Besides, 100k sales with independent digital delivery is more like 400-500k sales when running through publishers/manufacturing/distributors/retailers.
How do ya figure?
Are we certain that developers like Irrational Games see 100% of the $50 spent when people buy Bioshock via steam?
I think the figure for retail $60 games is that what..
edit: I have no idea. I know 25 percent goes to art, 20 percent goes to coders and engineers, the rest is split between the retailer, console maker, marketing, publisher, distro'er, etc.
[Then there's the slew of subscription-based games and MMOs that are out there, raking in the cash (evidently enough for the developers to keep making them)
That's a little optimistic. It's VERY tough to make money off MMOs, due to the big up-front costs in making such a huge game and continuing costs through running the servers, creating new content, etc. Not to mention the fact that they're so complex and time-consuming customers can only play one at a time, and a huge number of those are sewn up in WoW.
I'm not saying that there won't be more companies willing to take a risk, but most MMOs don't really make money.
I know that GalCivII runs their own download servers, and handles their own purchasing. So, they certainly do get 100% of every dollar that comes their way.
And $16 out of every $60 going to developers would certainly put it at the right amount to make it a fair comparison.
But even then it's just crazy to me to see hideously low numbers for Unreal Tournament 3, which pulled in 34,000 sales on the PC for its first month.. erg.
I think piracy does play a big role in this, which is a huge shame for the industry and its gamers. A couple of folks have pointed out here and in podcasts just how "popular" Crysis in particular is on pirate sites. I don't buy the argument that people just want to "try the game" to see if it works for their system before they purchase it, since the game does have a demo. I think the problem is with the demographics. The people most likely to have a system capable of running it, just happens to be the same as those with the knowledge of where to go to download/pirate games for free. It's funny because I've met many people who admit to pirating games, yet I know they earn more than enough to buy them.
I suppose the other reason is the lack of a rental or used-games market for PC games. Many gamers are, understandably, quite cheap and want inexpensive access to games. You can do this with video games, thanks to rentals, GameFly, and used games. However, that environment doesn't exist for PC games, and instead you have a readily available network for piracy.
Bringing up the excellent GFW Podcast again, I agree with Jeff Green's assessement that we're going to be seeing some big changes to the PC games industry over the next year or so. Subscription and micro-transaction-based games appear to be becoming more and more popular. In a way, it's already huge now (if you include WoW).
I know that GalCivII runs their own download servers, and handles their own purchasing. So, they certainly do get 100% of every dollar that comes their way.
And $16 out of every $60 going to developers would certainly put it at the right amount to make it a fair comparison.
I agree on both accounts.. except I'm pretty sure I was totally wrong on the $16 thing, and I'm not sure where I got that number from.
45% of the $60 purchased at retail for, say an x360 game, goes to pay for artists and coders/engineers. that I am sure of. Which is $27.
I suppose the other reason is the lack of a rental or used-games market for PC games. Many gamers are, understandably, quite cheap and want inexpensive access to games. You can do this with video games, thanks to rentals, GameFly, and used games. However, that environment doesn't exist for PC games, and instead you have a readily available network for piracy.
I think that is a pretty big reason, along with the fact that you can't really buy used PC games, nor sell PC games you're tired of to help buy new games like console folk can.
I think the problem is with the demographics. The people most likely to have a system capable of running it, just happens to be the same as those with the knowledge of where to go to download/pirate games for free.
It's funny because I've met many people who admit to pirating games, yet I know they earn more than enough to buy them.
That's the sickest, saddest thing of all right there.
If you have the money to afford a rig that can run Crysis, you can afford to buy the damn game itself.
Instead these people are content to spending hundreds of dollars and lots of time upgrading.. and then pirating the very reason they upgraded for in the first place?
I think it's kind of pathetic on their part, and sad for the industry.
Subscription and micro-transaction-based games appear to be becoming more and more popular. In a way, it's already huge now (if you include WoW).
It's already here, and it's probably just going to grow in popularity.
[Then there's the slew of subscription-based games and MMOs that are out there, raking in the cash (evidently enough for the developers to keep making them)
That's a little optimistic. It's VERY tough to make money off MMOs, due to the big up-front costs in making such a huge game and continuing costs through running the servers, creating new content, etc. Not to mention the fact that they're so complex and time-consuming customers can only play one at a time, and a huge number of those are sewn up in WoW.
I'm not saying that there won't be more companies willing to take a risk, but most MMOs don't really make money.
Source?
I'm not saying that every MMO makes money, or that it's easy. But hey, there are even lots of free-MMOs out there that make their money off micro-transactions or optional subscriptions. Certainly there are some that don't make money, but I'd wager a significant percentage of them do earn enough profit, otherwise they would have been canned ages ago.
Also keep in mind that as technology and knowledge increases, it becomes easier for companies to start up MMOs. Heck, we have text-based ones popping up all the time. Social networking MMOs, like Warbook on Facebook, are becoming more popular too.
Capitalism is a wonderous thing sometimes. It weeds out those that aren't good or lucky enough, and benefits those that are.
