Done this a few times before:

 - production cost (for a publisher) has NOTHING to do with pressing costs. Its basically the license fee the hardware manufacturer makes off the software. A ballpark figure is $7US. Its higher on the PS3, could be $10-$12US.

 - shipping costs are usually $2-$3 per unit. Not so sure if the software is pressed in the US, for a US publisher.

 - retailers typically buy product for "around" half the retail price. A $49 title would be purchased (in bulk) for around $23-$25 - but sometimes a lot lower ($15-$17) US per unit. This is typically done in bulk (by a chain HQ, which then distributes to stores as needed). The units are usually non-refundable as well. A $60 title could be a bit more, edging $27-$30US. $30 purchased by stores would be rare.

Developers get NOTHING. Its rare that external developers get a royalty deal, and when it is - its usually done such that the royalties on the first "XXX" units pay for the development (i.e. 250k, or 500k units). Development costs are usually negotiated upfront, then paid on a "per-milestone" basis. Once a game is delivered, the developer usually get nothing more (except for a final gold payment).

Publishers also have *other* costs to pay:

 - shipping to retailers

 - various types of insurance

 - some marketing levys

...etc... 

Note - the equation is *very* different for the platform owners. They manufacture at cost, getting a better deal with retailers (usually), and have very well established shipping channels at low cost.

If Ninty is selling a copy of Galaxy at $49US - they might be making as much as $23-28 "profit" per unit. This does not include development or marketing costs of course.

For the most part , for a $50 game, $10 goes to retail, $10 to manufacturing, 15-20 to the publisher, and the dev team MIGHT see $10. This depends on how high of an advance they were given. The publisher needs to see their entire loan repaid via sales before the developer gets even a penny of the profits. This is why a lot of dev studios are going independent and doing the digital distribution thing.

In digital distribution, there is no retail, no manufacturing and the dev team acts as its own publisher. So they would get all $50 of that game. Yet, most aren't so greedy, and will pass a lot of those savings along to the customer, selling the game for $20-$30 for digital distribution. The devs still make a lot more money this way as opposed to the traditional approach.

As internet connections grow faster in speed and storage space grows, there will be a much larger shift to digital distribution and a shunning of the publishers by the developers. Think of how more musicians are giving away free music online or selling through their website. No manufacturing, no retail, no record company. Discs in the future will be only used as home storage or for movies, I feel certain of that.

does anyone have an idea about wii ware titles?

shams said: Done this a few times before: - production cost (for a publisher) has NOTHING to do with pressing costs. Its basically the license fee the hardware manufacturer makes off the software. A ballpark figure is $7US. Its higher on the PS3, could be $10-$12US. - shipping costs are usually $2-$3 per unit. Not so sure if the software is pressed in the US, for a US publisher. - retailers typically buy product for "around" half the retail price. A $49 title would be purchased (in bulk) for around $23-$25 - but sometimes a lot lower ($15-$17) US per unit. This is typically done in bulk (by a chain HQ, which then distributes to stores as needed). The units are usually non-refundable as well. A $60 title could be a bit more, edging $27-$30US. $30 purchased by stores would be rare. Developers get NOTHING. Its rare that external developers get a royalty deal, and when it is - its usually done such that the royalties on the first "XXX" units pay for the development (i.e. 250k, or 500k units). Development costs are usually negotiated upfront, then paid on a "per-milestone" basis. Once a game is delivered, the developer usually get nothing more (except for a final gold payment). Publishers also have *other* costs to pay: - shipping to retailers - various types of insurance - some marketing levys ...etc...

 That seems to make the most sense.

shams said:  - retailers typically buy product for "around" half the retail price. A $49 title would be purchased (in bulk) for around $23-$25 - but sometimes a lot lower ($15-$17) US per unit. This is typically done in bulk (by a chain HQ, which then distributes to stores as needed). The units are usually non-refundable as well. A $60 title could be a bit more, edging $27-$30US. $30 purchased by stores would be rare.

Retailers buying for roughly half the retail cost of games would mean this branch follows the same principle as most retail in general (like clothes, furniture, food etc).

But why do I very often see here on VGC people say that game retailers practically sell at cost (only adding max 20%), and that they really only make money from selling used games? They say that they've heard this from local store salesmen etc, and for example for games that cost $60 in a store, the retailer pays $50 to the publisher/distributor (there's a huge discrepancy between 50% and 83%). And following from this, you see numbers like $35-40 for each sold copy reaching the developer, according to many people.

So let's take a game like Heavenly Sword. It had a dev budget of $20 million, and people on the Sony subforum claimed it would break even at 500,000 sold copies, because 500,000 x $40  = $20 mill.

What to believe?

I think costs depends on the game.

For example, GTA IV & Madden could probably muscle its way onto a retailer shelf at wholesale prices of $50-$55 easily. Those games generate massive amounts of foot traffic and everyone knows it. While for lesser well know games they might have to go with $40-$45.

In addition, high priced developers are definitely given royalties ... RockStar, Maxis, Blizzard, Valve, Harmonix etc. Or how else r they going to be kept happy and keep making those games. For lesser well known developers, I am guessing they probably get royalties but only if they are independent and only after X # of games sold.

Here is probably a good article that breaks down the costs of Gears of War for the XBox 360.

http://www.forbes.com/technology/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames.html

On a side note, development is more or less a fixed costs, so that big chunk should be decreasing as more units are sold.

shams said: Done this a few times before:  - production cost (for a publisher) has NOTHING to do with pressing costs. Its basically the license fee the hardware manufacturer makes off the software. A ballpark figure is $7US. Its higher on the PS3, could be $10-$12US.  - shipping costs are usually $2-$3 per unit. Not so sure if the software is pressed in the US, for a US publisher.  - retailers typically buy product for "around" half the retail price. A $49 title would be purchased (in bulk) for around $23-$25 - but sometimes a lot lower ($15-$17) US per unit. This is typically done in bulk (by a chain HQ, which then distributes to stores as needed). The units are usually non-refundable as well. A $60 title could be a bit more, edging $27-$30US. $30 purchased by stores would be rare. Developers get NOTHING. Its rare that external developers get a royalty deal, and when it is - its usually done such that the royalties on the first "XXX" units pay for the development (i.e. 250k, or 500k units). Development costs are usually negotiated upfront, then paid on a "per-milestone" basis. Once a game is delivered, the developer usually get nothing more (except for a final gold payment). Publishers also have *other* costs to pay:  - shipping to retailers  - various types of insurance  - some marketing levys ...etc...

The reason i originally was talking about developers/publishers, was because they share the game budget (developing+marketing) and they share their share. Besides, publisher and developer can be the same company and in case the developer is independent, who only made a deal with outsider publisher to publish their game, then they have a royalty deal. Good point about the disc manufacturing, i had totally forgotten it.

@BDBD

I know that the killer apps for Ps360 are way above 50M, but most game's budgets have to be much lower than that. At least that's what seems reasonable to me, but again, I have a weird look on reality.

Nintendo Zealot said: The average US game is around $50, the retailers probably make around $20 a game. Then the license fee is probably $5-10 leaving around $20-25 for the publisher.

 I used to work in retail, games off of a $50 game they make from $3 to $6 each sold.