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A screen grab from They Bleed Pixels, an upcoming Xbox Live Indie channel game from Toronto-based Spoooky Squid

It's never easy for small, start-up studios to turn a profit from the games they make. An understanding of publishing channels, industry trends, and effective promotion strategies is key. However, even the most savvy business strategy will be for naught if you don't start with a game people want to play.

That's not going to be a problem for Spooky Squid, the Toronto-based studio behind the upcoming Xbox Live Indie release They Bleed Pixels. The two-person company's game is an instantly entertaining Super Meat Boy-inspired 8-bit side-scroller with a dark, Lovecraftian vibe and spectacularly gory combat.

Don't worry if you got lost midway that description. All you need to know is that it's a polished and challenging old-school platformer. I spent about 90 minutes with a not-quite-final build last week and came away eager to play through the whole thing.

Its dark story focuses on a student at a boarding school for troubled young ladies. Upon finding a blood-stained book our heroine begins having terrifying nightmares in which her hands are replaced by giant claws. She has to journey through creepy, deadly environments, lithely avoiding spiky traps with graceful jumps while dispatching enemies in variety of imaginative ways, such as launching them into spinning saw blades and skewering them on ceiling pikes.

As with most platformers, our objective is simply to make it to each level's exit. However, players also have the opportunity to search out secret areas containing pages of the mysterious book that's the source of the girl's dreams and can carry out more audacious (and increasingly gruesome) combos to increase their score.

But it's the little things that make it memorable.

For example, gutting our enemies in stylish ways isn't something we do just for the satisfaction of seeing huge deluges of pixilated crimson. It also adds to a meter at the top of the screen that allows us to set new save points. That means we have a say over where we want to respawn in tricky areas – an innovative and tactically advantageous touch.

And the audio/visual experience, which combines a powerful retro soundtrack with dark, artsy backgrounds, is unexpectedly rich. Each dream has its own musical and graphical theme, like an underground level set in front of silhouetted flames and a quick, flickering score. It has a kind of distinct flavour and character that big studio projects often fail to find.

Indeed, They Bleed Pixels is clearly a product of many late nights spent fussing over the smallest of things. If the devil is in the details,then there's a fair chance the guys at Spooky Squid are lunch buddies with Beelzebub, and we should be glad of it.

Minutia is less of a concern in DLC Quest, an Xbox Live Indie channel game released last November from another tiny Canadian outfit: Ottawa's one-man Going Loud Studios. This brightly-coloured two-dimensional platformer, which was named the best Xbox Live Indie game of 2011 by Official Xbox Magazine, simply wants to tell us a joke. And it's a good one.

Most gamers are aware of the relatively recent video game phenomenon known as downloadable content. It's the extra maps, skins, and weapons released after a game's launch that publishers charge for on a per-item basis. DLC Quest takes the idea of paying extra for this content to ridiculous extremes by forcing players to purchase game elements they normally take for granted.

The experience begins with our avatar standing upon a grassy field. There is no sound, our character doesn't animate (he simply glides), and we can't even move to the left. These and other basic "features" – like the ability to double-jump – need to be purchased from an in-game DLC vendor using coins collected during our journey.

It's clever, funny, and acts as a great example of how games can be a powerful and effective form of satirical commentary.

Of course, it's also a one-trick pony. After 30 minutes you begin to wonder just how far Going Loud can take the joke, and the answer comes shortly thereafter when the game abruptly ends.

But that's not a complaint as much as an expectation. Like They Bleed Pixels, DLC Quest only costs just 80 Microsoft Points, or about a buck. Viewed on an entertainment hour-per-dollar basis, it's at least as good a deal as most big budget action games.

And if that's all it takes to keep these little studios with big ideas in business making fun and subversive games, it's well worth the price.

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