November 20, 2016

Assistant Professor Stacie Bosley

School of Business
Hamline University
1536 Hewitt Avenue
St Paul, MN 55104
Dear Professor Bosley,
On October 16, 2016 I requested permission to further research the feasibility of a model of
development which would be able to increase profits specifically within indie games. I had
previously stated that the study would be complete by November 27th and I would be happy to
report that this schedule has been upheld. I would like to thank you for approving my request to
look into this field of research despite it not being very academic in nature and have attached the
entirety of my report for you to review and, hopefully, approval.
As you are more than aware of, I have been quite interested in the gaming industry for some
time, this due to being a hobbyist whose entirety of free time is taken up by either games or game
paraphernalia. Of course, with respect to its capacity to produce profits on mostly labor and
human capital, it also sparks interest from the point of view of an economist as a good whose
profits can be maximized.
To give a bit more insight on the real meat of what I researched, I was looking into whether the
fact that a game was developed from a model whose sole purpose was to help maximize profits,
would influence its expected profit margin. To find any potential impact on profits I looked at
past research, specifically looking for any instances of attempts at profit maximization of
entertainment and if there were any reservations from consumers of that media. In addition to my
research, I conducted a survey of 35 students attempting to extract the same information I
attempted to find from my research but from a more directly applicable source.
Should further research be conducted there are a number of recommendation I have, the most
obvious being to create the model of development. I would also recommend using the actual
model in a more extensive survey among only those who have a tendency to purchase indie
games to have a more definitive understanding of the change on the games expected profit.
Once again, thank you for allowing me to look into this feasibility question. If you want to talk
about anything, about this feasibility study in particular, feel free to contact me at 612-991-7027
or at thammel01@hamline.edu.
Thanking you again,

Tucker Hammel

Running Head: PROFITABLE INDIE GAMES

Running Head: PROFITABLE INDIE GAMES

Profitable Indie Games: Myth or Possibility?

A Feasibility Study
Tucker Hammel
November 15, 2016
Hamline University

Abstract
The intent of this paper is to discuss whether it is feasible to determine if an indie game that is
designed to make money, will actually be able to do so. This paper reviews about some past
research and how it relates back to the question at hand. In addition, this paper discusses a
preliminary survey of 35 students conducted to determine if they would be dissuaded from
purchasing a game where it is stated that the intent is to make money. Ending with a section that

Running Head: PROFITABLE INDIE GAMES

discusses how a larger study would be conducted, as the results of the research done up to this
point is largely inconclusive with regards to the initial feasibility topic.

Table of Contents
Introduction................................................................................................................ 4
Methods...................................................................................................................... 6
Results........................................................................................................................ 7
Is a regression the best model to determine expected profits?...............................7
Would the model have to be updated very frequently?...........................................8
Do consumers want to avoid purchasing a game that is designed to increase
profits?.................................................................................................................... 8

Running Head: PROFITABLE INDIE GAMES

Conclusion................................................................................................................ 10
Recommendations.................................................................................................... 11
References................................................................................................................ 12

Introduction
Within the field of economics, there is a large void of studies regarding video games and
how to make a profit through this medium (Seo 2015). Larger companies tend to have access to
the funds required to determine the release schedule and current holes in the field to determine
what games are currently in demand and if a game in production will be profitable (Tschang,

Running Head: PROFITABLE INDIE GAMES

2007). Unfortunately, for smaller companies or even sole individuals who desire to turn a profit
from the games that they produce, there are only high cost means in which they can determine
how their game will be received and this can only be used on a case by case basis (Tschang,
2007).
The intent of this paper is to look into the feasibility of developing a model which can be
used to determine the expected profits of a game in development, and if it is capable of being
changed, what should be modified to lead to higher expected sales. The model is intended to
include various interaction terms between genres, genres seasonality, the most statistically
significant variable for skill of production, prior to release advertisement, and a dummy variable
for if the game was created to make money, this would be in addition to any other variables
which appear within available data which have significant t-scores and influence over profit. But
the development of the exact model for profit is for a later study as I determined that it would be
better to first determine if the idea of profit maximization is unappealing to indie game
consumers or even possible to begin with. As such the limit of this paper is a look into past
research as well as the results of a self-made survey, all of which, looking into whether it is
worthwhile to attempt to develop a model which can predict profits in indie games.
The rest of this paper is focused on what I have found through my research and survey
results. Starting with methodology of my research, continuing to the results from said research, a
quick rundown on what conclusions can be made, and wrapping up with how to proceed should
the desire exist to do so.

Running Head: PROFITABLE INDIE GAMES

Methods
In finding past research, the main restriction which I was placing on the papers I was
looking for was if I could apply the information to the video game genre, limiting the goods
which could be used to those with the intent of entertainment. Beyond that restriction however, I

Running Head: PROFITABLE INDIE GAMES

desired to answer a few questions with regards to the model that would be developed and used
those questions to lead my research. The first criteria question which I based my research on was
if I would have to recreate the model shortly after creating it. The second criteria, while I hold
the method highly and have some confidence that it can be, having evidence or backing on if
regressions can be used this way, would also be useful in determining if the model is even
possibly going to work. The final question I had desired to answer was if there were significant
reservations among consumers to purchase games which are designed to make money.
As I believed that there was a better chance on finding answers to my first two questions
through other peer reviewed articles I decided to attempt to answer my third through a survey of
35 Hamline University students.

Results
Is a regression the best model to determine expected profits?

