EA Spends 3x More On Marketing Than Development 442
G3ckoG33k writes "According to Electronic Arts officer Rich Hilleman, 'the price of producing console games has rocketed, with marketing costing up to three times more than the development of a title.'" Sounds pretty insane, but does anyone know how this compares to the film industry?
TJ (Score:4, Insightful)
Well maybe if they spent more money on the development they wouldn't need so much money into marketing... *sigh*
Why is this a surprise? (Score:5, Insightful)
Software development is a lot like a having a baby. 1 woman, 9 months = 1 baby. You can't add 8 more women to the equation and get a baby in one month. And as projects get larger, the success is dependent on cohesive management, not necessarily additional resources.
However, with marketing -- you can send any number of suit-monkeys out to cut deals with drink manufacturers, t-shirt companies, magazines.. etc. All without detracting from the potential quality of your final product.
If it's in the game, it's likely because one of these marketing people said it needed to be in the game. Thank them for in-game advertising and in-game shops that accept real world money.
Well, that explains a lot (Score:4, Insightful)
Hmm... (Score:5, Insightful)
Re:Excessive Marketing (Score:2, Insightful)
In this thread we get to read over and over how Slashdotters would run a gaming company, if they ran a gaming company.
Putting a headline like this on a web site like this is a guaranteed flamebait page impression generator. With a readership composed of mostly help desk employees who program in their spare time and aspire to be engineers the natural jealosy of more socially adept types, like marketing people, can be easily manipulated. Point out that the most comercially successful game company in the world budgets 3x more for marketing, where geeks don't work, than development, where they do, and you are sure to get comment after comment saying this is the wrong thing to do. Comments from people who couldn't manage the business end of a Snoopy snow cone pushcart.
So yeah, sure, everyone is waiting with bated breath to see what Slashdotters think of EA's business decisions. EA makes a mint. EA is sure to keep turning out games. EA isn't closing shop or laying off or in danger of never getting a game to stores. EA knows that staying in business takes more than making great games and hoping people show up to buy them.
Cue more out of depth stupidity.
Monopoly (Score:5, Insightful)
Umm, no decent games. Their sports titles are often the best. They get the best reviews and most sales.
That's because EA has signed exclusive agreements with so many relevant leagues (NCAA, NFL, NHL, FIFA). By definition, the only player in a market will get the best reviews because it gets the only reviews.
What if they did the opposite? (Score:3, Insightful)
Seems to me, the best products don't need advertising. The ones that don't sell themselves need others to run around selling them instead.
Re:Probably on par with other entertainment ... (Score:4, Insightful)
However, it could go the other way. Everyone sees your movie/game/etc and they tell their friends it sucked. Nobody buys the DVD. I feel about the same with marketing. If your commercial looks like shit and I see it over and over, I am less inclined to buy your game/movie/etc. Even if I were thinking about it (fan of IP or whatnot) but am spammed with ads, I'll not buy it out of spite. Which is to say, too much marketing can hurt in my opinion.
Re:Well, that explains a lot (Score:2, Insightful)
Re:The same for drug industry (Score:3, Insightful)
Re:Why is this a surprise? (Score:5, Insightful)
Software development is a lot like a having a baby. 1 woman, 9 months = 1 baby. You can't add 8 more women to the equation and get a baby in one month. And as projects get larger, the success is dependent on cohesive management, not necessarily additional resources.
In keeping with your baby analogy, you also cant do it alone. Without competent writing, testing and a lot of other people its like trying to give birth all by yourself, your baby will probably be still-born and you end up relying on 'marketing' to con the public into believing it isn'r dead. Spending that much on marketing is like hoping giving the baby a good name makes a difference to how healthy it is.
However, with marketing -- you can send any number of suit-monkeys out to cut deals with drink manufacturers, t-shirt companies, magazines.. etc. All without detracting from the potential quality of your final product.
With enough marketing, you can almost bury bad reviews and lack of plot/gameplay/entertainment under a mountain of bullshit & biased reviews.