Problem is, there are very, VERY few games selling well lately. The IGN PC people dropped some numbers a while back:
So with all these great games released on PC this year, the question is: what the hell happened to the gamers? What's most troubling about the PC market is the sales numbers. The best selling game in North America, according to NPD numbers, was the World of Warcraft expansion pack Burning Crusade. That was the only game on the list that sold over a million PC copies this year and its base product World of Warcraft the only other game to pass a half-million sold. The next best seller, The Sims 2: Seasons, was down around 300k. And check this, of the 31 games that managed to sell over 100,000 copies this year, 21 of them were released in previous years and 11 of them were Sims products. Command & Conquer 3, Supreme Commander, Lord of the Rings Online, BioShock were the only games released this year to sell over 100k that weren't Sims or World of Warcraft related according to NPD.
Wouldn't that perspective make the 86k that crysis sold a lot less painful? I'd bet it would also have been on that list if it had another month. (for that matter, why didn't they wait for the december NPD before doing a yearly sales article?)
But there's a very large audience for smaller, more niche titles. Hardcore gamers like us tend to discount titles like The Sims, Railroad Tycoon, casual games (Peggle, Bejeweled, etc.), and even excellent indy titles like Aquaria. Many of them may not do a million in sales, but they also don't take 5 million to create.
Not to mention games like Civilization IV and the Total War games.
These are high-quality games that are about as "hardcore" as you can get. Yet they are created by moderately small teams (compared to big-budget console games), and without the need for much in the way of voice acting and the like.
Personally, it's games like the Civ and Total War series that have kept me hooked on PC gaming. They offer something that can't be entirely replicated on other platforms, and which suits the whole notion of PC at-your-desk gaming really well.
Between them and the occasional CRPG and RTS game, there's enough reason to keep my PC reasonably up-to-date. The ability to play PC FPSes is just an added bonus.
I think the problem is with the demographics. The people most likely to have a system capable of running it, just happens to be the same as those with the knowledge of where to go to download/pirate games for free.
It's funny because I've met many people who admit to pirating games, yet I know they earn more than enough to buy them.
That's the sickest, saddest thing of all right there.
I've been occasionally checking the sales figures for new PC games vs the amount of people downloading off torrents lately.
Torrents win every time, often by a massive margin.
With Crysis, there was an individual torrent with well over 150,000 users at one time. Two months later, it's still going strong with almost 10,000 users. There are a couple of other Crysis torrents with thousands of users still active.
Over the past two months, how many people have pirated Crysis, just from these torrents? How many of those people would have then copied the game and handed it out to friends? The number of gamers playing Crysis legitimately is dwarfed by the people who have copied the game.
The most common attitude to this issue among gamers is to say "LOLOL pirate hysteria. Don't copy that floppy LOL". But it really is something that has spiralled out of control, and I bet that most of the people who are pirating PC games can afford them... after all, they can afford to buy a machine to play the games on.
The most common response to that kind of data is that not all of that piracy translates into lost sales.
But I say, so? What would be a conservative estimate for the proportion of pirated copies that do account for lost sales? 20 percent? 1 out of 5 people pirating Crysis do so in order to avoid paying $50?
20 percent of 150,000 is 30,000. That's just a little less than half of Crysis's retail sales (first month), and that doesn't even account for the alternative torrents that you've mentioned. 30,000 is nearly equal to the number of sales that Unreal Tournament 3 made (first month) as a comparison.
I think the problem is with the demographics. The people most likely to have a system capable of running it, just happens to be the same as those with the knowledge of where to go to download/pirate games for free.
It's funny because I've met many people who admit to pirating games, yet I know they earn more than enough to buy them.
That's the sickest, saddest thing of all right there.
I've been occasionally checking the sales figures for new PC games vs the amount of people downloading off torrents lately.
Torrents win every time, often by a massive margin.
With Crysis, there was an individual torrent with well over 150,000 users at one time. Two months later, it's still going strong with almost 10,000 users. There are a couple of other Crysis torrents with thousands of users still active.
Over the past two months, how many people have pirated Crysis, just from these torrents? How many of those people would have then copied the game and handed it out to friends? The number of gamers playing Crysis legitimately is dwarfed by the people who have copied the game.
The most common attitude to this issue among gamers is to say "LOLOL pirate hysteria. Don't copy that floppy LOL". But it really is something that has spiralled out of control, and I bet that most of the people who are pirating PC games can afford them... after all, they can afford to buy a machine to play the games on.
On one hand, I hate DRM and copy-protection because it often causes so many problems. Certainly a few people here may recall all the problems with StarForce copy-protection.
Yet on the other hand, it makes me sad to see a developer like Crytek fall victim to what appears to be rampant piracy. I wish gamers were more responsible, but it's obvious that many couldn't care less about paying for content, when they can just get it for free.
That's why I'd love to see changes in the industry where developers are assured the sales they deserve, yet customers aren't hounded by intrusive copy-protective schemes. Millions of people have no problems paying every month for access to World of Warcraft, and Blizzard deserves the credit (and profits!) for they efforts.
The most common response to that kind of data is that not all of that piracy translates into lost sales.
But I say, so? What would be a conservative estimate for the proportion of pirated copies that do account for lost sales? 20 percent? 1 out of 5 people pirating Crysis do so in order to avoid paying $50?
20 percent of 150,000 is 30,000. That's just a little less than half of Crysis's retail sales (first month), and that doesn't even account for the alternative torrents that you've mentioned. 30,000 is nearly equal to the number of sales that Unreal Tournament 3 made (first month) as a comparison.
That's gotta sting.
I think though that specificity should be taken into account with torrenting too, though.
