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Forums - Sales Discussion - Pachter's explanation on where your 60 dollars goes

heedstone on 11 April 2010
Naum said:
heedstone said:
Naum said:
heedstone said:
dunno001 said:
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.


Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

Good point dude, I didn't know that.  Sounds like you lot have it pretty damn good!  I think we have to pay about 17% tax in the UK! 

Please 17% tax is nothing... here in Sweden we first have around 28% tax(used to be around 32%) on our paychecks then we pay something called "moms"( wich pretty much makes everything 20-25% more expensive then it should be)... don't even get me started on what we pay extra for alcohole and nicotine based stuff...

Haha, that sucks dude!  The worst place I've been for tax was Norway (your next door neighbours!), it's a beautiful country, but man was it expensive! 

Sure it may be more expensive there of turists but the people in Norway earn a hell af alot more money each month.. hell people at MC'Donalds making burgers in Norway earn about the same as i do

Haha, yup I'd believe that.  I was £10 for a Bic Mac meal!! 



The dude abides   

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BoneArk on 11 April 2010

I pay $50 for games.



                                                                                                                                                                                                                                                                   

NicholasCage on 11 April 2010

How about when a game is in "Greatest Hits" category? Where is the $29.99 going?



Battlefield Bad Company 2 > Modern Warfare 2

ProdigyBam on 11 April 2010
NoCtiS_NoX said:
ProdigyBam said:
aragod said:
jarrod said:
MonstaMack said:

For once I think Pachter is right. Retailers do get a good chunk ($12 seems fair) for each game. I think with a 50 million dollar budget a game should easily break a million or more (if not It would be a flop, wouldn't it?) but it makes you wonder how much the average Wii game costs, or games like Deadly Premonition. Obviously not every game costs the same to make.

 

I work in retail and the mark up % did account to close to $12 profit per game. I think it was around $4 for a $20 game, so that means budget games have to sell a lot more or actual be budget in budget development costs (lol). So I hope Deadly Prem didn't run them much.

Does he also factor in price cuts? I mean if the game drops to $40 it has to obviously sell more to make up for the difference.

Average multiplatfom HD game R&D budget: $15-30m, AAA HD games regularly exceed $40m

Average Wii game R&D budget: $5-7m

Average budget for GC/PS2/Xbox games last gen: $3-5m

For AAA HD games, typically advertising budgets match or exceed development budgets.

And a few random R&D budgets...

  • Gears of War: $10m (no engine/tech costs, built "for free" alongside UE3)
  • Red Steel: $12m
  • Spore: $35m
  • Gran Turismo 5: $60m
  • Grand Theft Auto IV: $100m+
  • Modern Warfare 2: $40-50m ($200m advertising budget)

I just wonder where did you get access to these numbers, I'm curious as I'd like to find out few more game budgets.

God Of War 3: $44m (with engine)

Uncharted 2: $20m

Infamous: $40m+ (with engine)

MGS4: less than $60m (with engine)

Thats the few i know

infamous cost that much?

Last year i read an interview with a sucker punch guy in a german magazine, dont know which..

he was asked how much the game costed "about 30-40 million dollars, right?"

and the guy answered something like "no, bit more than that"

so i assume 40-50 million



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TheSource on 11 April 2010

That $36 can be substantially less for some publishers - it varies tremendously.

When EA got The NFL liscence exclusively it cost a ton...and cuts into the profitability of the Madden games.

The Music in music games has to be paid too.

Movies, tv-shows, engines, and alot of other stuff is liscenced.

$36 is really only what you get if its all the content for the game is in house so that you don't have to liscence anything...and if the game isn't part of an established series you probably need more advertising than usual for the game to break out and do well.

So for Madden NFL 2010 which has alot of ad costs, server costs and the NFL brand cost it might be more like:

PSP - $17 / unit - $3m budget ~ 176k to break even

Wii - $22 / unit  -  $5m budget ~ 227k to break even 

PS3/X360 - $30 / unit  $15m budget ~ 500k to break even

Edit: This is a better, simpler way to look at it - and its from Pacther's 2009 report

Category PC Game PS2 Era Game Wii (est) PS3/360 Game DS PSP Dig Dist
Retail Price $49.99 $39.99 $49.99 $59.99 $34.99 $39.99 $9.99
Retail Take $10.00 $8.00 $10.00 $12.00 $7.00 $8.00 $3.00
Wholesale Price to Publisher $39.99 $31.99 $39.99 $47.99 $27.99 $31.99 $6.99
Manufacturing/Packaging  $2.00 $2.00 $2.00 $2.00 $3.00 $2.00 $0.00
Big Three Manufacturers Fee $0.00 $6.00 $8.00 $10.00 $4.00 $5.00 $0.00
Liscenced Content Royalties $0-$8 $0-$6 $0-$7.50 $0-$9.50 $0-$6 $0-$6 $0-$1.50
Development Costs $1-$7 $1-$5 $1-$7.50 $1-$10 $1-$3 $1-$4 $1-$3.50
Total Cost of Goods Sold              
Low $3 $9 $11 $13 $8 $8 $1
High $17 $19 $25 $31.50 $16 $17 $5
Average $10 $14 $18 $22.25 $12 $12.50 $3
Publisher Gross Profit Margin*              
High (Lowest Costs/Wholesale) 92% 72% 73% 73% 71% 75% 86%
Low (Highest Costs/Wholesale) 57% 41% 38% 34% 43% 47% 28%
Average (Avg Costs/Wholesale) 75% 56% 56% 54% 57% 61% 57%

 

 



People are difficult to govern because they have too much knowledge.

When there are more laws, there are more criminals.

- Lao Tzu

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outlawauron on 11 April 2010

@ TheSource

Exactly. Talking to small, private shops. The amount the publisher gets varies greatly. They get a lot more for selling smaller games, but they get a measly $2 for selling a new copy of Madden. (when it was $60)



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dunno001 on 11 April 2010
NicholasCage said:
How about when a game is in "Greatest Hits" category? Where is the $29.99 going?


The only part of this I can confirm is $6 of it goes to the retailer. If it is a percentage of sales as some theorize for the licensing fee, then another $6 would go there, leaving $18 for the distributor. If it's a fixed $12, then only $12 is left for the publisher (and would explain why games don't go to $20...)

-dunno001

-On a quest for the truly perfect game; I don't think it exists...

scottie on 11 April 2010

Nice one, The Source - although the 'big three license fee' shouldn't be zero for digital distribution - MS/Sony/Ninty/Valve will take a cut if you sell on XBLA/PSN/Wiiware/DSiware/steam.

And there is still a cost associated with Digital Distribution that should go in the manufacturing/packaging section, ie cost of servers.

also, Blu ray costs as much as a dvd?



dnnc on 11 April 2010

it's not that pachter is almost always wrong!!!!!!!!!!!
the problem is just like you article, it's been said already!!!!!!!!!
he yaps stuff that has already been said and tries to take credit



my signature went on strike, it's demanding 3% raise

Kasz216 on 11 April 2010

As far as I know... the model Pachter mentioned is the most common one, though often the developer does take some risk and not get all of that money up front.

It depends on if the Publisher picks up development from the start or whether they are shopping the project usually.

Nothing is so cut and dry in absolutes.