Its all about risk. Why spend $4 million on development of a risky game that might be a massive hit when you can spend $1 million on the game, $3 million on marketing and be fairly sure that it'll make a million or two profit. If the marketing approach fails, its because of piracy obviously.
If it's in the game, it's likely because one of these marketing people said it needed to be in the game. Thank them for in-game advertising and in-game shops that accept real world money.
Sad but true.
Re:Why is this a surprise? (Score:3, Insightful)
But without all the sex, of course.
Re:Probably on par with other entertainment ... (Score:2, Insightful)
Re:What if they did the opposite? (Score:5, Insightful)
I take it you've never actually run a business yourself? Believe me, in the modern world you can make the best product but if you can't grab "mind-share" it won't sell. Marketing is always a large proportion of the cost of a product whether it's a videogame, a movie, or a dishwashing liquid.
Re:Excessive Marketing (Score:5, Insightful)
The problem with this scenario is that marketing helps in the initial, but it does not help in the long term...
Marketing can make caviar from crap. Seriously they can. BUT if EA keeps producing crap people will realize it is not caviar, but crap. Then to make it caviar again you need more marketing. It is a never ending race.
Had they not made crap in the first place then they would not have to spend that much on marketing.
While marketing is needed, the best marketing is when people tell other people that they should buy the product.
Here is an example; Heinz Ketchup. I have lived throughout Europe, and North America, and there is no way I will buy anything but Heinz Ketchup. Yes they have a marketing campaign, but Heinz does do a pretty good job making ketchup. They don't take their clientel for granted. With marketing Heinz could expand. Another example; nutella, Coke, Pepsi, etc...
I always knew EA wasted money, but this is nuts! (Score:3, Insightful)
Imagine if they spent that cash on development instead?
gamers don't need TV commercials.
Madden and other crap franchises are the bulk of the ad budget.
Re:Hmm... (Score:3, Insightful)
Good thinking. Just like how Amiga put their effort into making a better computer than Apple, so today nobody has ever heard of a 'Macintosh'.
Re:Why is this a surprise? (Score:4, Insightful)
Software development is a lot like a having a baby. 1 woman, 9 months = 1 baby. You can't add 8 more women to the equation and get a baby in one month. And as projects get larger, the success is dependent on cohesive management, not necessarily additional resources.
However, with marketing -- you can send any number of suit-monkeys out to cut deals with drink manufacturers, t-shirt companies, magazines.. etc. All without detracting from the potential quality of your final product.
If it's in the game, it's likely because one of these marketing people said it needed to be in the game. Thank them for in-game advertising and in-game shops that accept real world money.
Makes sense, I suppose... But it is still galling to me as a customer.
That means that if I spend $40 on a video game only $10 of it actually went to manufacturing the game - the remaining $30 went to marketing.
Of course... That $10 didn't actually go to manufacturing the game either, because part of it went into DRM and packaging and whatever else...
So we're looking at maybe $5 or so of my money actually making it back to the folks who genuinely worked on producing my video game.
Yes, I understand there's lots of expense involved in producing a video game. You need development kits and office space and beta testers and all that good stuff. You can't very well turn out a modern video game in your garage. I get it.
But it seems kind of self-defeating to me... You aren't making enough money, so you throw in some DRM to stop piracy and do a bunch of marketing to draw in more cash. But you have to pay for the DRM and marketing... So you aren't making enough money to cover your new expenses... So you throw in some more marketing to draw in more cash...
Somewhere along the line it stops being about producing a game that people enjoy playing and want to buy. Somewhere along the line it starts being about micropayments and subscription fees and sequels and product placement and toys and tie-ins...
And then the publishers wonder why sales are down.