I mean, if I'm pirating a game, what are the chances that I'm specifically looking for crysis and if I can't find it I'll say "Well I guess I'll shell out $50 that I wasn't prepared to play before!" versus the chances that I'll say "Hey look UT3 is up. I'm looking for just any shooter really" or "Oh hey Bioshock, another FPS single player" or finding some other game that is reasonably in the same style?
Now, yeah, even with the small percentage of people who a: want the game enough that they will pay $50 for a new game and want specifically a certain game the actual numbers are probably still costing the developers a large amount of money.
I just can't think of a single time where I've wanted a game enough that I would only be satisfied with a specific game when I didn't want it enough to pay for it.
The most common response to that kind of data is that not all of that piracy translates into lost sales.
But I say, so? What would be a conservative estimate for the proportion of pirated copies that do account for lost sales? 20 percent? 1 out of 5 people pirating Crysis do so in order to avoid paying $50?
20 percent of 150,000 is 30,000. That's just a little less than half of Crysis's retail sales (first month), and that doesn't even account for the alternative torrents that you've mentioned. 30,000 is nearly equal to the number of sales that Unreal Tournament 3 made (first month) as a comparison.
That's gotta sting.
I think though that specificity should be taken into account with torrenting too, though.
I mean, if I'm pirating a game, what are the chances that I'm specifically looking for crysis and if I can't find it I'll say "Well I guess I'll shell out $50 that I wasn't prepared to play before!" versus the chances that I'll say "Hey look UT3 is up. I'm looking for just any shooter really" or "Oh hey Bioshock, another FPS single player" or finding some other game that is reasonably in the same style?
Now, yeah, even with the small percentage of people who a: want the game enough that they will pay $50 for a new game and want specifically a certain game the actual numbers are probably still costing the developers a large amount of money.
I just can't think of a single time where I've wanted a game enough that I would only be satisfied with a specific game when I didn't want it enough to pay for it.
I think that the "lost sales pirates" are the types with the know-how to build and maintain high-end PCs, and probably follow the PC gaming industry at least relatively close enough to know what big-name, big-budget games like Crysis are coming beforehand. They probably think, "Wow, I can't wait for Crysis! That's going to be awesome!" and then when it comes out, they jump on the torrents as soon as they can so that they can have the game. And not pay for it. I think that these are the people translating into lost sales. the ones that really do have the money to buy the game, the ones that are excited for the new big-hit PC games, but are the ones that just don't want to go out and pay for it. They want to pay the big bucks for their hardware now so that they can enjoy the big hit and awesome new games later without paying anything along the way. They think that they're getting quite a good deal, and the money they "saved" by not buying the game, they can use for more hardware upgrades.
This is what i suspect is the mentality of the "lost sales" pirates. And if you assume that 1 out of 5 pirates are like this, or even 1 out of 10, you're looking at a major hit in sales.
I know that GalCivII runs their own download servers, and handles their own purchasing. So, they certainly do get 100% of every dollar that comes their way.
And $16 out of every $60 going to developers would certainly put it at the right amount to make it a fair comparison.
I agree on both accounts.. except I'm pretty sure I was totally wrong on the $16 thing, and I'm not sure where I got that number from.
45% of the $60 purchased at retail for, say an x360 game, goes to pay for artists and coders/engineers. that I am sure of. Which is $27.
Jesus fucksticks. I went researching the numbers and I was fucking appalled. Like shit-that-would-make-you-vomit-into-your-mouth appalled. If we look at the 45% number through common sense, it just doesn't match up at all. Galactic Civilizations* for example sold 150k units during its entire lifetime and cost $300,000 to make, and I had never even heard of the thing about the game until recently. At $50 a pop and getting 45% of the gross means that they would have ended up with $3,000,000 profit. Which is a return of investment of 1000%, fucking insane. No way could it be anywhere near an order of magnitude of 45% royalties. Assuming they roughly broke even (or, lets say made 25% profit, still a fuckawesome return on investment), we'd ought to see something like 5% royalties.
I went and did some looking and it appears that the developer's cut runs around 15-20% of a game although exceptionally powerful studios can see up to 25%. Of the publisher's cut. Keep in mind that all manufacturing costs/packaging/distribution/QA/patching are paid by the either the dev or publisher out of their cut and must be recouped before royalties are calculated. What really happens is that developers get fucked out of their mind, most of whom don't see any money other than their initial advance.
Here is an example.
Imagine a hypothetical million seller game. The game sells for $50 a pop, generating $50,000,000
End user pays (retail price) - $50,000,000
Store pays (wholesale price) - $33,000,000
Publisher pays Sony (PS2 mfg/lic. price) - $-15,000,000 (this may be an out of date cost nowadays)
Amount left over (publisher gross per unit) - $18,000,000
Amount going into initial advance (for this example, $3 mil) - $-3,000,000
Amount going into marketing/packaging/etc. (for this example, $3 mil) - $-3,000,000
Amount subject to developer royalties (Pub+dev profit) - $12,000,000
Amount after developer cut (*15%) - $1,800,000
Amount after developer cut (*20%) - $2,400,000
Amount after developer cut (*25%) - $3,000,000
So, the total amount of money that the developer saw was between 4.8 mil - 6 mil for a million seller game. Roughly $2-3 per game, which means a real royalty rate of around 4-6%**. It matches up roughly with the common sense estimate too. Also it is naturally in a developer's best interest to go for large advances if they aren't going to get a million seller. Yeah, it's fucked up six ways from Sunday. It is also the reason that I think digital distribution is making an impact far more powerful than the mere sales numbers would imply.
