D
Deleted member 11852
Guest
Well this is the internet where the general rule is it you can't cite it, it didn't happen 
Are PCs holding back the console experience? (Witcher3 spawn)
I absolutely agree with this. I'm generally happy as long as the game runs well for what it is, with at least relevant graphics options like texture levels, resolution and texture filtering. LOD should be better on the PC version though, as even some current gen games have absolutely horrid LOD (I'm looking at you AC: Unity). PC is pretty much the best platform to develop for since you can aim high and then pare down assets for the consoles as needed in a very nice and controlled manner. Also, all the big stream and Youtube gamers that have command of major audiences play on PC, not console. PC gaming has undergone a massive resurgence and developers know that they can't piss 'em off like they used to.
It is however important to note that PC games at the same price point as console titles provide more profit since there is no console royalty, and with direct downloading, more money is made by not having to provide a package. I think that's another reason behind this focus on PC versions of games.
Also, I think it's sort of a godsend that these "new" consoles are not as beastly as they could've been. It's nice knowing that a paltry i3 and a medium end GPU from 3 years ago with 1 GB of VRAM is enough to play just about any game right at minimum specs and 720p. If it wasn't for the fact that the PS4 has exclusives I want to play, my fiancee and I probably would've not bought one yesterday. To keep my i5 + R9 270X PC free for me, I would've upgraded her PC's Radeon 7750 to a GTX 750 Ti and her RAM to 8 GB so she could play AC: Unity on her PC at levels just as good as the PS4. So even if the 7750 might be relatively low end now, there isn't anything it can't play just yet. Hell, the Radeon 5850 I retired in December could play Shadows of Mordor and MGS5 Ground Zeroes at medium settings without issue. It's only too bad I'll probably never bother trying the 5850 out with GTA5 as my old PC is disassembled and in storage.
I think, but not certain at all, that everyone is using 30% as the magic publisher rate.
Silent_Buddha
Legend
It's similar. I believe digital sales % is pretty much the same. Physical is a fixed cost up to a point (the console royalty I believe is directly tied to the duplication cost of optical disks) and thus varies depending on the price of a title. For full priced (60 USD) titles, it's somewhere around 20-ish percent I believe. However, when you factor in that the publisher isn't getting the full 60 USD (retailer margins, etc.) it's likely roughly 30% of what the publisher actually receives (and the remaining bit of what they receive also has to go towards shipping and handling, physical packaging other than the disk, etc.).
Per unit sale, Steam is roughly equivalent to digital sales on console, but significantly more profitable than physical sales on console for the publisher.
Regards,
SB
aaronspink
Veteran
Wrong comparison!
The correct comparison is:
Console Royalty + retail margin + distribution margin
Vs.
Stream Margin
And in general "retail margin + distribution margin" = 50%. So there's that.
Don't know if MS/Sony are double dipping on digital distribution but its highly likely.
Way it generally works is that on a $60 retail console sale, the publisher will take home ~$20.
Way it generally works is that on a $60 steam based sale, the publisher will take home ~$42.
Its part of the reason that CDPR made more money off PC gamers with Witcher 3 than off both consoles combined. ~1/3 of sales were PC based. >2x revenue per PC sale and roughly >1/2 of PC sales they pocketed the whole of the margin (GOG ~= CDPR). That means for 2.6 million console sales they made $52 mil. For 1.3 million PC sales they made ~66 million.
$287 vs $100/$110 is the difference spent on the Xbox 360 cpu/gpu vs the new 8th gen consoles cpu/gpu(apu).
Consoles have far less expensive hardware than last generation, and even more so when you factor in inflation:
BOM = bill of materials
In 2005 Microsoft spend an estimated $247 ($287 with inflation in 2013 dollars) on the CPU/GPU of the Xbox 360 Launch BOM.
Sony spent an estimated $100 on the APU in 2013. Microsoft spend an estimate $110 on their apu. Of course you can factor in MS/Sony got a better deal by going with a single chip solution from one single chip maker.