Re:Why is this a surprise? (Score:2, Insightful)
Re:The same for drug industry (Score:3, Insightful)
Re:Excessive Marketing (Score:5, Insightful)
Marketing is more than just booth babes and TV commercials. Something as simple as where a product is on the shelf (eye level versus toward the ground, for example), or where your displays are in the store (in the back? at the entrance? How big are they?) is marketing, and it all costs money to do. The news doing a story on lines stretching out the door for the newest game release was probably prompted by a call from marketing. Tech news sites and TV shows featuring documentaries or segments about the "breakthrough" technology your game uses are all part of the marketing effort. Hell, even the guy behind the counter telling you it's a good game (or even the other "shopper" mentioning it in passing) may well be part of the marketing machine.
To claim that your household brands, especially Coke or Pepsi, get by without marketing is silly. Yes, Heinz may not spend as much on visible marketing, but they do pay for prime shelf space at your local store, and they've spent decades honing their image as a superior brand. None of that happened by accident, it was all marketing. The fact that you may not even realize you were being marketed to, and yet still have a preference for their brand, is part of what makes their campaigns so brilliant. Even word of mouth advertising can be primed by a good marketing department. And, of course, both Coke and Pepsi spend ungodly amounts of money making sure their logos are plastered all over just about everything you see. Coca Cola alone spends more than $1 billion annually on marketing.
A lot of people make the mistake of equating marketing with advertising, and in reality it's much, much more than that.
Re:The same for drug industry (Score:2, Insightful)
Sure about that?
Canadian meds are cheap, even though they are completely identical to their US counterparts. Why? Because the Canadian government dictates what they will pay for them. This cuts into the companies revenues. In order to make up those revenues, they need to charge someone else more. Guess who that someone else is?
Re:The same for drug industry (Score:5, Insightful)
One thing that someone in the biomedical industry told me is that the path that drug research usually takes is that a Phd candidate will do basic research at the university, carry this research with them to a small startup company, which is then acquired by a big pharmaceutical if one of their drugs looks promising, who then goes thought the FDA testing process and gets the drug to market.
According to her these marketing/research numbers that get thrown around don't include the costs of acquiring start-ups. Since it is pretty much impossible for a small company to afford to get a drug through the FDA approval process, their entire business model is to sell-up to the big phamaceuticals, either the entire company or individual drug patents. Therefore, this aquisition / patent license money funds an awful lot of research that doesn't get counted in the numbers.
And it seems to me that this system works fairly well - the university / small lab environment is really more conducive to basic research than a large company who is focused on getting products to market. And in this case, the patent system helps provide a business model for these research labs that wouldn't exist otherwise.
Thanks for the folks that posted those sources, I'll have to check them out in detail later on, and see if they confim/refute what I've heard.
Re:2K football? (Score:5, Insightful)
Incidentally, EA bought the rights in response to 2K gaining significant market share on Madden [gamespot.com]. Additionally, 2K had started to sell their annual edition for $20 (Half of what Madden cost at the time). Rather than enter into a price-war, EA decided they could screw everybody out of their money by making a deal.
Sports games are the ones with the lowest overall development costs for EA. They get to re-use 90%+ of the assets and code from the previous year and get to charge full price. All they need to pay is marketing and licensing. It's a perfect market for a price war, and you can only sustain high prices by changing the rules.
Re:Excessive Marketing (Score:4, Insightful)
Re:TJ (Score:3, Insightful)
The modern world runs on marketing- unfortunately, the internet makes that even more true. Now that anyone has the power to broadcast, you have to spend a lot of money getting our voice heard.
Re:Why is this a surprise? (Score:2, Insightful)
Spending 3x more on marketing than product development is like buying a mid-1990s Honda Civic.
First you check out the overall condition of the body, then the engine. If you've got a little money to spare, you take it to a mechanic to give it a once-over. You spend some time and money to get something that is probably mechanically sound.
Once you think you've got a decent car, now you go out and buy a body kit, a loud exhaust system that doesn't actually improve your car's performance. You put a carbon tail fin on it and tint the windows limo black. Then you start shopping for body kits and get the flashiest, most expensive one you can find. Finally, give it a new paint job. Be sure to put giant kanji letters on it that kinda look cool but you don't really know what they mean, and make sure they're the shiniest you can find.
