KZ2 and game budgeting in general *spin-off

[obonicus]

But the regardless of the number I am fairly sure that that budget didn't included shipping, etc. Marketing not so sure, but given the amount of marketing it might not be factored in (I am only judging from heresay as I haven't seen a single KZ commercial over here.). [I'll gladly be corrected by someone with publisher experience]. So the point I am trying to make is (even if you leave out the game budget) the "profit" (the return you see after above factors have been subtracted) is not $ 40 per game.

Then are we saying that the retail chain markup, from wholesalers to the final store is 50%, from $40 to $60? I honestly don't know; I've seen numbers, but they too were guesses.

I had seen numbers that suggested that 3rd parties, once retail/logistics gets their cut, once licensing fees are resolved get about $25-35 for a game (now, this was several years ago, so they might've even be referring to the old $50 price tag). Considering we don't even know the licensing cost, this discussion becomes more and more pointless. A 50% markup purely for retail does seem excessive.

My point is that the $40 may be after shipping and manufacturing costs are taken care of, unless someone can affirm that yes, the markup is that big.

 

[wco81]

Wouldn't the KZ2 engine likely be amortized over more than just one game?

If there is a KZ3, it should not take as long to develop?

 

[betan]

I don't know about the $ 50 million number, so I'll stay clear of that. It's probably extrapolated from other big budget titles.

IIRC, $50 million number initiated from a blog post which reported a rumor regarding doubling initial budget of $25M a couple years back.

But the regardless of the number I am fairly sure that that budget didn't included shipping, etc. Marketing not so sure, but given the amount of marketing it might not be factored in (I am only judging from heresay as I haven't seen a single KZ commercial over here.). [I'll gladly be corrected by someone with publisher experience]. So the point I am trying to make is (even if you leave out the game budget) the "profit" (the return you see after above factors have been subtracted) is not $ 40 per game.

As obonicus said, I didn't mention profit nor excluded marketing though it wasn't clear.
According to Forbes, retail pays ~$48.
Of that ~$1 is for distributor to keep (transportation etc), another couple of dollars for printing and packaging ($3 for Gears at the time, maybe slightly more for BD _now_).

The rest goes to publisher (Sony), platform owner (Sony) and developer (Sony) in hopes of covering development (including 3d party licensing and other stuff) and marketing costs. Whatever left is pretty much profit (or loss).

I think when you factor in the Euro margins and discs on the shelves, 1 million sold to customer leaves a pretty healthy marketing budget.
Whatever the case (as we don't know those exact numbers), the situation is far from 20% (even with the assumption of rumored $50M).

In fact, Heavenly Sword being a bomb (financially) seems wishful thinking as well.

edit: I keep forgetting, but some of the development cost of KZ2 is also an investment beyond KZ2 sales.

 

[the ignoramus]

This "50 million dollar" stuff seems like bullshit to me.
Shu Yoshida has said in an interview that GoW III was Sony's most expensive game, with a budget of 40 million.

 

[wco81]

You would think GT5 would be the biggest budget.

But they're taking so long to come out with it that you wonder if the demand will remain.

 

[StefanS]

Wouldn't the KZ2 engine likely be amortized over more than just one game?

Of course, we just looking at it from the perspective that KZ2 has to break even.

 

[patsu]

I thought one GG interview mentioned that KZ2 was under development for 2.5 years ?

 

[StefanS]

As obonicus said, I didn't mention profit nor excluded marketing though it wasn't clear.
According to Forbes, retail pays ~$48.
Of that ~$1 is for distributor to keep (transportation etc), another couple of dollars for printing and packaging ($3 for Gears at the time, maybe slightly more for BD _now_).

The rest goes to publisher (Sony), platform owner (Sony) and developer (Sony) in hopes of covering development (including 3d party licensing and other stuff) and marketing costs. Whatever left is pretty much profit (or loss).

I stand corrected then. If we're being conservative, we could assume a revenue of 43 $ (to leave some headroom).
I guess it all hinges on if the marketing budget is factored in the reported 50$ million.

