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Jay520 on 27 June 2012
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famousringo said:
Jay520 said:
Yeah...I wonder what they by 'more profitable'. Do they mean in relation to the cost of the game or do they mean absolutely more profitable? If its the former, then its really nothing to get worked up about. I'm sure there are plenty of cheap ios, Wii games etc have higher profit-to-cost ratios than traditional core games. Doesn't mean they're going to take over. I remember reading an Ubisoft article the other day they said Just dance's profit-to-coat ratio was much higher than a game like Assassin's Creed. Yet Ubisoft still makes way more expensive ps360 games than cheaper Wii games. (Hell, they even said they used Just Dance's Profit to fund their more expensive, and probably more profitable, Assassin's Creed) However, if its the latter- Infinity Blade was absolutely more profitable than Gears of War- then we'd be in for a massive shift in game development, but I don't think that's what they're referring to here.


You've got it backwards. Rate of return on investment is actually more important than absolute profit. Profit margins are a limit on potential future growth.

Here's a purely hypothetical example to demonstrate:

Ubisoft is making a new Assassin's Creed game for next-gen consoles. We'll call it ACX. Expected revenues are huge, so the budget is huge, too. $50 million.

At the same time, to capitalize on the buzz, Ubi is releasing a stripped down spinoff on mobile devices called ACX Mobile. Expected revenues aren't nearly as large, so this game's production budget is $1 million (pretty huge for a mobile game).

The games launch, and they both do okay, ACX grossing $55 million (10% profit margin, $5 million profit), and ACX Mobile grossing $1.5 million (50% margin, $0.5 million profit). Whoa, the big game generated ten times the profit of the mobile game! Guess we know which one has a bright future.

wi

But holdn, here comes the next round of gamei starts work on ACX2 and ACX2 Mobile. Ubi wants both games to be bigger than their predecessors, and is determined to remain competitive with other publishers, but they also have to be sure to stay in the black. They want to make at least 10% profit on every game they make, and they can't be sure that ACX2 will be a bigger success than ACX, so they keep the budget of the big game unchanged. Another $50 million.

ACX2 Mobile, on the other hand, has expectations far higher than the previous title. All else being equal, Ubi can expect another $1.5 million in revenues, so they jack up the title's budget to $1.35 million (a 35% increase) to compete harder in the mobile space and hopefully earn even larger rewards. At worst, they expect to earn a 10% profit on the title.

See what's happening here?



yea but would there not also not be a limit for the mobile games? A significantly lower limit. I'm not arguing that mobile ios/Android gaming isn't growing rapidly. It is. I'm just arguing that console gaming won't be replaced or become drastically less relevant like some others are implying.