Pyrogon Postmortem

When you've invested a lot of effort and made a huge gamble, only to see minimal payoff, it's hard to sit back and objectively analyze why things didn't work out the way you had planned and hoped for. But in order to learn and grow then writing a postmortem helps.

With Pyrogon ceasing further development of new titles (but continuing to sell and support existing products for the indefinite future), I thought it would be a good time to sit back and reflect on what went right and what went wrong.

The Beginning

Pyrogon was started in 2001 as a co-venture between myself (Brian Hook), and Rosie Cosgrove, a fellow coworker from Sony On-line Entertainment. We had sufficient funds of our own to do our own thing for maybe six months, which we felt was plenty of time (oh, the naivete...) to get funding and start a new game development house.

The Publisher Pitch

Our original idea was that erstwhile coworkers would hopefully approach us to start a game company once we received funding, and that we could then leverage our particular successes (I worked on the successful Quake 2 and Quake 3 franchises; Rosie was the art director on Everquest) into a contract with a major publisher to develop a title of some kind.

Our naivete was pretty monumental but, hell, if you don't try, you don't learn, right? This approach failed abysmally, but to our credit we recognized that this was a dead end before it killed us completely.

Publishers Never Say No, They Just Stop Answering E-Mails

The first thing we learned is that publishers will always act interested and will never say "No, we're gonna pass". Disinterest pulls a publisher out of the loop, which could put them at a competitive disadvantage, and saying "No" is a bridge that few publishers want to burn even with relative nobodies. If they don't get back to you after six months and don't return e-mails and phone calls, even though it's really a "no", they didn't actually say "No", and thus if you suddenly have a bad ass demo six months later you can expect the lame "Oh, hey, I realized that we haven't talked in a while...what's up?" e-mail from the biz dev guy hoping he didn't screw the pooch by passing on a hot new property.

So if you're starting a new game company, don't get excited just because you haven't received any rejection slips yet. Publishers will string you along as long as it doesn't hurt them.

A Good Demo Is Not Enough -- It Must Be Jaw Dropping

The second thing we learned is that you need a killer demo, not just a good one. Talk is cheap, and a 300 page design doc, presentation, and even a team "on paper" won't get you a deal -- more so today than in 2001. You have to spend time and effort putting together something that is so mind blowing the execs are flat out scared you might sign with someone else. It's the difference between a pretty girl smiling at you and a naked pretty girl straddling your lap and licking her phone number onto your face. Publishers need to feel like the latter if you want to get a deal.

There are way, way more developers out there than there are publishers looking to fill in slots in their product matrices. You're competing with a ton of others for the same scraps, and if you're not a proven commodity (i.e. your team has worked as a team before on a hit title, as opposed to the more common "stack of resumes willing to tolerate each other" teams we see these days), don't expect to be king shit of fuck mountain. It's not going to happen.

Unless You Are Chocolate Covered God, Any Deals Offered Will Suck

This leads us directly to the straw that broke our back -- the demands of most publishers today dealing with nascent studios are ridiculous, to the point that unless you're beyond desperate, signing a deal with a publisher often means signing away your soul. The usual deal is a pittance advance, enough to barely pay yourselves competitive salaries (warning: they want you to be economical, yet still hire the best available talent in the industry), and then you also need to provide the publisher right of first refusal on several subsequent titles, and you need to give the publisher equity in your company, possibly with an option to buy your company outright.

This means that even when busting ass to make a great big hit, any dreams of huge pots of cash and rocket cars made of gold are irrelevant because when you do have a huge hit, your publisher will simply step in and buy you at a relative bargain -- probably using your own royalties, to add insult to injury. If you look at the spate of recent publisher acquisitions, that's basically how it's gone down.

What it comes down to is this: getting a decent publishing gig as a third party developer is real tough unless you're independently wealthy; have a huge number of contacts in the industry; or you're willing to sign away your future in order to have a present.

I give out major props to those studios that have managed to attain success without relying on one of those, but those companies are few and far between, and luck and timing play a huge part in that.

But for Pyrogon -- it wasn't going to happen. Time to move on.

