Games Don't Need To Sell 1 Million Copies For Success

[ZippyDSMlee]

Well it costs the dev 20-40M to make a "AAA" game they get about 20-30$ for every 60$ game sold so 1M comes in close to paying off the debt incured to make the game, FYI whatever the publisher makes selling the game dose not go to paying off what debt the game has.

Regardless for anything that comes close to a normal modern 3D game you are going to need to sell nearly a million to make a profit.

I'm not really sure I follow your reasoning on this one. If a game costs $1 Million dollars to make, and a company get $1.1 Million in sales, it made $100,000. Now, they have made back their initial $1 Million, and unfortunately, that means they don't have much more to work with on their next project, but they recouped the cost of the initial release.

Then we have to take into account long term sales of a game. Most people only track what a game does for the first month or possibly two, but the reality of it is that a game still sells for a long while after that. I personally just bought Wrath of the Lich King for the first time. I was out of WoW for a while, then I had friends who got into it, so started playing again, then when I hit 70, I needed Wrath. They don't give a crap about Wrath sales, but the game still needs to be bought in order to enjoy what Cataclysm has to offer down the road. Take into account new WoW players. Someone who was amazed by the ridiculous ad campaign of Cataclysm, but has never invested in it before, has to purchase all other expansions before they can get Cataclysm. They aren't tracking these numbers, but they are selling these products again.

Edit: Basic Math - If you spend $30 million dollars on a game (this of course includes digital production, physical production and advertising), you need to sell 500K copies at $60 each to break even. And none of this breaking it down stuff to decide who gets what. If you spent $30 Million on this game, that is all included into the initial cost of the game. If you follow my reasoning, at 500k units, you have recouped the cost of the game, and you can use it on the next project. It doesn't look good on paper though. The company is in the same spot as if it did nothing at all. But, in real terms, the company has done something. It has produced a piece of software that 500k people have bought. In the future, they want to do better, but if they did not, they are not worse off, and they have lost no money. But on paper and in terms of stock value, it hasn't done anything. In business this is undesirable, in art, this is GREAT. Haha, now people just need to decide what they think the medium is supposed to be.

Er no I am talking about AAA tiles sold in retail stores, the dev gets are best 30% that 60$ the retailer gets around 6-10$ the pub gets the rest. Its its a more indie game they get most of the final price.

So you have a game that was made for 10-30M it needs to sell 500K-1M titles (15-30M) to break even or make some money back, the more money you make the more you can expand the studio, tho pub owned studios the pub tends to get most of the money with the dev getting paid off and may have a chance to make another game or 2 before being disbanded and reformed under a new studio.

Anyway for AAA games they need to sell nearly 500K units in order to break even, the sooner you do that the better.

For smaller devs you need only a few grand up to 100K in sells to gain a profit.

The lower your over head is the less units you need to sell to break even, the sooner you break even the sooner you make a profit.

I understand what your saying, but that is not how business works. A developer either picks up a contract or creates an original IP and sells it to the publisher for a set price. So, what happens is by the time a game gets released, the developers have already been paid. All the programmers, artists, sound guys, etc., are already paid what they are paid. The development studio has been paid by the publisher. That is why when a game does excessively well there is all kinds of griping about how the publisher gets everything and devs don't get shit.... well they don't get shit because the developers signed a contract to do it for so much money. The only time this model changes is when a developer publishes it's own games. Business in this sense is all about risks. The publisher assumes the largest risk, so it reaps the most benefits.

The thing about a development house being successful is this: When they create a game that is exceptional or sells really well, they look better and can charge more for their contract in the future. Also, if they have a good or great track record, they can add to the ability for a game to sell.

I guess my point is that the breakdown that a lot of people demonstrate for game development may be reality for some titles, but not all, and I would say not most. A studio is paid already for the work that has been done to get to release. That is why EA is crying the blues about revenues being down, despite having a nearly perfect track record for the year, but none of the studios that develop games for them are being axed.

Edit: This business model can be compared to the music industry. A developer is an artist, a publisher is... well a publisher. Artists sign a contract for a set amount of money, just like the developers do. They they jump through the hoops that publisher asks them to, to earn the money for the project they worked on. Then the publisher reaps the majority of benefits from the success because they have the largest portion of risk.

No I understand that its just when you boil it down you can say that most modern 3D titles have huge budgets thus need to sell nearly a million units to make money. Or rather the more quickly you get to 1 million units sold you are much more likely to make a good profit.

And modern games is like film/music where everything is done to try and make more money rather than making a better product that will sell on its own merits.
/curmudgeon

 

[Baresark]

Well it costs the dev 20-40M to make a "AAA" game they get about 20-30$ for every 60$ game sold so 1M comes in close to paying off the debt incured to make the game, FYI whatever the publisher makes selling the game dose not go to paying off what debt the game has.

