Ubisoft CEO: Next-Gen Games Will Cost Triple to Make

[CrystalShadow]

You might find it interesting to note that in 1995, Wing Commander 3 was the most expensive computer game ever made.

How much did it cost? $5,000,000. And most of that had to do with the video footage and actors in it.

a normal (high budget) game from that era had a budget in the region of $350,000.

These days, an average mainstream title has a budget in the $3-7 million range!

Do you understand the consequences here?
Let's say you buy a game for $60.

about 50% of that goes to the shop that sold it to you.

That leaves $30.

The publisher probably gave you an advance on the game, so you get nothing more out of it until you pay back your advance. - Typically, the publisher will only give you 20% anyway.

So... that means, of the $30 dollars left, the developers get about $6.

How much do you have to sell for that to be viable?

because the price of games hasn't changed substantially over the years, we can compare 1995 to 2009 quite easily.

A 1995 game costing $350,000 to make would need to sell about 58,000 copies for the studio to break even.

A current generation game averaging a budget of, say, $3,000,000 would need to sell 500,000 copies (at full price) to break even not to make a profit, just to get back the costs involved!

Do you know how many games sell 500,000 or more? the top 10 to 20 games in a year, maybe. If you're lucky.

Now do this same calculation with a budget of $60,000,000 - I can guarantee there aren't many games that can make enough money to cover the cost of that kind of budget...

There may be more people playing games now than in 1995, but not by a factor of 10, and certainly not by a factor of 200!

 

[Low Key]

about 50% of that goes to the shop that sold it to you.

That's a really large percentage. I'd guess it's more like 20-30%.

 

[CrystalShadow]

about 50% of that goes to the shop that sold it to you.

That's a really large percentage. I'd guess it's more like 20-30%.

That's nothing. a 100% markup is on the low end for retail.

With the exception of certain kinds of things that are very competitive (the PC industry for instance), the margins on most retail products start at about twice what it costs the shop.

For some things (fashion clothing for instance), the retail markup gets into the region of 300-400%.

Shops can discount things by a large amount precisely because they only pay about half as much as they try and sell it on for.
Granted, if it truly doesn't sell they may start dumping stock at below cost, but that's usually when you see things go from being $60 to being $10 or something like that.

 

[Zer_]

about 50% of that goes to the shop that sold it to you.

That's a really large percentage. I'd guess it's more like 20-30%.

That's nothing. a 100% markup is on the low end for retail.

With the exception of certain kinds of things that are very competitive (the PC industry for instance), the margins on most retail products start at about twice what it costs the shop.

For some things (fashion clothing for instance), the retail markup gets into the region of 300-400%.

Shops can discount things by a large amount precisely because they only pay about half as much as they try and sell it on for.
Granted, if it truly doesn't sell they may start dumping stock at below cost, but that's usually when you see things go from being $60 to being $10 or something like that.

That is totally false. Trivial things like USB extensions and Network Cables have a huge mark-up. Usually around 300% or even more. When it comes to hardware like a console the mark-up is only about 10% if that. Computer hardware also has a very low mark-up.

On the software side of things I couldn't say, but it's most definitely not over 50%. When Blockbuster would purchase movies to sell the mark-up was only about 10-20%. The special editions and stuff with fancy boxes had bigger mark-ups though. I see no reason why software would be any different.

 

[Gyrefalcon]

I am reminded of the Death to Good Graphics [http://www.escapistmagazine.com/articles/view/columns/experienced-points/6069-Death-to-Good-Graphics] write-up by Shamus.

No wonder Ubisoft is reluctant to jump into the inevitable upcoming generation.

Thanks for the link, it has some very good points. The sad thing is, I would play some of my old 2-D games. In fact I do. I downloaded Joust and Ms. Pacman onto my X-Box because I still like them. Centipede would be welcome along with Archon and Below the Root. But of all the titles out there...if they would just give me back the original Master of Monsters and Cyberpunk as they were on the Sega I and ALL of my friends would be on the X-Box non-stop.

(And I DON'T mean the very poor remake they brought out for the PS2 where they decided you couldn't play with your friends until you built up an army playing alone and added a day and night effect that was one shade of orange shifting to a nearly identical shade of orange.)

This has nothing to do with the Nostalgia effect, it has a whole lot to do with pitting yourself against your friends or working out fragile alliances with them to take out a single player but with a strategy game instead of a shooter! And the story and missions for Cyberpunk? It can still keep up pretty well with at least 65% of the games out there.

And if you think it isn't possible to slow down successfully or take a step back, I would invite you to play Culcept and Culdcept Saga. There wasn't a lot of graphics upgrade although there were some. (And they needed to hire a few more good voice actors in a BIG way.) But that game is still as fun and addictive as the first time around.

So there is a market out there for old games and lower-cost graphics ones. So maybe time will allow more of the "classics" to return or get a second look. We'll see.

