|The Risk Business|
So you want to start your own software house? Clare Edgeley talks to the entrepreneurs
YOU'VE DEVOTED a year of sleepless nights to writing a game which beats all others hollow. Now comes the difficult bit: how are you going to sell it?
Your options are few. You can sell the game to a well-established software house. In the unlikely event of them liking it, they will pay an advance and royalties, and leave you to concentrate on your next blockbuster. We travelled down that well-trodden path in the August issue of Sinclair User.
Or you can decide to go it alone, and either sell the game by mail order or submit it to distributors who will then sell it into the high street.
This month we find out what it's like being a mail order minnow abroad in the predatory seas of the software industry.
Five years ago, when the industry was in its infancy, mail order was the only way to sell games. The distributors had not yet muscled in to control the software scene. As the market grew and high street stores like W H Smith and Boots opened computer departments, distributors became necessary to control the flow of games into those stores and the increasing numbers of computer shops.
Selling games by mail order is not as simple nowadays. With the wealth of games available in the shops, there is no real call for anyone to go to the bother of sending off for a game, with the wait which that entails until it is received. Unless, that is, the game is not available in computer shops.
"Mail order is for the small boys," says Domark's Dominic Wheatley. "With mail order you don't know when you'll get the product - it's a big turn off for the punter. If the game is faulty, it's much easier going into a shop to exchange it."
Domark has sold about two or three per cent of its total sales through mail order, catering for those who live abroad and for those whose local computer shops, do not stock a full range of games.
Automata's Christian Penfold disagrees. "With mail order you've got the advantage of being able to sort out faults very quickly and to tell whether it is the tape or micro which is at fault. There is a definite need for mail order companies and I'm trying to make 1985 the year of the postage stamp. We work on the assumption that if you've made the effort to take your order to a post office, you deserve that order to go out the day we receive it." Automata started off as a mail order company, later sold through the distributors and experienced such problems that it has reverted to mail order again.
Many small software houses have to survive on mail order sales only, as distributors will not handle their products. George Clough, of Manx Tapes, runs a small one-man outfit through which he has tried to market his business program, Classic Book-keeping: "No distributor will look at my programs. Terry Blood Distribution likes it but won't take it on because it doesn't have fancy packaging and it won't fit onto the shop shelf. Packaging it professionally would be a silly waste of time and money. To have the manual for my program printed, I would have to order about a thousand copies and boxes to make it pay." However, it is unlikely that Clough will have as many as a thousand orders.
Laurie Sinnett, now working as a programmer for Sentient Software, ran into trouble when he tried to market his program Dietmaster two years ago from his company Delta 7. "I had a couple of really good reviews but it flopped. The distributors wouldn't take it on as the packaging was so poor."
If you want to increase sales by getting your software into the high street, you must approach the distributors. That means you need a good quality product with good quality advertising and packaging. A review or two in the computer press also helps.
Delta 4 is a small software house run by Fergus MacNeill and three friends. They are 16, have just left school and are going to college. The company is run from home on a part time basis and is doing extremely well, considering it caters only for the lunatic fringe of the adventure market.
MacNeill depends heavily on reviews and has had great success with Bored of the Rings - a Sinclair User Classic - which he has recently sold to Silversoft. "Initially we did hardly any advertising and sent out no review copies, which is why we didn't get much publicity. From the Quest of the Holy Joystick onwards we relied heavily on reviews. If we get a good review, we receive more orders and sell up to 100 copies a week over all our games."
|"There is a need for mail order. I'm trying to make 1985 the year of the postage stamp"|
"We get large numbers of enquiries after a review", agrees Sentient's Laurie Sinnett. "If we do get to the stage where we advertise, it will depend on the review that game gets."
Advertising can be a costly business. Classified adverts are the best bet and it is essential to bring your product to the readers' attention. Even if it has been reviewed it is necessary to inform people where they can obtain it.
"You've got to create a convincing advert and you've got to make sure you get your money back," say Hewson Consultants' Andrew Hewson. "Do a survey of all the classified adverts in the different magazines, and if people are advertising consistently in the classified pages, they are earning money. See what type of advert they are placing, in which magazine and for what product."
