I guess it comes down to whether you think the Microsoft investment will lead to a better product. Is the Microsoft money in addition to what they would have funded internally, or is it Microsoft paying a % of the total? It changes the story from the SE side. The first situation, they're risking delaying on other platforms to release a better product, which would hopefully lead to more sales in the long run. The second situation, they're being incredibly financially conservative, taking a risk delaying late on the other platforms, just to lower the bottom line. There is probably some middle ground, and that's likely the situation. From the interviews it sounds like Microsoft is investing in development as well as marketing. If you choose not to believe that, then you're likely to believe the second option, where SE is just using the money to lower their bottom line. Opinions will probably follow party lines quite nicely.
Tomb Raider exclusivity fallout thread *spawn
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Deleted member 11852
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It was more of a post in jest, if you check the L.A. Times article they in turn quote OnLive, who no doubt did extensive research on the economics of the costs of games as they were going out of business
What surprised me the most of the platform holder royalty. $7 a game! Wow. GTA V sold about 16m each on 360 and PS3 so that was $112m apiece for Microsoft and Sony.
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Deleted member 13524
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Hum.. Notice who presented that study.. it was OnLive, during a presentation to promote their game streaming services. That's a defunct company which by then was raging war against the consoles and retail market. I would take those numbers with a grain of salt.
There's $15 of retailer margin and $4 for ditribution and BoM, That much is granted, ok.
But then it's $7 of platform royalty. I'd say this number definitely isn't the same for all games.
And $7 on returns?! Maybe they made an average using all the returns of crappy titles that were made for the Wii out of sheer disappointment, but I can't see Tomb Raider getting that amount of losses out of returns...
Besides, those numbers are USA only. I don't know of many stores here (in Europe) that even accept returns for videogames and movies.
One of Europe's largest retailers, Mediamarkt, certainly doesn't.
And now the digital sales are also coming in pretty strong this generation. I'd say the percentage going to the publisher is even higher here.
Maybe the actual number isn't exactly $40 (I don't know where but I definitely read this number somewher), but I doubt it'd be much less than $35.
I think you're missing a link here..
L. Scofield
Veteran
I don't see the big deal. It's just a temporary exclusive. And of course they won't announce for how long the deal lasts since they don't want an incident similar to RE4 which was announced for PS2 just a month before it released on GCN.
If anything something like Bloodborne is way worse, they take a successful multiplatform developer and pay them to make exclusive content for a single platform, permanent exclusive content.
If anything something like Bloodborne is way worse, they take a successful multiplatform developer and pay them to make exclusive content for a single platform, permanent exclusive content.
This is why hardware sales at a profit are not the most critical factor and why you hear the platform holders looking at (and touting) software attach rates, this is all the matters to them.
Soz. Updated. I've never heard 2/3 of the value of a disk, or anything like, going to publisher. I've always taken it to be about a third from bits I've seen and heard here and there. So even a comfortable 50% seems implausible to me.
That's also per disc printed, which includes units not sold. At least it used to be that way, and I don't know that it's changed this gen. This is why producing a disk was so expensive and limited to larger publishers.
Ironically this is where the original XBOX DRM scheme would assist - the publishers could have forced that to licenced per activation.
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Deleted member 11852
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Microsoft would lose what the publishers save
From what I read Valve gets something like 10-15% per game but I honestly cant' find a reliable source.
Maybe Sony and MS ask less, maybe not, it's hard to tell.
Obviously Sony, MS,EA, Ubisoft, get 100% out of every "proprietary" game they sell on their stores.
Though valve takes a 30 per cent cut of Steam sales
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It's a mystery at this point. Although if we look at the breakdowns, we can see an obvious 27% not going to the retailer. Throw in no printing or distribution costs, perhaps 30% overhead saving on downloads (how do they justify RRP prices then?!). I don't know if the console companies charge a flat fee or a percentage, and unless they release that info themselves, it'll be forever shrouded in NDA mystery.
One of the benefits of the deal with Microsoft could be a reduction in the royalties paid per disc. So beyond straight cash injection, there could be other financial benefits that allow them to make more money per sale.