Outside Investors

Pyrogon never really investigated the option of finding outside investors for several reasons. First, we had reasonable capital of our own, so external investors would have been immediately leery of us, assuming that they were being solicited for risk mitigation instead of out of actual need -- which would have been true. Second, we would have given up control to outside investors, which is something we didn't relish. Third, the dog-and-pony show for investors -- venture capital or angel investors, it doesn't matter -- is a major time suckage.

When it comes to convincing other people to give you money (investors or publishers), you can't screw around. You can't sorta/kinda do it while you're working on stuff you really want to do. You have to make it your full time goal to get investors or a publishing deal if you want it to happen, which means any other real development takes a back seat in the process.

The question you have to ask yourself is: "Do you want to spend the next year trying to find funding, or do you want to spend the next year developing software?" I don't regret pursuing our own thing instead of trying to grab money from someone else.

If Pyrogon had spent its only two years in existence trying to find funding before shutting down then I would definitely be bitter.

The Shift to Downloadable Games

About this time we saw Real Networks launch Real Arcade, and the idea of becoming an independent studio was rearing its head, partly out of panic (a publishing deal was now very unlikely -- the best offer we had would have effectively been a guaranteed money losing proposition) and partly because it sounded like a great way for us to achieve our respective dreams -- independence, sane working hours, and ownership/control over what we did. We chatted with Real a bit, looked at the games that they were selling, and decided we could probably compete in that arena.

The game that intrigued us the most was the World War One flight sim by Small Rockets called Master of the Skies: The Red Ace. We felt that if there was a strong market for that type of game, and if we could provide maybe a science-fiction take on that universe, that we had a chance at success.

We worked on such a game, tentatively titled Cold Star, for several months, with pretty good results. However we were still several months from completion and the entire time we were looking at games like Bejeweled and getting envious. We decided to take a brief detour and work on a puzzle game -- Candy Cruncher.

Candy Cruncher was developed very quickly, and through the help of some friends (Longbow Digital Arts) we had a great launch. It was submitted to Real Arcade, and we also found another distribution partner, GameHouse. Candy Cruncher's launch on RA was a great success, debuting at #1, and the early success with Longbow and then, a few months later, GameHouse, was extremely encouraging.

The Puzzle Game Ghetto

The problem now was that we were victims of our own success -- we were managing to make monthly income off a six week development schedule that we originally expected to spend nine months on with a space flight sim. How in the world could we justify spending six more months finishing that when we could easily just crank out several more puzzle games and reap much higher return-on-investment?

Short answer: we couldn't. We started working on puzzle games full time, next releasing Letter Linker through GameHouse exclusively, and then a mah jong tile matching game, NingPo? Mah Jong, through PopCap. These two followups were immensely successful by our standards, even though within the puzzle game market they were second tier successes.

We had a new plan -- we'd make puzzle games until we had a strong residual income stream, and then once we hit that goal (which we had hoped would require only two more puzzle games), we'd take a year off to work on the games we really wanted to do. This seemed eminently doable.

Things were growing great, then we hit a rut -- the downside to cranking out a lot of games quickly is that you spin your wheels wondering what kind of game to do next. At a typical game development studio you have 2-3 year development cycles -- coming up with one good idea every few years is quite a bit easier than coming up with a good idea every few months.

We had cranked out three good games pretty rapidly, but were having a hard time following up. We had at least three different ideas we ended up pursuing, with a lot of dead ends. One title was initially signed by a partner, but after six months they "refocused" and opted not to continue with it. Another never got past the experimental stage. We also experimented with a few other ideas, trying to get out of the "match three" style of play prevalent in the industry.

But in the end one of our most marked failures was an inability to deliver yet more new compelling designs. We were tapped out, at least in the puzzle and casual game area. With enough struggling we could have come up with something, but it was becoming stressful work instead of fun design.

The Competition Arrives

At about this time we also started seeing a rather large influx of mainstream game developers seeking refuge in the puzzle game sector. For a while every disgruntled former game developer was showing up and starting their own one man shops in order to get away from The Man.

