I've been discussing budgets and profits with DKII for a while now. He pointed out that it's basically impossible to know the budget of a game because they can be pretty much anything, but he also said that often a lot of the budget comes from the storyboard and art, so an RPG with a lot of both of these things usually has a naturally higher cost of development. He said this is the reason that RPGs tend to not be released until a couple years into the generation. They stall time for userbase to make up for high dev costs.

However, he also said that when a game is developed by one company and published by another, usually the publisher hands the developer money up front that accounts for both dev costs and the developer's payment for the game. Any money made off sales then goes to the publisher, which he said makes about 50% of the retail sale price.

My theory is that in this case, given that Microsoft has basically bottomless pockets for their console in Japan, no expense was spared. The game was developed at a fairly costly level, but Mistwalker was also handsomely compensated for their work, and the only one facing any cost loss here is Microsoft who never cared in the first place about the cost.

Anyway, it's impossible to tell for sure so continuing the debate is basically useless. IMO Mistwalker's games have been very fun, and that makes the developer successful in my eyes, but I don't think the sales are anything to brag about.

Edit: As a side note Legend, DKII also mentioned that your theory doesn't work because of Guitar Hero, which gives them a much larger piece of the pie than a standard retail game, which he said a publisher recieves about a 50% retail sale price return for. 

Actually my numbers do work, feel free to work them out for yourself if you don't believe me.  If Activison only got 50% of the retail price then that means that Activisions games generated ~$871.7 million dollars between Oct 07 - Dec 07.  Even removing DLC from that number it would still require them to sell at least 12 million games on the 360 to come up with that kind of number (and that's assuming *a lot* of guitar hero 360 bundles were sold, I'm talking 2.5+ million between Oct-Dec 07).

Actually what I've considered doing is finding another publisher who doesn't have an expensive peripheral game but lists net profit then using VGC to calculate a good estimation of actual profit.  I may do it later.  If I do I'll make a topic for it.  I really have nothing left to add to this discussion though.

Gabe Newell quotes the same 7.50 Legend. Of course he was doing it to pimp Steam. So who knows if he was exagerating.

That's the thing. The 7.50 I believe was for an individual developer who went through a publisher.

Steam would let a small developer go through steam, charge full price and get the other half of the pie.

The problem with "what they make" is nobody takes into account things like shipping, packaging, printing, box art, advertising, disc production, liscensing fees (Which don't exist on PC correct?)

Activision, a publisher and devloper would in fact get both publishing and developing revenue.  But also publishing and devloping costs... publishing i believe can actually be MORE expensive.

didn't mistwalker hit a million a few weeks ago, because ash sold 100,000

Also I think you greatly underestimate how much buisness Activision did Legend.

For example there is the PC market... which does quite well in other markets outside of the US and which they had a couple big releases.

Not to mention games count that they publish yet do not develop. When we are talking straight development costs.

You are using a developer AND a publisher. You'd have to use a devloper only.

Of course... you've also got to deal with the fact that each deal between a publisher and developer is going to differ.  Just how the distributor deals are different.

Wal-mart pays less for it's videogames then Best Buy for example. 

How many $20+ million dollars games are being made by independent studios and are not being funded by whoever is going to publish them?  I can't imagine it being more than a few at best.  That $7.50 is likely for much smaller games.

The figures for Activision are for a 3 month period and are broken down by console.  The PC number is fairly small but it's obvious that Guitar Hero 3 and Call of Duty 4 did a lot better on consoles than PC.

Oh? Can you prove that? Call of Duty 4 launched in and stayed in the top sales on Steam.... and every estimate in existence says you get significantly more money for a copy sold on steam than a copy in retail. And again, you are ignoring the fact that GH3 completely skews your "statistic."  There are far too many flaws in your logic for you to use it as a realistic defense of your argument.

How does development costs have any effect on revenue when games are sold at a flat price?

Also... that 7.50 per game was apparently in reference to Half Life 2 when it first released.

So... not a small game by any means.