“…Gnome producing octopus…” - I don’t know about you but I’ll pay to see that shit.
Add-on questions: Is there a statistic about who (publisher, developer, Illuminati etc.)earns how much by any sold game disc? Or is that something which changes all the time, depending on the individual contracts?
Hmmmm… well it definitely can vary per game, and I’m not certain off hand. I’d the developer gets around 15% (assumming they didn’t self-fund), the retailer 25% (including shipping costs), the platform fee (if a console game) is around 10%, and the rest going to the publisher. In addition, some lisencing agreements give the lisence holder a cut per every game sold. Anybody think I’m wrong somewhere? I’m just going off the top of my head of things I’ve read in the past.
The numbers I’ve been told are: on a $50 console game, the retailer usually pays ~$35-40 depending on size, distributor, deal etc. Sony/MS usually see around $15 including manufacturing, with that number going down as the game sells enough to hit certain thresholds. That leaves around $20-25 for the publisher to cover development costs (including any royalties or prepaid development costs to the developer), marketing etc. I’d guess the developer is effectively getting about $5-10 from that publisher chunk, again depending on size/scope/deal etc.
Sounds good, though something about developers getting a cut… a lot of publishers pay for development as an “advance against royalties”. Effectively, this means the developer doesn’t get any additional money above and beyond what they were paid to make the game until their share (the $5-10 per game) covers the entire production budget. This doesn’t happen very often. Of course, publishers don’t ask for money to make up the difference, so they are effectively taking on the entirety of the risk. Still, it does seem sort of unfair the developers rarely see any additional money for their work even when it is a profitable success.
I’ve seen it! Of all the deliberately bad movies I’ve rented, this is one of the better ones. That’s not saying much though.
Seriously, could you cut this stuff out?
This is close for the last gen, but now console games are retailing at $60. So the way it works out from the $60 retail price is:
$15 goes to the retailer
$12-13 goes to first party
$2-3 is the actual cost of materials + shipping
$5 is “reserved” for price protection or returns
So the publisher nets $25 off a game that retails for $60. So if the publisher invested $15 million in development, marketing, production, QA, sales, etc, then the game needs to sell 600,000 units at full price to break even.
As Greatatlantic mentions, developers usually have a % against this net revenue, but they have to earn out their advance first. Additionally, publishers like to define the recoupable revenue as “adjusted income” which means that they take out first party costs, cost of goods, and reserves before they count the revenue that is eligible to be counted against the advance.
So in the above example, if the dev cost was $8 million and the dev earns out at a rate of 15% adjusted for first party costs/cost of goods/etc, then the dev team doesn’t see any additional money until about 2 million copies are sold, but would start earning $3.75 per unit after that.
Keep in mind that there is a quite large sales range in which a game will make money for the publisher but not the developer because of the “royalty advance” rule mentioned above. There aren’t any good figures on this stuff, but I suspect quite a lot of games fit into this range.
Crap. How is EA still in business with all the BS they put out? I know they sell a lot of Madden games, but crimeny…
Do publishers do the same “funny math” the movie biz does to ensure the game never shows a profit?
Everything is an expense.
Do developers ever rely on royalties to continue operations or expansions or is devleopment solely funded by advances and royalites are used for Ferraris? :)
But what about games on sale for half or even 10% of the original price? Do the aforementioned percentages still count, or is all the lost money, so to speak, on the retailer?
The first parties (MS, Sony, Nintendo) usually have a system for their first party royalties that is tied to the original wholesale price of the game. That being said, it’s a few bucks off, not a significant percentage.
Retailers also command a smaller dollar amount on a lower price game. A $39.99 game might have a wholesale price of $32, leaving the retailer with $7.99.
So there’s a small cushion for lower price points, but generally the margins are lower than a full price game. If you don’t sell significantly more units to offset the low price point, it’s not going to make sense to come out at the lower price.
The retailer “bought” the game at $35 when it originally shipped to them - though likely won’t pay for 90 days or whatever their account terms are. Of course, that’s the theory & what ends up happening is one of these usual scenarios:
- the retailer had a ‘price protection’ deal with the publisher, meaning the publisher pledge to guarantee a RRP of x for so many days/months, and the publisher cuts the wholesale price (or discounts a big chunk etc) on those previously bought copies.
- the retailer had a ‘sell or return’ type deal, and threatens to return those unsold copies, so the publisher does a deal to keep the unsold stock return.
- the retailer takes the cost hit to clear up shelf space or stock space.
The last only really happens with “old” games like those big Circuit City clearances or the occasional price drop after a while. If a new console game gets a pricedrop within a couple of months, it’s because it’s not selling & it’s one of the first two scenarios (or some sort of variant on it).
Same. Going to rent this as soon as I can find it.