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Forums - Gaming Discussion - Anatomy of a $60 video game

MonstaMack on 25 February 2010

Somehow I doubt this chart. That means $22 would be saved by going DD only. Well sort of, cause then Steam/MS/Sony/Nintendo would get their share.

Either way I'm not gonna spend hours downloading a 40+ gig Blu-Ray game. I rather just walk to the store and get a copy.



It's just that simple.

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cfr316 on 25 February 2010

$60 seem expensive but I remember the days when I paid $80 cdn for a 8-bit Super Mario 3 Nintendo game when it was first release.



mrstickball on 25 February 2010

Monsta - that assumes that the DD website gives them 100% of the revenue. Not the case.

Steam is a 60/40 split in favor of the developer. So a $50 game would earn the developer $30. Better than retail, but given the size of the sales base...May not be the be-all-end-all proposition for publishers to make money.



Back from the dead, I'm afraid.

naznatips on 25 February 2010
mrstickball said:
This is why I think retailers should be pursuing some sort of print-on-demand capability that would remove the returns issue and most likely help out retailer margins, providing a cheaper overall product.

Dgc - You are correct. From my understanding, Nintendo has the highest royalty rate of the Big 3. As far as I know, MS charges slightly less than Sony, while both charge less than Nintendo.

I've never seen anything that stated this. I do know that for downloadable games Nintendo's royalty rate varries based on the size of the game (larger games which take up more of their server space cost more).

Aside from that, royalties, or licensing fees, are always negotiable. Microsoft waves them frequently in order to draw in true and timed exclusives (as well as buying out commercial airtime, as with FFXIII). As with everything in gaming, budget and costs varry wildly depending on the game. It's also certainly not a flat rate of $7, but a percentage rate, and while Nintendo may take a higher percentage of the MSRP it's doubtful that it's more expensive, given the, by default, lower MSRP of their games. Of course, they also often subsidize games just like Microsoft (MH3 for example I garauntee you is not paying royalties).



MonstaMack on 25 February 2010
mrstickball said:
Monsta - that assumes that the DD website gives them 100% of the revenue. Not the case.

Steam is a 60/40 split in favor of the developer. So a $50 game would earn the developer $30. Better than retail, but given the size of the sales base...May not be the be-all-end-all proposition for publishers to make money.

Ok thanks for the information. Wow, I had no idea Steam took in that much in terms of money. Though a savings is still a saving I suppose. I'm guessing It's still expensive to store those gigs of files on the server side.


What I'm really surprised is MS doesn't choke hold certain companies if they aren't paying any royalties. IE if the game promises to be exclusive it should be that way permanetly. Then again I think that's MS's fault when it comes to one year exclusives and it bit them in the butt in Japan.



It's just that simple.

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naznatips on 25 February 2010
mrstickball said:
Monsta - that assumes that the DD website gives them 100% of the revenue. Not the case.

Steam is a 60/40 split in favor of the developer. So a $50 game would earn the developer $30. Better than retail, but given the size of the sales base...May not be the be-all-end-all proposition for publishers to make money.

You completely made that 60/40 number up... while I don't have exact numbers for Steam royalty rates (there's a very strict NDA on such things) numerous actual game developers have stated it's very generous/lower than everything else out there, and they take a smaller cut than retailers:

http://www.neoseeker.com/news/12017-tripwire-steam-does-not-exploit-indie-developers/
http://seven.pairlist.net/pipermail/casual_games/2009-January/003651.html
http://www.neogaf.com/forum/showthread.php?t=300537&page=3
http://forums.steampowered.com/forums/showthread.php?t=888033

60/40 would certainly not be a smaller cut than retailers. Another says they have a comparable fee to Xbox Live Communities, which suggests that they are actually lower than even the retail licensing fees of the 360, PS3, and Wii. Valve also varries rates depending on the type of game like Nintendo and Sony (indie games and small games cost less).



mrstickball on 25 February 2010
naznatips said:
mrstickball said:
Monsta - that assumes that the DD website gives them 100% of the revenue. Not the case.

Steam is a 60/40 split in favor of the developer. So a $50 game would earn the developer $30. Better than retail, but given the size of the sales base...May not be the be-all-end-all proposition for publishers to make money.

You completely made that 60/40 number up... while I don't have exact numbers for Steam royalty rates (there's a very strict NDA on such things) numerous actual game developers have stated it's very generous/lower than everything else out there, and they take a smaller cut than retailers:

http://www.neoseeker.com/news/12017-tripwire-steam-does-not-exploit-indie-developers/
http://seven.pairlist.net/pipermail/casual_games/2009-January/003651.html
http://www.neogaf.com/forum/showthread.php?t=300537&page=3
http://forums.steampowered.com/forums/showthread.php?t=888033

60/40 would certainly not be a smaller cut than retailers. Another says they have a comparable fee to Xbox Live Communities, which suggests that they are actually lower than even the retail licensing fees of the 360, PS3, and Wii. Valve also varries rates depending on the type of game like Nintendo and Sony (indie games and small games cost less).

I'm really getting tired of you accusing me of making things up:

http://steamreview.org/posts/finances/

Developers

    “Revenue sharing with developers under the Steam system is 60/40 (developer/Valve).”

Profit margins for developers are a major selling point for digital distribution, and Steam does not let the side down. I’m pleased to say that there are now figures as accurate as possible for each margin: 10%-20% for traditional retail/publisher deals; roughly 60% for Steam developers; and an incredible 86% for Valve themselves. Add to that the fact that Valve doesn’t take the developer’s IP and the effective margin becomes wider still.

