Scruff7: Are you suggesting that Nintendo is somehow making it unprofitable to make graphically high end games? Are they doing so with some manner of black magic? Because if you're not suggesting using black magic, you just sound like an idiot.

Nintendo's example, if Nintendo has an example, is to spend years upon years developing games, delaying them, then releasing phenomenal games. Games like Super Mario Galaxy and Super Smash Brothers Brawl will not disappoint despite the lofty hopes Nintendo fans have for them.

Look at the Halo 3 beta -- visually it was disappointing and the fans let Bungee know it. Personally, I found it disappointing on many levels (it felt like playing Quake 3). Nintendo's example, if anything, would be to innovate rather than releasing, say, another Ratchet and Clank with upgraded graphics.

You will find that not all 360/PS3 games cost 15-20m to develop.  Yes, games like Resistance, Killzone and Gears of War cost s fortune, but you will find that developers will be getting hard cash from Sony or MS to develop on their platform.

There is a mythical 500k number being banded around, that generally represents the required number of units to be sold to break even.  This will be based on a $3-$4m budgetted project, which suggests generally that $8 from each game sold goes back to the developers to recoup costs.

360 and PS3 games are generally $10-$20 more expensive to buy and would probably include $15 or so for the developers.  I reckon traditionally, a game for either the 360 or PS3 would cost double the PS2 generation budget at the moment...so $6-$8m, which would mean they would need to sell just over 500k to make back their money.  But with games like Killzone and Resistance with their rumoured $20-$40m budgets, would mean that the games would have to sell over 2.5m copies to break even.

A game like GTAIV would have a huge budget also, but combined 360 and PS3 sales should easily break the 2.5m sales worldwide.

The problem is that developers will not be making the same money they did last generation unless they develop more for the Wii and DS. 

When they say it costs 15 million to develop they are including all licensing fees and every cost that the dev has to pay to create ship and produce the game. So I wasn't ignoring the cost of licensing of the other fees.

Doesn't quite work like that. Deals tend to vary a lot, but publishers generally pay directly for the entire development budget.

They then spend as much (or a lot more) on marketing than they do on development.

For a $60US title, a publisher could make $20-$25US / unit. Say that total costs (marketing + dev) come to $30m (only for BIG titles - not average titles).

(this is more for platform holders, as it only costs them a couple of bucks to produce/box titles - versus the $5-$10 /unit they charge for 3rd-party developers). 

That comes to about 1m units to break even (for the publisher). This would be over lifetime - years. There might be other revenue streams as well (licensing, digital downloads, advertising, etc...).

Its completely reasonable for a publisher to spend $10m-$15m on a "medium" sized title (marketing + dev costs) resulting in roughly 500k units to break even.

The general excepted number is that developers receive 30% while publishers receive 70% from what I understand. But that would be after removing retail and other costs.

From the early days of the Atari to today there has been a pretty standard increase in development cost increase from generation to generation; roughly 4 times the previous generations' development costs. With each generation there was also an dramatic increase in the market and a reduction in the quantity of games which meant that most games were profitable (or at least broke even).

For the past 3 or 4 years there has been a lot of people who claimed the market was going to crash in this generation because the worldwide market had not been growing as quickly (some markets were shrinking) and development costs were going to pass into the range where only Blockbuster games could be profitable. Many companies have looked at in game advertizing, micropayments, episodic content and smaller games as a solution to these problems.The reality is that these approaches have (generally speaking) not fixed the problem.

Honestly, if Nintendo is successful with the Wii (and truely expands the market to the non-gamer) they could actually do more to enable developers to continue their escalation of development costs; kind of a paradoxical situation being that the Wii is specifically designed to keep development costs low.

most of the time, publishers pay developers to develop a game. usually, the upfront payment does not cover the cost of development, and they developer gets a cut of the revenue as compensation. this cut could be anywhere from 0% (no cut, full upfront payment), to really just about anything. it's really the PUBLISHER the bears most of the risk. some small developers would of course, first develop a game and then pitch it to a publisher to have it published, and those deals would be structured differently.

if a game retails for $60, a good rule of thumb is the publisher/developer gets back about $30 . so if a game costs 15 mln, it'll need to sell about 500,000 just to break even.

EDIT: most publishers have in-house development studios.

 it depends on the deal struck on licensing.  sometimes licensing is on per game sold, not a one-time fee.  and when they say 15 mln to develop, they really mean 15 mln to DEVELOP, not including any of the marketing, shipping, placement, royalties, etc.

Generally licensing fees are payed in one lump sum to Microsoft or Sony. The cost of those fees vary depending on the game and are included in the deveploment cost.

Some games may have different agreements that are dependent on the number of units sold but those are usually killer aps like Halo and GTA that everyone knows will rake in the dough.

You can compare this to the music idustry, the people that record the CD and produce it spend an amount and the publisher spends a different amount but when they talk about how much it costs to make they include both amounts so that the number looks bigger.

I'm not denying the fact that it costs alot of money to develop a game, however, I think there is a misunderstanding about what dev totals include which could be caused by either the media's inflation of the numbers of the developers, because as the OP pointed out the numbers don't add up.

I'm not saying it would become unprofitable to make graphically high end games, such as big budget games on the 360 and PS3, unless too few people buy 360s and PS3s. i don't think it will come to that.

what i am saying, is that companies are motivated by profit. if by developing games for the Wii, which do not cost as much to develop, but reach a larger consumer base, they can increase profit through sales, then this is where software development companies will go. 360 and PS3 games will still be profitable, but not as profitable as Nintendo games.

make sense so far, or do you need me to slow down?

if they are diverting their energy and resources into developing games for the wii, then they won't be putting that expertise into the technically more advanced next gen consoles, simply because there is not as much profit in it.

there is a large proportion of games coming out for the Wii and DS which are relatively cheap to design and manufacture and then go one to sell increadible amounts. this is huge profits for Nintendo. Other software companies will want a peice of this pie, they want that profit.

I'm not talking about what the fans want, because these are the sort of games that the'casual' gamers want - Nintendo have done very well to identify this and exploit it. woo hoo for them. i'm concerned that this casual gaming phenomenon will deivert resources away from 'high end gaming', as you put it, such as 3rd party PS3 and 360 games.