This hurt us (and many other developers) pretty badly by increasing competition dramatically. We suddenly found ourselves losing negotiating leverage, and there was a pretty concerted effort on the part of portals (Yahoo! Games, Real Arcade, etc.) to negotiate revenue sharing percentages down -- early RealArcade titles would see 40 or 50% of the take go to the developer, but that number has dropped to 25% or even less in some cases. This effectively halved our potential revenue.

On top of that, the increased competition meant that each game had to be bigger, better, and more exciting than what we could get away with even six months prior. It's not that the existing games were bad -- keep in mind that Bejeweled is still one of the best selling puzzle games on the market, and it is decidedly crude by today's standards, even among the casual gaming crowd -- but that with so many developers competing for "shelf space" in the market, there was a need to differentiate. So now we had multiple game modes, flashy graphics and animations, high quality music, all of which contributed to increasing development schedule.

We were now looking at development schedules probably three times that of before, and profits of maybe half of our previous titles, together giving us 1/6th the previous return on investment from a game like Candy Cruncher. Our last game, Fruit Frolic, was the one we had the most confidence in. We felt we had nailed variable game play, music, animations, flash, you name it -- and it ended up our worst selling title.

All this was a tough pill to swallow, especially because it happened very rapidly -- in less than four months we went from our highest grossing month in sales to panicking about our future. Quite the turn around, and a hard one to deal with.

This was absolutely devastating, the market was changing much faster than we could adjust to -- with six month development schedules we had proven to be fairly light on our feet, but the shifting conditions were asking us to be Muhammad Ali nimble. And, to some degree, prescient.

It became, as a friend put it, "the mainstream game industry writ small" -- we were now facing the exact same situation we were trying to escape from, but with even more uncertainty since we were the ones footing the development bills!

Shifting Strategies Too Costly

Our (up until now) successful business plan went from looking perfect -- I mean perfect, with near flawless execution on our part, clear skies ahead, and nothing but open road as far as we could see -- to looking disastrous in the span of about six months total. During that time I also made the decision to relocate to Atlanta, Georgia from San Diego. I've wondered often if that was a bad idea and that somehow led to Pyrogon's eventual closing, but I don't think that's the case -- at the time we were mostly working from our respective homes anyway, meeting a couple times a week at most, so telecommuting was not a problem. Not only that, but the real problems had nothing to do with us as much as it had to do with the market changing in a way we were unprepared to tackle.

It really boils down to this: if I had stayed in San Diego, would things have been different? I'm not sure they would have been -- the short term problem was the market, not us (and yes, the long term problem was my inability to adjust to those market conditions quickly enough).

Our business plan was rotting out from beneath us, we had little time to find and execute an alternative (due to our high personal burn rates), and this was the third such radical shift for us since the company was founded. We were tapped out creatively and had no time to gather our thoughts and regroup.

Could we have done contract work to tide things over? Yes, maybe, and we did use that to bolster our income a little bit, but in the end I think that the idea of "contracting to fund independent development" rarely works. If you want to be a successful contractor, you have to make it your first priority -- which interferes with the "real" work you're trying to do. It's not like bussing tables while going to acting auditions, contract work is tough to find and tough to do well and dominates your time if you want to keep at it.

Not only that, but the money wasn't really there in contracting. We would get some sniffs from corporations about some work, and then when they'd hear our prices they'd be taken aback and claim that some outfit in Prague or Kiev or Calcutta could do it for 75% less -- which is fine, but we couldn't. If other companies were doing games for $30/hour, more power to them, but that wasn't really viable for us.

Exit Strategy

So what do you do when your entire business plan rots out from underneath you with almost no warning? We could have gone down with the ship, which would have been noble and/or stupid. The fact was that we had a pretty good idea we were screwed in the long run, and we had no clear cut idea how to tackle it. We had also just come off a seemingly interminable period of indecision and lack of direction, and that was weighing on our souls as well -- if we weren't getting it done in the best of times, how in the world could we justify slogging it out for another year?

We could have put all our resources into a swan song project, but that would have been a risk of fairly monumental proportions without a clear potential homerun product on the table. Not only that, but a commitment of that magnitude would have prevented us from really doing anything but getting a new product (not a puzzle game) out into the market as fast as possible and with almost no room for error. If we had a project we really believed in, I think we would have done this, but we had more of a "I guess this would be cool" set of projects. You don't swing for the fences with two strikes unless you're pretty sure that the pitch is a good one.