100k online sales if you get every cent is actually like getting a 2 million copy seller.
*I'm using Galactic Civilizations because Stardock they made the jump from developer to dev-publisher specifically because of this. They've released the economic numbers to the press and are trying to entice other devs into using their digital publishing system. I guess they want to be a mini-steam.
**The music industry is around a real royalty rate of 7% for big name artists.
Edit: links. Video Game Economics, an article about how this goes about. EDRP, an independent publishing house that is trying to lure in developers with it's highly competitive 20% rates. Financial Aspects of Game Development. And just for kicks, a radiohead article, which estimates that their digitally distributed album netted $6-10 million in profit, which is about ten times over what their their most popular album prior got them.
When I said 45% went to the art and coding, I meant to pay their salaries and what have you.. not sheer profit.. blagh, I just got confused is all.
I got the numbers from this, from 1up.com:
ON A $60 GAME OF GEARS:
* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?
Under this breakdown, where would "profit" go to the developers? Or... rather.. how does all this work, under this model, for developers? (I see the 1.5% going to "publisher's pocket"..)
Wow, even at Sony's prime, they never reached the level of dominance that Nintendo has now.
That's exactly what I thought when I saw the 2007 pie. What's even more crazy is the amount of it that's DS. It has 4 megs of RAM. 4 megs.
What the heck is a WonderSwan?
One of the Gameboy's many "competitors". Gunpei Yokoi was supposed to have had a hand in its creation. As you can see from that video, it didn't do much.
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Dr Mario KartGames DealerAustin, TXRegistered Userregular
edited January 2008
If dev costs are paid mostly or in total by the publisher in advance of printing, wouldnt it be more accurate to think of it not as a % per game, but you sell X number of games to retail for the publisher to recoup all intial costs, and then its MOSTLY profit from there, aside from recurring/ongoing costs like marketing.
Minus that weird kickback thing that they give back to the retail stores when they kick a price drop in I guess.
I mean, if I'm pirating a game, what are the chances that I'm specifically looking for crysis and if I can't find it I'll say "Well I guess I'll shell out $50 that I wasn't prepared to play before!" versus the chances that I'll say "Hey look UT3 is up. I'm looking for just any shooter really" or "Oh hey Bioshock, another FPS single player" or finding some other game that is reasonably in the same style?
Well, if people aren't that picky, they could just go and grab any old shooter from a bargain bin at their local games store for $10-20. I'm sure that there would be quite a few there, some probably only a year old.
Even if they did decide to pirate another game when their original choice isn't on the Torrent sites, it's still piracy impacting on sales. They are avoiding paying for a game by downloading one, even if it wasn't the title they originally intended to get. But in reality, most people who are downloading a game want that specific game.
For me, the saddest thing is that piracy becomes a habit... it's addictive. Once you start pirating games, and you realise how easy it is, then you start thinking: "why would I pay for games, they're all here for free". Before long, you convince yourself that buying games is financially irresponsible, after all, that money is better in your pocket than some greedy publisher's. In the end, when someone mentions that they bought a game you think "what an idiot, he has more money than sense", and feel superior.
I've been there and done that. When I was a university undergrad, I pirated plenty of games. I used the excuse that "I can't afford to buy these games", when in reality I could. Sometimes I'd tell myself that "I'll buy this game if I enjoy it", but then I'd finish the game, so there was no real reason for buying it. After a few years of this, I started actually thinking about what I was doing. When I finally decided to start buying games, it took ages to rewire my brain to accept the idea of paying for something I could get for free.
* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
No possible way. No way by orders and orders of magnitude. Totally, totally off. Gears has sold two million copies in six weeks. That's $120 mil in cash @ $60 a pop. That means that the art guys got 30 mil, and the programmers got 24 mil. Epic had 70 total employees when Gears was being developed and took two years to develop. So, do you really think that every single person at Epic makes $380,000 a year?
Edit: And that was in six weeks of game sales. No wonder they slacked so much on UT3, everyone in the company was able to retire for life after Gears.
I'm still sticking by 4-6% being the reasonable cost of dev share, and it roughly matches what game companies spend.
zerg rush on
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Dr Mario KartGames DealerAustin, TXRegistered Userregular
edited January 2008
Not that I'm agreeing with those figures, but that logic is off.
The money that a company makes and the salaries that the people involved take arent quite related like that. I would imagine the salaries are also very unevenly distributed among the people there, skewing very highly towards the few at the very top.
Good points, zerg rush. I have no idea, then, why this breakdown is shown as it is shown; or alternatively, how it is supposed to be applied. Indeed, everyone at Epic would certainly not be making 380k a year, and while the higher ups maybe making millions and the artists /coders making less, I still don't quite get how the breakdown of the $60 is supposed to apply.
Not that I'm agreeing with those figures, but that logic is off.
The money that a company makes and the salaries that the people involved take arent quite related like that. I would imagine the salaries are also very unevenly distributed among the people there, skewing very highly towards the few at the very top.
Also, the money doesn't go to paying the people who worked on the last game, it goes towards funding subsequent games.
Epic might be able to fund a few games with the money they made from Gears. One of those might be awesome, and will help them to expand further, others could be flops.
The more money they get for a game, the more money they have to employ new people, fund new games, and to experiment in the future.
