Game Companies Face Hard Economic Choices 511
Hugh Pickens writes "The NY Times reports that the proliferation of free or low-cost games on the Web and for phones limits how high the major game publishers can set prices, so makers are sometimes unable to charge enough to cover the cost of producing titles. The cost of making a game for the previous generation of machines was about $10 million, not including marketing. The cost of a game for the latest consoles is over twice that — $25 million is typical, and it can be much more. Reggie Fils-Aime, chief marketing officer for Nintendo of America, says publishers of games for its Wii console need to sell one million units of a game to turn a profit, but the majority of games, analysts said, sell no more than 150,000 copies. Developers would like to raise prices to cover development costs, but Mike McGarvey, former chief executive of Eidos and now an executive with OnLive, says that consumers have been looking at console games and saying, 'This is too expensive and there are too many choices.' Since makers cannot charge enough or sell enough games to cover the cost of producing most titles, video game makers have to hope for a blockbuster. 'The model as it exists is dying,' says McGarvey."
As we discussed recently, OnLive is trying to change that by moving a big portion of the hardware requirements to the cloud. Of course, many doubt that such a task can be accomplished in a way that doesn't severely degrade gameplay, but it now appears that Sony is working on something similar as well.
$25 million? (Score:5, Informative)
It takes $25 million to take the exact same game, shine it up a bit and put a new cover on it and expect people to shell out $60 for it?
Maybe spend some of that on coming up with something new.
Already proven model (Score:4, Informative)
As we discussed recently, OnLive is trying to change that by moving a big portion of the hardware requirements to the cloud. Of course, many doubt that such a task can be accomplished in a way that doesn't severely degrade gameplay, but it now appears that Sony is working on something similar as well.
This model is already proven in the case of my Win Mobile phone [htc.com]. See, IE mobile takes suck to whole new levels. There's Opera, which does much better, but is still slow as sin, even with a dual-core 400 Mhz ARM chip powering the unit. It honestly feels like Navigator 4 back on my Windows 95 Pentium 90 way back when...
Enter Sky Fire [skyfire.com]. They have a Linux rendering farm of (get this!) instances of the Mozilla rendering engine that pre-render websites for you, and you download the rendered result, much like Google Maps - in square sections, ajaxy-style.
It's fast enough for me to watch YT and Hulu video meaningfully if I'm connected via a decent Wifi. Now, it's not FPS games, but if it's good enough for a video, it's probably good enough for pre-rendering and/or AI computation.
SDKs are too expensive and exclude developers (Score:2, Informative)
I wanted to write software for consoles but found the startup costs too high. I wanted to start by homebrewing some prototypes and then further developing them to get backing. I couldn't get a console SDK etc without jumping through many complicated hoops.
So I targeted the web.
Now I've gone ahead with non-console platforms, gotten financial backing then written those games and made very good money in the process... and had a lot of fun as I go.
Cry me a river.
Math (Score:4, Informative)
Cost for the developers is $25m, need to sell 1m units at $50-$60. So, what happens with the other $25-$35? I'm assuming the licensing fees to make a console game are included in the $25m. So that leaves, physical production, logistics, and the retailer cut. Those 3 things really make up 50% of the price tag? Maybe that's something that has to be fixed. A lower price tag often has a positive influence on the number of units sold.
As for OnLive going to change things, who's going to pay for OnLive's hardware, and software licenses? Right, their subscribers. Will OnLive get more relaxed licensing terms than normal customers (i.e. don't require a license for each subscriber)? Probably, but when 1000 people want to play game X at one time you still need 1000 licenses at that time.
Re:Where does the money come from? (Score:3, Informative)
Earnings Per Share - Quarterly Results
FY (03/09) FY (03/08) FY (03/07)
1st Qtr -$0.30 -$0.42 -$0.26
2nd Qtr -$0.97 -$0.62 $0.07
3rd Qtr -$2.00 -$0.10 $0.52
4th Qtr NA -$0.30 -$0.08
Source:http://moneycentral.msn.com/investor/invsub/results/hilite.asp?Symbol=US%3aERTS
Re:The solution is 2D games (Score:4, Informative)
I disagree.
To get quality art in 3D is hugely expensive, and pushes the system requirements through the roof.
I use 3D spaceship models rendered as sprites for my next game. They are hugely high poly, yet I rendre them using 2 quads.
You can't get the same effect in 3D without rendering at least 30,000 times as many polys. It also means the entire ship (not just the bit facing the camera) needs to be modelled and textured.
I've worked on 3D games and 2D games. 3D gobbles up tons of CPU and GPU time and involves horrendously huge teams to get decent visual quality.
Show me the 2D games companies that are struggling. Popcap maybe? BigFishgames? Both making millions, whilst the big 3D blockbuster publishers struggle.
Re:Math (Score:5, Informative)
Cost for the developers is $25m
Huge mistake right there.... budget breakdown is more like:
30% various licensing fees for theme, art, and music.
30% for marketing, tv commercials, paid for advertorials and complimentary copy in magazines and online, print ads, posters in stores, parties for the media, show expenses.
30% for executive management bonuses, HR, finance, other non-frontline cost centers
8% for customer service to handle all the bugs, purchasing/shipping department, technical writers, etc.
2% for developer pay, at most.
The percentages vary slightly from megacorp to megacorp, but not much.
The question that will not be asked, is why the overhead approaches 99% yet provides so little impact on the final gameplay experience.
Re:am i missing something? (Score:3, Informative)
The attach rate for the Wii is better than the PS3.
