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Forums - Sales - Basic Gaming Sales/ Money Questions

bobobologna on 13 June 2009
Slimebeast said:
theRepublic said:
mrstickball said:
theRepublic said:
mrstickball said:

Not according to Epic:

http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_print.html

I think you misinterpreted the article.

The way I read it is the publishers make $1 per copy only after they recuperate their costs.  Before that it sounds like they take as much as possible since they paid the developer up front to make the game.

The developer then makes nearly 45% of the remaining $59.  That means $26.55 at best, not $30 to $40.  This is only after the game starts making a profit.

The rest goes to retailers, distributers, licensing fees, etc.

The article makes no such assumptions as to who takes what percentage other than the ones given..So why assume the publisher makes more than the stated revenue?

There are lots of variables on the Gears of War estimate. Licensing (which was/is 5% of the pie) may or may not be needed for any given game. Marketing (7%) can also greatly vary....What if the marketing team is in-house? Also, corporate costs and hardware development would be associated with developer costs, I'd think.

So it really depends on how you want to quantify it.

I gave an esitmate of $30-40 profit for developers. The low end of the spectrum would be $25 in very bad cases, but it could near $40 if the right requirements were met (lower marketing budget, no licensing).

For the companies that do put next-generation titles out early, making a profit is tough. Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it creates to make a profit. Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.
 The key word here is start making $1 per game sold.  Think about it, if the publisher only made $1 for every game, how could they make a profit on 1 million units sold?  That would only be $1 million.  They take the developers portion until they make it into the black.  That gives us:

$26.55 + $1.00 = $27.55

$27.55 × 500,000 ≈ $13.8 million

$27.55 × 1,000,000 ≈ $28.5 million

Those numbers put us in line with what we know about the costs of HD development.

So overall, the picture looks like this: The publisher pays a developer a certain amount to make a game, developer makes the game, publisher publishes game, publisher takes lion's share of money until they break even, publisher makes $1 per game after that, developer makes additional money after game breaks even.


What do you exactly mean with that part of the sentence?

I think he's basically saying that until a publisher makes "enough" money (enough to recoup whatever investments they made), they get most of the money.  After that point, most of the money would then go back to the developer.

So if a publisher puts up $20 million to develop a game, they might take $25 of each game sale until they make $25 million.  After they make $25 million, then they would get just $1 for each game sold instead of the initial $25 they were getting.



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theRepublic on 13 June 2009
bobobologna said:
Slimebeast said:
theRepublic said:
mrstickball said:
theRepublic said:
mrstickball said:

Not according to Epic:

http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_print.html

I think you misinterpreted the article.

The way I read it is the publishers make $1 per copy only after they recuperate their costs.  Before that it sounds like they take as much as possible since they paid the developer up front to make the game.

The developer then makes nearly 45% of the remaining $59.  That means $26.55 at best, not $30 to $40.  This is only after the game starts making a profit.

The rest goes to retailers, distributers, licensing fees, etc.

The article makes no such assumptions as to who takes what percentage other than the ones given..So why assume the publisher makes more than the stated revenue?

There are lots of variables on the Gears of War estimate. Licensing (which was/is 5% of the pie) may or may not be needed for any given game. Marketing (7%) can also greatly vary....What if the marketing team is in-house? Also, corporate costs and hardware development would be associated with developer costs, I'd think.

So it really depends on how you want to quantify it.

I gave an esitmate of $30-40 profit for developers. The low end of the spectrum would be $25 in very bad cases, but it could near $40 if the right requirements were met (lower marketing budget, no licensing).

For the companies that do put next-generation titles out early, making a profit is tough. Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it creates to make a profit. Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.
 The key word here is start making $1 per game sold.  Think about it, if the publisher only made $1 for every game, how could they make a profit on 1 million units sold?  That would only be $1 million.  They take the developers portion until they make it into the black.  That gives us:

$26.55 + $1.00 = $27.55

$27.55 × 500,000 ≈ $13.8 million

$27.55 × 1,000,000 ≈ $28.5 million

Those numbers put us in line with what we know about the costs of HD development.

So overall, the picture looks like this: The publisher pays a developer a certain amount to make a game, developer makes the game, publisher publishes game, publisher takes lion's share of money until they break even, publisher makes $1 per game after that, developer makes additional money after game breaks even.


What do you exactly mean with that part of the sentence?

I think he's basically saying that until a publisher makes "enough" money (enough to recoup whatever investments they made), they get most of the money.  After that point, most of the money would then go back to the developer.

So if a publisher puts up $20 million to develop a game, they might take $25 of each game sale until they make $25 million.  After they make $25 million, then they would get just $1 for each game sold instead of the initial $25 they were getting.