Looking at it that way, it seemed like the best thing was to close our doors gracefully instead of gasping for breath desperately as the rising tide slowly covered our heads. We knew when we were licked. Rosie had a job offer from her former employer that would provide the stability that she and her family really needed, and I, well, would have time to ponder my situation.

Overall we broke even (roughly), had a good time, and learned a hell of a lot. It was stressful but still worth it, at least to me. Could we have done something different and pulled out of the unintended flame out? Maybe, but to this day I can't think of anything we could have done that would have definitely saved us -- things changed too rapidly, and for a small company, time is not a luxury you can count on to help you out of a tough situation. With near oracular prescience and planning we might have survived.

Lessons Learned and What I Would Change Today

We learned quite a few lessons, too many to list here, and covering too broad a range of topics, but it's all hindsight and what-if.

For example, I regret that we didn't pursue some of the grander game designs we had in mind that may have taken a year to develop -- maybe if we had completed those games we'd still be around today? Then again, maybe if we had done those games, we would have collapsed much faster and the entire affair would have been a money pit. It's hard to say what would have been the right choice, since the choice we made wasn't obviously the wrong one -- we didn't completely flame out.

The other (obvious) lesson is that starting a game company when you have a high personal burn rate will kill you. Rosie and I had our respective families to support, and with mortgages, insurance, cars, day care, etc. the costs stack up such that we have to be three times as good as the proverbial starving college student. To some extent the sweet spot for starting your own company is when you're single with almost no living expenses and responsibilities -- college students or guys working out of the basement of their parent's house. You may lack experience, but you have a long time to sort your shit out. Unfortunately we were both a little past that point.

Rosie and I didn't have that luxury, we had a deadline looming when we'd flat run out of cash, and that placed immense pressure on us to make the right short term financial decisions. If you have time, then you can weather a lot of mistakes and changes.

There were a couple things I think we did right, but that's really tough to say given that Pyrogon is no longer developing games -- proof is in the pudding, right? The big thing is we did everything possible to concentrate on our core competencies -- art and coding. We off-loaded as many non-core tasks to outsiders as possible -- Web site design and maintenance, legal documents, accounting, bookkeeping, payroll, e-commerce, etc.

I think that was a good decision, because if we had done all those things we would have been mired down in business minutiae instead of developing games, and a lot of our early momentum might have been lost. That said, at least a couple key areas turned out to be dodgy -- our lawyers flat out sucked, costing us too much money and doing a horrendous job at the most basic tasks, and we went through three different e-commerce suppliers before finally finding one that seemed relatively stable.

Even after outsourcing so much, the day-to-day friction costs of maintaining the business weighed heavily on me while trying to develop games. Every month I had to sit down and pay bills; we had to find insurance; we had to find an office; we had to monitor the Web site for outages; we had to package up installers and upload them; we had to do marketing by hitting all the shareware sites; etc. etc. None of these issues in isolation were that big a deal, but all these little (but important) things were constantly assailing me while I was busy trying to get "real" work done.

We also benefited tremendously by partnering with portals such as GameHouse, Real Networks, and PopCap to distribute our games, even though our take would be much smaller. Their audiences are so vast that the lower profit is more than compensated for by the volume.

The downside to this is that we lost a lot of control and became dependent on third parties for the continued success of our puzzle games. I don't think this was a right or wrong decision -- if we had concentrated on marketing instead of development things could have gotten uglier even faster. More importantly, we didn't care if we gave up control of our puzzle games in the short run, because puzzle games were not our long term focus.

Some might claim we were unfocused or lacked a long term plan, and this is true on the surface. But more accurately, we were simply being fluid and reacting to the environment while still trying to keep our eye on the future. Without short term success, planning for longer term success is rather moot.

Even so, I have a nagging suspicion that there is a correlation between success and the motivation for starting a company. If you start a company for reasons unrelated to the product you will be making, my belief is that you will mostly just get by and rarely be a huge success. If you find yourself saying "I want to start my own company because I can make better games" or "because I want to be my own boss" or "because I think I have a better process" -- be careful.