How do we get these numbers:
Xbox 360 BOM = $525 ($606 in 2013 dollars via factoring in inflation)
sources: http://www.theregister.co.uk/2005/11/24/xbox360_component_breakdown/
http://electronics360.globalspec.com/article/2210/xbox-360-teardown
http://www.alphr.com/news/hardware/80708/isuppli-reckoning-the-xbox-bill-of-materials
PS4 BOM + manufacturing cost is at $381.
Xbox One minus Kinect2 BOM = $396 ($396 in 2013 dollars). Alot less spent on the console internals this time around.
A less important stat, but just for the fun is comparing Xbox 360 adjusted to inflation to Xbox One/PS4 there is a $210 and $225 drop respectively in hardware component cost this generation. Of course getting to the heart of the matter is they spent less on the cpu/gpu.
Consoles have far less expensive hardware than last generation, and even more so when you factor in inflation:
BOM = bill of materials
In 2005 Microsoft spend an estimated $247 ($287 with inflation in 2013 dollars) on the CPU/GPU of the Xbox 360 Launch BOM.
Sony spent an estimated $100 on the APU in 2013. Microsoft spend an estimate $110 on their apu. Of course you can factor in MS/Sony got a better deal by going with a single chip solution from one single chip maker.
How do we get these numbers:
Xbox 360 BOM = $525 ($606 in 2013 dollars via factoring in inflation)
sources: http://www.theregister.co.uk/2005/11/24/xbox360_component_breakdown/
http://electronics360.globalspec.com/article/2210/xbox-360-teardown
http://www.alphr.com/news/hardware/80708/isuppli-reckoning-the-xbox-bill-of-materials
PS4 BOM + manufacturing cost is at $381.
Xbox One minus Kinect2 BOM = $396 ($396 in 2013 dollars). Alot less spent on the console internals this time around.
A less important stat, but just for the fun is comparing Xbox 360 adjusted to inflation to Xbox One/PS4 there is a $210 and $225 drop respectively in hardware component cost this generation. Of course getting to the heart of the matter is they spent less on the cpu/gpu.
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DuckThor Evil
Legend
I remember you talking about something similar before and I never bought your numbers, I didn't want to argue too much as I don't have much to go with, but I don't see you having much either.
I stumbled upon some old thread on IGN talking about this and despite the source being what it is, to me it seems a few there have a pretty solid information on the matter.
http://www.ign.com/boards/threads/h...deo-games-for-at-wholesale-pricing.179921401/
And this "~$20" and "retail margin + distribution margin" = 50%." just feels like really bad misinformation.
Silent_Buddha
Legend
Looking at that board it's relatively correct.
If you are looking at starting your own store, you are likely going to buy through a distributor and not direct from the publisher. That means you'll likely pay anywhere from 45-55 USD for a 60 USD game depending on how large your buy order is and how good you are at negotiating prices (if you have a small local chain your leverage will be greater than if you have only 1 store). The distributor also needs to make a profit from selling you those games as they act as a middle man between you and the publisher.
If you are a large retail outlet, you will usually interact directly with the publisher for large order but may have to deal with distributors at times for special orders or if stock runs out. Dealing with distributors is a last ditch recourse as what you pay is significantly higher than what you pay directly from the publisher. But you can't order small batches from publishers, so it's a necessary evil at times. The large chains, as mentioned in that thread can get prices as low as 30 USD on a 60 USD title. But that's assuming they handle virtually all of the shipping and distribution from when the product arrives in the country and that's assuming they are an extremely large chain (like Walmart) with a proven record of moving a LOT of product (and hence ordering very large batches of product).
Employees of the large chains will never see the true cost of the product. What they see is a somewhat inflated cost. So when an employee can get a product at say "cost" +5-15%. That's usually "real cost" +10-30%. The reason for that is manifold. Things like averaging in the cost of occasionally having to order form distributors. As well as the cost to the company for shipping and distribution within their own chain.
