The next-gen videogame profit pie

Before you put a voodoo curse on game publishers for titles that set you back up to US$ 60 or for not releasing enough games for your next-gen console, better read this. Game publishers can lose millions of dollars from a single game that fails to sell. And they only get a single buck from every game they sell. That means publishers must sell at least half a million (in some cases at least 1 million) copies of a single title to make any money.

Can you blame them for being cautious? Or for pricing their games as high as possible without being lynched?

According to game publishers, the period when consumers are moving up to new machines is particularly risky for them. If a console flops, then games made for them die with them. With production costs reaching staggering heights of US$ 20 million, few publishing houses can take that kind of hit and live to make another game.

Capcom games pusher Mark Beaumont says investment is very high during the launch period. That’s why you won’t see game publishers rushing to the stores with armful of PS3 and Wii games to sell. Capcom waited more than six months after the Xbox 360 launch before it released Dead Rising. You have to wait just as long before you get to play your first Capcom game for the PS3.

With just a dollar going to the publisher, who gets the US$ 59.00 of your money? Here’s the approximate breakdown:

• US$ 27.00 (game developers including programming and design)
• US$ 12.00 (retailers)
• US$ 7.00 (console manufacturers)
• US$ 7.00 (marketing and advertising)
• US$ 3.00 (licensing for games based on other franchises such as Marvel Comics or NFL)
• US$ 3.00 (manufacturing costs including blank DVD media, game imprinting, plastic case and instruction manual)
• US$ 1.00 (distributor)
• US$ 0.20 (corporate costs including accountants, analysts and lawyers)
• US$ 0.03 (developers’ kits and demo units)

(If you’re mathematically inclined and added the digits above you will get more than US$ 60 because these are breakdown estimates – not actual figures – just to give you an idea where your money goes.)

But don’t feel sorry for game publishers. Those who do strike a hit get a slice of the videogame sales that experts say will hit US$ 44 billion by 2011. That’s a pretty big pie worthy of Paul Bunyan!

Via Forbes

Before you put a voodoo curse on game publishers for titles that set you back up to US$ 60 or for not releasing enough games for your next-gen console, better read this. Game publishers can lose millions of dollars from a single game that fails to sell. And they only get a single buck from every game they sell. That means publishers must sell at least half a million (in some cases at least 1 million) copies of a single title to make any money.

Can you blame them for being cautious? Or for pricing their games as high as possible without being lynched?

According to game publishers, the period when consumers are moving up to new machines is particularly risky for them. If a console flops, then games made for them die with them. With production costs reaching staggering heights of US$ 20 million, few publishing houses can take that kind of hit and live to make another game.

Capcom games pusher Mark Beaumont says investment is very high during the launch period. That’s why you won’t see game publishers rushing to the stores with armful of PS3 and Wii games to sell. Capcom waited more than six months after the Xbox 360 launch before it released Dead Rising. You have to wait just as long before you get to play your first Capcom game for the PS3.

With just a dollar going to the publisher, who gets the US$ 59.00 of your money? Here’s the approximate breakdown:

• US$ 27.00 (game developers including programming and design)
• US$ 12.00 (retailers)
• US$ 7.00 (console manufacturers)
• US$ 7.00 (marketing and advertising)
• US$ 3.00 (licensing for games based on other franchises such as Marvel Comics or NFL)
• US$ 3.00 (manufacturing costs including blank DVD media, game imprinting, plastic case and instruction manual)
• US$ 1.00 (distributor)
• US$ 0.20 (corporate costs including accountants, analysts and lawyers)
• US$ 0.03 (developers’ kits and demo units)

(If you’re mathematically inclined and added the digits above you will get more than US$ 60 because these are breakdown estimates – not actual figures – just to give you an idea where your money goes.)

But don’t feel sorry for game publishers. Those who do strike a hit get a slice of the videogame sales that experts say will hit US$ 44 billion by 2011. That’s a pretty big pie worthy of Paul Bunyan!

Via Forbes