I tried to dig up number on the KZ2 marketing campaign but, all I could find were the numbers for the UK alone (GBP 2 million). So I'd that the global marketing budget is well in excess of 20 million dollars.

I think when you factor in the Euro margins and discs on the shelves, 1 million sold to customer leaves a pretty healthy marketing budget.
Whatever the case (as we don't know those exact numbers), the situation is far from 20% (even with the assumption of rumored $50M).

Yeah never doubted that the 20% number is too low.

 

[Asher]

I thought one GG interview mentioned that KZ2 was under development for 2.5 years ?

Which would be completely nonsensical, unless you truly believed they did virtually no work before the CG teaser trailer?

 

[patsu]

That's what they meant by pre-production, dude. I supposed they don't need the full team while they figure out the look and mechanics.

The Ico team takes 4 years to make a game too. I'd imagine the team size grows from a small number to hundreds towards the end. The KZ2 CG was "merely" a one-off outsource job remember ?

OTOH, Shuhei killed 8-Days before it went into production to avoid the large development investment.

 

[wco81]

Why would anyone root for companies to NOT invest big in some games?

From the perspective of consumers and those in the industry, isn't it generally a good thing that big projects are funded?

Maybe some of these ambitious attempts are commercial and critical failures but should the industry stop aiming for the stars?

 

[patsu]

If they planned the finance based on a longer term view, some people may invest a little more in the "infrastructures" (KZ2 engine + some assets, detailed Gran Turismo car models may be reusable). It's a risky move.

One million KZ2 sales in such a short time should be above average. Nonetheless, KZ2 sales is probably a great disappointment to Sony in general.

It's interesting that a few people insisted that KZ2 is nothing special and yet must take a full 4 year production to make. The truth is probably somewhere in-between.

 

[joker454]

From the perspective of consumers and those in the industry, isn't it generally a good thing that big projects are funded?

I think it's more important that big projects be profitable. For example, I'm currently thinking of changing jobs and I'm talking with two local shops that are PS3 exclusive. The thing is, with all the negative financial news about Sony lately I can't help but ponder to myself, how long can they keep funding all these studios? They have an enormous payroll, many are big names that you all know, but they have many smaller places that have yet to turn a profit. It's a nagging concern that I can't shake, that they just may decide to start dropping studios one day. That's partly why, especially as of late, the profitability of Sony studios has become of interest to me. I'm trying to understand the long term viability of them funding all these studios worldwide and wondering if one day the hammer will just drop. I would have preferred that KZ2 sold 5 million copies, that would have validated their strategy to an extent. But it hasn't...so what are they thinking now? Stay the course, or scale back?

It's interesting that a few people insisted that KZ2 is nothing special and yet must take a full 4 year production to make. The truth is probably somewhere in-between.

From what I see KZ2 doesn't use much middleware, meaning that they had to invent all the tech and tools themselves in house. That takes a reeeeeealy long time.

 

[patsu]

From what I see KZ2 doesn't use much middleware, meaning that they had to invent all the tech and tools themselves in house. That takes a reeeeeealy long time.

That's besides the point. Despite the ambition to build a new engine and game from scratch, Project Offset team size is small initially right ? The reeeeeeeeeeeeeely long time argument just proves my point. Do you need a full team of production artists for 4 straight years to develop the engine ? No. Then, how many top notch SPU programmers do you think they can find to use up tens of millions of dollars in the early days ? Not to mention some of these techs are shared with other teams.

EDIT: Plus it's patently false to say that GG had to invent all the tech and tools themselves in-house. We already know they at least use Illuminate Lab's tool to bake some lightings into the assets. They probably did splurge on the sound production, mo-cap and cleanup, etc. It's an expensive production no doubt (because of the pristine quality), but I think we want numbers from GG and Sony themselves. What we have so far are hearsays, inaccurate speculations and biased guesses.

I'm trying to understand the long term viability of them funding all these studios worldwide and wondering if one day the hammer will just drop. I would have preferred that KZ2 sold 5 million copies, that would have validated their strategy to an extent. But it hasn't...so what are they thinking now? Stay the course, or scale back?