Don't forget that out of what the publisher actually gets, much of that has to be passed on to packaging, duplication, as well as initial shipping and handling. So what aaronspink mentions is a rough approximation of what the publisher gets from a 60 USD title, although he's a bit generous on the 20 USD for physical retail if he means that as profit margin. Digital distribution on the other hand only has 1 non-publisher/developer entity eating from the pie - the digital storefront. There's no packing, no duplication, no distribution middle man, no shipping, no handling, no customs fees, etc.
Back about 17 or so years ago I used to work in procurement for a mid-tier retail chain focused on video, books, and software. We had more procurement power than local chains, but less than the super chains. For single store numbers, I'm friends with people that used to own local game stores that sold console and PC games (they are no longer in business). Single store and small local chains have it very rough and it's basically impossible to stay in business without relying on used game and used console sales.
Regards,
SB
DuckThor Evil
Legend
I think you are doing a little bit of selective reading there, maybe I am too, but my conclusion based on that whole thing is that typically retailers pay around $50-55 for a $60 game and using a distributor eats into their margins not the publishers, but the distributor marking isn't anywhere close to what aaronspink is saying. Anything that goes significantly lower than $50 is a special case. I do not believe that the take home figure is much lower than what leaves from a Steam sale, maybe five bucks, so maybe somewhere around $35-38 for a $60 retail console game. I believe the console maker royalty to be around $10 per game.
Good question, but it looks like the edit history was intact. I've restored what was there pre-edit.
DuckThor Evil
Legend
Good job! 
Silent_Buddha
Legend
You can, of course, believe whatever you want to believe. What I relayed is the reality as it was 10-20 years ago. I doubt that things have changed drastically in the physical retail market in the last 1-10 years. The really large chains can get the software from publisher's fairly cheap. But that's also because they take on some of the costs associated with distribution from the publisher or distributor. Those costs aren't just transportation related costs but warehouse storage costs as well. If a product moves quickly enough, the storage costs aren't as large. If something sells more slowly, however, those costs start to escalate quickly.
Things are far more complex than just publisher receives X amount for physical retail. However, it generally is that simple for digital distribution. For Steam the publisher/developer always gets 70% of a sale. Virtually all of which is pure profit margin (you still need to recoup the cost of development, however, but that exists for physical as well). Even if a publisher were able to get 70% of every retail sale (not even remotely close), just a fraction of that would be profit margin due to all the associated costs.
So for digital
- A 60 USD sale nets a pub/dev 42 USD in profits (minus taxes).
- A 30 USD sales nets a pub/dev 21 USD in profits (again minus taxes).
- A 10 USD sale nets a pub/dev 7 USD in profits (again those taxes).
- A 5 USD sale nets a pub/dev 3.5 USD in profits (taxes)
- A 60 USD sale might net a pub 10-20 USD in profits (minus taxes). This is accounting for all the costs associated with producing a physical product and getting it to retail. This is assuming all copies are sold. If not, than that 60 USD sale might have generated Zero profit as they are still recovering the costs associated with bringing the product to retail.
- A 30 USD sale means someone is eating part of the costs or packaging has been reduced. Potential for profit is minimal.
- A 10 USD sale means the pub/dev and/or retailer has taken a huge loss as many of the costs associated with physical retail are fixed costs.
- A 5 USD sale...we're joking at this point. That doesn't even cover the cost of duplication which includes the console maker's cut (the 10 USD price point wouldn't cover that either).
Regards,
SB
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I'm not that sure about physical retail earnings.
A friend of mine had a video game store and he made little profits on new titles, he'd buy 60$ games around 50$, and I don't think it costs that much to move trucks of games around...
Manufacturing isn't that expensive, although it's not as cheap as we'd think, and moving marchandise around is not that expensive either.
It's unfortunate I can't remember the cost of an optical disk for the publisher, I think it's something like 2-3$.
Would be nice if someone knew ^^
For the record I remember a studio I worked for was getting 12$ per physical copy sold, and we all know the publisher gets the Lion share...
A friend of mine had a video game store and he made little profits on new titles, he'd buy 60$ games around 50$, and I don't think it costs that much to move trucks of games around...