Honestly I just think it's FUD. The wikipedia article mentions that bands and their label split the royalties 50-50. Yeeaaaaah. Riiiight.
Edit: Halo 2 game development costs, 40 mil. 8 million copies @ $50 gross means 400 mil. Assuming they broke even, we're looking at 10% dev share. Which is expected, since higher selling games naturally cause highe dev share. And lets say that the company earned 100% profit (which is absurdly astounding growth), we'd be looking at 20% dev share.
The original point was not so much about devs getting ripped off. Merely that independent outfits using online distribution have really disproportionate income compared to console games. So, 100k sales online isn't really so bad if you're a small outfit and don't have much costs. Since computer games are adapting to this new distribution method, they aren't in dire straights. And they may be doing even better now than past years.
Oh, I know that those specific numbers don't match up. It just helps illustrate how absurdly, ludicrously wrong those numbers are. And 1Up.com quote specifically mentions pay, as in salary.
If you did that analysis on a game that was a flop, you'd probably find that the average developer salary was $3000.
That's why saying: "10% of what you pay goes here, 20% goes there" is simplistic nonsense (as you've pointed out).
It apparently is nonsense. Which is why my brain couldn't wrap around how it was supposed to apply. Because it doesn't really make any sense when you actually think about it.
Uh, just to flog the horse one last time: the problem is that dev/art salaries are a fixed cost not a variable one. They basically determine how many copies you have to sell to break even but not your marginal profits/costs per sale. It's the variable costs of software being so low and fixed costs so high that make it easy for a hit game to make a ton of mony and for a flop to lose a ton.
lowlylowlycook on
(Please do not gift. My game bank is already full.)
Edit: links. Video Game Economics, an article about how this goes about. EDRP, an independent publishing house that is trying to lure in developers with it's highly competitive 20% rates. Financial Aspects of Game Development. And just for kicks, a radiohead article, which estimates that their digitally distributed album netted $6-10 million in profit, which is about ten times over what their their most popular album prior got them.
Wow, I had no idea that In Rainbows did so well. I had asked my sister about it (who's a big radiohead fan), and she pretty much said that it flopped and that no one paid anything. Well, I guess that would be the $5 average, and somehow it works out to more money than they would get it they had gone with a publisher.
Well, it looks to me like offering content online directly to customers is starting to become a popular business model, and hopefully will continue to do so. And it still intrigues me that, given the rampant piracy prevalent today, you still see people who are willing to pay money, even if they don't have to.
Uh, just to flog the horse one last time: the problem is that dev/art salaries are a fixed cost not a variable one. They basically determine how many copies you have to sell to break even but not your marginal profits/costs per sale. It's the variable costs of software being so low and fixed costs so high that make it easy for a hit game to make a ton of mony and for a flop to lose a ton.
Actually, it depends. Many teams are able to secure a royalty for the engineering team, so that it is flexible. The IGDA has an article that talks about this. I would imagine that many well-known, experienced studios will (and can) demand higher royalties.
I think that Dr. Mario Kart sort of nailed it. I would imagine that the figures Slash posted are absolutely true until X numbers of copies are sold, at which point both companies have broken even. After that point, it's pure profit.
I mean, take the GTA games. Those made buttloads of money. After the first 500,000 or so paid everyone's wages, the next 9,500,000 copies were pure profit to Rockstar and their publisher.
Edit: Apparently I missed about 10 posts while I was watching TV.
It's all in Japanese though so, Colour coding is as follows:
Red = Nintendo Plum= Sega White = PCE (??) Blue = Sony Yellow = WonderSwan Orange = SNK
Aside:
Check out Sega fighting it's way into the market during the 16bit wars.
Mourn as Sega, just as quickly, shrivels away between 1996 and 2002
GBA - Was waaaay bigger a player in the market than I thought it was.
2006 + DS = Holy Shi...
Despite all the "Nintendo = Doomed" fuss that was being made a few years back, Nintendo was never really in that bad a position given it's combined market share.
Judging by the respective growths and dips for each, it seems MS has been predominantly eating into Sony's rather than Nintendo's market share.
DS growth - Holy Shi..
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FencingsaxIt is difficult to get a man to understand, when his salary depends upon his not understandingGNU Terry PratchettRegistered Userregular
edited January 2008
I'm thinking Nintendo knew they were never in as bad shape as everyone was saying.
Posts
How do ya figure?
Are we certain that developers like Irrational Games see 100% of the $50 spent when people buy Bioshock via steam?
I think the figure for retail $60 games is that what..
edit: I have no idea. I know 25 percent goes to art, 20 percent goes to coders and engineers, the rest is split between the retailer, console maker, marketing, publisher, distro'er, etc.
Steam ID: slashx000______Twitter: @bill_at_zeboyd______ Facebook: Zeboyd Games
Japanese sales pie chart video from 1996-2007.
It does end with total...
That's a little optimistic. It's VERY tough to make money off MMOs, due to the big up-front costs in making such a huge game and continuing costs through running the servers, creating new content, etc. Not to mention the fact that they're so complex and time-consuming customers can only play one at a time, and a huge number of those are sewn up in WoW.
I'm not saying that there won't be more companies willing to take a risk, but most MMOs don't really make money.
And $16 out of every $60 going to developers would certainly put it at the right amount to make it a fair comparison.