Regardless for anything that comes close to a normal modern 3D game you are going to need to sell nearly a million to make a profit.

I'm not really sure I follow your reasoning on this one. If a game costs $1 Million dollars to make, and a company get $1.1 Million in sales, it made $100,000. Now, they have made back their initial $1 Million, and unfortunately, that means they don't have much more to work with on their next project, but they recouped the cost of the initial release.

Then we have to take into account long term sales of a game. Most people only track what a game does for the first month or possibly two, but the reality of it is that a game still sells for a long while after that. I personally just bought Wrath of the Lich King for the first time. I was out of WoW for a while, then I had friends who got into it, so started playing again, then when I hit 70, I needed Wrath. They don't give a crap about Wrath sales, but the game still needs to be bought in order to enjoy what Cataclysm has to offer down the road. Take into account new WoW players. Someone who was amazed by the ridiculous ad campaign of Cataclysm, but has never invested in it before, has to purchase all other expansions before they can get Cataclysm. They aren't tracking these numbers, but they are selling these products again.

Edit: Basic Math - If you spend $30 million dollars on a game (this of course includes digital production, physical production and advertising), you need to sell 500K copies at $60 each to break even. And none of this breaking it down stuff to decide who gets what. If you spent $30 Million on this game, that is all included into the initial cost of the game. If you follow my reasoning, at 500k units, you have recouped the cost of the game, and you can use it on the next project. It doesn't look good on paper though. The company is in the same spot as if it did nothing at all. But, in real terms, the company has done something. It has produced a piece of software that 500k people have bought. In the future, they want to do better, but if they did not, they are not worse off, and they have lost no money. But on paper and in terms of stock value, it hasn't done anything. In business this is undesirable, in art, this is GREAT. Haha, now people just need to decide what they think the medium is supposed to be.

Er no I am talking about AAA tiles sold in retail stores, the dev gets are best 30% that 60$ the retailer gets around 6-10$ the pub gets the rest. Its its a more indie game they get most of the final price.

So you have a game that was made for 10-30M it needs to sell 500K-1M titles (15-30M) to break even or make some money back, the more money you make the more you can expand the studio, tho pub owned studios the pub tends to get most of the money with the dev getting paid off and may have a chance to make another game or 2 before being disbanded and reformed under a new studio.

Anyway for AAA games they need to sell nearly 500K units in order to break even, the sooner you do that the better.

For smaller devs you need only a few grand up to 100K in sells to gain a profit.

The lower your over head is the less units you need to sell to break even, the sooner you break even the sooner you make a profit.

I understand what your saying, but that is not how business works. A developer either picks up a contract or creates an original IP and sells it to the publisher for a set price. So, what happens is by the time a game gets released, the developers have already been paid. All the programmers, artists, sound guys, etc., are already paid what they are paid. The development studio has been paid by the publisher. That is why when a game does excessively well there is all kinds of griping about how the publisher gets everything and devs don't get shit.... well they don't get shit because the developers signed a contract to do it for so much money. The only time this model changes is when a developer publishes it's own games. Business in this sense is all about risks. The publisher assumes the largest risk, so it reaps the most benefits.

The thing about a development house being successful is this: When they create a game that is exceptional or sells really well, they look better and can charge more for their contract in the future. Also, if they have a good or great track record, they can add to the ability for a game to sell.

I guess my point is that the breakdown that a lot of people demonstrate for game development may be reality for some titles, but not all, and I would say not most. A studio is paid already for the work that has been done to get to release. That is why EA is crying the blues about revenues being down, despite having a nearly perfect track record for the year, but none of the studios that develop games for them are being axed.

Edit: This business model can be compared to the music industry. A developer is an artist, a publisher is... well a publisher. Artists sign a contract for a set amount of money, just like the developers do. They they jump through the hoops that publisher asks them to, to earn the money for the project they worked on. Then the publisher reaps the majority of benefits from the success because they have the largest portion of risk.

No I understand that its just when you boil it down you can say that most modern 3D titles have huge budgets thus need to sell nearly a million units to make money. Or rather the more quickly you get to 1 million units sold you are much more likely to make a good profit.

And modern games is like film/music where everything is done to try and make more money rather than making a better product that will sell on its own merits.
/curmudgeon

Truer words were never spoken my friend.

 

[Treblaine]

I apologize in advance for this titan of a post, but this is a topic I dedicate considerable thought to on a regular basis.
*Snip*

Brevity would appreciated, I'd be able to respond much sooner.

Firstly I don't have a problem with Activision and CoD. I liked CoD4, I don't have a problem with them essentially releasing the same game several times as well

My problem with Activision is not their business strategy just that Kotick is an idiot with all the people skills of - well - he withholds payments and over-reacts when his employees have a problem with that. He deserves credit for organising these two separate studios releasing games in a staggered structure each working for 2 years on each iteration but each 12 months out of sync. It's a brilliant business strategy holding their corner of the market and growing it every year but still giving each studio 2 years to work on the game and also co-operating.

