How to Start a Video Game Company

Part 1 - How to start a Video Game Company business - Background

Starting a video game company can be an exciting venture for entrepreneurs who are passionate about gaming and want to create engaging, immersive worlds for players to explore.

Having said that, you should keep in mind that launching a successful video game company requires more than just a love for gaming — you’ll also need an understanding of game design principles, strong project management abilities, and the business acumen needed to run a company.

In this comprehensive guide, we’ll walk you through all the essential steps you’ll need to take to start your own video game company, from securing funding and building a skilled team to developing your first game and bringing your products to market.

Our guide is in 3 parts:

• Part 1 - How to start a Video Game Company business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

Industry Overview

The video game market is a massive industry that continues to show remarkable growth — in 2024, for example, the global video game market is predicted to reach an estimated value of USD $282.30 billion, continuing on this upward trend until 2027 at a compound annual growth rate (CAGR) of 7.80%.

This growth is thought to be primarily driven by several key factors, including:

• The increased accessibility to the tools needed for game development

• The growing popularity of mobile games

• The rise of new revenue models (e.g., free-to-play games with microtransactions)

Despite this, the industry is not without its fair share of challenges, with the main ones being:

• Market Competitiveness: In 2023 alone, for example, more than 100,000 new games were released on the video game market Steam.

• Rising Development Costs: The average indie game now costs between $50,000 and $500,000 to produce, while AAA titles (i.e., big budget, flagship games) often exceed $100 million.

New entrants will need to know how to effectively tackle these challenges if they want to successfully establish themselves in the competitive gaming landscape.

Startup Costs

If you’re considering whether a video game company is right for you, the first thing you’ll need to know is whether it’s a) affordable, and b) worth the investment. I mean, how much can you actually make running your own video game company?

Well, it depends. The initial investment for a video game company varies widely based on factors such as your development approach, team size, and the complexity of your first game:

• Development Equipment ($5,000 – $50,000): You can expect to spend a significant portion of your initial budget on the equipment needed to be able to develop games — which will likely include several high-performance computers, high-resolution monitors, and testing devices (as a minimum). With that being said, the amount you end up spending on this cost can vary greatly depending on the types of games you’ll be developing (i.e., for mobile, PC, or console platforms).

• Software Licenses ($2,000 – $15,000 annually): Another significant initial and ongoing expense you’ll need to plan for is the cost associated with obtaining all the software needed to develop games. Almost all programs used in game development — such as Unity or Unreal Engine for game engines, Blender or Autodesk Maya for 3D modeling, and Spine or Adobe Animate for animation — charge a steep license fee that you’ll need to pay periodically.

• Talent and Staffing ($150,000 – $500,000 annually): Due to the high salaries demanded by the specialists in this profession you’ll need to hire — such as programmers, artists, designers, and possibly sound engineers — staffing costs will likely form the biggest part of your budget when starting out. While some indie studios start with smaller teams to minimize this cost, it will still be significant as skilled game developers are typically paid between $60,000 and $120,000.

• Legal and Licensing ($5,000 – $20,000): Ensuring your game development business operates legally and is protected from potential disputes is another crucial expense to account for. In particular, you’ll need to invest in obtaining intellectual property protection (e.g., trademarks for your studio’s name and logos), as well as copyright your games and pay for lawyers to draft and review contracts for employees and freelancers.

• Marketing and User Acquisition ($10,000 – $100,000): In order to maximize visibility and ensure there’s a strong audience waiting for any games you develop, budgeting for marketing campaigns, social media presence, promotional materials (and potentially paid user acquisition) is essential.

As a new video game company, we recommend starting with a smaller project to establish your workflow and market presence before moving on to tackling larger, more ambitious games. This approach will help you to manage initial costs while building essential experience and industry relationships.

Earning Potential

The earning potential for video game companies can be highly substantial, with many successful indie game companies generating between $100,000 and $500,000 in their first year alone.

However, it’s important to note that profit in this industry is highly variable — while successful indie games have the potential to generate millions in revenue, industry data shows that in reality around 85% of indie games fail to break even.

On top of this, for games that do find success, studios need to be prepared to pay for between 12 and 18 months of development costs before seeing any revenue from their first game.

Another important factor influencing your earning potential is the revenue model you plan to use. While premium games sold by big studios typically charge between $50 and $70 per copy sold (with platforms taking a 30% cut), free-to-play games often see higher potential returns due to microtransactions and their wider audience reach.

As such, the latter route is often recommended for new entrants, as big video game companies can rely on their existing fanbase to make sales on one-time purchase games. The only drawback is that free-to-play games require ongoing development and marketing investment to keep players engaged.

Ultimately, the key to sustainable profitability lies in building a portfolio of games rather than relying on a single title — this approach helps spread risk and create multiple revenue streams, though it requires careful resource management and strategic planning.

Day-to-Day and Growth

Is a video game company profitable?

While video game companies can be highly profitable, success is highly variable — with industry data showing that only about 15% of indie games earn enough money to break even.

However, successful games can generate substantial returns, with hit indie titles often earning between $100,000 and $500,000 in their first year and some breakout successes generating millions in revenue.

How much does it cost to start a video game company?

Starting a video game company typically requires an initial investment between $50,000 and $500,000, depending on your team size and project scope.

In general, the largest expenses to prepare for when starting this type of company are usually development equipment, software licenses, and staff salaries.

What skills do you need to start a video game company?

Beyond technical skills in programming and game design, you’ll need strong project management abilities and business acumen to run a successful game company.

Most successful founders combine technical expertise with skills in team leadership and financial management with experience in established game studios before launching their own companies.

How do game companies make money?

Game companies generate revenue through multiple channels, including direct game sales, in-app purchases, advertising, and licensing.

The most successful companies often diversify their income streams across different platforms and monetization models, rather than relying solely on one-time purchase revenue from a single game.

Part 2 - Is a Video Game Company business the right fit for you?

Part 3 - Action plan to launch your Video Game Company business in 90 days