Study: Average dev costs as high as $28m

For most multiplayer games, gamers wouldn't accept having the player base split every year. Yes, Call of Duty does that apparently but that is the exception to the rule.

Also, if you're making the games all at once then how do you decide which features go in the first game and which ones you'll only put in the third game? This would get especially hard for multiplayer games where every sequel adds or improves things.
 
Making people buy your second game in similar (or preferably larger) numbers means that you have to significantly improve the experience. Nobody would pay you for playing the same game three times, that should be obvious.
What a great game with good storyt and graphics doesn't sell games ? madden , tony hawks , guitar hero's , call of duty are all the same games each year. Some things get added but yo ucan still do the same with a planned trilogy. After all you learn alot while programing the 2nd and 3rd games should get better graphics due to more textures and models and animations done through the development process

Making the game better can mean several things, like improving on existing things and adding all kinds of new content.
The first part absolutely requires feedback and experience from the first game and thus it means you can only start the second game once the first is released. Look at how Gears of War 2 has significantly improved even the main characters and the engine as well. Would it have been as successful if Epic just re-used the same engine and content?
The second part also means that either you co-finance two art teams of the same caliber or wait until the one team completes the first game. One year is just not enough to fill up a game with new levels, enemies, weapons and stuff.

Goew 2 could have been very sucessfull and could have been released much sooner had they reuced the same textures , models and other features and gamers would have still eaten it up. You wouldn't be making new levels and enemies and what not in just a year. They would be made over the whole development process . There would be no idle time when artists stop creating and move to other projects. Look again at mass effect 2. The normandy , citidal and other places are all there in the game again and most likely bioware had to pay to make them again.

However, gearing up full scale production of a new IP with two entire teams is clinically insane. You risk wasting two times the money if the first game fails.

Let's look at it from another angle. Would Mass Effect 2 be such a critical success if it had the same main elements, but just with a few new planets? Because that's what your approach would get them.

I think my approach would get them alot more. cod4 to cod 6 was 2 years of development. That included multi and single player . With my system part 2 and 3 of a trilogy would be in various states of completion by the time part 1 shipped. So an additional year of development would surely get a second one out and 2 years would get a third one out.


I'd also like to remind you that Lord of the Rings wasn't 3 movies made at the same time at all and your assumptions here aren't exactly right.

Live action photography involved a LOT of reshoots and pick-ups, because Jackson kept rewriting the script based on his experiences and the reception of the movie. Complete sequences like the ents' siege of Isengard were added months before the premiere of the actual movie.

Also, Weta has worked on the movies sequentially - they only started with TTT once FOTR and its Extended Edition were completed. Gollum was completely re-designed ~8 months before the second movie's release. The visual effects suffered a lot because of this, there were huge amounts of rushed shots with bad compositing of blue/greenscreen elements and so on.

And the reason he was allowed to do this was because he made the entire starting investment back with just the first movie. He realized that he could make better sequels with more resources and work than what was originally planned, and ended up changing almost everything. There's a reason no studio has attempted to work the same way - it is very, very inefficient and risky.[/QUOTE]
 
I'm not following.

You set up a trilogy and you go to work. You have writers making a trilogy from the onset. of course game one gets a higher priority but all are worked on.

You have programers creating an engine to be used on all 3 games. You have artists creating art that will be used on all 3 games and models and animations and what not.

You start in 2010. In 2013 you release the first game. Since game 2 is reusing the same art , engine , animations and what not you release it in 2014 , you then release part 3 in 2015. If the first 2 games at that point are have sold very well and warrent a 4th , 5th and 6th game you look at the market. IF its a console game and hte generation will be over by the time the 4th game ships you move target platform . And you have to start from scratch. If you however you started early in a generation you might get lucky and can have the next 3 games come out on the same platform using the same assets as the first 3.

What you've just described are typically considered expansions or DLC (for short mini-expansions). Reusing the exact same resources virtually unchanged. And even THEN, those things are started usually until after the main game has been finished.

Funding enough artists/level designers to work on 3 complete games simultaneously would be financial suicide for the first studio to attempt it.

Here's the best real life example I can give you using by far the most successful developement studio in existence in the PC world (not a single title failed to sell blockbuster numbers for the timeframe the game was released). And all their titles spawned 1 or more expansions which also sold in blockbuster numbers.

Studio: Blizzard.
Game: Starcraft 2.

Is going to be released as a trilogy. Main game featuring Human campaign/storyline. 2 "expansions" featuring campaign/storylines for the other two races, Protoss and Zerg.

