Forums - Nintendo Discussion - Myth busting; 3rd party games are unprofitable on Wii U

I saw a lot comments, posts, blogs, threads  and videos about 3rd party games not being profitable on Wii U and that they don't sell well which is true, but that does not mean that it is not profitable in the first place, I decided to bust this myth by showing you this:

 

As you can see, a 3rd party developer/publisher has 27$ of "profit" per copy/unit that is priced at 60$ while a console manufacturer releasing games on their own platform would get 34% per copy/unit that is priced at 60$. All in retail/physical copies/units thus when we look at VG Chartz then you can see that a game that sold 100K/100000 copies/units is most likely profitable if its a low budget port while a exclusive to be profitable would probably need to reach 500K/500000 to 1M/1000000 copies/units to be profitable depending on costs....

Of course there will be temporal price drop in accordance to some action or holiday or permanent after some time, depending on publisher and/or retailer.

3rd party publisher gets 45% per copy while a first party publisher gets  55% per copy...

Average game development has a budget of 20 million US dollars while a Triple A title has 100 milllion and above...

So feel free to look at various retail software sales for that or that console, don't forget to consider variables as price of copy of that and that game drops after some time thus you could said amount of copies time by 27 for 3rd party and 34 for 1st party developer times then divide it by 3 or 4 and then time by 2 or 3 respectively...

Hopefully you understood my point/message/argument and that you have enjoyed reading this thread. :)



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What's the cost of game development specifically for a Wii U version? If we use this formula, then a game like Blops 2 for Wii U made something like 5.2 million dollars in margin. That's all well and good, but what did it cost them to develop the game? 5.2 million dollars seems a bit high for a port. 2 million maybe? 2 and a half? I don't really know.

What I do know is that you're not including opportunity cost in this decision. Suppose Activision made 2 million on Ghosts for Wii U. That's nice, but what else could they have been doing with that team at the time? Could the team have been working on another project that would have netted 5 million? You have to take that into account too.

nvm



wrong things.
Average game doesnt cost 20m dollar. Many considered AAA games cost that so........
and the 27$ the publisher gets is not profit but revenue...

the WiiU ports were rumored to cost around 1.5m to do so its safe to assume WiiU ports are all being profitable...but how much? is it worth it?
thats the Q



There is this thing called opportunity cost. Even if it's profitable you might get more money back if you invest your time and ressources into something else...

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you're not considering everything.

retailers typically negotiate contracts that if they buy XXX number of units and only sell a fraction of them sell then the publisher is on the hook to buy the remainder back. BUT, the publisher still has to pay the distribution and royalty cost of the original printing. so if the publisher overestimates demands it can significantly reduce or even eliminate all revenues on the game.

point is even if 100k units are sold,... if the publisher printed100k they make a profit,. if the publisher printed 200k then they probably made no revenue, and if they printed 500k they have negative revenue. it's a risk and potentially a costly one.

remember THQ? over estimating the UDraw demand on the HD consoles was the number one loss maker contributing to their bankruptcy.



Keep in mind that 3rd party games drop in price over time. They may make $27 at the start but that doesn't mean it's going make that amount forever. Once a game drops to $20 the publisher will basically be making nothing per copy. Even if they do turn a slight profit on porting a game to WiiU, how is that worth their time when they're making so much more money on competing systems?

Had a bet with eFKac on whether or not Valve will be at Sony's E3: I lost.

JWeinCom said:
What's the cost of game development specifically for a Wii U version? If we use this formula, then a game like Blops 2 for Wii U made something like 5.2 million dollars in margin. That's all well and good, but what did it cost them to develop the game? 5.2 million dollars seems a bit high for a port. 2 million maybe? 2 and a half? I don't really know.

What I do know is that you're not including opportunity cost in this decision. Suppose Activision made 2 million on Ghosts for Wii U. That's nice, but what else could they have been doing with that team at the time? Could the team have been working on another project that would have netted 5 million? You have to take that into account too.


Ubisoft once stated their Wii U ports cost something like $1.2 million.



JWeinCom said:
What's the cost of game development specifically for a Wii U version? If we use this formula, then a game like Blops 2 for Wii U made something like 5.2 million dollars in margin. That's all well and good, but what did it cost them to develop the game? 5.2 million dollars seems a bit high for a port. 2 million maybe? 2 and a half? I don't really know. Cost of making a Wii U version is estimated to be 1 million US dollars, that is basically a low budget port with foundation based on Xbox 360/PlayStation 3 version/build of the game rather than lets say Xbox One/PlayStation 4/PC version which would need a complete recode of the game to make it run on Wii U thus it would have higher costs then up-porting Xbox 360/PlayStation 3 version. Down porting from Xbox One/PlayStation 4/PC is currently unprofitable...

What I do know is that you're not including opportunity cost in this decision. Suppose Activision made 2 million on Ghosts for Wii U. That's nice, but what else could they have been doing with that team at the time? Could the team have been working on another project that would have netted 5 million? You have to take that into account too. This thread is not about that, it is only about the thing that this threads title is about.

supernihilist said:

wrong things.
Average game doesnt cost 20m dollar. Many considered AAA games cost that so........ You are not considering the cost of porting it to other platforms, alpha and beta testing, costs of advertisements and many other things...
and the 27$ the publisher gets is not profit but revenue... I did not wrote profit, but "profit"... It is revenue, but also profit after they recoup the costs of development, marketing and production of copies...

the WiiU ports were rumored to cost around 1.5m to do so its safe to assume WiiU ports are all being profitable...but how much? is it worth it? It is 1 million or 1.5 million... It all depends on complexity of the game... So there are variables/factors that affect the cost of porting it. You know that companies sometimes have teams that have nothing to do and they have teams of new comers that get tasks like this to practice and get experienced then shufled to some real projects... Porting is like bottom of the barrel, you need a place to start from and porting a game is just that for most coders/programmers.
thats the Q




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Fusioncode said:
Keep in mind that 3rd party games drop in price over time. They may make $27 at the start but that doesn't mean it's going make that amount forever. Once a game drops to $20 the publisher will basically be making nothing per copy. Even if they do turn a slight profit on porting a game to WiiU, how is that worth their time when they're making so much more money on competing systems?


@bold I wrote that in the thread, maybe I poorly explained that... If thats so then I apologize...

@underlined You aren't considering the fact that all major developers have porting team that are mostly filled with newcomers in company, porting is bottom of the barrel and that is where these rookies start and that is where they gain experience and knowledge so it is cheap for them to put a currently relatively inexperienced employees to porting team... It is in a way a win win for the publisher/company. Hit two flies with one swing/strike.