By using this site, you agree to our Privacy Policy and our Terms of Use. Close

Forums - Sales Discussion - Pachter's explanation on where your 60 dollars goes

From having my girlfriend working at Bestbuy I have known for quite a while that retailers get a good cut. Retailers don't make much money off of TVs, Consoles, etc... Majority of their profits come from games and accessories.



iPhone = Great gaming device. Don't agree? Who cares, because you're wrong.

Currently playing:

Final Fantasy VI (iOS), Final Fantasy: Record Keeper (iOS) & Dragon Quest V (iOS)     

    

Got a retro room? Post it here!

Around the Network

For once I think Pachter is right. Retailers do get a good chunk ($12 seems fair) for each game. I think with a 50 million dollar budget a game should easily break a million or more (if not It would be a flop, wouldn't it?) but it makes you wonder how much the average Wii game costs, or games like Deadly Premonition. Obviously not every game costs the same to make.

 

I work in retail and the mark up % did account to close to $12 profit per game. I think it was around $4 for a $20 game, so that means budget games have to sell a lot more or actual be budget in budget development costs (lol). So I hope Deadly Prem didn't run them much.

Does he also factor in price cuts? I mean if the game drops to $40 it has to obviously sell more to make up for the difference.



It's just that simple.

I find it interesting then, that Amazon regularly bundles $20 gift cards and free shipping with the hottest new games. The margins for games on Amazon and Walmart must be razor thin-- like $1 or so.

It also must be devastating to publishers when the games don't sell that well and a quick price reduction is enacted. I usually never buy games when they are released because I know that I can get them for at least $20 off the new price 2-4 months after release. For example, I finally broke down and bought a new copy of Mass Effect 2 for $40 last week.

The really bad games like Bionic Commando can be had for just $10 a few months after release. It would be interesting to know how much the console manufacturer lowers their cut once an official price cut is announced.



 

Most anticipated games of 2011:

Uncharted 3,Legend of Zelda: Skyward Sword, Rocksmith

Modern Warfare 3, Super Mario 3D

 

That sounds pretty right.

Remember though that development budgets rarely include the manufacturing costs and advertising costs so the copies required for publishers to break even are more then you'd expect.



Gilgamesh said:

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

 

I agree, to high some might say. I know some friends who own shops, and none of them get 20% of the sale price (none of them are video game retailers, but oh well)



Around the Network

Here's a better breakdown of the matter:

 

Obviously there is a lot more than most would have it seem, but yes games are quite the risk especially with higher budges and larger marketing campaigns.  Hope this sheds more light on the risks the publishers and especially the retailers take. 

Source



outlawauron said:
makingmusic476 said:
kitler53 said:
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.

Sony doesn't have to pay itself licensing fees, so they get $48 a game, thus requiring 1.25 million to break even with a $60 million budget.

The sales of Prologue are paying for that nicely.

Well, you can't really convert that exactly as Prologue started out at $40.

But Prologue was also a digitally distributed game, which means retail margin equals zero and distribution equals zero, and those two factors combine to be about $20. So, theoretically Sony should make about as much money on a $40 Digital Distribution game as they do on a $60 hard-copy game, assuming they would be paying for the Playstation Network either way, and its costs aren't factored in.

 

Oh, dear, I'm beginning to sound like a Sony fanboy... Mario Kart Wii will more than quintuple the sales of GT5! Sony'll go bankrupt within the week!



Wii has more 20 million sellers than PS3 has 5 million sellers.

Acolyte of Disruption

That's how I always figured it work. The music business works in a very similar way. It'll be interesting to see how things shape up once an indie dev gets big enough and successful enough to actually finance the entire production of their games and only need a distributor to put content on shelves.



MonstaMack said:

For once I think Pachter is right. Retailers do get a good chunk ($12 seems fair) for each game. I think with a 50 million dollar budget a game should easily break a million or more (if not It would be a flop, wouldn't it?) but it makes you wonder how much the average Wii game costs, or games like Deadly Premonition. Obviously not every game costs the same to make.

 

I work in retail and the mark up % did account to close to $12 profit per game. I think it was around $4 for a $20 game, so that means budget games have to sell a lot more or actual be budget in budget development costs (lol). So I hope Deadly Prem didn't run them much.

Does he also factor in price cuts? I mean if the game drops to $40 it has to obviously sell more to make up for the difference.

Average multiplatfom HD game R&D budget: $15-30m, AAA HD games regularly exceed $40m

Average Wii game R&D budget: $5-7m

Average budget for GC/PS2/Xbox games last gen: $3-5m

For AAA HD games, typically advertising budgets match or exceed development budgets.

And a few random R&D budgets...

  • Gears of War: $10m (no engine/tech costs, built "for free" alongside UE3)
  • Red Steel: $12m
  • Spore: $35m
  • Gran Turismo 5: $60m
  • Grand Theft Auto IV: $100m+
  • Modern Warfare 2: $40-50m ($200m advertising budget)


Showertea said:
outlawauron said:
makingmusic476 said:
kitler53 said:

 

 

But Prologue was also a digitally distributed game, which means distribution [costs] equals zero

 

Not really, there's extra traffic that Sony has to pay to support. Infact, Sony charge at a rate of 16 cents per gigabyte for downloads off the PSN. (I have no idea if that cost is a partial subsidisation of the cost, a total subsidisation or if Sony make a profit on it) GT5 prologue is 1.9 gb Meaning that each time someone downloads it it costs them about 30 cents. 

 

Hmm, when I started this post I had imagined I would be presenting a larger final number :P

 

http://playstation.joystiq.com/2008/03/17/gt5-prologue-download-weighs-1-9gb/

 

*actually reads the article linked*

 

Oh, that 1.9 gb doesn't include the videos, which are kept on Sony servers and streamed to you when you need to access them. So if someone plays the downloaded version often enough, it'll actually cost Sony more than it would have to ship the disc