Currently looking at 4+ years dev for the engine + human campaign. Projected each expansion for Protoss/Zerg will be 1-2 years each. Using the EXACT same art resources.

Already there is outcry from many gamers complaining that they won't release all the content at the same time.

Blizzard cannot release the content at the same time because the content for the Protoss and Zerg won't be even remotely complete and in any station other than possibly storyboarding/concept's of levels/outline of the story.

Blizzard has oodles of cash and can (unlike any other studio) pretty much do whatever they want. And even THEY cannot finish 3 games in the time it takes to finish 1 game. They can't even finish 1 game and 2 expansions in the time it takes to finish 1 game.

Arguably the most successful studio on the planet.

Regards,
SB
 
Blizzard cannot release the content at the same time because the content for the Protoss and Zerg won't be even remotely complete and in any station other than possibly storyboarding/concept's of levels/outline of the story.

Blizzard has oodles of cash and can (unlike any other studio) pretty much do whatever they want. And even THEY cannot finish 3 games in the time it takes to finish 1 game. They can't even finish 1 game and 2 expansions in the time it takes to finish 1 game.

Arguably the most successful studio on the planet.

They have an especially hard time shipping more than one title within a given window of time. Generally, it's all hands on deck when it gets close to ship.
 
Profit margins

From an earlier post i understand that nowadays one can expect a return of investment of around 70%. This figure is then used as a negative, compared to a few generations back when it would be as high as 700%.

Now, assuming these figures are real. And even if they are inflated and we can say 50% now and 350% back then...

Are we saying that a ROI of 50-70% is bad? Because i would love to make a bad investment like that!

Sure, development costs are high these days, and sure you might have the bombs here and there which make a loss, but the videogame industry has obviously been on the radar of many hungry investors lately, because of the potential ROI, otherwise the industry itself would not have grown to the level it is now. On top of it the videogame industry has proven itself to be pretty much recession proof.

MS and Sony and everyone else aren't doing it for love, they are in it for the money and they bloody well should be. Try investing in a company where the best ROI you can ever expect is between 3% and 7% (when things go really well), then you can complain about high videogame development costs! It's all relative.
 
I think you got something wrong...

70% of games cannot even make their development costs back, far from producing any profit at all!
 
I think you got something wrong...

70% of games cannot even make their development costs back, far from producing any profit at all!


Mmm...

As someone noted previous in that climate your potential return on investment for an average titles was about 7:1. Meaning for every one dollar invested you had a fair chance to get 7 dollars back.
[...]
Now, all that equates to far FAR higher dev costs. We're talking going from 10's of thousands to 10's of millions. Higher packing, administration, facilities costs. And so we end up with an industry average of return on investment of 1.7 dollars for every dollar spent, IF you manage to have a blockbuster.
 
Even that percentage is only for titles that are not only financially successful, but a bockbluster. And this 70% average profit has to pay for all the bombs as well!

Obviously games like the COD series are a rare exception; that 70% is more likely for a Bioshock or a PS3 exclusive.
 
Even that percentage is only for titles that are not only financially successful, but a bockbluster. And this 70% average profit has to pay for all the bombs as well!

Obviously games like the COD series are a rare exception; that 70% is more likely for a Bioshock or a PS3 exclusive.

I blame the... lazy developers... ;)
 
I serious doubt those ratios and numbers especially used in conjunction because they don't make sense.

If 70% of all titles failed then how can a pub get by with 1.7 return on average on their blockbusters. Your average blockbuster wouldn't even support a sequel with the same level of investment nevermind paying for the 70% of titles that were published and failed to generate any profit.

How big is the 360's library now? 400-500 full fledged titles? 70% would put profitable 360 titles at about 120-150 titles or 30-35 profitable games a year over the last 4+ years.

I bet the reason 70% of games failed to reach profitability because the 70% of dollars invested went to the 30% that did reach profitability. Meaning that a vast majority of failures were games that had very small budgets and lack the proper resources to succeed other than by luck.
 
The short answer is that they don't get by.

EA did not have anything more successful than that average 1.7 ROI for more then a year, and they suffered for it. Their new franchises have failed to break through, their old ones are not selling well either. Layoffs, losses, whatever you want.
MS and Sony are a more mixed bag, Halo's always a good money maker even if the rest of the franchises aren't that strong. SCE exclusives haven't really produced anything that big yet, but they can take some more losses for a while longer.
Ubisoft has a few good franchises; Assassin's Creed 2 is around 6 million units by now. Activision has been on the roll for years with COD and Guitar Hero. THQ has suffered in the past years considerably; but TakeTwo does fine thanks to GTA and their sports franchises.

