CREC010500 - Overview and definitions: video games - phases of development

Four phases of development 

The VGEC legislation sets out four phases of developing a video game: 

  • Initial concept design 

  • Design (also known as pre-production) 

  • Production 

  • Testing 

Expenditure eligible for VGEC is limited to core expenditure, which is expenditure on designing, producing and testing a video game (CREC051000). This means that expenditure on the first phase of development, initial concept design, must be separated from core expenditure.


Attributing costs across the phases of development 

For video games, it is anticipated that attributing costs to a specific stage may prove difficult. Video game developments do not always take place in a strict sequential manner. There is no standard format for development. Items of expenditure may therefore be attributable in varying degrees to several stages. 

For example: 

  • A game designer and level designers might be engaged from initial concept through to testing. They will typically have less involvement after the design stage, but they will often be required to provide input throughout production and sometimes in testing; 

  • Programmers, artists and sound technicians will be responsible for creating the video game itself. In addition to the production phase, they will often be involved in testing and be required to correct issues that arise from that process. They might also be consulted in the design stage to consider what is feasible in respect of gameplay, artwork or audio effects. 

It would be reasonable to consider that all these examples contribute to more than one stage of video game development. 

It is important to first identify which phase(s) of development a given item of expenditure contributes to. It is then necessary to determine how much expenditure is attributable to that phase. 

The attribution of costs between phases of development must be done on a just and reasonable basis (CREC055000). 


Distinguishing initial concept design from later phases of development 

Because VGEC is available on design phase expenditure but not on initial concept expenditure, it is important to understand the difference between the two. 

Initial concept expenditure relates to activities usually undertaken to determine whether the video game is commercially feasible. The expenditure is speculative in nature. 

Design expenditure is expenditure that would typically occur after the decision to proceed with development has taken place but prior to production. It is also known as pre-production. The expenditure is not speculative in itself. 

In larger software developers, a game designer will often produce a proposal for a video game, sometimes referred to as a pitch. This will outline several aspects of the video game including: 

  • concept, 

  • gameplay, 

  • feature list, 

  • setting and story, 

  • target audience, 

  • requirements and schedule, 

  • staff and budget estimates. 

These elements may not always be considered in detail at the initial concept design stage, especially for smaller VGDCs. This may be particularly true where the video game is a sequel or heavily based on another existing game, where the concept and gameplay may be determined by the existing game. 

These initial considerations are speculative in nature and typically do not qualify as core expenditure. They also relate primarily to commercial decisions that may be addressed by the development team or the publisher. 

However, there is no reason that some of the activities undergone at this stage may not also contribute to qualifying design. This might be where an aspect of the initial concept design is given specific attention in order to distinguish the game from other similar concepts. 

For example, a game may rely heavily on aspects of gameplay to produce a unique selling point for the game. A programmer may become involved to help address initial queries over whether some aspects are possible and how they might affect other aspects of gameplay. 

This might be considered to fall within initial concept design because it is still uncertain whether the video game will commence development. This activity may also be considered to be qualifying design on the basis that it would usually occur, and any resulting code will be also be used, after the game had received approval.


Expenditure attributable partly to initial concept design and partly to later phases of development 

Some costs relate both to the concept design phase of a video game and to other phases of development. Examples of such costs would be those incurred on gameplay design and the story. 

In each case it is necessary to establish to what extent the expenditure on the story is incurred on establishing whether a video game should be made and how far it is incurred on actually making the video game. 

The correct apportionment will vary according to circumstances. There is no definitive apportionment method, and any reasonable method may be used. 

For example, if a developer worked substantially full time on a video game for a year, with the first three months being taken up with initial concept design and the remaining nine months with design, production and testing, it would be reasonable to allocate one quarter of the developer’s fees for that period to the initial concept stage, and three quarters to the later phases, to be treated as core expenditure. 

A plot story could be used during the design phase of a video game as well as the later phases of development. If the original story was more or less unchanged through this process, then it may be reasonable to allocate its costs according to how it is used through the various stages of development. This could be evidenced by the extent to which reference is made to it throughout these phases. 

It may be the case that a writer is engaged and is paid for an initial fee for a first draft of a story for development purposes followed by further instalments as development proceeds and refinements are made and a script for the voice actors produced. It may be reasonable to allocate costs according to the timing of payments and the use to which the various versions are put. 

For example, if a single rough draft of the story is required for the pitch, the initial fee related to this would be concept design expenditure and not be included in core expenditure. Provided that all subsequent payments for story development and the script for actors follow the decision to proceed with the video game, then these may be treated as core expenditure. 

A development company may rely on an estimate used in the development of previous video games for apportionment, but this will only be appropriate where the facts are similar.