Now this car you probably spent $4000 on at the start has about $12000 worth of upgrades that make it really pretty on the outside. Of course, you didn't change the seats, fix up the engine, or even replace the stereo. In the end, it's yesteryear's model, worn out on the inside. Nobody can see that because you don't have to race it and since the windows are tinted so dark nobody can see inside anyways. Since looking good is all that really matters, you drive it around town really slowly with the radio blaring whatever's trendy. All your friends think it's cool because they go for that sort of thing and now they think you've got money and they want a car just like it.
Re:Hmm... (Score:3, Insightful)
Your main point is valid: The best selling games are typically the most advertised. However, you are missing one more piece to the argument: There's plenty of great games that, no matter how much money you sink on advertising them, could never be huge sellers.
Marketing can't do miracles: It sure can make up for bad quality, but what it can't do is make an unpopular premise work. Would 30 million worth of advertising make Hearts of Iron III sell 3 million copies in the US, regardless of its quality? There's no way you can convince the mass gaming public, the buyers of the Call of Duties and Halos, to go buy a slow paced strategy game. The fact is that, no matter how finely crafted a game is, the first step is making people being interested in the game's premise and main mechanics, and that's something that requires aiming at the mass market in the first place.
Many developers just don't craft their game thinking about that prototypical mass market consumer, and then find that their great game sells half a million copies. The reason that we are seeing good quality more related to sales is not just the advent of gamerankings and metacritic, but the fact that publishers are making it a lot harder for talented studios to take on projects that aren't even marketable in the first place. Great quirky games are now limited to publishers like Atlus, and have budgets designed to keep the studio alive even if the sales are nowhere near the top of any sales chart.
As the industry ages, and learns what the potential of each idea really is, we see the proper amount of development and marketing put into most game designs, which helps fuel the same forces you talk about: Nobody wants to sink millions in marketing for a bad game, and nobody wants to put a lot of resources into a game that does not have a good chance at appealing to the market. Who loses? Those of use that want to see games that aren't aimed straight at the mainstream. It's sad that Beyond Good and Evil didn't sell, but wouldn't it be worse if it had never been created, and instead we had yet another well polished shooter?
Re:Why is this a surprise? (Score:2, Insightful)
I think you have an excessively optimistic view of marketing. The point isn't to kindly get the word out and objectively represent your product so that anyone who is interested can buy it. The point is to get as many people as possible to pay for it, thus netting you more money. Whether these people enjoy what they've got after you've raked in all that cash isn't of any concern. With fake reviews, "creative" quoting of real reviews, misrepresenting products, taking advantage of consumer ignorance, and more, companies have made it abundantly obvious that they'll do anything they legally can to get you to buy their product, and even things they can't legally do, as long as it gets them enough money to balance out the penalties.
One could argue that this isn't exactly the wisest of behavior in the long term, but companies are stupidly short-sighted and most people are just plain stupid and aren't willing to give up a bit to make companies stop doing things they don't like, so it's not a problem anyway.
People need to be told what to buy (Score:3, Insightful)
Everyone wishing that the money were spent on development instead of marketing is, unfortunately, living in an ideal fantasy world.
People are dumb. They follow trends, soak up advertisements, and generally do what marketers tell them to do. You personally might be immune, but remember that just by reading Slashdot (and therefore being somewhat tech-savvy) you have already self-selected against most of the population.
In modern culture, quality does not correlate with success. (Arguably, in entertainment, it never has... consider ticket sales for generic romantic comedies with famous actors vs thought-provoking art-house films.) Quantity is much stronger than quality. Exposure is all that matters.
Nobody bothers to do independent research anymore; Consumer Reports has been dropped in favor of Google search, and whoever has the most hits wins.
Welcome to the present day.