Manufacturing isn't that expensive, although it's not as cheap as we'd think, and moving marchandise around is not that expensive either.
It's unfortunate I can't remember the cost of an optical disk for the publisher, I think it's something like 2-3$.
Would be nice if someone knew ^^
For the record I remember a studio I worked for was getting 12$ per physical copy sold, and we all know the publisher gets the Lion share...
DuckThor Evil
Legend
To be honest I didn't see you relay much? You certainly didn't relay anything even remotely proofing that publisher gets $10-20 from the retail sale vs $42 for digital (Steam). I specified that only in special cases do wholesale companies get to purchase games for significantly less than $50, co-advertising for example could be one such example. Prices are negotiated so there is some room for differences, but your numbers in general seem unrealistic if not out of this world.
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aaronspink
Veteran
The only person there will any real knowledge is basically running a mom+pop store and they get totally hosed on pricing. Those guys from the stores saying that their wands give them the wholesale price? HAH!!! Its likely the manager of the store doesn't even get the real wholesale price. The price they are seeing is the to-store pricing which != wholesale. Companies like Walmart et al that are doing volume + handling distro are paying ~$30 at the factories for the games. And actual wholesale distributors are selling at $45-50 to end point retailers which means they are paying SIGNIFICANTLY less than that. The wholesalers certainly aren't buying the games at the $50+ range as then in many cases they would be making 0% to -% margin (and a wholesaler making 0% to -% margin on ANYTHING isn't a wholesaler for long!).
As far as "retail+distribution margin ~=50%", that's been true for decades and has applied from actual real vinyl, to tapes, to cds, to dvds, to bluerays, to game cartridges, to game cds, to game dvds, etc. There are a lot of costs in distribution, warehousing, retail that have to be taken care of.
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DuckThor Evil
Legend
I don't see you having too much real knowledge about this either... I wonder if this made you drop the "~$20" though? I think you are vastly overestimating the costs of retail and distribution. Extrapolating fixed costs from a $10 cd to $60 game doesn't sound right either.
aaronspink
Veteran
These costs and margins are pretty standardized across all physical media. Major retailers like walmart/amazon/et al aren't going to touch games unless there is significant gross margins, just like with other media. Video games go into the distribution channels at roughly ~$30. Now you aren't going to get that price unless you are a major player in retail and are ordering factory direct, but if you are, that's what you'll pay. ~$10 of that ~$30 goes to the console owner as royalty and for manufacturing. Major US retailers need to make ~25% gross margins on sales to remain profitable. They make ~0% on the actual consoles. They make it up on the accessories and games related to the consoles. And its not really about the fixed costs, its about gross margins. The absolute costs for distribution and retail between CDs (MSRP is generally ~$20 btw) and games is roughly the same, but that doesn't mean the retailer or the distributor is going to take a haircut on their gross margins to sell it. Esp when they are already basically selling the consoles at cost. Its part of what makes it all work. They make significant gross margin on the actual games to offset the loss of gross margins on the actual consoles.
Its the same for DVDs, etc. A $20 dvd or CD at retail isn't making the publisher much more than 50% of that. It part of the reason that the games industry moved over to steam so quickly and aggressively. 30% to steam was and is significantly less than they lose to physical distribution.
aaronspink
Veteran
Unless your friend is a major retailer, its likely he doesn't even get tier 1 pricing from his distributor. Unless he's moving very high volume he's going to be at the high end of the pricing from that distributor, esp if he can't move boxes worth of each title. He's one breakdown of costs: http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/02/anatomy-of-a-60-dollar-video-game.html
That puts the publisher cut at $27 instead of $20 but doesn't include things like advertising incentives, etc which places like walmart pretty much require which will eat another $5 or so, so you are looking at ~$22 to the publisher. And large retailers like walmart etc will also push down their costs to acquire as much as possible simply because they can, so it wouldn't be unusual for then to get the game for ~$30 or so once they roll everything in.
In the games industry, the publishers don't tend to get the lion share. It all depends on the contract and the investments involved: how much money is the publisher putting in vs how much is the studio self funding, etc.
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