Running Head: PROFITABLE INDIE GAMES

While speaking with certainty is difficult with respect to whether or not it is the best,
what a regression does (reduce sum of squared error between the predicted and observed values
across all available data points), suggests that it is a good fit for this model (Wooldridge, 2015).
There are a few nuances that must be upheld however, including but not limited to, proper
creation of the model, setting aside data so that it can be confirmed to be predictive, and it should
be used only as a causative model if a set of rules are upheld.
With regards to the creation of the model, there are a few things that can or must be done
to different variables to make sure that there is logical reasoning behind its existence within the
model. The most important thing which would have to be done for this model is to make sure to
include interaction terms. Including interaction terms would show how a newly created variable,
which is dependent on two or more other variables, influences profits. As touched on in the
introduction, the basest interaction terms I would be using is largely between binary variables for
genres and different months to denote seasonality of a specific genre. The reason to include this
seasonality variable for each genre is to make sure that as much variation is explained as possible
from those variables when there is an expected relationship unique to the combination of the
variables (Wooldridge, 2015). Of course there are a few things to be on the lookout for when
developing the model, the most important of which is to make sure to not include variations of
variables that do not logically make sense to increase the models R2 or its explained variation.
To make sure that there is in fact some use for the model besides to explain variation
within the dataset that the model is based off of, having a separate set of data to which the model
can be used to attempt to predict the profits of a new set of games, is a common and important
part of the model creation process. There are a number of restrictions to regressions which must
be kept in mind, most of which are tackled in the model creation process but there are a number

Running Head: PROFITABLE INDIE GAMES

which are inherent to various parts of things, the only one which I believe that needs to be noted
is the fact that if the variables values are not normally distributed, the predictive ability of the
model falls apart. The only thing which can be done to combat this is to increase sample size and
have the law of large numbers allow us to operate as if it is normally distributed, unfortunately
there is not a set sample size which fixes different levels of non-normally distributed values and
can only be determined to not be useful after running the regression.
Would the model have to be updated very frequently?
Given that the games industry is in fact vary volatile with regards to its desirable genres
and how people decide to purchase goods (Tschang, 2007). It is safe to assume that at any
singular time that the model is run with relevant data, the output can only be used for a short
period of time. That however does not mean that the model itself is not useful, merely that it will
have to be re-run with current data to determine the optimal changes to make or what the
expected profits will be, at the time of deliberation.
Do consumers want to avoid purchasing a game that is designed to increase profits?
From my survey which was responded to 35 times, I found that the majority of those who
held a significant likelihood of purchasing a game, held only a slight reservation to purchasing a
game which is explicitly created to make a profit (figure 1). Only two would be included in a
larger survey, as they are the only ones who had responded saying that they had previously had a
purchasing history of indie games, and as such this conclusion and all other conclusions made
from this survey, are in no way statistically significant with regards to my initial feasibility
question.

Running Head: PROFITABLE INDIE GAMES

Figure 1. Frequency of how desirability changes across various prior probabilities

with newly introduced information of game is designed to make money.

Conclusion
It is difficult to determine whether or not it would truly be a good idea to continue with
the development of a model to determine the expected profits of a game. On one hand, if the
development of the model goes smoothly, all you have to do to determine expected profits is run

Running Head: PROFITABLE INDIE GAMES

the model again with current data. On the other hand, it is entirely possible that the results are
inconclusive, it is possible that a mistake was made when creating the model or when retrieving
data, or that no one within the games audience is open to the idea that the game was developed
with profits in mind.
The creation of the model is, in itself relatively easy once the data is received, it may take
time to think through everything that must be done to make it as thoroughly capable as possible
but should just be a matter of time and logic to get it done properly. This model can be used
multiple times, but it would have to be re-run after some time has passed to make sure the
coefficients are staying current.
From the perspective of someone who desires for the creation of the model, I would say
that it is both a good idea and feasible to create the model. Still, I understand the reservations
that others may hold with the albeit inconclusive, negative impact on sales due to using the
model. In the end I believe that there is a little bit more research that must be done in order to
determine if this model is in fact a good idea to follow through with.

Recommendations
Before collecting the data and starting on the model, the only recommendation that I can
think of at this point in time is to create a new survey, strictly for those who have purchased indie
games and are the market base for the games that would be using the model. When the survey is

Running Head: PROFITABLE INDIE GAMES

re-run, determine if there is in fact a significant impact on desire to purchase a game because it is
developed to make money and attempt to quantify it so that it can be used to determine if the
model once developed will have any positive influence.

References
SEO, Y., BUCHANAN-OLIVER, M., & FAM, K. (2015). Advancing research on computer
game consumption: A future research agenda. Journal Of Consumer Behaviour, 14(6), 353-356.
doi:10.1002/cb.1557
Li, M., Jiang, Q., Tan, C., & Wei, K. (2014). Enhancing User-Game Engagement Through
Software Gaming Elements. Journal Of Management Information Systems, 30(4), 115-150.
doi:10.2753/MIS0742-1222300405

Running Head: PROFITABLE INDIE GAMES

Tschang, F. T. (2007). Balancing the tensions between rationalization and creativity in the video
games industry. Organization Science, 18(6), 989-1005. doi:10.1287/orsc.1070.0299
Diamantopoulos, A., & Winklhofer, H. (2003). Export sales forecasting by UK firms: Technique
utilization and impact on forecast accuracy. Journal Of Business Research, 56(1), 45.
Wooldridge, J. M. (2013) Introductory Econometrics. Boston, Massachusetts: Cengage Learning.