| SonytendoAmiibo said: The thing that blows my mind is that 91 billion dollars was made in 2016, yet all these devs are going under. Where is all that money going? |
The $91 billion number refers to gross sales. Only a tiny fraction of that is profit. Theoretically, the industry could experience sales of $500 billion, but make zero money.
In reality, some of the big guys are profitable. So, of that $91 billion, there was probably a few billion in profit "made" by developers and publishers.
Lets think about something here. If a game costs $100MM to develop, publish, distribute, and promote, that means the publisher needs to get $100MM back just to break even. There's also the retailer that has to get paid. So, Gamestop isn't paying $60 for games that they sell at $60. Typically, retailers are paying about 50% of the selling price to acquire the goods that they sell. In gaming, I imagine the retailers pay a bit more than that though. So, lets say they pay 66% of the retail price to the publisher. So, on a $60 game the publisher sees $40. Just to break even, on a game with a total budget of $100mm, they must sell 2.5 million copies *at full retail* just to break even.
Of course, many sales do not take place at that full retail price, once the game is 3-6 weeks old. So, the real break even is probably more like 3-3.5 million units sold just to break even. Then there's the fact that companies don't exist to break even. They have to make a decent profit, in order to justify their existence and raise money for the next project. That sounds like 4 million units of our theoretical game sold, just to turn a profit of a few million dollars on that $100MM investment.
These big numbers are the reason that we see annual iterations on some franchises, and the disappearance of so many studios. New IP is risky. Bigtime.