Most adverts placed by small companies are about three centimetres deep and one column wide, costing between £20.00 and £45.00, depending on the magazine. A large magazine charges more for advertisements but it is read by a greater number of people. You must decide how much you can afford and how many tapes need to be sold to pay for that advert, and still leave a profit.
"My father keeps the books", says Fergus MacNeill, "and our policy is that we will not get into debt. We only advertise if we've got the money - we don't buy things we can't pay for."
MacNeill explains why more money can be made by selling a game mail order. "We lose out a lot by not having our products on the shop shelves, but by selling mail order we make more pounds per copy. We don't pay the distributors 55 per cent discount. The real costs - after duplication, buying the tapes and printing the cassette inlays - are buying jiffy bags and stamps."
However, although more is made by Delta 4 per unit, compared to the volume sales created by huge advertising campaigns and impulse buys in the high streets, the small mail order company loses out.
Asvoguelle is one company which has fallen by the wayside. Peter Percy, 27, set it up in November 1984, to market his game Mount Challenge, with the help of a £1000 loan from his father and financial assistance from the Manpower Services Commission. Peter was away looking for a job when we tried to contact him, but his father gave us some details.
"Peter did a lot of work before November and wanted to launch Mount Challenge on April 16 of this year." He booked two adverts in the computer press and had one direct response for the game. In fact, he had to send that copy out twice as it got lost in the post the first time. He also sold four or five copies locally and had two enquiries - from France and Spain. Mount Challenge was reviewed once in Crash.
"Peter got everything ready before the launch date as he didn't know what the response would be," says Mr Percy. "I expected 40 or 50 enquiries." He has now got 900 tapes waiting to be sold - the packaging and printing were done professionally and he even bought all the jiffy bags.
"Peter closed Asvoguelle in mid-July. I hope he'll advertise again. He's very disheartened." Peter Percy was a sole trader, which means that he would have to pay any debts incurred. Fortunately, he paid for everything as he went along and does not owe any money.
Micromania's Dominic Wood is similarly disheartened. "My advice to anyone starting off in mail order is not to bother. If your game's good enough, one of the top five software houses will take it and you will be paid a royalty."
Two to three years ago, Micromania sold around 200 games a week and could afford to advertise in magazines. "Now it's more like two or three units a week, through mail order."
Micromania started by selling its games through mail order in 1982. Last year the distributors took on its games - Kosmic Kanga sold 10,000 copies - and a few months ago Micromania went bankrupt through problems with credit control. Even if the distributors do take on your game, it is not a guarantee of success.
"There's no room for small companies, and no chance of gaining a foothold unless you've got some marketing skill," says Wood. "You can't make a living dealing solely in mail order I would be surprised if a new company, advertising its games, sold more than 12 units a month."
Hewson Consultants and Domark feel the same. Hewson reckons on less than a half a per cent of his total income comes from mail order sales and Domark's Wheatley thinks he earns two to three per cent. Hardly enough to keep a cat alive, let alone pay for wages and equipment.
Sentient Software sells its adventure games through mail order, but that comprises only a very small slice of the business. According to Laurie Sinnett, the major bulk of the company's income is derived from contract work - doing conversions, and a lesser amount from distribution. Sentient is the sole distributor for Memotech software in the UK.
Sentient would not be thriving today if it had to rely on the income from its games. It needs the conversion work and distribution deal to keep the software side alive.
Even though Laurie Sinnett's first venture, Delta 7, failed, he does not regret the time spent trying to make it a success. His advice: "Try it. It was great fun and I learnt a lot from it even if I didn't make much money." Delta 7 was closed before it could run into debt.
George Clough of Manx Tapes is retired and became interested in the Spectrum as a business micro about two years ago. He wrote Classic Book-keeping and believes in advertising to keep his products in the public eye, but doesn't need to rely totally on the income the program might make for him.
"What I've invested is two years of my time. I've been struggling since last August when I advertised in ZX Computing three months in succession - the sales from those ads didn't cover the cost of advertising, and I'm down quite a few hundred. I'm not interested in selling 10,000 copies a month, I'm interested in serious programs.