These sorts of numbers aren’t easy to come by for distribution services, but it isn’t unreasonable to say that the 26% net margin difference between Valve and their Steam licensees is quite wide. Perhaps when xStream ramps up we’ll see some healthy competition.

And http://www.gamedev.net/reference/articles/article2271.asp:

The Q&A session brought to fore the following:

  • Valve is not ditching the retail system, as 75% of their business still comes through them.
  • Revenue sharing with developers under the Steam system is 60/40 (developer/Valve).
  • Developers will not need to use Source in order to use Steam.
  • Mike encouraged developers to separate their retail distribution contract from the digital distribution contract/rights. Hold on to them separately and not together. Control in your distribution is essential in maintaining good profit margins.
  • Valve also experienced problem with returns using Steam. But these are only less than 1% of the sales received. The problems are commonly in the form of charge backs from banks upon rejecting certain transactions upon the customer's request. This will need to be addressed when the number grows more significantly.
  • The cost structure of Valve's game is roughly 3% for customer support, 10% for bandwidth, 1% for payment charges and the rest is the profit margin. Reasonably good margins.
  • Steam distribution's success is shifting Valve into trying out episodic gaming distribution next.
  • Marketing function should be kept within your own company, essential as it helps create identity. This identity will be specific to your company and therefore, must be guarded.

But if you want to accuse me of things, you can. I will not put up with that, however. I guess this will be my last post in the non-OT forums.



Back from the dead, I'm afraid.

Riachu on 25 February 2010

Thanks to this data, I think I know how much Red Dead Redemption costs to make. Rockstar said that the game has to sell 5 million copies just to break even. They get $27 per copy sold. 5 million X $27 equals 135,000,000. This means that the game cost about $135 million to make, give or take 10%.



 

http://www.youtube.com/user/InvaderZimGuy1?feature=mhum

Xelloss on 25 February 2010


mrstickball , that data is from 2005 and is very outdated. Steam durrently is closer to 70/30, and it varies across publishers with indies typically getting closer to 65% royalty and majors negotiating far better deals.



naznatips on 25 February 2010
mrstickball said:
naznatips said:
mrstickball said:
Monsta - that assumes that the DD website gives them 100% of the revenue. Not the case.

Steam is a 60/40 split in favor of the developer. So a $50 game would earn the developer $30. Better than retail, but given the size of the sales base...May not be the be-all-end-all proposition for publishers to make money.

You completely made that 60/40 number up... while I don't have exact numbers for Steam royalty rates (there's a very strict NDA on such things) numerous actual game developers have stated it's very generous/lower than everything else out there, and they take a smaller cut than retailers:

http://www.neoseeker.com/news/12017-tripwire-steam-does-not-exploit-indie-developers/
http://seven.pairlist.net/pipermail/casual_games/2009-January/003651.html
http://www.neogaf.com/forum/showthread.php?t=300537&page=3
http://forums.steampowered.com/forums/showthread.php?t=888033

60/40 would certainly not be a smaller cut than retailers. Another says they have a comparable fee to Xbox Live Communities, which suggests that they are actually lower than even the retail licensing fees of the 360, PS3, and Wii. Valve also varries rates depending on the type of game like Nintendo and Sony (indie games and small games cost less).

I'm really getting tired of you accusing me of making things up:

http://steamreview.org/posts/finances/

Developers

    “Revenue sharing with developers under the Steam system is 60/40 (developer/Valve).”

Profit margins for developers are a major selling point for digital distribution, and Steam does not let the side down. I’m pleased to say that there are now figures as accurate as possible for each margin: 10%-20% for traditional retail/publisher deals; roughly 60% for Steam developers; and an incredible 86% for Valve themselves. Add to that the fact that Valve doesn’t take the developer’s IP and the effective margin becomes wider still.

These sorts of numbers aren’t easy to come by for distribution services, but it isn’t unreasonable to say that the 26% net margin difference between Valve and their Steam licensees is quite wide. Perhaps when xStream ramps up we’ll see some healthy competition.

And http://www.gamedev.net/reference/articles/article2271.asp:

The Q&A session brought to fore the following:

  • Valve is not ditching the retail system, as 75% of their business still comes through them.
  • Revenue sharing with developers under the Steam system is 60/40 (developer/Valve).
  • Developers will not need to use Source in order to use Steam.
  • Mike encouraged developers to separate their retail distribution contract from the digital distribution contract/rights. Hold on to them separately and not together. Control in your distribution is essential in maintaining good profit margins.
  • Valve also experienced problem with returns using Steam. But these are only less than 1% of the sales received. The problems are commonly in the form of charge backs from banks upon rejecting certain transactions upon the customer's request. This will need to be addressed when the number grows more significantly.
  • The cost structure of Valve's game is roughly 3% for customer support, 10% for bandwidth, 1% for payment charges and the rest is the profit margin. Reasonably good margins.
  • Steam distribution's success is shifting Valve into trying out episodic gaming distribution next.
  • Marketing function should be kept within your own company, essential as it helps create identity. This identity will be specific to your company and therefore, must be guarded.

But if you want to accuse me of things, you can. I will not put up with that, however. I guess this will be my last post in the non-OT forums.

I apologize, you didn't make it up, but you completely misunderstood what it's saying. That's steam publishing the game for a developer directly. Understand that under normal circumstances a publisher will pay an indy dev only 15%-20% for their game to publish it, and will also steal IP rights. This is Steam publishing the entire game, giving a 60% cut, and not touching IP rights.

For publishers it's stated explicitly in your own link that they take a 10%-20% standard cut, which means none of the additional fees apply. In other words your numbers were invalid to the discussion at hand.