50% is far to high!!

And every games store makes money off hardware, who ever said otherwise?

As far as I know my local EB only get as little as 20% or less for brand new games.

When sales decrease or as time goes on, the publisher of the game will sell it's game for cheaper to the retailers, resulting in a price cut at the stores, how much they cut the price is up to them, but they (retailers) make alot of money out of the games that have been out for awhile more-so then brand new games.

For example today EB are probably making 50% or more for every Final Fantasy X sold.

It really depends on how much it cost to make the game and marketing. And you really have to look at it as a whole company (or division) because it might take 1 million to make a game but the company spent 5 million on the engine that was used in three games.

Third party publishers have to pay for licensing, but sometimes get a break or a discount for exclusives (and MS even admits to paying for exclusives, while Sony and Nintendo won't admit it)

Often times companies will lie about how much was spent on a game, saying 20 million to make, but it isn't really true because games have much more shared resources than movies do. If companies were really spending that much per game none would make any money, it would take a third party publisher selling 800,000 copies to make any profit.

Here are rough numbers for a good quality successful console game from last generation.  Remember that successful games are generally very polished and high quality.

• Development Costs: ~$2.5 million for a modest game with a modest team size
  • About $1.5 million in salary
  • About $0.3 million in equip
  • About $0.75 million for overhead
• Cost of Goods
  • $3 million
• Marketing
  • $0.5 million at the cheapest
  • Usually $2-5 million
  • Marketing Development funds are usually 6% of the wholesale price
• Total: ~$6-11 million

Bingo. This is really the best way to find out whether or not an individual company is profiting on their hardware and software. All publically traded companies are required to post their financials, so with a bit of searching you can usually find out how much money they're making. Nintendo and Sony are both about to disclose their numbers from the last quarter (Microsoft just did so), making this a particularly good time to investigate these issues.

That's the best way to discover whether or not a console is turning a profit. Individual games are much more difficult to determine, since companies will usually group them all together in financial statements. Sometimes a developer or publisher will publically disclose their costs, allowing estimate to be made as to the number needed to be sold to turn a profit. More usually though, companies keep these numbers quiet, to avoid the potential for embarassment in the event of a flop. (A notable recent example was the much-hyped Gundam Musou for Japan's PS3; Namco-Bandai stated that at least 500k copies need to be sold to turn a profit, and the sales barely reached 300k.)

What few gamers seem to realize is that the margins in the industy are very slim. Development costs are expensive, then publishers take a cut, plus shipping, marketing, retailers taking a cut, console licensing fees have to be paid... you get the picture. One of the big secrets of the industry is that most developers actually lose money; only the really big publishers (like EA) consistently turn profits. Among some of the biggest names in the industry, here are publishers that are currently losing money: Take-Two, Microsoft, Sony, among others. Now when you get a real hit on your hands, the revenues can be gigantic indeed (see Activision and Guitar Hero for a good example), but most games lose money, and most developers do too. Be careful about investing in many of these companies!