 

[Theo Samaritan]

I didn't read all the replies, so I apologise if this has been mentioned before.

But think about it. The reason the costs of CGI movies are so high is because they are not common enough to drive methods and abilities cheaper.

If video games become the same quality, naturally production costs (at least those associated with graphic design and implementation) will fall due to the number of people now using these techniques. Chances are quite high that eventually production costs would fall back close to, if not on, the same as they are now.

 

[CrystalShadow]

about 50% of that goes to the shop that sold it to you.

That's a really large percentage. I'd guess it's more like 20-30%.

That's nothing. a 100% markup is on the low end for retail.

With the exception of certain kinds of things that are very competitive (the PC industry for instance), the margins on most retail products start at about twice what it costs the shop.

For some things (fashion clothing for instance), the retail markup gets into the region of 300-400%.

Shops can discount things by a large amount precisely because they only pay about half as much as they try and sell it on for.
Granted, if it truly doesn't sell they may start dumping stock at below cost, but that's usually when you see things go from being $60 to being $10 or something like that.

That is totally false. Trivial things like USB extensions and Network Cables have a huge mark-up. Usually around 300% or even more. When it comes to hardware like a console the mark-up is only about 10% if that. Computer hardware also has a very low mark-up.

On the software side of things I couldn't say, but it's most definitely not over 50%. When Blockbuster would purchase movies to sell the mark-up was only about 10-20%. The special editions and stuff with fancy boxes had bigger mark-ups though. I see no reason why software would be any different.

Duh. Didn't I just say that? - As I said, Computers are an obvious example of items sold with low margins.
Consoles themselves are worse, because they're often sold at a loss. Though it's debatable who absorbs the loss.

But games? Not over 50%? Well if you think you know better, fine.
The point is, retail markup on most (but not all) products is huge.
And it's rather dumb to start out by essentially calling someone a liar and then saying (mostly) the same thing.
It just makes you look stupid.

 

[Pendragon9]

Let's hope they go back to making some online games. Some Wii ship/PSN/XBL goodies for example.

Who here thinks we need a revival of old 2d/3d games for a while? It costs them almost nothing to make, they'd be fun to play, and it would be easy to download.

 

[TZORG]

Ouch. So we'll have even fewer games out each month? That sucks.

This right here.

 

[AceDiamond]

snip

You're right that people are trying to be more original for the first time in years, but there's a problem. Originality has not sold well.

Mirror's Edge did not perform up to expectations for example (and I'm glad we're getting a sequel though because at least they haven't given up on the idea)

The biggest problem is still this idea that we have to keep pushing the graphics and technology envelope, which in my opinion doesn't come off well anyway. For example, the engine used for Call of Duty, World at War does indeed make for some very impressive graphics, until you look at the people and realize "dear lord, the faces look like they've been wrapped in plastic", thus wrecking my immersion factor. What we need is to have engines that can be built up over time without increasing development costs and yet still delivering a good game experience (the Source engine being the best example, although you could make a case for Unreal Engine 2 and even Unreal Engine 3 being in the same vein. Apparently Epic has built UE3 to last until 2018 if it has to.).

And yes, the other problem is the size of development teams but I don't think that's necessarily the biggest problem, since you wouldn't need as large a team if you went with pre-existing tech.

I remember when everyone said Nintendo needed to go to disk media because that would keep games less expensive. And it did...for them. Games on the GCN were between $40 and $50 at launch most of the time, games on the Wii have been between $40 and $50 at launch, while PS3 and Xbox 360 games have been $60+. Something isn't right if the entire point behind uniform software box sizes and the use of inexpensive disk media has been offset by the extreme budget costs and development team sizes.

This is probably why I feel the independent games market has the most potential to grow in the coming years, releasing things on XBLA, PSN, and WiiWare with smaller development teams and faster development times.

 

[Zer_]

**SnippySnip**

The Source engine is very expandable. The difference from HL2 to L4D is quite drastic if you look at it. I also prefer Source's approach where they don't just slap on a gazillion post processing effects and not serve as a makeshift flashbang.

 

[pliusmannn]

they could make that games run on every PC too, like movies are played on every TV. i don't mind paying more and waiting more for games, maybe then they will be more finished and better, than usual today game

 

[Vriggchan]

Would we not see the speed at which the standard for better graphic oriented games slow down? they market plays off of the consumer, but if the market cannot afford the consumers demands then the demands are changed based off of what the market can provide? What I'm trying to say is that even with the technology there if people cannot afford it companies will not build it.

In the future, I believe we will see a bunch of games that are released by smaller companies that have less than stellar graphics (for that time), With only a few big companies taking on the top most expensive stuff. I also think that with the continuing similarities between consoles and computers, There will be no need to buy one or the either. there will only be one. Making programing across so many medias cheaper.