I think piracy does play a big role in this, which is a huge shame for the industry and its gamers. A couple of folks have pointed out here and in podcasts just how "popular" Crysis in particular is on pirate sites. I don't buy the argument that people just want to "try the game" to see if it works for their system before they purchase it, since the game does have a demo. I think the problem is with the demographics. The people most likely to have a system capable of running it, just happens to be the same as those with the knowledge of where to go to download/pirate games for free. It's funny because I've met many people who admit to pirating games, yet I know they earn more than enough to buy them.
I suppose the other reason is the lack of a rental or used-games market for PC games. Many gamers are, understandably, quite cheap and want inexpensive access to games. You can do this with video games, thanks to rentals, GameFly, and used games. However, that environment doesn't exist for PC games, and instead you have a readily available network for piracy.
Bringing up the excellent GFW Podcast again, I agree with Jeff Green's assessement that we're going to be seeing some big changes to the PC games industry over the next year or so. Subscription and micro-transaction-based games appear to be becoming more and more popular. In a way, it's already huge now (if you include WoW).
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I agree on both accounts.. except I'm pretty sure I was totally wrong on the $16 thing, and I'm not sure where I got that number from.
45% of the $60 purchased at retail for, say an x360 game, goes to pay for artists and coders/engineers. that I am sure of. Which is $27.
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That's the sickest, saddest thing of all right there.
If you have the money to afford a rig that can run Crysis, you can afford to buy the damn game itself.
Instead these people are content to spending hundreds of dollars and lots of time upgrading.. and then pirating the very reason they upgraded for in the first place?
I think it's kind of pathetic on their part, and sad for the industry.
It's already here, and it's probably just going to grow in popularity.
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Wow, even at Sony's prime, they never reached the level of dominance that Nintendo has now.
Source?
I'm not saying that every MMO makes money, or that it's easy. But hey, there are even lots of free-MMOs out there that make their money off micro-transactions or optional subscriptions. Certainly there are some that don't make money, but I'd wager a significant percentage of them do earn enough profit, otherwise they would have been canned ages ago.
Also keep in mind that as technology and knowledge increases, it becomes easier for companies to start up MMOs. Heck, we have text-based ones popping up all the time. Social networking MMOs, like Warbook on Facebook, are becoming more popular too.
Capitalism is a wonderous thing sometimes. It weeds out those that aren't good or lucky enough, and benefits those that are.
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Wouldn't that perspective make the 86k that crysis sold a lot less painful? I'd bet it would also have been on that list if it had another month. (for that matter, why didn't they wait for the december NPD before doing a yearly sales article?)
Steam ID: slashx000______Twitter: @bill_at_zeboyd______ Facebook: Zeboyd Games
Not to mention games like Civilization IV and the Total War games.
These are high-quality games that are about as "hardcore" as you can get. Yet they are created by moderately small teams (compared to big-budget console games), and without the need for much in the way of voice acting and the like.
Personally, it's games like the Civ and Total War series that have kept me hooked on PC gaming. They offer something that can't be entirely replicated on other platforms, and which suits the whole notion of PC at-your-desk gaming really well.
Between them and the occasional CRPG and RTS game, there's enough reason to keep my PC reasonably up-to-date. The ability to play PC FPSes is just an added bonus.
I've been occasionally checking the sales figures for new PC games vs the amount of people downloading off torrents lately.
Torrents win every time, often by a massive margin.
With Crysis, there was an individual torrent with well over 150,000 users at one time. Two months later, it's still going strong with almost 10,000 users. There are a couple of other Crysis torrents with thousands of users still active.
Over the past two months, how many people have pirated Crysis, just from these torrents? How many of those people would have then copied the game and handed it out to friends? The number of gamers playing Crysis legitimately is dwarfed by the people who have copied the game.
The most common attitude to this issue among gamers is to say "LOLOL pirate hysteria. Don't copy that floppy LOL". But it really is something that has spiralled out of control, and I bet that most of the people who are pirating PC games can afford them... after all, they can afford to buy a machine to play the games on.
But I say, so? What would be a conservative estimate for the proportion of pirated copies that do account for lost sales? 20 percent? 1 out of 5 people pirating Crysis do so in order to avoid paying $50?
20 percent of 150,000 is 30,000. That's just a little less than half of Crysis's retail sales (first month), and that doesn't even account for the alternative torrents that you've mentioned. 30,000 is nearly equal to the number of sales that Unreal Tournament 3 made (first month) as a comparison.
That's gotta sting.
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On one hand, I hate DRM and copy-protection because it often causes so many problems. Certainly a few people here may recall all the problems with StarForce copy-protection.
Yet on the other hand, it makes me sad to see a developer like Crytek fall victim to what appears to be rampant piracy. I wish gamers were more responsible, but it's obvious that many couldn't care less about paying for content, when they can just get it for free.
That's why I'd love to see changes in the industry where developers are assured the sales they deserve, yet customers aren't hounded by intrusive copy-protective schemes. Millions of people have no problems paying every month for access to World of Warcraft, and Blizzard deserves the credit (and profits!) for they efforts.
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I think though that specificity should be taken into account with torrenting too, though.
I mean, if I'm pirating a game, what are the chances that I'm specifically looking for crysis and if I can't find it I'll say "Well I guess I'll shell out $50 that I wasn't prepared to play before!" versus the chances that I'll say "Hey look UT3 is up. I'm looking for just any shooter really" or "Oh hey Bioshock, another FPS single player" or finding some other game that is reasonably in the same style?
