Well then, that explains a lot. thanks.
it’s never the artist’s fault, always the guys in the suit…
$24m for Brutal Legend seems an absurd number until you break down the revenues needed to pay for it and realize it doesn’t require an absurd number. Even if we go with the outdated idea that the publisher only get’s half of the $60 price tag (which isn’t true - most games cost retailers over $40 at this point), it still only required 800,000 copies to be sold at full price for the publisher to make back that $24m. That may have been a bad bet for Brutal Legend in particular, but it’s not a bad bet for a AAA game where the point is to sell in the millions.
I don’t think 24 millions is correct, not for a 4yr game project that requires multiple song license such as brutal legends.
24 million might be just the cost to paying all the employees for 4 years, but it sure didn’t cover anything else.
That assumes the $40 goes straight to the publisher’s pockets, which isn’t the case. There’s a fee for the console manufacturer, I don’t know exactly how much, but I’m pretty sure it’s no less than $10, and might be as high as $15. So that drops that number to $28, say. Then there’s the physical cost of creation and distribution, which is often $5 or so. Now we’re at $23. Now you have to subtract the cost of any royalty deals, from engines, middleware, licensed media, actors, etc.
I don’t know what that adds up to but I know it’s pretty standard for a dev to not get much more than $10 a copy.
I’m not talking about profit here. And I’m also assuming, which as Idrisz points out may be incorrect, that the $24m was the total cost of making the game. So that means that at $30 per copy to the publisher (which is what I used), it would take 800,000 copies to make a game that cost $24m to break even from the publishers point of view.
That’s the only point I was making. When you throw out a number like $24m I think people just assume that means you would have to sell millions of copies to break even, which obviously is not the case.
Actually, you’ve just proven it would likely take millions, or at least a million or more. As Charles said, even your $30 didn’t necessarily cover licensing costs or COGs for a console game. That pushes it to nearly a million alone.
That $24 million also may not include marketing costs for the publisher, making that budget closer to $30 million or more—Brutal Legend had a pretty big TV ad campaign—so you’re in the millions to break even.
The $30 has nothing to do with costs! How many times do I have to point that out? This is simply taking the $24m cost figure quoted above and pointing out that if that was the total cost to make and market the game (i.e. all the costs from labor to physical production to licensing to marketing), a $30 per copy take by the publisher would mean break-even was 800,000 units. Obviously if you start increasing the costs, the break-even goes up.
That $24 million also may not include marketing costs for the publisher, making that budget closer to $30 million or more—Brutal Legend had a pretty big TV ad campaign—so you’re in the millions to break even.
I think we’re talking in circles here. And even if we go with the $30m budget, that still only works out to 1 million to break even, which at least in my mind is different then “millions” needed to break even.
And really, this has nothing to do with Brutal Legends in particular anyway, as I pointed out in my first post. All I’ve been trying to say is that when we talk about AAA game development costs being in this range, people react as if that an insane amount of money to spend (see the “hookers and blow” comments above) when in reality you don’t have to sell a record breaking number of copies to make a profit on even that investment, at least from the publishers perspective.
Or the millions in marketing (both variable in terms of media spend on a global basis and fixed in terms of PR people, press tours, show space and brand/product managers, again with teams in all territories to cover) or the internal costs of EA producers and other production staff managing that external project, finance, sales commissions and other overhead.
What you’re talking about in that $24M is maybe the milestone payments (maybe), no where near the total cost of the game for the publisher.
And without getting into details, your $30 contribution margin is not actually $30.
Edit: you snuck in ahead of my post!
All I’ve been trying to say is that when we talk about AAA game development costs being in this range, people react as if that an insane amount of money to spend (see the “hookers and blow” comments above) when in reality you don’t have to sell a record breaking number of copies to make a profit on even that investment, at least from the publishers perspective.
It’s not an insane amount of money at all. Rather common in fact.
- Never make console exclusives as it is known suicide.
- “The publisher potentially breaks even at that point, but the developers don’t.” - if you can’t make it, get a publisher (or at least make your exclusive console rights holder pay you sacs of money and/or take over publishing costs so that you won’t take a dive to be their flagship title if you’re going independent).
But what you are ignoring is that once you add on all the other costs, total cost of a game increases drastically. Everything still needs to be paid for, and every physical copy still costs a base amount to sell.
I mean, you can argue that it doesn’t take millions of copies sold to break even, but it’s proven pretty regularly in the industry that actually, you do.
Yep, I’m also curious if these “development costs” include things like marketing budgets and even voice talent. Marketing is generally the responsibility of the publisher, voice talent I’m not sure and could fall to either the developer or the publisher, could depend on the contract.
Either way it sounds like the costs being discussed are specifically the costs the developer faces, not the developer and publisher combined. If that is the case then the number for the developer to break even is based on how much revenue the developer gets from a copy sold. Again, this likely depends on the contract but I imagine it is in the $10-$20 dollar range per copy (I haven’t worked for an independent developer for a long time and I wasn’t privy to the financials when I did). If we assume $20 (and I think that might be rather generous) and a developer cost of $24mil. then Brutal legend would have to sell 1.2 million copies for the developer to break even. I also wouldn’t be surprised if publishers often have a lower break even point than the developers.
It does, of course. “Break even” means that you can now make a profit, meaning all costs have to be accounted for. Of course, the break even sales numbers will be inflated if you have to pay royalties, as other costs take longer to pay off as you pull in less money per sale.
And when it comes to the developer, the publisher pays off their costs before the developer even sees a dime. So the real break even is publisher copies sold + developer copies sold.
As a general rule, Publishers “break even” and Developers “earn out”.
Third party developers (generally) receive Milestone payments as non-refundable advances against royalties. If your business guy is any good, those payments are sufficient to pay your development costs, plus a cushion while you negotiate for your next contract and any profit. Most games will never earn out.
Under this model, all of the financial risk has been taken by the Publisher. If the game does sell wildly well, the Developer may eventually start to see additional royalty payments. Counting on them is foolish, and if a game does well enough that those would be owed, it is more likely that the Publisher will try to buy the Developer (or will, if they have a contractual option to do so). It is the sale of the development studio that is the big “cash out” for developers.
[Side note: I am aware of at least one case where a studio struck a deal with a Publisher in which the Publisher took an equity stake in the company, and agreed to advance the developer the “burn rate” (i.e. salaries and all other expenses) for the title. The founders banked the equity stake, and handed out big raises all around. I’m not sure if the game ever shipped]
Not true. It’s more like never make an exclusive for an underperforming platform. Making exclusive launch titles has historically been very good business. I mean, was making Carnival Games for the Wii a dumb move? Imagine how much more it would’ve sold on 360, PS3, and PC!
That’s it right there. It wasn’t making a console exclusive that killed HS. It was making it a PS3 exclusive in 2007. Making a PS3 exclusive now is still pretty dicey unless you have a really favorable contract, but in 2007 it was just dumb.
I didn’t bother reading the whole thread but has anyone actually backed up the idea that the breakeven point for modern AAA titles is 1.5 million? Or is that just speculation based on this one instance?
Last I heard it was ~750,000. Although that may have been for “next-gen” titles altogether and not just AAA ones.
It’s not speculation. You’d be hard pressed to find more than a handful of AAA 360/PS3 titles with production budgets under $15 million.
???
Uh, that was what a significant chunk of the thread you didn’t bother to read was about.
I love the internet.
Chris