Wii Games Need to Sell a Million Copies to Make Profit

[John Funk]

Wii Games Need to Sell a Million Copies to Make Profit

Speaking to the New York Times [http://www.nytimes.com/2009/03/30/technology/30game.html?_r=3&hpw] about the difficulties game developers face in turning a profit, Nintendo's Reggie Fils-Aime said that Wii games need to sell a million copies on average in order to break even with development costs.

If you're thinking of joining the development business with a quick shovelware title thrown out on the mega-popular Wii to make a quick buck ... well, you might want to think again. According to NOA head honcho Reggie Fils-Aime, the vast majority of Wii titles don't ever turn a profit: In order to break even, a Wii game needs to sell about a million units.

According to NPD, only 16 out of 486 games on the Wii have ever shipped more than a million copies - and nine of those are first-party Nintendo titles. Not the best of odds, no? Furthermore, Reggie claims that the magic profit threshold for Wii games is intentionally lower than on the other consoles due to the Wii's inferior graphics: "[Nintendo] deliberately did not add high-definition capability to the Wii so games would be cheaper to make."

Beyond Reggie, the article itself is an interesting look into the state of the modern games industry and the problems it's facing. It is true that in terms of sheer revenue, the industry is growing. What isn't growing are developer and publisher profits - the average cost to make a game this console generation ($25 million) is more than double than what it cost to make a game last generation ($10 million), and the price on the shelf hasn't risen significantly enough to compensate.

Couple that with piracy, increasingly attractive smaller titles on PSN, XBLA, WiiWare or the iPhone, and you're looking at an industry that, if it fails to adapt to the times, is going to end up in trouble despite record revenue streams. "The model as it exists is dying," said Mike McGarvey, a former Eidos executive who is now on board with OnLive, the cloud-based gaming system OnLive [http://www.escapistmagazine.com/news/view/90423-OnLive-Cloud-Based-Gaming-of-the-Future], which made waves when it was unveiled at GDC 2009 last week.

It's a very interesting and sobering look at the state of the games industry and how companies are trying to adapt - if you've got a few minutes to kill, the article is definitely worth a read.

(Via RPGSite [http://www.rpgsite.net/news/316.html])

Permalink

 

[KDR_11k]

I'm not sure the numbers add up, at least for shovelware. That stuff is usually developed on budgets less than one million dollars so I doubt their breakeven point is going to be at one million sales. On Slashdot someone said that companies calculate 100k sales for every million dollars in the dev budget to break even (which would be consistent with the 10 million dollar number), a game developed with less than one million as its budget would not even need to sell 100k units to break even then.

What isn't growing are developer and publisher profits - the average cost to make a game this console generation ($25 million) is more than double than what it cost to make a game last generation ($10 million), and the price on the shelf hasn't risen significantly enough to compensate.

Er, you're pointing at the wrong variable there. The price is dictated by the demand at each possible price, most likely increases would actually decrease the revenue as sales decrease more than the increased price rakes in. Since dev costs are fixed they don't affect the optimum price (maximizes sales*(price - variable costs)). What's missing is more customers.

As for OnLive, it's not magically going to fix the situation [http://seanmalstrom.wordpress.com/2009/03/30/online-retail-wont-be-a-cornucorpia/]. The problem is not with the delivery method, it's with what is being delivered.

Also be careful about NPD, that's US-only, there are more worldwide million sellers than that.

 

[kawligia]

IMO, what these companies need to do is stop worrying so much about graphics. It seems like a majority of time and expense in making a game goes to graphics which is far less important than gameplay.

I would MUCH rather play a fun game that looked like a PS2 title than a short, buggy, or unbalanced game that looks like Crysis. I'm SURE I'm not alone there. In fact, the success of the Wii and small titles mentioned in the article prove that fact.