Variety says the attach rates are within five percent [variety.com], but Wii's 2 to 1 lead in hardware sales does tilt the overall sales figure in Wii's favor. But might Sony be using the interactive features of Blu-ray Disc to boost the number of "PLAYSTATION 3 compatible games"?
No Validity (Score:3, Informative)
It's amazing how someone can say so much and yet get so much wrong.
The Wii market isn't actually as big as it appears. In reality, it's quite possibly smaller than the 360 and PS3 markets.
Wrong. Your desperate fanboy mewlings fail to take into account any semblance of reality, as I will explain below.
Nintendo did a great job of selling the Wii to non-gamers. They've got a huge installed base out there now and should, in theory, have the kind of market dominance that the PS2 enjoyed last time around.
Actually, they shouldn't. Neither their installed base nor their market share is the same as the PS2's at any point in its lifetime. While the 360 and PS3 continue to founder and fail, they have managed to keep enough of the marketshare that the Wii doesn't even have 50%, while the PS2 had well over 65% of the market by the end.
There is no reason for the Wii to have PS2-like market dominance when it hasn't even crossed the 50% psychological barrier. This can all be explained without resorting to your childish stereotyping.
See, the flip side of selling consoles to non-gamers is that they are... well... non-gamers.
New gamers, non non-gamers.
If you look at the weekly games sales charts, the only Wii games that really make an impact are Wii Sports, Wii Fit and, to a lesser degree, Mario Kart Wii. All games that are bundled with the Wii console in the most common packages.
Not true, actually. There are many games which have made significant impact without being bundled. In fact, even in regions where Wii Sports isn't bundled, it is still selling extremely well.
People who actually buy games, as opposed to non-gamers who pick up a Wii and embittered slashdot posters nostalgic for the 80s, do actually tend to make HD graphics and high production values a factor in their purchase.
...and they drive the market into the ground in the process, because they're caring about mere marketing Kool-Aid rather than things that actually matter. The cost of making a game has risen so much that it's barely even possible to make a profit on a console-exclusive anymore, because of all the marketing fluff you have to bolt on to sell to the fratcore.
Your best chance to sell a game with the Wii is at the point of sale with the console itself. Once this has passed, a large majority of the consoles will sit in a cupboard unused.
Patently false. This is more invalid stereotyping.
It's pretty much a three way race in terms of actual games sales (and there are signs that the Wii is really struggling here).
And there it is: the "Non-hardcore games aren't real games" slur. Your attitude and the people who carry it have been poisoning this industry for ten years, and the crash has finally come. Go back to the margins where you belong, because your demographic has proven itself unworthy of its dominance.
If you develop for the Wii as your main platform, you're also, by tying yourself into its control system, ensuring that you'll need significant changes to port your games over to other systems, widening the target audience.
The target audience doesn't need to be any wider when it's already everyone. Sure, you'll lose some creepy adolescent males who strive to define themselves by driving others away, but who cares? You've got everyone else; you don't need that tiny sliver of the market.
On the other hand, develop for the 360, PS3 or PC and it's not that hard to get your game onto the other two out of those 3 platforms.
...which you pretty much have to do to make any money, because none of these markets is big enough anymore to sustain third parties on its own.
Re:The solution is 2D games (Score:3, Informative)
Bigfishgames make tens of millions of dollars a year.
The casual games industry is 2D and worth billions.
Yup I'm Soooooooooo worried that 2D games can't support a lone developer...
unlike most AAA games companies, my company is profitable.
Re:Math (Score:1, Informative)
You're cute. No, the $25M wouldn't include marketing because that's not enough money to do it. The things you listed don't exist for low-budget ($25M is low) games. Try $100-200M before you see TV spots and prominent in-store placement.
$25M sounds just about right for just the development costs. It's enough to pay for salaries, facilities, insurance, development hardware and electricity for a 100-person team for about two years. $1M/month to run a medium sized company is not exorbitant. (If anything, $10K/employee-month is low but I'm assuming your standard EA sweatshop rather than Id software here)
Re:am i missing something? (Score:2, Informative)
Yet they are making money and the companies who are keeping track of gamers are not. There are too few core gamers and they have too high expectations which means making games for them is a losing proposition.
Re:am i missing something? (Score:3, Informative)
Yes, I'm finding FFXII's Boss battles to be much more challenging and exciting than CT's (and CTs' were better than FFVI's). You have to play smarter in FFXII, you can't just power your way past bosses with minimal strategy.
I could not disagree more. In FFXII, you set up your gambits with basic strategies, like heal your friends, and then you walk towards monsters and your characters automatically kill them, with no more input from you. You do that enough times, and then you can walk up to a boss and watch your characters kill it. I didn't get to the end of the game, the last place I remember going through was the Feywood, but the battle system seemed basically non-existent to me. And the storyline started out really well, and then started to just consist of 10 minute cut-scenes that said you had to walk to the other side of the map, and here's some bullshit about why you can't take a boat/airship. I got bored and gave up.
The only regular RPGs I've played that required real strategy and not just leveling up have been the Valkyrie Profile series. In the first VP, I met a boss that was crazy hard, went away and leveled up a bunch, and still got killed just as easily. Went online, found out the recommended level level him was 10 levels below me, wtf? But my problem was that I had the skills on my characters set up all wrong, and my strategy sucked as. Then I play VP2, and almost got my ass handed to me in the first dungeon because I didn't take the time to learn the battle system or think about what I was doing. Both of them have an excellent story, btw.