It would be interesting to see how much money they make per disc, to get some idea of how much money Microsoft would have to give them to make it worth their while. And also to figure out at which point the whole venture becomes a huge financial loss for Microsoft.
It would be interesting to see how much money they make per disc, to get some idea of how much money Microsoft would have to give them to make it worth their while. And also to figure out at which point the whole venture becomes a huge financial loss for Microsoft.
I'd have thought MS offering the marketing budget ($50 million?) would be incentive enough. More money, whether cash or licensing reduction, would start to eat into MS's profits. Are they really wanting to spend out additionally on this deal? Just marketing, it's no loss to MS (as Dave says, they're going to spend on advertising anyway, so they can just make some of the XB1 marketing TR focussed). Effectively it's 'free' promotion for MS having TR as an exclusive they can promote over Christmas, and it's 'free' promotion for SE to have MS do this. Anything more than that would be overkill.
I suppose SE might look at the negative of the exclusive and want some form of compensation. If they present MS with a realistic expectation like, oh, I dunno, 6 million day one sales that they'd get if they were cross platform, they could try and press for some better value to make up for the loss in only selling 2 million units until they cane release later.
That's all going to remain theoretical. We'll never get those details. Not unless we engage in industrial espionage.
I suppose SE might look at the negative of the exclusive and want some form of compensation. If they present MS with a realistic expectation like, oh, I dunno, 6 million day one sales that they'd get if they were cross platform, they could try and press for some better value to make up for the loss in only selling 2 million units until they cane release later.
That's all going to remain theoretical. We'll never get those details. Not unless we engage in industrial espionage.
Silent_Buddha
Legend
If you consider that they (CD) want to maintain the scope of the first game and improve on not only that but the graphics as well (to better suit Next Gen, IE - better than the redone TR reboot), then the costs are likely going to be the same or higher. Sure they might be able to reuse some assets, but I'm sure they'd like to improve most or even all of it.
1/3 is a good rough estimate. Depends on the sales, it could be around that or it could be drastically lower due to having to cover the cost of unsold units.
That can compound a bad problem. Let's say SE budgeted for the 5-6 million in sales in the first 4 weeks, so basically maximum price. If they then only sell 3 million in that time frame that means that unless they sell the rest of those before the title is discounted they'll now be taking a significant loss on the title until they sell more than the projected units. That is also then compounded by storage of said product (product in storage not only sits there but costs the publisher money).
So while selling 5-6 million in the first 4 weeks likely would have recouped the investment with future sales generating profit. Now, 5-6 million in 1 year would likely be a loss. The longer it takes to sell copies the larger that number needs to be to break even. Especially as the price generally gets reduced in order to move more copies, compounding the problem. Also the longer it takes to generate sales, the more used sales become a factor taking away from revenue and making it harder to recoup the investment in the title.
After all, there's a fixed cost with regards to production, packaging and distribution per unit. But that's only a part of the real cost.
Now take a look at this...
http://www.gameinformer.com/blogs/m...re-enix-big-franchises-but-little-profit.aspx
Sleeping Dogs, Hitman, and Tomb Raider have critical success but not financial success. Company is losing money. What product actually made them money? Localization of COD: BO2 for the Japanese market and Smartphone games. They flooded the Final Fantasy fanbase with too many games in too short a time. And they didn't release a followup to a game which would likely have guaranteed big sales, Kingdom Hearts.
And that trend goes back to 2011 and likely even further back.
IIRC, Thief has also underperformed. And Deus Ex: HR despite high critical acclaim also underperformed.
Is there a trend here? Western IP from the Eidos aquisition aren't generating much profits, if any. Thus large continued investment into them is an extremely risky endeavor for a company that has only started to see some signs of hope. Where does that sign of hope come from?
http://www.ign.com/articles/2014/02/05/square-enix-financials-cast-final-fantasy-14-as-saviour
and
http://www.gamerheadlines.com/2014/...lowing-unexpectedly-strong-financial-results/
None other than Final Fantasy 14. A game more in tune with the traditional titles that Square Enix develops. If not for FF14, the company would likely be having yet another year of losses.