 

[Quaidis]

*snip; look two posts up*

I readily agree with KDR and could not have written it better. The figures really don't add up. This looks like something quickly thrown together to freak out people, encourage Wii bashing, and cause drama. The original article and subsequent RPGSite news, I mean.

 

[JMeganSnow]

It's quite likely that developers also need to do two things: cost containment, and figuring out WHAT is generating that profit. From what I've seen, most do neither. Just think of the fact that producing a super-high-def-awesome-graphics game means that you have to have computers that can RUN that game for EVERYONE ON THE STAFF (probably better machines for the people actually doing development work). That's a hefty price tag, esp. if you're buying your machines off the shelf.

Game companies also tend to do expensive things that sound kinda cool without actually thinking about whether it's really going to generate additional profit. How much does it cost to get Liam Neeson or Patrick Stewart to voice your poorly-written dialog as opposed to a competent no-name voice actor? Does anyone BUY your game JUST because it has Patrick Stewart voicing a half-dozen lines? So is this really a profit-oriented decision?

 

[oliveira8]

I doubt that..if it was that way why the hell does this exist???

And they still releasing crap like that!!!

 

[ShadowKirby]

I doubt that..if it was that way why the hell does this exist???

And they still releasing crap like that!!!

Cause Ubisoft makes a big buck on it's bigger title like PoP and the such that are multiplatform.

 

[oliveira8]

I doubt that..if it was that way why the hell does this exist???

And they still releasing crap like that!!!

Cause Ubisoft makes a big buck on it's bigger title like PoP and the such that are multiplatform.

They probably make more money out of their Imagine games than the PoP franchise...

 

[L.B. Jeffries]

I, for one, welcome our new era of episodic expansion packs and smaller indie games. I get more playing time out of the stuff I spent 10 bucks on than I do the games I spent 60 pretty regularly at this point.

That's not even acknowledging that the free ones get plenty of time as well.

 

[amplifiedshock]

Hilarious. I wonder why Reggie "scoffs" at OnLive... http://www.onlive1.com/showthread.php?t=30

 

[Rodger]

Hilarious. I wonder why Reggie "scoffs" at OnLive... http://www.onlive1.com/showthread.php?t=30

Probably because Nintendo's most profitable games, which they could survive on alone, are their own franchises. Mario, Zelda, Metroid, Pokemon, etc.

I think this highlights a problem on the horizon for console gaming. Namely, that more and more its coming into conflict with the "dying" pc gaming industry, and this is something that will likely grow more and more with distribution systems like Steam. Its getting harder and harder for Microsoft and Sony to turn a profit on their gaming division, mostly because they're spending more on producing the games/consoles and selling them to a comparatively small audience. The end result is they need to sell more and more games to make a profit, with less and less gamers actually buying them. Add in used game sales, piracy, both alleviated by digital distribution, and the lowering costs of high end PC's (or at least the kind of PC you'd need to run newer games) and the PC certainly seems poised to replace consoles entirely. And if it looks like their gaming division won't make them any money, Microsoft and Sony can axe it.

Naturally, of course, this doesn't apply to Nintendo. As already stated, Nintendo can self-sustain on its own franchises marketing to the same audience they have been since the NES era. I'm talking about the kids, of course, since thats the very reason they have those franchises and have Mario for a mascot.

 

[ShadowKirby]

I doubt that..if it was that way why the hell does this exist???

And they still releasing crap like that!!!

Cause Ubisoft makes a big buck on it's bigger title like PoP and the such that are multiplatform.

They probably make more money out of their Imagine games than the PoP franchise...

Maybe, I guess they don't have that much of a big development cost but I wonder how it looks in the sales.

 

[oliveira8]

I doubt that..if it was that way why the hell does this exist???

Spoiler

And they still releasing crap like that!!!

Cause Ubisoft makes a big buck on it's bigger title like PoP and the such that are multiplatform.

They probably make more money out of their Imagine games than the PoP franchise...

Maybe, I guess they don't have that much of a big development cost but I wonder how it looks in the sales.

