noname2200 said:
Hmm, we're getting closer, but we're not quite there yet. Assuming your figures are correct (and note that we're getting different figures, as I count 45 million sellers, not 42) the raw numbers do lean towards a split of revenue being as you say. Note though that I'm still not completely convinced: massive numbers of sales occur after a game achieves Greatest Hits/Player's Choice/Platinum Games status, wherein the revenue brought in plummets dramatically. I think that most of the big sellers haven't achieved that status in any great numbers at this point. Gears of war sold 75% of its total within 1/3rd of its current life on the market (33 weeks). Most top sellers follow that pattern of selling most of their units at full retail price. What dissatisfies me is that this still does not tell us about profits. I apologize for sounding like a broken record here, but I don't think you've directly addressed my concern just yet. For starters, I strongly disagree with your assertion that a game's costs are done when it's released. You're forgetting the cost of advertisement, a cost which can absolutely massive when one includes television and print ads (as the best-sellers almost always do). You've seen the commercials, I assume, and the billboard ads for games like GTA, Wii Fit, etc. Indeed, we know that a game's advertisement costs are a hidden cost that can eat into the game's ultimate profitability. http://www.gamasutra.com/php-bin/news_index.php?story=18699 "The margins on these games are good when you look at development, but it takes a lot of marketing dollars," said (North American president of Ubisoft Laurent) Detoc. "It's like packaged goods. You have to think about marketing, retail space, branding." He follows on by saying that "He explained that the extra marketing is necessary for attracting casual gamers, as they are not as devoted to following new releases as hardcore gamers." Sorry for being pedantic. Anyway heres a couple of points about profit/costs AFAIK. 1. Game engine development/art asset creation is counted as an expense rather than a capital cost, so initial engine development would show up on the balance sheet as a loss when in fact its actually more an investment in capital. So those first/2nd edition games cost a lot because of all the reworking of the tools and creation of art assets. 2. I didn't count advertising because I simply made the assumption that all games had advertising which cost about the same. Its true that it can be quite expensive but finding advertising #'s is even harder because finding out who paid what for what is a bitch in itself. However if we follow the principles of "game theory" that the equilibrium position in the market is that everyone advertises their games (Or at least the top 100 do) we would only have to work out an aproximate cost for the advertisement. I also don't quite follow you on your logic leap between these revenue figures being 80%, with profits therefore being 90%. In fact, we differ on that count by quite a bit. You're forgetting that a game's profits don't depend on its revenue, they depend on the revenue and the total costs. To give an example, we know that despite selling over a million copies, Heavenly Sword was still not profitable. By contrast, Zak and Wiki selling 400k copies (many of them for $20 or less) is still enough to make Capcom happy. Thus, revenue arguments don't tell us anywhere near enough to gauge profitability. It does tell us a lot when talking about absolute profit, not return on investment. If game A cost X but revenue was 120 million and game B cost y but revenue was 300 million. So long as we know that y is smaller than the difference in revenue between A and B we know that game B made more profit. Putting numbers in if Game A cost 1 million to make and game b cost 100 million to make, profit on game A is 119 million and profit on game B is 200 million. Its not the complete picture but its a very indicative partial glimpse. In fact, it appears that companies that focus on the low-revenue DS games tend to be more profitable in general than those which focus on making HD games (in general), even when the DS games barely crack six figures. Marvelous and Majesco are the prime examples of the latter, while Sega is a great example of the former. I guess what I'm ultimately getting at is that these generalities, while simple to calculate, don't give us the angle we need to actually understand what in the blazes is going on. I won't call it "down and dirty", but it's still not enough for me. (I know, I'm kind of a jackass, huh?) While far from being worthless, the numbers you've brought are not yet a convincing enough counterpoint to Malstrom's assertion that rising HD costs are killing off gaming companies, not when there are so many signs that the times are a'changing. While individual examples may torpedo the general rule... It stands to reason that if most games do not profit at all, and if you follow the estimate that 30% of games break even or make a profit, which fits even better when you apply the theory that the equilibrium position in the game market is to advertise even if in spite of the advertisement the game will likely fail. The only games which could profit and cover the massive losses on other games are the few which sell the most. We are talking absolutes here, not return on investment. |
Tease.