My problem is with the likes of EA forcing studios to compromise game quality in a haphazard attempt to increase profit. It as if the investors/executives do-not/did-not have any idea what they are dealing with, as if it is just a dumb toy that will sell regardless of quality. No appreciation of how sensitive gamers are to game quality and how to get that quality you NEED artistic freedom and NEED TIME!!

That to me utterly disrupts the Risk/Reward balance that investors in EA want, I think most of the investors (and EA executives) have-or-had little appreciation for how much time and creative freedom is needed to make a quality game and also how important a games quality is to its actual ability to sell.

I mean it is no consolidation to after you have butchered and devalued a franchise to say:

"oh don't worry, we can sell this hugely devalued franchise much later or maybe we can get some B-team on the project that is guaranteed to make much less money, much later than if we had kept the original studio"

Also abusing studios like Westwood mean EA is only going to get desperate studios or those that organise much independence.

That's why I have begrudging respect for Activision as they found the compromise between the need to release a franchise every year yet how each game needs at least 2 years to develop - that is using an existing engine, assets and basic concept.

I'm not going to pontificate about CoD taking 1 billion out of the video game industry every year because the franchise although compromised by rehashes is still at least playable.

Far better than the Movie industry where unwatchable gobshite like Transformers are the top grossing films.

On other points, Hellgate failed because it was a BAD GAME! Why was it bad? Who knows, mostly it is at the hands of the developers simply they screwed up, even Spielberg had his "1941" (crap film he made).

"Those investors that fund these mega-publishers don't want to just turn a profit, but they want to turn more profit than their competitors"

No, number one the investors want A PROFIT! THEN they want the Biggest profit.

I do not think the investors would want the LOW PROBABILITY of the biggest industry profit as that is what EA does with their rushed shit.

Also, C&C was top dog in RTS genre, why did EA have to slash & burn to "maximise profit" when they were already on top. I suppose Starcraft was doing better but EA did nothing to pursue their success such as supporting their studios more, no, they took the INCREDIBLY RISKY thing of firing dozens of people, enforcing draconian rule and squeezing development schedules.

Extending the golden Goose analogy, I have no problem with feeding Golden Goose (CoD), I have a problem with them BUTCHERING their Golden Goose just for a quick meal (EA-Westwood).

Also if companies like microsoft are buying smaller companies just to destroy them WHO WOULD SELL TO THEM?!?!?! Who would let that happen to their company? Who would go to work for a company that had leaders who even considered shit like that?

 

[Atmos Duality]

Brevity would appreciated, I'd be able to respond much sooner.

You probably won't believe me, but I chopped a number of examples and details out.
Yeah. It's one of "those" topics.

Firstly I don't have a problem with Activision and CoD. I liked CoD4, I don't have a problem with them essentially releasing the same game several times as well.

I've never questioned their business strategy, at least in the short term (year to year basis); but long term mega-giant companies like Activision more or less require stable super-profits (and this is that Economic Profit at work) to produce these titles.

ASIDE: In other news, Guitar Hero has finally died. So it's safe to state that Activision's strategy will work up to a point. It's better than EA's, but even it has long-term limitations.

My problem is with the likes of EA forcing studios to compromise game quality in a haphazard attempt to increase profit.

EA can be likened to China in regards to IP-exploitation. "Acquire a trusted name, then produce the title at the lowest possible cost." It was a strategy that worked out well when the market was still expanding in concept, but when the market began to contract we started seeing gamers demand quality over originality. Specifically, now that we've developed these tools and concepts, the goal is to compete on execution; which EA is utterly incapable of doing because their business model does not allow for it.

I mean it is no consolidation to after you have butchered and devalued a franchise to say:

"oh don't worry, we can sell this hugely devalued franchise much later or maybe we can get some B-team on the project that is guaranteed to make much less money, much later than if we had kept the original studio"

If you manage to make more money on that IP now than what you paid for it overall, then you didn't post a loss. That was the mindset EA had before, and it turned huge profits for them for nearly 10 years. Not even the gaming public's grousing about it over the years did much to stop them.
It's only recently that their business model has started to crumble at last, and in ways that cannot be directly/solely attributed to the recession (mismanagement, poor timetables).

I'm not going to pontificate about CoD taking 1 billion out of the video game industry every year because the franchise although compromised by rehashes is still at least playable.

Far better than the Movie industry where unwatchable gobshite like Transformers are the top grossing films.

I'd say that it's a sign of market stagnation and just leave it at that.