You need a vision, and by vision I mean "a fully realized concept with most of the relevant details sorted out". I do not mean "a vague idea of something I think might be cool". The latter is a snap shot or a single frame of a game, the former is an entire game in your head just screaming to be put into real form. You can extend the snap shot into a vision, but many snap shots don't make that transition.

We lacked that vision and focus when we started Pyrogon, but as with all kinds of hindsight, it wasn't exactly obvious to us at the time that this would be a serious impediment. If I had looked at the plethora of little splinter groups that have spalled off of game companies and noticed the strong correlation between "teams that are just teams" and "teams that want to make a specific game in their heads", maybe things would have been different.

Now What?

Pyrogon was an experiment and a gamble, and in the end it didn't pay off the way we wanted to. The company still exists (technically, its assets and liabilities have transferred to a new Georgia-based company, but to the end user and our partners nothing has changed), primarily because there is still some modest residual income coming in, and also because we have to support existing users. However there are no new products scheduled and no new updates (although I still do bug fixes if anything crops up).

Rosie has returned to Sony Online Entertainment to live the calmer life of a salaried employee. I've moved to the outskirts of Atlanta, GA to be closer to my family, and I've mostly been looking at different game ideas that I'd like to pursue: if I'm going to fail this time, I'd like to fail on something where I'm at least 100% gung-ho over the product. Also, working alone reduces the pressure on me significantly since I know that someone else (and their family) isn't dependent on me to pull the company out of a fiery spiral. I'm also taking on the occasional contract programming job and working on a book on programming (since finished: Write Portable Code).

Most success stories that are the result of hard work seem to involve several difficult lessons or failures, and then a series of incremental successes -- that's what I'm hoping for. I'm going to give games another shot, but this time alone and with a different focus. Taking my ball and going home just because the first foray into independence and entrepreneurship failed would be silly, and I'm specifically avoiding taking any mainstream industry jobs that would interfere with my ability to give this another go if I get the urge.

Looking back, if anything, I'm more surprised that we were as successful as we were given the sheer ad hoc nature of our business model. We managed to overcome several obstacles fairly smoothly, we just couldn't jump that last hurdle.

It would be nice to identify one disaster, one enemy, one screwed up deal, one bad decision, one something that I could point at and say "That, right there, if we had licked that, we'd still be kicking ass today!" Unfortunately, there were no villains in this story, the tank just ran dry before we could coast to the next gas station.

So while this postmortem is hopefully illuminating and interesting for many of you readers, in the end it's just that -- a postmortem, where we're analyzing a corpse and determining cause of death. The fundamental fact remains that it was my responsibility as founder to avoid having my company end up on a stainless steel slab with a light shining on its many little wounds.

Without flinching, I can say that the culprit, in this case, was me. We can find reasons and make excuses all we want, but following through and surviving despite having multitudinous reasons to just give up and go home is what separates the great from the merely average.

Final Words of Wisdom

Based on my experiences, here are my parting thoughts for those of you that are going to go out on your own at some time:

  1. Figure out your worst case period of time to get cash-flow neutral, then double it. That's your no mas line -- if you're not looking good at that point, it's time to regroup. Make sure you have enough money before you hit the "Go Home" line.
  2. The lower your burn rate, the longer you have before you hit the "Go Home" point.
  3. The more you have saved up, the longer you have before you hit the "Go Home" point.
  4. Do something you believe in, not just something you think you can do.
  5. Don't predicate your business plan on the good nature, favor, and co-operation of other entities such as distributors, publishers, banks, and investors.
  6. Just because someone else failed doesn't mean you will too.
  7. Just because someone else succeeded doesn't mean you will too.
  8. Reality doesn't give a shit how clever you think you are.
  9. Accept that failure is likely. You can't live in constant fear of failure, you have to accept that it's a possible and even likely occurrence -- accept it and then get it out of your head.
  10. Always be closing.

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Acknowledgments

Thanks to the many friends and colleagues that proof read this document and offered their opinions.

Russian Translation: available here http://www.dtf.ru/articles/read.php?id=1383