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The Business of Indie Games: How Licensing Transformed Small Studios into Global Powerhouses (And What Studios Can Learn)

The Business of Indie Games: How Licensing Transformed Small Studios into Global Powerhouses (And What Studios Can Learn)

The Indie Licensing Boom – Why Merchandising Matters More Than Game Sales

Indie games have taken the gaming industry by storm, proving that you don’t need a AAA budget to build a multi-million-dollar franchise. But what’s driving their success beyond game sales? Licensing.

Many indie studios have transformed their games into global brands by licensing their characters and worlds for merchandise, toys, and collectibles. For some, revenue from licensing deals now rivals or even surpasses game sales.

A prime example is Five Nights at Freddy’s (FNAF). The horror-survival game was initially a cult hit, but its eerie animatronic characters quickly became icons, leading to Funko Pop figures, action figures, books, and even a feature film. Fans who have never played the game still buy FNAF merchandise simply because they love the franchise’s aesthetic and storytelling.

The key takeaway? Indie studios no longer rely solely on game sales—smart licensing strategies can turn their IP into a lasting brand.

The YouTube & Social Media Effect – How Streamers Sell Merch for Indie Games

Indie games often gain massive traction through streaming platforms like YouTube and Twitch. Unlike traditional marketing, where studios pay for exposure, indie games thrive on organic content created by influencers.

Take Among Us, for example. The free-to-play game was released in 2018 but didn’t gain mainstream popularity until 2020 when streamers like PewDiePie and xQc showcased it. As more influencers played the game, millions of viewers followed, many of whom had never played it themselves. This game cultivated a community throughout the pandemic as many played online with friends or watched these streamers and YouTubers. Although the game was free-to-play, that didn’t stop fans from buying Among Us plushies, T-shirts, and keychains. 

A similar trend occurred with Poppy Playtime, a horror puzzle game that capitalized on the viral nature of YouTube Let’s Plays. By designing characters like Huggy Wuggy—who were instantly recognizable and marketable—the developers ensured their game would be a licensing success.

Games like Stardew Valley and Undertale have also built strong followings through YouTube content, leading to a massive demand for plushies, apparel, and collector’s items. Their success shows that even narrative-driven and pixel-art indie games can turn into merchandise powerhouses with the right fan engagement.

For indie studios, this proves that engaging with content creators can be just as crucial as game development. A viral video can make your game (and its merchandise) a global phenomenon.

Case Studies – How Licensing Built Gaming Empires

Minecraft – The Blueprint for Indie Game Licensing

Before being acquired by Microsoft for $2.5 billion, Minecraft was the ultimate indie success story. The game’s sandbox nature made it perfect for licensing, leading to official Lego sets, clothing, backpacks, a live-action film, and even a Netflix interactive series. Minecraft’s blocky aesthetic was easy to replicate in merchandise, making it one of the best-selling licensed gaming brands of all time.

Five Nights at Freddy’s – From Free Demo to Global Brand

FNAF’s success proves that lore-driven games with memorable characters can become licensing powerhouses. What started as a simple indie horror game grew into a multi-platform franchise, with toys, books, and a feature film. The brand thrives on its deep storytelling, which keeps fans engaged and eager to own a piece of the universe.

Among Us – The Power of Social-Driven Licensing

Among Us was built for virality. The colorful crewmates became meme-worthy characters, leading to licensing deals for plush toys, apparel, and school supplies. The game’s simple but unique design made it easy to translate into merchandise that appealed to both players and non-players.

Poppy Playtime – The New Wave of Indie Licensing

Unlike older indie titles, Poppy Playtime was developed with merchandising in mind from the start. The game’s creepy, yet oddly cute character designs (like Huggy Wuggy) were tailor-made for licensing, helping it quickly secure deals for toys, figurines, and apparel. This strategic approach to branding from day one set Poppy Playtime apart from its predecessors.

Stardew Valley & Undertale – Indie Storytelling Turned Merch Giants

Both Stardew Valley and Undertale built passionate communities around their immersive storytelling and unique art styles. Fans of these games eagerly collect plushies, posters, and even official guidebooks. The strong emotional connection players form with these worlds fuels long-term merchandising opportunities.

Baldur’s Gate 3 – Redefining RPG Licensing for Indie Success

Though backed by a strong IP, Baldur’s Gate 3 brought indie development sensibilities to a major franchise. With its D&D roots, the game naturally expanded into miniatures, dice sets, and official clothing, proving that even complex RPGs can carve out massive licensing opportunities.

What Indie Studios Can Learn from These Success Stories

If you’re an indie game developer looking to expand beyond digital sales, here are key licensing strategies to consider:

  1. Create Recognizable Characters: Games with iconic, marketable characters have higher licensing potential.
  2. Engage Influencers Early: Streamers and YouTubers can introduce your game to millions, driving demand for merchandise.
  3. Partner with Manufacturers and Licensees: From plush toys to clothing, working with established manufacturers and licensees ensures quality products.
  4. Protect Your IP: Trademarking your characters and game title early helps prevent licensing issues down the road.
  5. Think Beyond Toys: Consider books, apparel, and even partnerships with brands outside of gaming.
  6. Know When to Invest In Royalty Management Software: Track both inbound licenses (e.g., animation, voiceover, celebrity/product likeness) and manage outbound licenses. Monitor sales performance against license agreements and forecasts, ensuring royalties owed or due are accurately calculated.

The Future of Indie Game Licensing – What’s Next?

With the rise of AI-generated content and digital collectibles, the next phase of indie game licensing could go beyond physical merchandise. NFTs, virtual goods in metaverse platforms and other popular games, and direct-to-consumer licensing are emerging trends that indie studios should keep an eye on.

The key takeaway? Licensing isn’t just for AAA studios. As Minecraft, FNAF, Among Us, Stardew Valley, Undertale, Poppy Playtime, and Baldur’s Gate 3 have shown, indie games have the power to build billion-dollar brands. By leveraging strong characters, influencer marketing, and strategic partnerships, indie developers can compete at the highest levels of the gaming industry.

Conclusion

Indie games aren’t just games anymore—they’re brands. With the right licensing strategy, a small studio can turn a single game into a global franchise. If you’re an indie developer looking to explore licensing opportunities, now is the time to start. Or, if you’re an established developer with multiple properties and licensees and looking to grow, chat with us about IPM Suite and how our software can help manage outbound licensing of your characters, brands, and products.

Are you an indie dev ready to take your game to the next level? Let’s talk licensing!