Or change their product marketing and management approach. According to early Sony interviews, their internal game approval process is different from others. They were also spread too thin across many projects. Shuhei might have changed some of that already (I don't know). Besides the cancelled 8-Day project, we'll probably see more of his influences later this year or early next.

 

[wco81]

One thing you have to say about the PS3 exclusives so far is that they're all for the most part new IPs. It's unusual in this industry to bank so much on new titles rather than sequels of proven, established titles.

Perhaps that was strategically a mistake. Perhaps they would have been better pouring that money into GT and paying off Square and Rockstar/TakeTwo to make FF and GTA exclusive to PS3, and accelerate the development of GT5 and FF.

What's selling well on the HD platforms are sequels and shooters, i.e. projects which were relatively low-risk and creatively weak. Perhaps Sony thought they could create new properties or maybe they thought they could make any new genre successful.

Little did they know that the route to success in this generation would be shallow games like Wii Sports with a gimmick controller.

 

[obonicus]

It's interesting that a few people insisted that KZ2 is nothing special and yet must take a full 4 year production to make. The truth is probably somewhere in-between.

To be fair, I don't see people saying that KZ2's graphics aren't technically impressive, but rather that they don't like the look.

 

[patsu]

To be fair, I don't see people saying that KZ2's graphics aren't technically impressive, but rather that they don't like the look.

They are there, but I'm not going to dig them/it out (Too damn time consuming given my current schedule).

 

[tha_con]

Sony's 1st party studios don't have to make tons of money in gang busters. The internal technology they create will be reused over and over again.

I'd almost say the budget for Uncharted 2 is significantly smaller than the Budget for Uncharted 1. The Budget for the inevitable Killzone 3 will be considerably smaller as well.

Too many people are being irrational thinking that the initial spending on these games only serves the purpose of that single title, and all the technology will be put to waste soon after.

Sony spent money on KZ2 to further develop their EDGE tools, which also become available to 3rd parties. It's not like the money spent on KZ2 was EXCLUSIVE to KZ2, and is now "money wasted" if the game doesn't turn a profit. That's a ridiculous notion to believe, in fact, it's nothing more than foolish internet banter.

 

[obonicus]

I think it's more important that big projects be profitable. For example, I'm currently thinking of changing jobs and I'm talking with two local shops that are PS3 exclusive. The thing is, with all the negative financial news about Sony lately I can't help but ponder to myself, how long can they keep funding all these studios? They have an enormous payroll, many are big names that you all know, but they have many smaller places that have yet to turn a profit. It's a nagging concern that I can't shake, that they just may decide to start dropping studios one day. That's partly why, especially as of late, the profitability of Sony studios has become of interest to me. I'm trying to understand the long term viability of them funding all these studios worldwide and wondering if one day the hammer will just drop. I would have preferred that KZ2 sold 5 million copies, that would have validated their strategy to an extent. But it hasn't...so what are they thinking now? Stay the course, or scale back?

Well, on the other hand, it's not like a string of successes guarantees a company's health either these days. It helps, though, and it does seem like Sony's strategy is to depend far more heavily on first-party titles. But I do agree that small, underperforming studios will be shutdown. Which small, Sony-owned studios do you mean, though? Evolution? They're the only first-party studio I can think of with a distinctly underperforming title. Though Sony still seems to believe in the franchise, with the PSP/PS2 game coming later this year, and MS2 was very technically solid.

I mean, there are other underperforming first-party games, but it seems like they're mostly by third-party studios under exclusive contract. In which case I'm sure Sony will stop cutting checks to them and we may see a Factor 5 all over again.

 

[wco81]

Well if Sony cuts back, what else do they have?

Are they going to rely on third-party titles? At this point, they're getting second-class treatment from third-parties and why would anyone buy PS3s instead of 360s to play 3rd-party games?

If Sony retrenched and didn't take chances on the next LBP or the next Team Ico game but instead tried to make yet more cookie-cutter FPS games, is gaming really better off? Maybe more profitable but better?