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

heedstone on 11 April 2010

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.



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loy310 on 11 April 2010
Gilgamesh said:

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

The retailers get a lot more when you consider used game sales.



dunno001 on 11 April 2010
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.



Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

-dunno001

-On a quest for the truly perfect game; I don't think it exists...

restored_lost on 11 April 2010

12 dollare to the retailer isnt as bad as 12 dollars just to the console manufacturer. as a retailer you have to stock and display, actually SELL the game to the consumer, for some games its easy, others its not. Where as the manufacturer just collects its 12 dollars.



"even a dead god still dreams"

 

heedstone on 11 April 2010
dunno001 said:
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.


Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

Good point dude, I didn't know that.  Sounds like you lot have it pretty damn good!  I think we have to pay about 17% tax in the UK! 



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Naum on 11 April 2010
heedstone said:
dunno001 said:
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.


Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

Good point dude, I didn't know that.  Sounds like you lot have it pretty damn good!  I think we have to pay about 17% tax in the UK! 

Please 17% tax is nothing... here in Sweden we first have around 28% tax(used to be around 32%) on our paychecks then we pay something called "moms"( wich pretty much makes everything 20-25% more expensive then it should be)... don't even get me started on what we pay extra for alcohole and nicotine based stuff...



If it isn't turnbased it isn't worth playing   (mostly)

And shepherds we shall be,

For Thee, my Lord, for Thee. Power hath descended forth from Thy hand, That our feet may swiftly carry out Thy command. So we shall flow a river forth to Thee And teeming with souls shall it ever be. In Nomine Patris, et Filii, et Spiritūs Sancti. -----The Boondock Saints

jammy2211 on 11 April 2010
jarrod said:
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)

 I'm sure you didn't mean to but your figures are slightly misleading to how much AAA games cost last gen - for instance Final Fantasy VIII - XII all cost over $30 million, Onimusha and DMC both cost Capcom over $12 million and Mario 64 over $25 million (Albeit inflated due to not knowing the N64 specs before developmenet started). We've all heard about Shenmue too... (All figures taken from Famitsu I believe)

 The real difference now seems to be that EVERY game has to be a AAA budget epic, whereas before there was a viable market for lower investiment, lower payoff type games. We've now seen consumers group towards 4-5 megahits leaving there no room for cheaper games, I guess.

 



heedstone on 11 April 2010
Naum said:
heedstone said:
dunno001 said:
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.


Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

Good point dude, I didn't know that.  Sounds like you lot have it pretty damn good!  I think we have to pay about 17% tax in the UK! 

Please 17% tax is nothing... here in Sweden we first have around 28% tax(used to be around 32%) on our paychecks then we pay something called "moms"( wich pretty much makes everything 20-25% more expensive then it should be)... don't even get me started on what we pay extra for alcohole and nicotine based stuff...

Haha, that sucks dude!  The worst place I've been for tax was Norway (your next door neighbours!), it's a beautiful country, but man was it expensive! 



The dude abides   

jarrod on 11 April 2010
jammy2211 said:
jarrod said:
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)

 I'm sure you didn't mean to but your figures are slightly misleading to how much AAA games cost last gen - for instance Final Fantasy VIII - XII all cost over $30 million, Onimusha and DMC both cost Capcom over $12 million and Mario 64 over $25 million (Albeit inflated due to not knowing the N64 specs before developmenet started). We've all heard about Shenmue too... (All figures taken from Famitsu I believe)

 The real difference now seems to be that EVERY game has to be a AAA budget epic, whereas before there was a viable market for lower investiment, lower payoff type games. We've now seen consumers group towards 4-5 megahits leaving there no room for cheaper games, I guess.

 

Sure, AAA games regularly went higher. And FFs tended to be higher still due to copious expensive CG (though XI was higher than usual due to it's infastructure and XII higher than usual due to it's massive delays and staff changeover).  

Mario 64's budget surprises me, though it was rumored to have started as a Super FX2 project originally, and a lot of the R&D work was likely engine and tool building for N64.  EAD recycled it's base engine for OOT/MM too, so some of those costs could be likely be spread to later games (many games these days spread technology expenditures over future projects, like Yakuza Kenzan/3/4).

Shenmue was a real moneypit though.  It's budget was reportedly $70 for development... in fact until GTA4, it hadn't been topped.

General rule of thumb though, development costs have about tripled this gen on consoles (outside Wii).  If a AAA game generally cost $10-15m on PS2/GC/Xbox, that's basically $30-45m on 360/PS3 today.



Naum on 11 April 2010
heedstone said:
Naum said:
heedstone said:
dunno001 said:
heedstone said:

Hmm, I don't think it's as cut and dried as Mr Pachter makes out.  Also, I think he may of forgotten about tax.


Actually, in the US, tax is not included in the price like it is overseas for sales goods. Tax is an extra cost that is added on as a percentage depending on the area; here in VA, it's 5%, whereas in NY, the same item varies by county (7.5%-8.75% is where most fall), and then you have a couple like DE with no sales tax.

Good point dude, I didn't know that.  Sounds like you lot have it pretty damn good!  I think we have to pay about 17% tax in the UK! 

Please 17% tax is nothing... here in Sweden we first have around 28% tax(used to be around 32%) on our paychecks then we pay something called "moms"( wich pretty much makes everything 20-25% more expensive then it should be)... don't even get me started on what we pay extra for alcohole and nicotine based stuff...

Haha, that sucks dude!  The worst place I've been for tax was Norway (your next door neighbours!), it's a beautiful country, but man was it expensive! 

Sure it may be more expensive there of turists but the people in Norway earn a hell af alot more money each month.. hell people at MC'Donalds making burgers in Norway earn about the same as i do



If it isn't turnbased it isn't worth playing   (mostly)

And shepherds we shall be,

For Thee, my Lord, for Thee. Power hath descended forth from Thy hand, That our feet may swiftly carry out Thy command. So we shall flow a river forth to Thee And teeming with souls shall it ever be. In Nomine Patris, et Filii, et Spiritūs Sancti. -----The Boondock Saints