Before I start I realize that many on these forums hold disdain for Pachter's views and in particular think that any prediction he makes is false.  This has nothing to do with predictions however and I think we can assume that Pacther atleast knows something about the financial side of video games since that is his job.

We've all seen different guesses as to how much money the developer gets from each game sale and therefore how much they need to be profitable.  Pachter brings a different view point in his latest episode of "Pach Attack" which to me sounds much more plausible.

http://www.gametrailers.com/video/episode-111-pach-attack/64278

According to Pachter the 60 dollars you pay goes like this:

12 goes to the retailer

another 12 goes to the console manufacturer

and the remaining 36 goes to the publisher

The developer's costs are fixed and are paid by the publisher up front.  So the publisher eats the initial 10 milllion or whatever cost for development as well as whatever marketing costs they decide to spend and then will not start seeing a profit on their investment until the development (R & D) and the marketing costs are paid off by the 36 dollars per game sale.

I'm curious what others think.  Does this model make more sense than the idea that a certain amount of money from each game sale goes to the developer?  Obviously in this set up the developer would have a low amount of financial risk, but if their game failed to make the publisher an acceptable amount of profit they would most likely have trouble finding funding for later games. 

Finally someone answered this long asked question, that's an awful lot going to retailers.

Wow $12 to the retailer that's crazy. Also I didn't think it was as high as $12 to the console manufacturer.

This is (obviously) for the HD console games ... I would expect that Nintendo and the Publisher would take the biggest hits in publishing a game for the Wii or the Nintendo DS.

the price that goes to the console make used to make the difference of price between console and PC games. These days, boxed PC games seem to cost more and more often the same amount than console ones...

That was pretty interesting, I still wonder who pays things like shipping, transportation and stuf

277,778 full price sales for every 10 million in investment to break even. So a big budget game like GT ($60M) would need 1.67M sales to break even.

wii games would need a few more (per 10 million in investment) since full price wii games are only $50. probably like 300-320k.

I assume that Wii games have the same percentages for where the money goes, and therefore each is just 5/6 of what it is for 60 dollar games.

As for the break even point, this is true but you have to remember that if the publisher does not make a penny off of their investment then they are unlikely to think of it as a success and the developer may have a tough time getting funding in the future.  What I'm unsure of is how much money a publisher needs to make before they're happy but I would have to assume that changes based on the expectations for a particular game.

It goes something like this:

$12 Console maker
$12 Retailer
$30 Publisher
$6 shipping, packaging and handling as well as returns.

Damn, no wonder the 360 was able to turn its profits around for MSFT so quickly. With those publishing numbers for the big guns and then $12 bucks for all software on the software monster that is the 360.

well if you want to assume a straight 5/6 conversion then the wii would need 333,333k per 10 million investment.

...and very true that a publisher won't be happy if they don't get any returns.  but still, these back of the envelope estimates of how much a game needs to sell is interesting...at least to me.