Yes, that is what the article makes it sound like.  Here is the relevant part of the article:

For the companies that do put next-generation titles out early, making a profit is tough. Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it creates to make a profit. Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.

The remaining $59 per game goes into many hands. The biggest portion--nearly 45%--goes toward simply programming and designing the game itself. Then the console maker, retailer and marketers each get a cut. Add in manufacturing and management costs, and depending on the type of game, a license fee. Some gamemakers also have to pay a distributor to help get their titles in stores.

There is considerable flex to those costs. Licensing fees for companies attempting to promote home-grown intellectual property--games without Spider-Man, for instance, or NFL teams--may drop down to zero. On the other hand, games that have familiar franchises often have lower marketing costs--no need to explain to most gamers what Halo is.



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Slimebeast on 13 June 2009
theRepublic said:
bobobologna said:
Slimebeast said:
theRepublic said:
mrstickball said:
theRepublic said:
mrstickball said:

Not according to Epic:

http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_print.html

I think you misinterpreted the article.

The way I read it is the publishers make $1 per copy only after they recuperate their costs.  Before that it sounds like they take as much as possible since they paid the developer up front to make the game.

The developer then makes nearly 45% of the remaining $59.  That means $26.55 at best, not $30 to $40.  This is only after the game starts making a profit.

The rest goes to retailers, distributers, licensing fees, etc.

The article makes no such assumptions as to who takes what percentage other than the ones given..So why assume the publisher makes more than the stated revenue?

There are lots of variables on the Gears of War estimate. Licensing (which was/is 5% of the pie) may or may not be needed for any given game. Marketing (7%) can also greatly vary....What if the marketing team is in-house? Also, corporate costs and hardware development would be associated with developer costs, I'd think.

So it really depends on how you want to quantify it.

I gave an esitmate of $30-40 profit for developers. The low end of the spectrum would be $25 in very bad cases, but it could near $40 if the right requirements were met (lower marketing budget, no licensing).

For the companies that do put next-generation titles out early, making a profit is tough. Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it creates to make a profit. Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.
 The key word here is start making $1 per game sold.  Think about it, if the publisher only made $1 for every game, how could they make a profit on 1 million units sold?  That would only be $1 million.  They take the developers portion until they make it into the black.  That gives us:

$26.55 + $1.00 = $27.55

$27.55 × 500,000 ≈ $13.8 million

$27.55 × 1,000,000 ≈ $28.5 million

Those numbers put us in line with what we know about the costs of HD development.

So overall, the picture looks like this: The publisher pays a developer a certain amount to make a game, developer makes the game, publisher publishes game, publisher takes lion's share of money until they break even, publisher makes $1 per game after that, developer makes additional money after game breaks even.


What do you exactly mean with that part of the sentence?

I think he's basically saying that until a publisher makes "enough" money (enough to recoup whatever investments they made), they get most of the money.  After that point, most of the money would then go back to the developer.

So if a publisher puts up $20 million to develop a game, they might take $25 of each game sale until they make $25 million.  After they make $25 million, then they would get just $1 for each game sold instead of the initial $25 they were getting.

Yes, that is what the article makes it sound like.  Here is the relevant part of the article:

For the companies that do put next-generation titles out early, making a profit is tough. Namco Bandai president Takeo Takasu said his company needs to sell at least 500,000 copies of each PlayStation 3 game it creates to make a profit. Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.

The remaining $59 per game goes into many hands. The biggest portion--nearly 45%--goes toward simply programming and designing the game itself. Then the console maker, retailer and marketers each get a cut. Add in manufacturing and management costs, and depending on the type of game, a license fee. Some gamemakers also have to pay a distributor to help get their titles in stores.

There is considerable flex to those costs. Licensing fees for companies attempting to promote home-grown intellectual property--games without Spider-Man, for instance, or NFL teams--may drop down to zero. On the other hand, games that have familiar franchises often have lower marketing costs--no need to explain to most gamers what Halo is.

But the truth is it's actually the other way around. The more the game sells, the more money goes into the pockets of the publisher. That's the point of publishing games, you take a big risk by funding games that seldom break even, but when they do, you as a publisher get the biggest reward.



silicon on 14 June 2009

Thanks for all the great replies!

 

Also, for the developers to get paid $1 per copy, they must have an aggreement that allows for profit.

Let's say they put up $20 million for a developer to make a game...

And at release they make $27.55, with let's say 15% interest

That's roughly 835 000 games sold until the developers generate extra profit from the game.

I guess the amount of interest would depend on the developer..

 

Or am I wrong?