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‘Star Citizen’ Dev Spent Over $4 Million a Month in 2017

Kickstarter was still a brand new frontier in November 2012 when Chris RobertsCloud Imperium Games raised more than $2 million for its ambitious “Star Citizen.” Now, more than six years later, the company has raised more than 100 times that amount through private crowdfunding.

Cloud Imperium announced today it has secured $46 million in funding, leading to a corporate valuation of $496 million. That’s about 2.5 times what the company has raised from fans in a combination of crowdfunding and sales of game packages, monthly subscriptions, and in-game ships (some of which cost more than $400, and many of which cost as much as a full retail game or two).

As part of the news surrounding the funding from father and son Clive and Keith Calder, Cloud Imperium Games released an eight-page accounting document. According to that document, the company spent $193.3 million since 2012, with $14.23 million in reserve. About $48.8 million of that was spent in 2017, putting the company’s most recently reported monthly burn at an average of a bit more than $4 million.

On one hand, “Star Citizen” is an anomaly. It’s a game in development that has already brought in more than $200 million in revenue. Only one percent of that was through traditional crowdfunding. And yet, for the past three years, CIG has been spending more than it’s bringing in through its revenue streams.

Most of that is development expense. Cloud Imperium says that only $826,000 went to general and administrative. This includes accounting and legal services. Another $1 million is tied to capital expenditures like hardware, software, and office furnishings.

The company’s headcount has grown significantly since the original team of thirteen began six years ago. In 2017, Cloud Imperium reported 464 staff members in 2017. For a single-game studio, that’s a large number. Telltale Games had 250 across its multiple games upon its demise. Epic Games employs 700 (many of whom are tending the lucrative Fortnite garden).

Of Cloud Imperium’s 464 employees last year, 397 are classified as part of the development team. Calculating the percentage of staff that are identified as part of development costs and applying that to salaries gives us a rough sense of how much Cloud Imperium is spending on that portion of its staff.

One way to get a sense for how efficient a studio runs is by calculating it’s dev-month cost. This can range significantly based on geography. Cloud Imperium has offices in Los Angeles, Austin, Manchester, and Frankfurt. One rule of thumb for AAA development (and keeping in mind that “Star Citizen” has a larger budget than most AAA titles) is a $10,000 man-month. Anything above that starts to feel inefficient.

Based on the information available, Cloud Imperium’s dev-month cost appears to be lower than $6,000. The company is shifting its resources away from contracted developers, a cost that reached a peak of $14 million in 2015 and has been reduced to $3.3 million in 2017.

Contracting allows studios more flexibility and helps manage overhead. It also creates an obligation (both morally and financially) for an employer. Smart hiring is a key to survival, especially as game development becomes more hit-driven.

“You don’t hire someone because we have something we need this month and next month we don’t know,” Facebook’s Jason Rubin (co-founder of Naughty Dog) told Variety in a recent interview. “Are we sure that when we put someone in a seat, that’s their seat, as long as they’re good at what they do, or they get promoted into another seat, that we have the room for it?”

Cloud Imperium doesn’t seem to be in danger of a sudden fall-off in revenue. “Star Citizen” is only in alpha, and it keeps attracting players (both new and returning). For a game that is essentially early access, Roberts and his team seem have figured out how get players to keep spending even before the game hits beta, let alone what we would consider a full release.

How is Cloud Imperium earning revenue?
Six years after closing its initial funding on Kickstarter, “Star Citizen” is in playable alpha. Well, pieces of it are. Right now, you can “pledge” $45 to “back” “Star Citizen’s” Squadron 42 single-player campaign (now due out in Summer 2020, almost eight years after successful funding). There are also game packages for that price that include the “Star Citizen” game (separate from Squadron 42), which include space combat, a first-person-shooter mode, a ship racing mode, a single ship, and three months of insurance.

In “Star Citizen,” you have to keep your ship safe. If you buy a ship with cash, you’ll have lifetime insurance, which means replacing it only costs 10 percent (dwindling over time to nothing). Without insurance, you’ll have to pay the full in-game price to replace the ship. If you’ve upgraded it, you won’t get those better guns or shields back. Those will be covered by supplemental insurance later on through development. All of this is handled more leniently right now, as the game is still in alpha.

