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Unit economics

ad_campaign.txt
Garden Defense ad campaign (example) Ad spend          $1,000Installs          2,000LTV per player    $0.35

Should the studio spend more on this campaign?

  1. No. CPI is $0.50, more than the $0.35 LTV, so each player loses about $0.15
  2. Yes, because 2,000 installs is a lot of players
  3. Yes, because CPI is $0.35, the same as LTV
Show the answer

No. CPI is $0.50, more than the $0.35 LTV, so each player loses about $0.15

CPI is $1,000 ÷ 2,000 = $0.50. A player who costs $0.50 and brings in $0.35 loses money. LTV must be higher than what it costs to get a player.

Payback

cohort_june.txt
Players from June ads (example)Ad spend           $500Earned by day 30   $380Earned by day 60   $520Earned by day 90   $560

When did this group of players pay back its ad spend?

  1. Between day 30 and day 60
  2. Before day 30
  3. Never
Show the answer

Between day 30 and day 60

By day 30 the group had earned $380, less than the $500 it cost. By day 60 it had earned $520, so payback came between the two. A long payback means the studio needs cash in the bank while it waits.

Quick check

Why is a level editor for Garden Defense a realistic next feature for our studio?

  1. Our levels are already data in JSON files, so the editor only has to help players fill in those values
  2. Players could edit the game's code directly
  3. Shared levels never need checking, so it is no extra work
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Our levels are already data in JSON files, so the editor only has to help players fill in those values

Keeping levels as data, not code, is what makes an editor possible. Shared levels still need checking, so nothing mean or unsafe gets posted.

Quick check

Claude Cowork turned a folder of receipts into a monthly spreadsheet for the studio. What happens before the totals go to the accountant?

  1. A person checks the totals against the receipts, because AI can make mistakes
  2. Nothing, because AI tools never get numbers wrong
  3. Give Cowork the bank login so it can check the totals itself
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A person checks the totals against the receipts, because AI can make mistakes

AI speeds up the work, but people stay responsible for what goes out. Logins are secrets that never go into an AI tool, and a parent owns the studio's accounts.

Onboarding

Email from a new freelance composer
Can I start today? Send me the admin password for GitHub and Firebase, and we can sign the contract later.

What is the best reply?

  1. Contract first, then access to only the music folder the job needs, plus a buddy to ask questions
  2. Send the admin password so the composer is never blocked
  3. Let them start, and write the contract when the music is done
Show the answer

Contract first, then access to only the music folder the job needs, plus a buddy to ask questions

Signing first protects both sides, including who owns the music. Giving only the access a job needs keeps the studio safe if an account is ever lost or misused.

Recoup maths

deal_memo.txt
Advance:          $30,000Recoup:           publisher keeps all sales                  until $30,000 is repaidAfter recoup:     60% studio, 40% publisherSales so far:     $80,000 (after store fees)

How much has the studio earned from sales so far, on top of the advance?

  1. $30,000
  2. $48,000
  3. $50,000
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$30,000

The first $30,000 repays the advance. The $50,000 left is split 60/40, so the studio gets $30,000 and the publisher gets $20,000.

Quick check

A Kickstarter campaign with a $40,000 goal raises $31,000 by the deadline. What happens?

  1. Nobody is charged, because Kickstarter is all-or-nothing
  2. The studio gets $31,000 and must deliver everything promised
  3. Kickstarter pays the missing $9,000
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Nobody is charged, because Kickstarter is all-or-nothing

Kickstarter only charges backers if the goal is reached. That protects backers from a half-funded project, so studios set a goal they truly need and can reach.

Quick check

A game fund offers a grant for a $40,000 project, with 50% matching funding. What does that mean for the studio?

  1. The grant pays $20,000, and the studio must find the other $20,000 itself
  2. The grant pays $40,000, and the studio pays it back later from sales
  3. The grant pays $20,000 in exchange for 50% of the studio
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The grant pays $20,000, and the studio must find the other $20,000 itself

Matching funding means the studio covers part of the project itself. Grants are never paid back from sales and cost no ownership, which is why they are called non-dilutive.