Impact of XNA community on publishers?

[Shifty Geezer]

What will the actual economies be? 400 points is $5, right, at the lowest price. 35% of that is $1.75. PixelJunk titles are created by a 5 man team over 6 months, or thereabouts. XNA should, in theory, keep development quick and easy. So let's say 4 people over 3 months? How many units would they need to sell to get a decent income? A few tens of thousands. I would ask how well do download titles sell now, but of course you'd be looking at far more competition. I suppose like full game development, if you get a winning formula you could do very well. It's a shame Microsoft feel that they should get the lion's share for the developer's work. It's more insulting having been pretty decent about it to begin with and then change their mind!

 

[AzBat]

Microsoft responds to Kotaku's comments:

Xbox LIVE Arcade has long been known as the premier destination for digitally distributed original and classic games - making it a very appealing platform for game developers. We don't disclose details on our business contracts, but what we can tell you is that we work closely with all of our partners to provide the Xbox 360 community with the best entertainment possible while making publishing a title on XBLA an attractive prospect.

http://kotaku.com/359750/microsoft-responds-to-royalties-cut-rumor

Tommy McClain

 

[archangelmorph]

This should minimize xna's impact on larger scale games:

http://kotaku.com/359668/microsoft-cuts-indie-royalties-in-half

Not sure what Microsoft is thinking. I guess they really want to keep it indie, ie, keep a day job and perhaps make a game on the side. At this new royalty level it will be very hard to make xna games for a living now.

From my understanding & from people i'd spoken to this particular figure relates to XBLA game developers as opposed to XNA developers since the XNA royalty-scheme is yet to be finalized..

That's my understanding anyways..

I kind of figured maybe it was MS's way of discouraging further XBLA development by smaller independant studios (too many submissions already maybe?) as i'm not sure it applies to larger publishers looking to distribute their products on the platform (UbiSoft or Capcom for example.. please correct me if i'm wrong though..)
& in the hopes that MS could suck them into the XNA camp with promises of better royalties, IP retainment & as they put in their FAQ "incentives to keep these products exclusive to MS's distribution services"..

This is all theory however.. I'm yet to get proper confirmation on it.. Probably ask our tech lead when he gets back from GDC..

Edit: Thinking about it some more, it all seems to tie into my theory of MS wanting to raise .NET & XNA as a proper industry standardized solution for games development for the next generation of developers, hence MSs' aggressive push for getting XNA into universities & education establishments too..

 

[Shifty Geezer]

That's smart thinking archangelmorph. It all depends on the distinction made between XNA and Live! Arcade. And if the outcome isn't what devs want, they can always take their wares elsewhere!

 

[joker454]

How does that royalty compare with other download services though?

It's probably still better, I hear Real Arcade for example doesn't pay that high. But I'd argue thats not the point. Guys like me (and others) we're considering making xna our top priority and building a business around it, supporting a Microsoft platform fulltime. This latest half royalty revelation has totally torpedoed that idea.

Take a senior game developers relatively high salary along with all the perks associated with it including 401k (its dollar matching and huge tax benefits), paid vacation, royalties and/or profit sharing, bonuses, health plan, etc. Now look at the link with xna sales figures, take 35% of that number, divide it by a 4-10 people (whatever your team size may be), remove all the previously mentioned benefits, and account for taxes which are higher for independent contractors. Doing that math I can only come to the conclusion: Why bother?

So we won't. We'll keep it indie like Microsoft likes, doing bits and pieces here and there. If we have something put together in a year, then cool. If not, oh well.

On the plus side, there are some countries that can still make a good living off this. At a company I used to work at years ago, they would outsource small projects to teams in Chile, China, Russia, etc. In countries where salaries and benefits are still fairly low, then xna is still a godsend. I'd wager we'll be seeing some good xna projects coming out of those countries.

 

[iceberg187]

http://www.gamesetwatch.com/2008/02/xbla_royalty_rate_changes_clos.php

XBLA Royalty Rate Changes - Closer To The Truth?

- So, one of the big stories from earlier this week was Kotaku's one on Microsoft apparently 'cutting XBLA royalties in half', and it's one that has caused a lot of controversy, with plenty of predictable name-calling and insistence on the death of XBLA as a viable platform.

One of the problems here, of course, is that Kotaku's report only had one side of the story - and Microsoft isn't really in a position to refute the reports, because it will not discuss original or current royalty rates in public. Which leads us to a problem to be resolved - did Microsoft really cut its XBLA royalty rates in half without _ANY_ changes to the developer package?

