Brilliant Sean Mastrom's blog entry

[ItsaMii]

Squilliam said:

Sky Render said:
Your statement, Squilliam, takes nothing into account for budgets of games. Under your assumption, "profit" has a constant target value for all games, which just isn't true. Some games (such as GTA4) have enormous budgets, but most games are made for sub-$20mil. Unless you wish to analyze each individual game's budget to show precisely how much each individual game has made or lost for a developer to prove your point, I don't really see how you can maintain the argument. And odds are, you would prove mine instead; it's bad business to stay in an industry where you only take losses, and only a very poorly run company keeps at a losing prospect when they cannot make a profit.

As I realized that I could not count profit I switched to revenue which is freely available information. 80% of games make 20% of the revenue. Or 20% of games make 80% of the revenue.

As development costs are fixed once a game is produced essentially, if you get 30 million in revenue from a game which cost 20 million your return on investment is 50%. If that same game nets you 60 million in revenue, your ROI is 200%. Double the revenue, quadrupel the profits.

Furthermore I showed that at retail the top 10% of games made 120 million in revenue or likely 60 million in the hand for publishers. If the average cost of marketing and development is 30 million then the average ROI for the top 10% of games is 100%. Furthermore I counted the sales/revenue from just one console, I excluded the PS3 from this and if it was included it would just further strengthen my point.

I make 600 widgets, and it cost me $950 to make them. If 550 widgets are stolen but I can sell 50 widgets for $20 each, I make $1000 so im still profitable even after I lose money on 550 of them. 

 

I will try to provide better numbers. The following are part of 360 million sellers without a Japan Release:

Marvel UA, GTA 4, Guitar Hero 2, Mass Effect, Rock Band. So we got 120 games, not 42 (42 X 3 - 6). I may be wrong if the number you got from Metacritic included every downloadable game. I only took a quick look at gamefaqs and saw that the 400+ number was wrong.