Also make note of their cost cutting measures. Part of that will be re-evaluating what titles get funded and putting limits on developement spending on high risk titles (those Eidos IP aquisitions).
So, how can the company possibly justify as large an expenditure on Tomb Raider development as Crystal Dynamics would like (something similar to if not more than the previous title). And on top of that how could they justify a marketing budget that would be large enough to generate enough sales to justify the development costs of such a title?
Basically, their CEO and board of directors likely decided that development costs would be more limited for the Tomb Raider sequel, but Crystal Dynamics required a budget larger than that to do the sequel justice. Keep in mind that sequels aren't guaranteed to do better than the original title, and generally tend to do worse.
So Square Enix Eidos and/or Crystal Dynamics goes shopping around for a development partner for Crystal Dynamics and only Microsoft were willing to step up to the extent they wanted. I'm sure they would have preferred Sony as they are currently doing better in next gen console sales, but Sony already have Uncharted so I'm sure they weren't interested in funding at the level that SE/CD wanted.
People get too caught up in critical acclaim for a past game mean a sequel will obviously sell better. Ignoring the fact that many critically acclaimed games don't even make back the investment in selling them.
Perhaps if we lived in an age where physical distribution was a small minority of sales this wouldn't be the case. But the cost of physical distribution continues to rise while the price of products remains the same. Something has to break...
Regards,
SB
I do wonder if Steam sales helped them to finally profit. Those games have been on sale often and frequently in the top sellers lists on Steam, so while the $60 console model failed to make them any profit I wonder if pc side picked up the slack. It wouldn't be surprising since a $60 console sale is really 10+ sales of each disc after you factor in how many times it gets sold as used, whereas a purchase on Steam is a true single purchase, along with less overhead costs like not having to grease the palms of Gamestop, shipping costs, storage, etc... I wish we had data on that because that article is from 2013 so it probably didn't include the Steam side of sales.
A good post and POV. I'll just take you up on this statement. We don't expect TR to justify expense based on critical acclaim alone. It's expense is justified by selling 6.5 million units. If it broke even at 3.5 million as per reports, that's 3 million lots of $20 (at least) to SE. They made $600 million profit from TR. Okay, maybe we need to factor in discounted pricing into some of that. Still, they must have made some hundreds of millions of dollars in profit. If they can't make serious profits on >6 million units sold, they probably should get out of the video game business.
Either that of the video game business is about to collapse in on itself because it literally can't afford to exist.Silent_Buddha
Legend
I'm sure they've reached profitability since then for most of them. The point was that for virtually all of their Eidos IP aquisitions, they have invested heavily in development and marketing, but weren't able to recoup the investment quickly or in some cases at all. And that is with some of those titles (like Sleeping Dogs) having a lot of DLC available to help generate income. That puts a heavy burden on the company which requires profits from titles to keep the organization running.
As such, with their cost cutting measures in an attempt to maintain profitability as a company, I'm sure they are re-evaluating how much they fund continuations of those Eidos IPs. As well, I'm sure they are re-evaluating the direction for their Final Fantasy games (less flood of games, return to combat mechanics and stuff from previous games perhaps).
Regards,
SB
You're using a lot of made-up numbers there. Unless you can provide evidence that every $60 console disc is recycled to 10+ other users...
That sounds eerily similar to Hollywood studios saying piracy cost them a billion per film because it was downloaded X times on bitorrent.
Quantic Dream's producer Guillaume DeFondaumiere said that their log indicated Heavy Rain was played by 1.5x the number of discs sold. The reality is that this provided accessibility to a tier that wouldn't have bought it, and they indirectly improved the sales by spreading great word of mouth. The London School of Economics had a study about this phenomenon (music and film piracy actually increase sales).
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I didn't do a scientific study on it, It's a number told to me by a Gamestop employee when I asked out of curiosity. Sometimes its less because the disc goes bad, but they expect to recycle games quite a number of times. It's good profit for them apparently. Given how vehemently people argue to retain the ability to resell their old games on a gamers forum like this I'd say I'm inclined to believe her number.
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