The answer is no, of course. How Xbox Live Arcade works is badly understood by many, but let's try to split it up. Firstly, there are two different ways you can publish your game - either via Microsoft's own XBLA producers (let's call that 'first party'), or via an existing retail publishing partner such as Electronic Arts, Sierra, THQ, and so on (let's call that 'third party').

From what I understand, third-party royalty rates - which I believe were already less than 70% - are not affected at all by any of these new royalty changes. (Of course, if you're an indie and you have to go through a third-party, you will be getting a percentage of a percentage, because Microsoft takes a cut, and then your publisher, and then you. But you don't have to worry about testing, localization, getting ratings, and so on - it may be that Microsoft is keen for a greater percentage of games to run through those parties.)

So, it's the 'first-party' rates which are changing. And I didn't really have the specifics of how until an IndieGamer post by XBLA developer Paul Johnson helped counteract some of the paranoia. As he explains:

"If you had a 70% deal... for a game, then you'll get your 70% for the life of the product. There is now a sliding scale in place for royalty payouts that is sure enough less than 70% at its best, but I've always thought that 70% to be unsustainably high from the get go, not that I was going to complain about it...

In return for the more realistic but still commercially viable lower rate, you get a variety of services for free that would've cost you plenty and would previously have presented a barrier to entry. Worldwide [game] ratings, localization, etc. It's a good deal. Unless you think saying M$ makes you clever, in which case I'm sure it will suck."

So basically - yes, the rumor is essentially correct, in that some royalty deals on first-party games may now be as low as 35%. But these lower royalty deals will now apparently include a lot of the 'grunt work' in localization that the developer had to pay up front - and sometimes perhaps couldn't afford.

 

[archangelmorph]

http://www.gamesetwatch.com/2008/02/xbla_royalty_rate_changes_clos.php

Yeah but how much can localisation realistically cost?

& would that figure really validate nearly 35% losses by the developer per unit on a *really* great game that sold say over 1 million units at 1200 MS points for example (best case I know..)?

I'm not sure that it's as *sweet* a deal as this guy is making out & especially not across the board..

 

[Zassk]

The article said it was a sliding scale, so while 70% is no longer achievable, 35% is the worst-case. Personally, I don't know how we budding amateurs can really complain. If my XNA game is good enough to sell > 1 million units (sold, not just free demo downloads), then it would have been good enough to attract a publisher in the first place.

 

[Shifty Geezer]

On the plus side, there are some countries that can still make a good living off this. At a company I used to work at years ago, they would outsource small projects to teams in Chile, China, Russia, etc. In countries where salaries and benefits are still fairly low, then xna is still a godsend. I'd wager we'll be seeing some good xna projects coming out of those countries.

MicroSoft's grand plan to outsource gaming development to the East! It would actually be a boon to some economies, but I dare say MS will be resistant in opening development to these regions, just because everyone's resistant to them and they get everything last!

 

[mister slim]

Yeah but how much can localisation realistically cost?

& would that figure really validate nearly 35% losses by the developer per unit on a *really* great game that sold say over 1 million units at 1200 MS points for example (best case I know..)?

I'm not sure that it's as *sweet* a deal as this guy is making out & especially not across the board..

Even at a quarter of a million units at 800 points that's not a good deal. N+ cost $125,000 to make. 20,000 copies is breaking even. At 35% or even 45% the break-even point is rather higher, and the potential upside is rather lower. Seems like MS would rather depend on XNA for the quirky games and major publishers for the XBLA stuff.

 

[PARANOiA]

Even at a quarter of a million units at 800 points that's not a good deal. N+ cost $125,000 to make. 20,000 copies is breaking even. At 35% or even 45% the break-even point is rather higher, and the potential upside is rather lower. Seems like MS would rather depend on XNA for the quirky games and major publishers for the XBLA stuff.

Hang on a second... unless my maths is way out, how can you say a quarter of a million units at 800 points is not a good deal?

Let's look at N+. $125k to develop, 800 points which is I believe $10USD. If they were at the very bottom of the scale on the Live pricing (which we don't know!) they'd need to sell 35000 units to break even, right? ($10 * 35% = $3.50 per sale).

Now scale that up to your quarter-million comment, and you have 250,000 units. That's $875000 in revenue, or $750000 profit. That's a 600% return on investment if they were on the lowest possible teir. How can you possibly say that's not a good deal? Where are you investing your money where 600% ROI is a bad deal? I want in!

 

[Zassk]

Looking at the XBLA sales chart, a huge number of XBLA games have earned >$1 million. It looks very lucrative to me, even if MS takes 65%.