Alot of money considering the amount of game there is.

* Imagine: Master Chef (2007) (known as Imagine: Happy Cooking in PAL regions)
* Imagine: Fashion Designer (2007)
* Imagine: Animal Doctor (2007) (known as Imagine: Pet Vet in PAL regions)
* Imagine: Babyz (2007) (known as Imagine: Babies in PAL regions)
* Imagine: Figure Skater (2008)
* Imagine: Rock Star (2008) (known as Imagine: Girls Band in Australia and Imagine: Girl Band in Europe)
* Imagine: Teacher (2008)
* My Secret World by Imagine (2008)
* Imagine: Babysitters (2008)
* Imagine: Baby Club (2008)
* Imagine: Fashion Model (2008)
* Imagine: Modern Dancer (2008)
* Imagine: Fashion Designer New York (2008)
* Imagine: Champion Rider (2008)
* Imagine: Pet Hospital (2008)
* Imagine: Interior Designer (2008)
* Imagine: Wedding Designer (2008) (known as Imagine: Dream Weddings in PAL regions)
* Imagine Party Babyz (2008)
* Imagine: Ballet Star (2008) (known as Imagine: Ballet Dancer in PAL regions)
* Imagine: Movie Star (2008)
* Imagine Fashion Party (January 20, 2009)
* Imagine: Cheerleader (February 3, 2009)
* Imagine: Ice Champions (March 3, 2009)

And these are games for girls only...Mostly for the DS but theres some for the Wii to.

Source:http://en.wikipedia.org/wiki/Imagine_(video_game_series)

 

[KDR_11k]

Hilarious. I wonder why Reggie "scoffs" at OnLive... http://www.onlive1.com/showthread.php?t=30

For the reasons listed in the article I linked earlier, it's not the delivery method that makes core gaming die, it's the games. Reggie is the one Nintendo hired to figure out exactly how this market is going and he knows its direction. He knows what will work and what will not. OnLive is overhyped, even if it does somehow manage to turn out good it's not some magic cure that will suddently make core gaming profitable again.

 

[sirdanrhodes]

I doubt that..if it was that way why the hell does this exist???

And they still releasing crap like that!!!

Garry Glitter has saw the box art... Now he's in more shit.

 

[super_smash_jesus]

1 million games to make a profit, and 25 million to develop a game....

I don't know when I ever see a game that was 25 dollars which cost 25 million to create, so something about his math sucks (unless I missed something). Technically speaking, games are usually around 60 dollars CDN, which makes 60 million dollars if a million are sold, for a profit of 35 million, so where the hell are these figures coming from??

 

[Anton P. Nym]

1 million games to make a profit, and 25 million to develop a game....

I don't know when I ever see a game that was 25 dollars which cost 25 million to create, so something about his math sucks (unless I missed something). Technically speaking, games are usually around 60 dollars CDN, which makes 60 million dollars if a million are sold, for a profit of 35 million, so where the hell are these figures coming from??

You're forgetting that Ninty isn't selling games out of the back of a truck at yard sales. Retailers need to take a slice of that $60 just to stay in business, and distributors (who handle getting the game from the publishers to the retailers, the least challenge of which is the actual delivery) also charge for their services.

The rule of thumb in the old paper game industry was that every stage roughly doubles the price. If that holds true for games[sup]*[/sup], then of that $60 million Joe Publisher is taking home $15 million. If the game cost $20 million to develop, well, Joe's SOL even though he sold a million copies.

-- Steve

[sup]*[/sup] I suspect it's less drastic for electronic media, but I don't know by how much and can't make a reasonable guess.

 

[jinkaz]

A lot of wii games out in the market is just shovelware, quickly made to try and cash in on it's popularity. They would never ever sell a million copies, not in a million year.

(see what I did there?)

 

[Baneat]

if noone made any money from it, people wouldn't make games for it.