Split Thread: Games & Profitability

[the ignoramus]

Yes the smoketrail for rocket launcher is stll there, other than that i am really enjoying the Beta. I was in the RFOM 2 Beta and the best thing about it was the Co-Op and the Chicago level but K2 is on a different level. So far its def a day1 purchase

I should bloody well hope so. Insomniac are great guys and R2 looks nice, but KZ2 has been in development for four years with rumoured 70 million dollar budget as of last January. It had better look appropiately impressive and it had better play better than the majority of its peers.

 

[DieH@rd]

How do they plan to earn back some of that money? Even if they sell 4-6mil copies, they will not make enough $.

Maybe they will sell engine to other devs or outsource few expansion packs?

 

[the ignoramus]

I wouldnt be surprised if that game's budget was equal to GTA IV's when all is said and done and it's all because of the goddamn CG trailer from 2005.
That's the trailer that kick started the "war" between the PS3 and 360, Sony made the KZ2 a symbol for the PS3.
If KZ2 comes up short in any category, Sony loses face, which is why they are apparently willing to sink colossal amounts of money and time into the sequel to a very bad game. (Liberation was great, but KZ1's stench lingers)
If that trailer didnt exist, we'd probably have the game by now.
How much does a publisher make from each game sold? How much revenue does 5 million shipped units generate?

 

[Shifty Geezer]

The console company as publisher gets the full net revenue, without the loss of license fees. So on a $60 title, the retailers get their cut, the manufacturers and distributors get theirs, and everything else would be Sony's. Probably in the region of $40 is my guess, perhaps down to $30? 5 million sold would be $150 million. You'd also need to factor in console-shifting potential. Halo wasn't just a great investment for software sold, but it was responsible for a lot of XB's being sold. Which in that case actually cost MS money, but on other hardware, the longterm benefits are probably there

 

[Acert93]

The console company as publisher gets the full net revenue, without the loss of license fees. So on a $60 title, the retailers get their cut, the manufacturers and distributors get theirs, and everything else would be Sony's. Probably in the region of $40 is my guess, perhaps down to $30? 5 million sold would be $150 million. You'd also need to factor in console-shifting potential. Halo wasn't just a great investment for software sold, but it was responsible for a lot of XB's being sold. Which in that case actually cost MS money, but on other hardware, the longterm benefits are probably there

You missed marketing.

Halo 3 had a huge marketing budget and if Killzone 2 wants even half of those sales they will need to have a massive marketing push (one in which you don't see PS3 owners complaining here about how Sony failed to market the game correctly as well). Of course shifting units is a different game in 2009 at the PS3's price point with market saturation occuring at certain price points as well as the aggresive price down we are seeing.

 

[AlNom]

You missed marketing.

Surely the $70M rumour includes marketing budget?

 

[Cheezdoodles]

You missed marketing.
.

Marketing budget for Halo was reported to be around 10 million.

So making these huge 50-150 million dollar games can still pay off.

Considering how many consoles a very hugely hyped game can sell, it can be very profitable for first parties to go that route. It also gives them these huge difersification boost with unique games that can be very big selling points for the console itself.

Besides, since the $50 million is to be divided by 3-5 years. The investment needed isn't even that big if we factor in time-value-of-money:

A 50 million dollar budget game only costs 40m (3 years) 36m (4 years) 20m(5years)
A 100 million dollar budget game only costs 80m (3 years) 75m (4years) 69m (5 years)
A 150 million dollar budget game only costs 118m (3years) 112m (4years) 106m (5years)

Discounting at 10%

 

[AlNom]

Mod Note: Split because it was going OT in the KZ2 thread, and it seemed good. And good is good.

 

[vazel]

KZ2 is a console-peen contest I think Sony would be willing to bear some loss on it if they have to. Their marketing campaign better be nothing less than glorious.

 

[RancidLunchmeat]

I don't think the question is really whether or not Sony would be willing to lose money at this point, but whether or not they necessarily have to.

Is it realistic to be hopeful for them to recover their investment just on software sales? Or has that train already left the station and all they can hope for is an impact on shifting units?

 

[Arwin]

I don't know, but somehow I doubt that the game has had something like 150 people working on it for four years. I don't think production kicked into such a high gear fully until early 2007, probably? Am I way off base? I seem to remember that they had a hard time getting enough qualified people in the Netherlands, and I think a fair few people from all over the world ended up working in the Netherlands as a result - but I'm sure it took a while before they had a proper team up.

 

[dobwal]

Marketing budget for Halo was reported to be around 10 million.

So making these huge 50-150 million dollar games can still pay off.

Considering how many consoles a very hugely hyped game can sell, it can be very profitable for first parties to go that route. It also gives them these huge difersification boost with unique games that can be very big selling points for the console itself.

Besides, since the $50 million is to be divided by 3-5 years. The investment needed isn't even that big if we factor in time-value-of-money:

A 50 million dollar budget game only costs 40m (3 years) 36m (4 years) 20m(5years)
A 100 million dollar budget game only costs 80m (3 years) 75m (4years) 69m (5 years)
A 150 million dollar budget game only costs 118m (3years) 112m (4years) 106m (5years)

Discounting at 10%

Huh?

A 50 million dollar budget game costs 50 million dollars regardless of how many years it takes.

Plus, you're examples shows a reduction of buying power over time not a savings.