How you can exploit the recession

How you can exploit the recession

By Owain Bennallack

June 30th 2009 at 12:22PM

A guide to running an economically resilient studio

Recessions are a vital part of capitalism. Without these cyclical purges, more bad companies would limp along, drawing money away from those with better ideas or less efficient operations.

Worse, we’d live in some kind of planned economy, where every citizen has two tractors, but no socks.

Such a glib characterisation of a 100-year old ideological battle may be of little comfort if you’re suffering from the worst downturn since World War 2. But the flipside is that for stronger companies, recessions present the opportunity to take market share and get positioned for the good times.

LESS IS MORE
For example, studies have shown that companies who step up their marketing in a recession tend to benefit.
Advertising cuts are easily justified when profits are falling, yet marketing money goes further in a downturn as rivals slash their budgets and rates fall.

Result: a good product can reach more consumers for less money.

Cheap advertising is not obviously useful to many game developers, and nor is another classic recessionary silver lining – High Street vacancies and falling rents. Very useful if you’re looking to roll out a pizza restaurant chain, not so much if you’re a studio making games in an industrial park. But the point is these downward forces are at work across the economy, not just in town centres where they’re most visible.

HAGGLENOMICS
Here are five ideas for ways games companies can benefit from the recession:

1. Everything is negotiable
Office rent, insurance, equipment, salaries, benefits, company cars: drive a hard bargain on anything you need to buy or hire. Deals are there to be made with landlords for whom a healthy company is a prized commodity after that flashy big spender went bust last month. Even if you can’t get a cheaper price, you might be able to get tweaks to onerous clauses in long-term agreements.

2. Fire bad staff
I’m not qualified to discuss employment law. But what I can tell you is companies and experts have told me a recession is the time to cut the dead wood out of a company.

The key, obviously, is to make sure the right people go. Some big games companies are currently amputating limbs where keyhole surgery would seem advised. Dropping a whole team when a project is completed delivers fast results for shareholders and might be easier legally, but it represents a lot of recruitment time and potentially good talent down the drain.

3. Hire great staff
Such short-sighted shedding of staff combined with studios going bust means employers have the upper hand for once in game development. People are scared,
and potential employees now value strong looking survivors, which you can use to your advantage.

And don’t neglect graduate recruitment. With so many experienced staff knocking about, some studios aren’t bothering with new blood. But this could be the opportunity to find really great brains that’ll thank you twice over for the start.

4. Exploit currency swings

The pound is still low against the dollar, for various macro-economic reasons. What matters for UK studios is they’re more competitive than they’ve been for many years (tax incentives and so on aside). I’d hope this would be an opportunity for companies to fatten their margins, rather than simply undercut each other, but we’ll see.

European developers have the opposite problem – a strong currency. Perhaps a good time to consider outsourcing to a dollar-linked corner of the world?

5. Diversify

Less competition and cheaper staff mean this could be a great time to innovate into new markets or technologies, such as those we’re exploring at the Develop Conference in Brighton’s new Evolve day on July 14th.

For an illustration, consider the Internet business. After the dotcom implosion, venture capital and advertising vanished and most Internet companies went to ground (whether dead and buried, or merely hiding). This opened up space for Facebook, YouTube, MySpace, Flickr and the other so-called Web 2.0 outfits that emerged during those years. Will we see something similar in games?