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JaggedSac on 21 October 2008
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HappySqurriel said:

Forbes.com did a cost breakdown for Gears of War ( http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_print.html )

http://www.1up.com/do/newsStory?cId=3156044

ON A $60 GAME OF GEARS:

  • 25% (aka $15) goes to pay the art and design guys.
  • 20% ($12) goes to pay the programmers and the engineers.
  • 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
  • 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
  • 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
  • 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
  • 5% ($3) goes to actually manufacturing and packaging the disc.
  • 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
  • 1.5% (just $1) goes into the publisher's pocket.
  • 1.5% (also $1) goes into the distributor's pocket.
  • 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
  • 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?

Now, you can break this list down further into fixed costs (Art, programming, marketing, and market development) and per-unit costs (pretty much everything else). The per-unit costs are estimated by this breakdown of being (roughly) $30 and are probably not going to change that much for most of the titles. Fixed costs per-unit estimate also depends on the sales level, for example a $10 Million marketing budget (worldwide) is not a particularly large marketing budget but accounts for $20 for a game that sells 500,000 copies while a $40 Million marketing budget (worldwide) would only represent $10 per game on a game that sells 4 Million copies; most of these games had moderately large marketing budgets.

You are correct though, we can't really know whether these titles are profitable or not without knowing about any deals that were made to keep per-unit costs down.

Very, very informative post.  Well done.