Re:The same for drug industry (Score:4, Insightful)
One thing that someone in the biomedical industry told me is that the path that drug research usually takes is that a Phd candidate will do basic research at the university, carry this research with them to a small startup company, which is then acquired by a big pharmaceutical if one of their drugs looks promising, who then goes thought the FDA testing process and gets the drug to market.
According to her these marketing/research numbers that get thrown around don't include the costs of acquiring start-ups. Since it is pretty much impossible for a small company to afford to get a drug through the FDA approval process, their entire business model is to sell-up to the big phamaceuticals, either the entire company or individual drug patents. Therefore, this aquisition / patent license money funds an awful lot of research that doesn't get counted in the numbers.
So big drug companies are the RIAAs of the drug world: They don't actually create anything useful, they just exploit it for huge profit. Awesome.
Re:TJ (Score:1, Insightful)
Disgustingly, this is also true of big pharmaceuticals.
It's a natural result of monopoly rights. In market segments where you have competition there's a reasonable natural limit on the value of marketing; raise your costs and prices too much and your customers will buy the competitors product instead. With monopoly rights there is nobody else to buy an equivalent product from. The price point at which your customers drop off is where they can no longer afford the product at all, which places the marketing ROI equilibrium far, far higher.
That's one of the fundamental efficiency problems with IP; use 'intellectual property' to transfer X dollars from the rest of the economy to the desired area and most of it will get lost in waste, such as marketing.
So it's not really marketing that needs extra regulation, it's monopoly rights that need to be scrapped. There are few methods of redistributing funds within the economy that are as wasteful and damaging as the monopoly.
Re:Why is this a surprise? (Score:2, Insightful)
So move along you cattle, there's nothing to see here as we purchased your viewing rights a long time ago.
Re:TJ (Score:5, Insightful)
The purpose of marketing is product differentiation, which is why it is more important in segments with heavy competition. Common products like Tylenol have hundreds of millions in marketing so that the consumer "trusts" their brand name product over a generic. While it's true pharma companies market patented products to which they have monopoly rights to distribute, it is because there are alternative products which treat the same illness available to consumers. For example all the ED treatments on TV may still be covered by patents, but they are all competing against each other.
The other reason for marketing is to promote off-label use of their product to expand their market. This is a grey area of fact and marketing fiction; In some ways it's healthy for the market because doctors receive extended "education", the downside is the information is skewed towards a single product. The majority of marketing budgets consist of doctor education courses and free samples, rather than television and other direct to consumer marketing.
There are very few treatments which a single company dominates. While they may hold a monopoly on a single medication, there are usually alternative chemistries that behave in a similar fashion to treat the same illness. It is because of monopoly rights that multiple treatments are available for the same illness, with the only difference being that they work better or worse for a small portion of the population. There is no one-drug-fits-all, so it is important to create incentives for continued research into similar products. Those incentives just wouldn't be there without the artificial monopoly of IP, companies would all just pump out the same medication that works in 90% of people and ignore the other 10% of patients because the market wouldn't allow them an opportunity to recoup the research dollars.
While I agree change needs to occur. there is no easy solution to health care. If it was as easy as saying scrap IP, I would be all for it, unfortunately the world is far more complex.
Re:Why is this a surprise? (Score:3, Insightful)
Well, theoretically over-hype could backfire if the game turns out to be absolute shit, but since most EA titles just require that initial sale
TFA said that they had a window of six weeks to recover costs on a game. This speaks volumes.
Six weeks sounds pretty much like the time it would take for word of mouth to spread that a game sucks big time. So yeah, produce a game that sucks and you have a very limited amount of time to sell it.
Based on the quality of the EA games I have purchased, unfun crashing crap on PSP, barely fun stuff on GBA, I'd say they are barking up the wrong tree.
TFA also said they lose lots of sales due to resales and piracy which reminds me, I want to dump the two crap EA PSP games I bought at the local GameStop maybe I can trade them for games that don't crash.