ASIDE: That's the only thing I can thank Cameron for; it knocked Transformers 2 off the top of the charts. Never in my life did I suspect I would ever be thanking James Cameron for producing a shiny Dances With Wolves knockoff. For ANY reason. It's like thanking a surgeon for lopping your arm off because it might of had gangrene.

On other points, Hellgate failed because it was a BAD GAME! Why was it bad? Who knows, mostly it is at the hands of the developers simply they screwed up, even Spielberg had his "1941" (crap film he made).

Indeed. Though remember that I was hitting you with the investor's point of view.
Hellgate had potential to be great (as Borderlands can attest to. They're practically the same game, but Borderlands knew exactly what to focus on, and it was made for a much stronger console-market.)

No, number one the investors want A PROFIT! THEN they want the Biggest profit.

I've essentially already said that.
Please consider that a capitalist will ALWAYS go for what he/she feels is the best possible venue of investment in their current situation. If that means turning small profits so they can invest in more risky ventures later, that will happen.
However, the opposite approach is equally valid. It's easy to become trapped in a financially conservative mindset today, but do not forget that the gaming industry today is driven by a recession-ridden world market.

Back in the late 90s/early 2000s the gaming market had everything to gain. Investors could afford to take risks (how else can you explain Daikatana and Duke Nukem Forever being funded for so long? Those were two titles that meant an awful lot to their creators. Imagine how hard it was to get that investment money for production!)

Stop thinking in terms of strictly black and red ink. The dominant strategy changes in the long term.

I do not think the investors would want the LOW PROBABILITY of the biggest industry profit as that is what EA does with their rushed shit.

Ahh, but for the longest time EA had the most consistent returns. How else did they expand to take over countless developers during the early 2000s? Remember: EA was in the Fortune 500, and it wasn't through magic.

Also, C&C was top dog in RTS genre, why did EA have to slash & burn to "maximise profit" when they were already on top. I suppose Starcraft was doing better but EA did nothing to pursue their success such as supporting their studios more, no, they took the INCREDIBLY RISKY thing of firing dozens of people, enforcing draconian rule and squeezing development schedules.

To this day, the only rational theory I've come up with for that bit of insanity is that Westwood was threatening to walk on EA if they didn't cease the exploitation of their studio and name. EA instead chose to fire them and institute their own people; this being quite evident by the relative quality and tone of C&C from Generals onward.

Having the rest of the story would be interesting to be sure.

Extending the golden Goose analogy, I have no problem with feeding Golden Goose (CoD), I have a problem with them BUTCHERING their Golden Goose just for a quick meal (EA-Westwood).

At the time, EA probably figured that by lowering the cost of production and exploiting the name, they could turn a solid profit. Though as it's been proven, that only works so many times.
It's taken some time, but I do believe EA is finally out of Golden Geese. Even their sports titles are starting to come under fire, and people have been blindly buying that shit for years now.
They've finally hit the ceiling where annual minor graphical updates no longer suffice and now the games are being exposed for what they are.

Besides, it's not like we don't see this sort of bullshit running rampant today. Everything that was even remotely nostaligic before is being dredged up and 'Rebooted'.

Also if companies like microsoft are buying smaller companies just to destroy them WHO WOULD SELL TO THEM?!?!?! Who would let that happen to their company? Who would go to work for a company that had leaders who even considered shit like that?

When you put your company stock out on the public market, you take a risk. Back then, that was a very popular manner in growing your burgeoning software company amidst a sea of developers. Attract investors, and try to grow quickly. However, this also means that someone with deep pockets can come by and snatch you up before you ever really get going.

At the time, Microsoft had industry scouts everywhere, and they started routinely torpedoing companies that showed promise (primarily as potential competition). Likewise, EA had their sights set on several key companies from the start (Westwood and Maxis chief among them).

"Try as you may, you can never ignore the 800lb gorilla."

 

[Treblaine]

Far better than the Movie industry where unwatchable gobshite like Transformers are the top grossing films.

I'd say that it's a sign of market stagnation and just leave it at that.

ASIDE: That's the only thing I can thank Cameron for; it knocked Transformers 2 off the top of the charts. Never in my life did I suspect I would ever be thanking James Cameron for producing a shiny Dances With Wolves knockoff. For ANY reason. It's like thanking a surgeon for lopping your arm off because it might of had gangrene.

That I will agree with you whole-heartedly, for all Avatar's many MANY flaws it was at least watchable and has some redeeming features.

Still think the movie should have ended with the Navi massacring every last human on Pandora while Jake just looks on not doing anything to stop it...

... you know it would have made the film 10x better.

Spoiler: Also

-Quaritch succeeds in blowing up spirit tree
-Scientists betray Jack
-Natiry is killed by Quaritch
-Slimy executive escapes in private shuttle as the "lone survivor to tell the horror story"
-Post-credit Stinger is of Aliens style US Colonial Marines tooling up for war... genetically engineered Marines physically superior to even Navi.