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Forums - Sales Discussion - Lazard Analyst: PS3 & 360 games need to sell 600k to break even, Wii 300k

TheSource on 06 July 2007
Analyst: Favorable Economics Should Drive Publishers to Wii

Many publishers have already increased their focus on Nintendo's Wii and Lazard Capital Markets analyst Colin Sebastian only sees this continuing. The economics of publishing for Wii are just too appealing, he says. More within...

Lazard Capital Markets analyst Colin Sebastian has issued a new report on the publishing economics for Nintendo's Wii. Ultimately, he believes that the lower cost and broader audience on the Nintendo console should "encourage additional Wii support."

 

 

"Approaching the E3 industry conference next week, there appears to be lingering investor anxiety related to the impact on third-party publishers from a stronger Nintendo. However, our analysis of title economics suggests publishers should be able to tolerate lower retail pricing and attach rates on the Wii vs. PS3 and Xbox 360 without sacrificing title profitability," he said.

 

Why is Wii so attractive? According to Sebastian, the answer's simply in the economics: "Based on the typical front-line retail price for Wii titles, we estimate that publishers need to sell approximately 300,000 units per title to break even. Specifically, using $49 front-line software pricing, the wholesale price is about 80% off retail, or $39. Third-party software publishers pay royalties and disk and packaging costs of approximately $9, with license and distribution fees costing another $7 to $9, leaving a contribution profit of $22 to $23. Assuming development and marketing expenses of about $7.5 million, we reach the estimated break-even unit total. We believe this is a conservative assumption, given that the mix of Wii titles may be more balanced towards owned-IP (i.e., reduced or no-license royalties). In contrast, we estimate that breakeven units for front-line Xbox 360 and PS3 titles are in the 600,000-unit range, or at least double the Wii's break even level."

 

One of the criticisms of Nintendo platforms has typically been that first-party always dominates and Nintendo doesn't allow third-party to adequately compete with their own offerings. Sebastian sees a different scenario on the Wii, however.

 

"We believe investors should not be surprised that Nintendo titles are dominating bestseller lists early in the cycle, given the popularity of first-party franchises among Nintendophiles," he said. "But Nintendo does not want to predestine Wii to the lackluster market share achieved by the GameCube in the last console generation, and we believe the company has aggressively pursued third-party support and is offering new tools (such as the recently announced WiiWare) to expand content offerings. We believe that as the cycle progresses, it is possible for a more balanced blend between top first-party and third-party titles to emerge."

 

By the end of Nintendo's fiscal year in March 2008, Sebastian believes that the Wii will have an installed base of nearly 20 million worldwide. He also thinks that tie ratios on the platform will continue to improve and Nintendo will offer more in the way of DS-Wii connectivity.

 

Article source: http://biz.gamedaily.com/industry/feature/?id=16727

Interesting stuff I think.



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When there are more laws, there are more criminals.

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ckmlb on 06 July 2007

Interesting indeed, but it doesn't take into account ports. I mean I'm sure it takes less sales to break even on the port of a game as compared to a game made from the ground up on a certain console.

Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

Also, the easiest break even point would be for the cheaper made games (mini game collections and others). This shift of focus by the big publishers, will it be towards making more of these kinds of games or will it be sinking bigger budgets into Wii games? In the case of the latter, it will offset some of the lower break even point advantage of making Wii games.

I assume he got these numbers based on the averages of games that are already out on Wii and PS3/360. In which case, the break even point should be low since there haven't seen any big budget games on the Wii (outside of Twilight Princess maybe?). This can change in the future as bigger games are made on the system and that average can go up correct?

Also, the 3rd party support stuff has still been lackluster, as third parties haven't been given the necessary stuff to make games online on the Wii (as of now) and the sharing of Miis has only been allowed for EA (the biggest 3rd party).



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Desroko on 06 July 2007
ckmlb said:
Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

  Actually, the word so far has been that porting to the PS3 from 360 and vice-versa is actually very difficult, due to the differing architecture.


ckmlb on 06 July 2007
Desroko said:
ckmlb said:
Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

Actually, the word so far has been that porting to the PS3 from 360 and vice-versa is actually very difficult, due to the differing architecture.

The new word is that porting from 360 to PS3 is more difficult than porting from PS3 to 360 which is why a few games now are gonna have the PS3 as the main format and port them over to the 360.

Eitherway even with the difficulties, a ported game you have to sell less of to break even. Because you are not making a whole new game on the system.



Thanks to Blacksaber for the sig!

HappySqurriel on 06 July 2007
ckmlb said:

Interesting indeed, but it doesn't take into account ports. I mean I'm sure it takes less sales to break even on the port of a game as compared to a game made from the ground up on a certain console.

Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

Also, the easiest break even point would be for the cheaper made games (mini game collections and others). This shift of focus by the big publishers, will it be towards making more of these kinds of games or will it be sinking bigger budgets into Wii games? In the case of the latter, it will offset some of the lower break even point advantage of making Wii games. 

I assume he got these numbers based on the averages of games that are already out on Wii and PS3/360. In which case, the break even point should be low since there haven't been any big budget games on the Wii (outside of Twilight Princess maybe?).

Also, the 3rd party support stuff has still been lackluster, as third parties haven't been given the necessary stuff to make games online on the Wii (as of now) and the sharing of Miis has only been allowed for EA (the biggest 3rd party).