Some of the ships available for purchase on the “Star Citizen” website right now are represented through concept art. They haven’t been through the 3D modeling process or balancing. It’s essentially a pre-order for something that’s simply a picture and planned stats. Ship implementation is lagging in varying amounts. The Banu Defender, for instance, went on sale in late April 2017 and is planned for release in early 2019. The Kruger Intergalactic P72 Archimedes was put up for sale in November 2015. It’s due during the second quarter of 2019.

A disclaimer did warn buyers (as it does on similar “concept sales”) that these are not “flight-ready” in-game vehicles. “The Defender is being offered for the first time as a limited concept sale,” the “Star Citizen” website reads. “This means that the ship design meets our specifications, but it is not yet ready to display in your Hangar, fight in Arena Commander or fly in the Alpha. All revenue collected from Concept Sales goes directly to supporting the development of ‘Star Citizen;’ to building a game with a scale and depth that’s never been accomplished in games before. Your contributions directly finance the hundreds of developers striving to create the Best Damn Space Sim ever and the team engaging with the Best Damn Community Ever. Concept Sale profits don’t go to shareholders or personal pockets; they go directly into developing a better game.”

Details related to Concept Sales and earmarking for development purposes (as assured in the disclaimer) are not included in the eight pages of financial information released by Cloud Imperium Games today, but Roberts tells Variety that about 80 ships are now flyable in the game. Another 20 or so were sold as concepts and are currently in development. The remaining vessels are some of the larger ones. These are massive and explorable unto themselves, with fully detailed interiors. Roberts said the company made a decision to try and finish off the smaller, faster-to-create ships first before turning their efforts to the massive ships.

One-quarter of the company’s revenue is earned through concept sales, according to Roberts. The remaining is generated through sales of existing “flight-ready” ships, subscriptions, and starter packs. There’s also in-game currency, but the amount players can purchase is capped.

Cloud Imperium wants to transition away from the early pre-sale model that has worked so well for it in the future (and included a $27,000 package of 163 ships and additional extras). “Our revenue has shifted away from concept sales to flyable ships or new players,” Roberts said. “We’d rather people not write a big check for big ships. It could become unbalanced over time.”

New investment, new marketing
The newly announced $46 million is earmarked for marketing and distribution efforts. Cloud Imperium spent a hefty $7.1 million in 2017, which included events like the annual CitizenCon. This category also includes online service, customer support, and player relations.

The new funding is indirectly explained in the financial documentation. “Clearly, there is a cost in delivering this substantial game to our community and whilst we carefully manage our server and deployment costs and develop technologies for increased efficiencies, this cost will increase as we deliver to more and more players,” the company says. “The engagement with our community is also, of course, a direct consequence of our open development ethos, which has taken us to where we are today, and our events are growing in size and attendance. Consequently, it is not surprising that costs in this entire cost category are rising, climbing to $7.1M globally by 2017 and are likely to continue in that direction as we prepare for releases.”

Clive and Keith Calder, the investors behind Family Office and Snoot Entertainment respectively appear to have made a straightforward investment in CIG. Though they do get board of directors representation, and own just over 9 percent of the developer.

CIG says that it wants to give Squadron 42 “the launch it deserves.” Whether that includes a marketing blitz, primetime ad buys, larger convention presence at PAX, E3, Gamescom, and San Diego ComicCon, hasn’t been revealed yet (and likely won’t until we get much closer to the 2020 launch).

“Star Citizen” isn’t a “Kickstarter game” anymore. It hasn’t been for a long time. Its ever-growing budget rivals that of the biggest AAA-games. Its modest (but not tiny, even for a $2 million Kickstarter campaign) team of 58 people is now a huge, multi-location operation.

Costs are growing, and revenue hasn’t kept pace since 2014. Cloud Imperium needs this marketing fund because so much of the market is already tapped (or at least aware of what it’s been building). It’s far too early, even after six years, to predict whether “Star Citizen” will live up to Chris Roberts’ promises. No matter what happens though, the game industry has never seen anything like “Star Citizen’s” story, and we probably won’t for years to come (if ever).

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