Based on my experiences, I can easily confirm the $12 of a $60 game going to the retailer. (Wholesale is, in most standard cases, 80% of retail for video games. Special deals may be negotiated for sales, but this is not the normal wholesale price.) However, the $12 for royalties sounds high. In the SNES days, the royalty was $10, regardless of the original price of the game. It was part of why 3rd party companies hated Nintendo and the cartridge- since Nintendo didn't have to pay their own licensing fee, they shaved that $10 off the retail price. So you had Donkey Kong Country coming out at $50, versus pretty much every 3rd party game at $60. This was the start of where "can't compete with Nintendo" came from, but that's drifting off-topic.

So, even if I do allow that $12 through to royalties, it makes the figures initially seem right. But then Pachter goes on to make a generalization- about ALL developers being paid a flat fee. This will vary based on the contract- some larger developers know that their games will sell, and could demand a portion of sales revenue. This is where things get hairy, as this will vary by contract. Going by the Infinity Ward lawsuit to Activision, it would stand to reason that their contract had a profit sharing clause in it. This, of course, would eat into that $36 publisher take.

And the publisher has other costs to consider- they are the ones who have to handle (and cover the cost of) any defects, distribution, printing, etc. And if they press too many copies, they have to take the loss. A game dropping in price fast only reduces the take that the publisher gets. Note that the retailer paid $48 for the game, and the publisher sent $12 over to Sony/MS. But now it's returns time. A retailer returns a game, and expects their full $48 back. The publisher is now at -$12 on this game, since they don't get a refund. This is what leads to the price drops on existing stock. The publisher comes to an agreement with stores to change the retail price to $40, making wholesale $32, and refund $16 per copy. And this $16 comes from 1 place: the publisher's cut. They may be able, assuming that royalties are a percentage, to get the lower royalty cost on further sales out, but what is out is paid. And those $40 games that were $60 are actually worth less to the publisher than the newer ones shipped out for $40. ($36-$16 refunded versus $24.)

It's a very nice simplification that has some basic understanding of where the money goes. But it really glosses over the intricate details that makes contract law so changing. So we still can't say for certain where every penny is going...

Amazon always offers free shipping on orders of 25$ or more regardless of the items.

infamous cost that much?

Mostly Develop Magazine and Gamasutra.  Just google the figures and you'll find links.

So who charges the least in royalties? MS? Sony or Nintendo? Or Apple when they release their console ? (lol).

People should also consider "money hatting" or some sort of favoritism companies get. Splinter Cell Conviction, even as a timed exclusive, must pay a bit less royalties towards MS or get some sort of free promotions. I believe MS paid Namco quite a bit to put Tales of Vesperia exclusive for several years for the 360, and so on.

Usually, "money hatting" comes in the form of reduced royalty fees or funding for advertising.  Sometimes there's also more direct develolment support or IP loaning too.  Actual money pay outs are pretty rare really.

The term started due to Microsoft's deal with Oddworld for Munch's Odyssey, though that was really more a publishing arrangement.  Microsoft funded development, but they published the game too, which isn't what we tend to use the term for today (ie: Gears of War, LittleBig Planet, Endless Ocean, etc).

Thanks jarrod your posts are always informative and you really know your stuff.

Thanks. <3

I think out of the 3 Nintendo likely charges the lowest rate, though that's likely due to lower general pricepoints.  At an equal price (say $39.99) I suspect Nintendo might be highest, and probably Microsoft lowest.  I'm not going off anything concrete with that, just a hunch.

I believe PSP rates are generally lower than DS too now surprisingly (they started out much higher, but about a year ago Sony dropped most PSP related fees and costs considerably), though DS rates also depend on what size card you're ordering (which can now go up to 512MB).  I don't know specific numbers, but I know PSP started out around $7-9.

Last gen, GC/PS2/Xbox rates also ranged $7-9 on a $40-50 game, and GBA ranged $5-10 depending on the size cart iirc.

I think that this is a very good assestment and almost exactly what I thought which makes it more compelling of why publishers don't need to sell a million copies of the game to make a profit on the WII and infact the publishers would probably need to sell less copies vs the 360 & PS3 because they don't spend as much money in making Wii games and Nintendo takes a bit less as well to intise publishers to make games for the Wii.

Nintendo, Sony or Microsoft don't charge the same to let the game being publish on their console, last numbers I've seen were between 13-18$ also I'm surprise retailers make that much of each games