Konami, Capcom and the rest of the japanese publishers have enough moderate successes to support themselves. Square on the other hand closed down a few studios they've purchased via the Eidos takeover. And I guess I don't have to get into how Nintendo's doing.


Also, about your example, just take a look at how many million+ sellers the 360 has: about 80-90 from the actual grand total of those 4-500 titles. Assuming that some of the sub-million sellers are not AA budgeted and some have made a profit, it's still about in line with the 30%-70% ratio.
And the 360 is an extremely profitable platform with very good software sales and attach ratios!
 
EA's losses aren't entirely due to the performance of their games. In their latest report their losses are actually down, dramatically, though they do still seem to think that they'll continue losing money. EA is consistently successful, they just have a ton of costs elsewhere. It's even a bit humorous that you mention EA's franchises not doing so well, just about the time EA announced the latest FIFA game having done nearly 10 million copies WW.

A prediction I caught from GAF from Sidhe's managing director is that we'll probably see a bunch of small studios die after GDC.
 
Well, I haven't looked that deep into their financials, but I know that Mirror's Edge and Dead Space weren't selling that well, NFS and MOH neither, and SIMS is on the decline too. The new Army of Two and Dante games don't look like blockbusters, either.
FIFA seems to be the cow that keeps it going, then. They certainly aren't doing well.
 
Mirror's Edge was 2008, though. Dead Space Extraction was an amazing bomb (something like 9k in NPD). NFS isn't great, and they're rebooting MOH. As for Sims, it might be on decline but it was at about 4 million in August and I'd bet it's kept a pretty steady clip since.

Army of Two we'll have to see on Thursday. The first one did incredibly well for new IP, but no one was too crazy about this one, and from what I can tell it didn't demo too well. Dragon Age was a success, though. And I don't know enough about Dante. Bayonetta and Darksiders managed to net around 1.2 million copies a piece so far, so there's some life in the 'action chop stuff up' genre.

Don't forget EA Sports Active, which did quite well as well. EA is more surprising in that it has a bunch of games that perform solidly (even Mirror's Edge got past 1 million) but they still hemorrhage money. They don't have Activision's mega-blockbuster hits, but their biggest new IP (or non-'Hero', non-WoW, non-CoD IP) in 2009 was what, Prototype?

I have no idea how their MMOs are doing; Mythic was chopped up and sent to live with Bioware, last I heard. You can make money on MMOs with userbases of 50-60k (City of Heroes was/is quite profitable for NCSoft, as an example, as is EVE) but I'd bet WAR had a lot of costs to recoup.

EA also cut a bajillion jobs and shuttered a whole ton of studios. It's hard to tell how much of it was actual fat and how much was a sign of poor health. (I am curious about whether Maxis is actually being shut down, if there were anyone, say, a mod, who might have an idea about such things.)
 
Dante's gotten far lower review scores so far, and it doesn't have many redeeming qualities. Except for boobs, maybe.

Anyway, the point still stands - even among the few big publishers that have survived the past 5 years, we can find quite a lot that are suffering, because of the low success rate of video games. EA is just one of them, Sony and THQ and Eidos (before the Square purchase) and a few others aren't doing that well either. And the overall sales of X360 titles seem to support the 30% average success rate too.
 
I serious doubt those ratios and numbers especially used in conjunction because they don't make sense.

If 70% of all titles failed then how can a pub get by with 1.7 return on average on their blockbusters. Your average blockbuster wouldn't even support a sequel with the same level of investment nevermind paying for the 70% of titles that were published and failed to generate any profit.

The 1.7 return isn't the average for Blockbusters.

The 1.7 is the average when a title turns a profit. So that includes the product that makes only 1% profit (which would be considered a corporate loss actually, as it wouldn't cover day to day operational costs) as well as the blockbusters.

Also a title could incur a loss and yet still foster a sequel. If the first title also incurred significant costs for engine and art developement. If they then forcast that with the same or slightly lower number of sales they could have made a profit minus the engine and art costs, they might give the go-ahead for a sequel.

Regards,
SB
 
One thing is for sure, an industry doesn't grow this steadily if there is no profit to be made, or if only a few players (the "blockbuster makers") make money.
 
Coincidentally, the growth has kinda stopped in 2008.

Not at EA. Revenue has grown 36% from fiscal year 2007 to fiscal year 2009, while R&D has grown at a 30% clip. However, revenue costs has grown 65% in that time period. In 2009, R&D costs were 1.4 billion while revenue was 4.2 billion.

Its not development costs that are killing EA.
 
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