I had a thought...

[Zaik]

So, most of us read somewhere or another than EA apparently needs to sell 5 million copies to break even on Dead Space 3. Let's postpone all the mud slinging for about 3 minutes and pretend this is completely accurate.

To be honest I have no idea what the ratio of digital distribution sales vs. retail that number represents, so let's just run three sets, 1 full retail, one full digital, and one 50/50.(although if I had to make a wild guess based on nothing I'd say it'll end up closer to 70/30 in favor of retail)

For retail, I'd guesstimate about...$10 is lost to sales tax + retailer? Someone correct me if that's off:

(60-10) * 5,000,000 = 250,000,000

Digital, they get the whole pie:

60 * 5,000,000 = 300,000,000

and 50/50, well, I'm just going to cheat and do it the easy way:

(60-5) 5,000,000 = 275,000,000

A big number, certainly. But it's a little on the bizarre side when you consider Dead Space 2 was released Jan 25th-28th, 2011, depending on where you are. So, let's pretend development on Dead Space 3 started right there, 28th of January, 2011.

Estimated release date on Dead Space 3 is Feb 2013, for the sake of my laziness we'll pretend it's 25th - 28th of Feb to get an even 2 years and a month.

2 years 1 month = $250M - $300M
1 month(25) = $10M - $12M
1 day(30.5) = $327868.85 - $393442.62
1 hour(24) = $13661.20 - $16393.44

So apparently, every hour, a minimum wage worker's entire year's income is spent on...what, exactly?

I'm genuinely curious how you even get rid of that much money. You could flush $100 bills down the toilet, but at the speed you would need to go you would destroy any septic tank within a week. You couldn't burn it for long, the fire dept. would eventually have to get involved. Garbage disposals would overheat and jam long before you could trash it all as well.

Maybe they just buy 1 million 40 gallon trash bags and have some intern throw all the money into the trash bags, then take it out?

 

[Hal10k]

You're making some incorrect assumptions about the relationship between retailers and publishers. The publisher doesn't see a dime off of the sixty dollars you pay for a game. Instead, they sell the games to the retailer directly, usually for around $30 a unit (U.S. standard). Out of the $30, a little more so is taken out for licensing fees for console releases. That's why EA was so eager to set up Origin: they get way higher returns, and they don't have to pay Steam either.

And to answer the original question: the cynical side of me (which is really more like 24 out of the 25 sides of a multifaceted polygon) wants to say that it's going to bonuses, but it could really be anything, from legions of playtesters to an assload of marketing. Maybe the game just really was that expensive to make. If EA is guilty of any crime as a business, it's extraneous expenses.

 

[Owyn_Merrilin]

If I had to guess, I'd say it's a combination of an unusually expensive development cost and a big marketing campaign. Most of the cost of a AAA game these days is marketing. GTA IV is unique in costing $100 million completely for development[footnote]$30 million on development alone is closer to the AAA average, or at least it was a year ago.[/footnote], but when marketing is factored into the cost, $100 million actually isn't all that unusual. It's gotten to the point where it literally costs more to properly advertise a game than it does to develop it. Why, I have no idea, but they really are blowing that much money on marketing.

As admittedly funny as Hal10K's post is, the sad truth is that bonuses are a rare beast in the software industry, whether that's game development, business software, or any other kind of software. Game developers are more likely than some other developers to get one, but it's still not something that happens often, as evidenced by the debacle over Infinity Ward's Modern Warfare 2 bonus. It's sad because those are the guys that could actually use a bonus. I'm sure the executives get bonuses all the time, but that's not part of a game's budget. The development budget for a game basically boils down to what the developers were paid to make it. It's pretty much food money for an army of programmers and artists.

 

[Grygor]

For retail, I'd guesstimate about...$10 is lost to sales tax + retailer? Someone correct me if that's off:

Way off. Out of the $60 retail price, the publisher typically nets slightly less than half (about $27).

PC game sales net slightly more (about $34 per copy, now that PC games also usually retail for $60 new) because there's no platform royalty - however PC sales are only a small minority of overall sales.

For online sales, the various online stores don't publicly disclose their revenue splits, but Valve is rumored to take roughly 30% of every copy sold on Steam. Using that figure as a baseline assumption means that EA will net about $35 each or so on PSN and XBL sales. Net on PC sales via Origin will be pretty close to $60 (less the cost of actually running Origin) because of course EA owns Origin - however, sales via Origin will only account for about 5% of overall sales.

Using a nice round $30/copy net revenue at 5 million copies, that gives us $150 million total. And yes, there's absolutely no way the budget for DS3, even including marketing costs, is anywhere near that large

---

Now, of course, EA didn't actually say they needed to sell that many to make a profit; they claimed they needed an audience that large to justify continuing to spend money on the franchise.

But even that's not what they actually meant. What EA really means is that they really want to have more big-selling franchises - in particular, they want to be Nintendo.

Nintendo has two franchises that routinely sell over 10 million copies (2D Mario, which can be counted on to break 20 million, and Pokemon), several that usually sell around 5 million (Zelda, 3D Mario, Super Smash Bros, Mario Kart).

Of late, EA's only big franchises are Battlefield, Medal of Honor, The Sims, and Rock Band - and Rock Band, like Guitar Hero, is pretty much dead now.