 

[Shifty Geezer]

Nice to see some numbers. Mean average is over 100k at $1 million gross. Variation is all over the place but if you could produce something of quality, you should be fairly safe at getting a decent amount of sales. If you were a one-man/two-man band, you might be able to eek a reasonable living out of it.

 

[joker454]

Looking at the XBLA sales chart, a huge number of XBLA games have earned >$1 million. It looks very lucrative to me, even if MS takes 65%.

Indie devs don't get access to ip's like Castlevania, Street Fighter, etc. As much as I would like to, I can't have Ken and Ryu in our game So that sales list is a bit deceiving as many on there rely on ip history and pedigree to boost sales, a perk you would not have.

Dev time it also longer than one would expect. I've asked friends about this and posted about it elsewhere, but it takes 4+ people 6 to 12 months to make a complete fully polished and qa'd xblive game. That number surprised me as well, but it comes from a company that has made numerous xblive games so I take it as accurate.

 

[mister slim]

Hang on a second... unless my maths is way out, how can you say a quarter of a million units at 800 points is not a good deal?

Let's look at N+. $125k to develop, 800 points which is I believe $10USD. If they were at the very bottom of the scale on the Live pricing (which we don't know!) they'd need to sell 35000 units to break even, right? ($10 * 35% = $3.50 per sale).

Now scale that up to your quarter-million comment, and you have 250,000 units. That's $875000 in revenue, or $750000 profit. That's a 600% return on investment if they were on the lowest possible teir. How can you possibly say that's not a good deal? Where are you investing your money where 600% ROI is a bad deal? I want in!

Sorry, that wasn't clear. The change in terms is not good for someone like Metanet who can fund localization and the other services MS is providing in exchange for the royalty cut.

 

[FutureCTO]

http://www.gamesetwatch.com/2008/02/xbla_royalty_rate_changes_clos.php

Here is another story on this topic. Pointing out that with royalty cuts on XNA, developers hope to make it on Wiiware for many other reasons, including that each development station cost's 1/4 what it does for XNA and PSN.

Plus: "The cost of making a game for WiiWare can be significantly less than that of an XBLA or PSN game, firstly because the hardware is a lot cheaper and secondly because the SDK Nintendo provides is very detailed," explains Nic Watt, Nnooo's creative director.

"It should be noted that we can purchase almost two to four Wii development kits for one Xbox 360 or PlayStation 3 one, which as you can appreciate for a small company can affect our budget a lot."

But beyond that most studios, in fact, say that they expect to make a sufficient return on investment which can in turn be reinvested back into production of more games for the service. "For us Pop, our first title as a company, is hopefully going to sell enough to allow us to move onto bigger and more immersive games," adds Watt. "We are a small company purely self-funded by myself. From here we want to use the proceeds Pop generates to fund more WiiWare titles which utilise more of the unique aspects of the machine."


"Nintendo has made it very clear to us that we'll not only be making a better royalty rate from WiiWare games, but we'll also have a better chance of selling games - the service won't be clogged up with the retro titles that have blighted the chances of many independent studios on Xbox Live Arcade," said one studio business development boss, speaking to Develop under conditions of anonymity.

Added another WiiWare developer, who also didn't want to be named: "Frankly, we're not looking at making games for Xbox Live Arcade because the service is full of shit," he said, pointing towards the service's number of retro remakes.

Those making WiiWare games agree that confining old games to the Wii Virtual Console channel will serve them in good stead as time goes on.

http://www.developmag.com/interviews/143/WiiWare-Week-Versus-Round

And here is what one developer's employee had to say.

"Hear, hear" My team and I recently finished work on a big next-gen SKU. As a sequel team had already started work, we were given the option of working on the following up, or putting a team together to target a downloadable title (I work for a big publisher with internal studios). But when we looked at the cost of XBLA, and the ROI, it didn't match up, so chose to start work on a prototype PC casual game instead - in time we might put it on XBLA, but only as a lossleader. WiiWare may well be a much more viable avenue for it.

http://www.developmag.com/news/29474/Nintendos-secret-war-on-Xbox-Live-Arcade-and-PlayStation-Store

There is a lot more across developmag.com but that is what I was trying to point out in the XNA faq thread. That Wiiware is making a much more affordable entry point and a more diversefied move in genre distribution.

 

[AzBat]

XBLA != XNA

Right now the XNA tools are free. The only charge is the $100/yr Creator Club membership. As for royalties, we don't the know the details since they haven't announced anything. So far everything leads to developers being given the choice as to whether or not they can charge for their games. How much they get to keep probably won't be known till the final wraps are taken off this holiday season.

Tommy McClain