scope of games has gotten larger," says GameWEEK magazine West Coast editor Andy Eddy. "You have to hire a team of people. It's more like making a movie than it used to be."

In fact, it typically takes about two years to put together one video game. You'll need at least one computer programmer, and it wouldn't hurt to have a sound technician, a graphic artist and a 3-D artist--or at least somebody who can multitask. And unless these yahoos will work for free, that's where much of your million or two will go.

Of course, there are exceptions. Jason Davis and friends (who also happen to be brothers) Jon and David Chait started their Cambridge, Massachusetts, company, Reality Bytes Inc., "severely undercapitalized." They pooled stock options from previous jobs and began with only $100,000 (yes, only). But that was in 1994, the Stone Age of video games. The three--Jon's 33, his partners are 29--created a video-game developing company that was also a publisher, which is one way to go, but generally the wrong way.

"It's all well and good to dream about launching one of the bestselling games of all time," muses Jon, "but the cost from a marketing perspective and the cost to build the game is enormous. It competes with your ability to start on the next game--just from a cash-flow perspective."

And so Reality Bytes--which has a staff of 12 and growing--is dropping its publishing aspirations, and as the partners work on their third video game, Dark Vengeance, they're searching for a publisher. With marketing a game costing $2 million or more, it's easy to see why Reality Bytes had cash-flow problems. They produced Sensory Overload for about $15,000, but Havoc cost more than $1 million, and Dark Vengeance will easily cost $2 million-plus.

Reality Bytes brings in $1 million to $10 million a year. "I don't want to be more specific than that," says Jon, "because we don't want our competitors to know what our resources are." The industry is that cutthroat.


The line between movies and video games is blurring, including the corporate culture. Jon concedes, "I've become more disenchanted with the ethics of the business end [of the video-game industry]. That part of it has definitely transitioned to Hollywood. People don't play this game nice."

And they aren't all playing in Hollywood; the Hollywood of video games has yet to be created, says Eddy. If there is a video-game hub, it's in San Francisco; to a lesser extent, Los Angeles, Dallas and Austin, Texas; and, increasingly, in Japan.

Video games are also becoming Hollywoodesque narratively, says 31-year-old Bob Stevenson, one of the three co-founders of video-game developing company Planet Moon Studios in Sausalito, California: "The whole format of games is changing. Obviously, it's going to the Internet. I think it may emulate television, where a game is like a series--but you'll pay for what you see."

And there are a lot of ways you can make a profit. You don't need to market your video game to the obvious target: young boys. Jennifer Pahlka, director of the Game Developers Conference sponsored by Miller Freeman Game Group, one of the leading voices in video games, says 55 percent of Internet gamers are women, who make up 38 percent of the video-game consumer market as a whole.

But to successfully play the video-game game, industry experience is crucial. "Get a job," advises Jon, who worked at Lotus Development before he started Reality Bytes. "Get any job; get inside and watch [the industry]. You have to become experienced in the entire cycle--when an idea is born, when it's developed, the timeline of what it takes to plan it and bring it to fruition."

Into the 21st Century

When Laura Groppe founded Girl Games Inc. in 1994, she began with CD-ROM video games for girls. Today, Groppe's expanded her Houston company into all types of interactive entertainment products for girls, computer and otherwise.

Finding investors was surprisingly easy for Groppe, 36--she raised the money from individuals with deep pockets, and later, one corporation with very deep pockets. Groppe will say only that her company is profitable and has doubled sales every year. We'll take her word for it; that one corporation is Mattel.

Groppe suspects her CD-ROM computer games--and all computer games--will eventually be history, though she won't make predictions on the console market, which Girl Games will soon be entering. Groppe predicts we'll be downloading virtually all our games from the Internet "once the technology is available."

Because technology is ever-changing, "You have to start creating your game with the technology in mind that's going to be available a year and a half from now," warns Eddy. Tomorrow's games are being made today--readying, for instance, for when we're playing games on HDTV. "It's like trying to cross a track ahead of a train," says Eddy. "You have to time it." And if you don't time it right--well, you get flattened.

If there's a moral to all this, Jon may have it: "No one knows the formula [for] how to make a game great."

You've seen it a million times. Three teens huddle around a video game in an arcade. A young girl on tippy-toes plays Ms. Pac-Man. You relive your youth as you watch an 11-year-old boy destroy invaders from space on a GameBoy. These are products that are products of the imagination. And millions of dollars and great computer programmers are worthless if you don't have it--and use it.

Know The Rules

Good reading about starting a video-game company:

  • Game Over Press Start to Continue by David Sheff and Andy Eddy (Cyberactive Media Group, $19.95,
  • Joystick Nation: How Videogames Ate Our Quarters, Won Our Hearts and Rewired Our Minds by J.C. Herz (Little Brown & Co., $23.95.
  • Watch for the upcoming How to Get Into the Game Industry by Ernest Adams, to be published by Miller Freeman Game Group in March 2000.

    Trade magazines include:

  • GameWEEK (Cyberactive Media Group) is published weekly; a one-year subscription costs $99. For information, visit
  • Game Developer magazine (Miller Freeman Game Group) costs $34.95 for 13 issues. For information, visit
  • Gamasutra, an online magazine from Miller Freeman Game Group, is a news source for game designers, producers, programmers and artisans, and a forum for industry insiders to sound off on technologies and trends. It's free; access it at

Play Stations

Miller Freeman Game Group sponsors several video-game trade show conferences:


More from Entrepreneur

Learn how to get your own business launched with our on-demand start-up course. Whether your ready or just thinking about starting your own business, get started for free with our first 3 lessons and receive a personalized 1-page business brief.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Let us help you take the NEXT step. Whether you have one-time projects, recurring work, or part-time contractors, we can assemble the experts you need to grow your company.

Latest on Entrepreneur