Now, yeah, even with the small percentage of people who a: want the game enough that they will pay $50 for a new game and want specifically a certain game the actual numbers are probably still costing the developers a large amount of money.
I just can't think of a single time where I've wanted a game enough that I would only be satisfied with a specific game when I didn't want it enough to pay for it.
That's exactly what I thought when I saw the 2007 pie. What's even more crazy is the amount of it that's DS. It has 4 megs of RAM. 4 megs.
I think that the "lost sales pirates" are the types with the know-how to build and maintain high-end PCs, and probably follow the PC gaming industry at least relatively close enough to know what big-name, big-budget games like Crysis are coming beforehand. They probably think, "Wow, I can't wait for Crysis! That's going to be awesome!" and then when it comes out, they jump on the torrents as soon as they can so that they can have the game. And not pay for it. I think that these are the people translating into lost sales. the ones that really do have the money to buy the game, the ones that are excited for the new big-hit PC games, but are the ones that just don't want to go out and pay for it. They want to pay the big bucks for their hardware now so that they can enjoy the big hit and awesome new games later without paying anything along the way. They think that they're getting quite a good deal, and the money they "saved" by not buying the game, they can use for more hardware upgrades.
This is what i suspect is the mentality of the "lost sales" pirates. And if you assume that 1 out of 5 pirates are like this, or even 1 out of 10, you're looking at a major hit in sales.
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What the heck is a WonderSwan?
Jesus fucksticks. I went researching the numbers and I was fucking appalled. Like shit-that-would-make-you-vomit-into-your-mouth appalled. If we look at the 45% number through common sense, it just doesn't match up at all. Galactic Civilizations* for example sold 150k units during its entire lifetime and cost $300,000 to make, and I had never even heard of the thing about the game until recently. At $50 a pop and getting 45% of the gross means that they would have ended up with $3,000,000 profit. Which is a return of investment of 1000%, fucking insane. No way could it be anywhere near an order of magnitude of 45% royalties. Assuming they roughly broke even (or, lets say made 25% profit, still a fuckawesome return on investment), we'd ought to see something like 5% royalties.
I went and did some looking and it appears that the developer's cut runs around 15-20% of a game although exceptionally powerful studios can see up to 25%. Of the publisher's cut. Keep in mind that all manufacturing costs/packaging/distribution/QA/patching are paid by the either the dev or publisher out of their cut and must be recouped before royalties are calculated. What really happens is that developers get fucked out of their mind, most of whom don't see any money other than their initial advance.
Here is an example.
Imagine a hypothetical million seller game. The game sells for $50 a pop, generating $50,000,000
- End user pays (retail price) - $50,000,000
- Store pays (wholesale price) - $33,000,000
- Publisher pays Sony (PS2 mfg/lic. price) - $-15,000,000 (this may be an out of date cost nowadays)
- Amount left over (publisher gross per unit) - $18,000,000
- Amount going into initial advance (for this example, $3 mil) - $-3,000,000
- Amount going into marketing/packaging/etc. (for this example, $3 mil) - $-3,000,000
- Amount subject to developer royalties (Pub+dev profit) - $12,000,000
- Amount after developer cut (*15%) - $1,800,000
- Amount after developer cut (*20%) - $2,400,000
- Amount after developer cut (*25%) - $3,000,000
So, the total amount of money that the developer saw was between 4.8 mil - 6 mil for a million seller game. Roughly $2-3 per game, which means a real royalty rate of around 4-6%**. It matches up roughly with the common sense estimate too. Also it is naturally in a developer's best interest to go for large advances if they aren't going to get a million seller. Yeah, it's fucked up six ways from Sunday. It is also the reason that I think digital distribution is making an impact far more powerful than the mere sales numbers would imply.100k online sales if you get every cent is actually like getting a 2 million copy seller.
*I'm using Galactic Civilizations because Stardock they made the jump from developer to dev-publisher specifically because of this. They've released the economic numbers to the press and are trying to entice other devs into using their digital publishing system. I guess they want to be a mini-steam.
**The music industry is around a real royalty rate of 7% for big name artists.
Edit: links. Video Game Economics, an article about how this goes about. EDRP, an independent publishing house that is trying to lure in developers with it's highly competitive 20% rates. Financial Aspects of Game Development. And just for kicks, a radiohead article, which estimates that their digitally distributed album netted $6-10 million in profit, which is about ten times over what their their most popular album prior got them.
I got the numbers from this, from 1up.com:
ON A $60 GAME OF GEARS:
* 25% (aka $15) goes to pay the art and design guys.
* 20% ($12) goes to pay the programmers and the engineers.
* 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
* 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
* 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
* 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
* 5% ($3) goes to actually manufacturing and packaging the disc.
* 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
* 1.5% (just $1) goes into the publisher's pocket.
* 1.5% (also $1) goes into the distributor's pocket.
* 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
* 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?
Under this breakdown, where would "profit" go to the developers? Or... rather.. how does all this work, under this model, for developers? (I see the 1.5% going to "publisher's pocket"..)
Steam ID: slashx000______Twitter: @bill_at_zeboyd______ Facebook: Zeboyd Games
One of the Gameboy's many "competitors". Gunpei Yokoi was supposed to have had a hand in its creation. As you can see from that video, it didn't do much.