Producing and XBox 360, PS3 and PC cross platfom game would mean that you would need much lower sales per-system but you would need much higher sales overall. The unfortunate consequence is that many games do not sell dramatically better (overall) when they're ported across several platforms as if they were released exclusively for one platform; essentially, there will be a certain portion of people who would have bought a game for the XBox 360 who would choose the PS3 or PC version if it were available and (generally speaking) multi-platform games get less press and are hyped far less by fanboys than exclusive games.

 



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Desroko on 06 July 2007
ckmlb said:
Desroko said:
ckmlb said:
Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

Actually, the word so far has been that porting to the PS3 from 360 and vice-versa is actually very difficult, due to the differing architecture.

The new word is that porting from 360 to PS3 is more difficult than porting from PS3 to 360 which is why a few games now are gonna have the PS3 as the main format and port them over to the 360.

Either way even with the difficulties, a ported game you have to sell less of to break even. Because you are not making a whole new game on the system.


Less, but in all likelihood still more than you need to sell on the Wii. 

And in any case, the article never actually says that ports were not considered. He assumes average costs of $7.5m - if we could actually get dev costs for a cross-platform game, say Spider-Man 3, that would help. 



ckmlb on 06 July 2007
Desroko said:
ckmlb said:
Desroko said:
ckmlb said:
Seeing as many PS3 games are being ported over to the 360 and a lot of 360 games are being ported to the PS3, breaking even will be lower on one of the two consoles in those cases am I right?

Actually, the word so far has been that porting to the PS3 from 360 and vice-versa is actually very difficult, due to the differing architecture.

The new word is that porting from 360 to PS3 is more difficult than porting from PS3 to 360 which is why a few games now are gonna have the PS3 as the main format and port them over to the 360.

Either way even with the difficulties, a ported game you have to sell less of to break even. Because you are not making a whole new game on the system.


Less, but in all likelihood still more than you need to sell on the Wii.

And in any case, the article never actually says that ports were not considered. He assumes average costs of $7.5m - if we could actually get dev costs for a cross-platform game, say Spider-Man 3, that would help.


 I never said it wasn't more than Wii games, but it is worth mentioning. The article does say what a game takes on average to break even on a system, so that specific port game will be lower on the other system that gets the port. 



Thanks to Blacksaber for the sig!

ckmlb on 06 July 2007
HappySqurriel said:
ckmlb said:

Producing and XBox 360, PS3 and PC cross platfom game would mean that you would need much lower sales per-system but you would need much higher sales overall. The unfortunate consequence is that many games do not sell dramatically better (overall) when they're ported across several platforms as if they were released exclusively for one platform; essentially, there will be a certain portion of people who would have bought a game for the XBox 360 who would choose the PS3 or PC version if it were available and (generally speaking) multi-platform games get less press and are hyped far less by fanboys than exclusive games.

 

 

You're thinking about stuff from the multi platform owner perspective. Unless a port is much later (Oblivion, Fear, Rianbow Six because PS3 was much later) then that isn't a factor. Also most people will own one system not both.

So right now, GTA IV whichever platform it is being made on mainly, and whichever platform gets the port it doesn't matter because people will buy it eitherway on whichever system they have. What will matter is the user base and that will make the sales different from 360 to PS3. It won't be because one is a port of the other.

You're thinking of long time ports where the game has been avaialable for ages, but most games should be released simultaneously now on both systems if they are multiplatform. 

 



Thanks to Blacksaber for the sig!

mrstickball on 06 July 2007

Taking into account various stories I've read, a port from 360>PS3, and vice versa costs around 10% of the development budget.

Therefore, a PS3 + 360 game to break even would be just under 700,000 by this analysis....Not too bad, but not too good either.



Back from the dead, I'm afraid.

HappySqurriel on 06 July 2007
ckmlb said:
HappySqurriel said:
ckmlb said:

Producing and XBox 360, PS3 and PC cross platfom game would mean that you would need much lower sales per-system but you would need much higher sales overall. The unfortunate consequence is that many games do not sell dramatically better (overall) when they're ported across several platforms as if they were released exclusively for one platform; essentially, there will be a certain portion of people who would have bought a game for the XBox 360 who would choose the PS3 or PC version if it were available and (generally speaking) multi-platform games get less press and are hyped far less by fanboys than exclusive games.

 

 

You're thinking about stuff from the multi platform owner perspective. Unless a port is much later (Oblivion, Fear, Rianbow Six because PS3 was much later) then that isn't a factor. Also most people will own one system not both.

So right now, GTA IV whichever platform it is being made on mainly, and whichever platform gets the port it doesn't matter because people will buy it eitherway on whichever system they have. What will matter is the user base and that will make the sales different from 360 to PS3. It won't be because one is a port of the other.

You're thinking of long time ports where the game has been avaialable for ages, but most games should be released simultaneously now on both systems if they are multiplatform. 

 


No, I'm really not ...

It is a well known effect, if a game is not exclusive it doesn't receive the same level of hype as an exclusive game; had Grand Theft Auto 4 been released exclusively for either the PS3 or XBox 360 we wouldn't hear much about games like Lair or Mass Effect because either systems fans would use it as an example of why their system was so great. Platform specific gaming sites devote far more attention to exclusive titles than multiplatform titles ...

You do see some increase in sales by making a game multiplatform but it certainly is not a linear scale ... Releasing a game for the PS3, XBox 360 and PC would probably increase sales to 1.5 to 2 times the sales of putting it on a single platform (obviously depending on the genre and popularity of the game).

If producing a game as a multiplatform title really brought in the sales increases you are anticipating no game would ever be exclusive ...