Minus that weird kickback thing that they give back to the retail stores when they kick a price drop in I guess.
Well, if people aren't that picky, they could just go and grab any old shooter from a bargain bin at their local games store for $10-20. I'm sure that there would be quite a few there, some probably only a year old.
Even if they did decide to pirate another game when their original choice isn't on the Torrent sites, it's still piracy impacting on sales. They are avoiding paying for a game by downloading one, even if it wasn't the title they originally intended to get. But in reality, most people who are downloading a game want that specific game.
For me, the saddest thing is that piracy becomes a habit... it's addictive. Once you start pirating games, and you realise how easy it is, then you start thinking: "why would I pay for games, they're all here for free". Before long, you convince yourself that buying games is financially irresponsible, after all, that money is better in your pocket than some greedy publisher's. In the end, when someone mentions that they bought a game you think "what an idiot, he has more money than sense", and feel superior.
I've been there and done that. When I was a university undergrad, I pirated plenty of games. I used the excuse that "I can't afford to buy these games", when in reality I could. Sometimes I'd tell myself that "I'll buy this game if I enjoy it", but then I'd finish the game, so there was no real reason for buying it. After a few years of this, I started actually thinking about what I was doing. When I finally decided to start buying games, it took ages to rewire my brain to accept the idea of paying for something I could get for free.
No possible way. No way by orders and orders of magnitude. Totally, totally off. Gears has sold two million copies in six weeks. That's $120 mil in cash @ $60 a pop. That means that the art guys got 30 mil, and the programmers got 24 mil. Epic had 70 total employees when Gears was being developed and took two years to develop. So, do you really think that every single person at Epic makes $380,000 a year?
Edit: And that was in six weeks of game sales. No wonder they slacked so much on UT3, everyone in the company was able to retire for life after Gears.
I'm still sticking by 4-6% being the reasonable cost of dev share, and it roughly matches what game companies spend.
The money that a company makes and the salaries that the people involved take arent quite related like that. I would imagine the salaries are also very unevenly distributed among the people there, skewing very highly towards the few at the very top.
Steam ID: slashx000______Twitter: @bill_at_zeboyd______ Facebook: Zeboyd Games
Also, the money doesn't go to paying the people who worked on the last game, it goes towards funding subsequent games.
Epic might be able to fund a few games with the money they made from Gears. One of those might be awesome, and will help them to expand further, others could be flops.
The more money they get for a game, the more money they have to employ new people, fund new games, and to experiment in the future.
Edit: Halo 2 game development costs, 40 mil. 8 million copies @ $50 gross means 400 mil. Assuming they broke even, we're looking at 10% dev share. Which is expected, since higher selling games naturally cause highe dev share. And lets say that the company earned 100% profit (which is absurdly astounding growth), we'd be looking at 20% dev share.
The original point was not so much about devs getting ripped off. Merely that independent outfits using online distribution have really disproportionate income compared to console games. So, 100k sales online isn't really so bad if you're a small outfit and don't have much costs. Since computer games are adapting to this new distribution method, they aren't in dire straights. And they may be doing even better now than past years.
If you did that analysis on a game that was a flop, you'd probably find that the average developer salary was $3000.
That's why saying: "10% of what you pay goes here, 20% goes there" is simplistic nonsense (as you've pointed out).
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(Please do not gift. My game bank is already full.)
Wow, I had no idea that In Rainbows did so well. I had asked my sister about it (who's a big radiohead fan), and she pretty much said that it flopped and that no one paid anything. Well, I guess that would be the $5 average, and somehow it works out to more money than they would get it they had gone with a publisher.
Well, it looks to me like offering content online directly to customers is starting to become a popular business model, and hopefully will continue to do so. And it still intrigues me that, given the rampant piracy prevalent today, you still see people who are willing to pay money, even if they don't have to.
Actually, it depends. Many teams are able to secure a royalty for the engineering team, so that it is flexible. The IGDA has an article that talks about this. I would imagine that many well-known, experienced studios will (and can) demand higher royalties.
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I'd love to see that done worldwide from as far back as possible.
I mean, take the GTA games. Those made buttloads of money. After the first 500,000 or so paid everyone's wages, the next 9,500,000 copies were pure profit to Rockstar and their publisher.
Edit: Apparently I missed about 10 posts while I was watching TV.
Hmmm, well, I think a lot of the data is available, all we need is the appropriate sound effects, and someone who has a lot of time to spend on it.
Also, I find it quite impressive by how much Nintendo jumps into the lead in 2006. The sucess of the DS really has been quite phenomenol.
1990 - 2007 worldwide hardware:
http://www.youtube.com/watch?v=Xgz86T2TPbI
It's all in Japanese though so, Colour coding is as follows:
Red = Nintendo
Plum= Sega
White = PCE (??)
Blue = Sony
Yellow = WonderSwan
Orange = SNK
Aside:
Check out Sega fighting it's way into the market during the 16bit wars.
Mourn as Sega, just as quickly, shrivels away between 1996 and 2002
GBA - Was waaaay bigger a player in the market than I thought it was.
2006 + DS = Holy Shi...
Despite all the "Nintendo = Doomed" fuss that was being made a few years back, Nintendo was never really in that bad a position given it's combined market share.
Judging by the respective growths and dips for each, it seems MS has been predominantly eating into Sony's rather than Nintendo's market share.
DS growth - Holy Shi..