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What is the profit margin on video games?
- Thread starter X26
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McBradders
NeoGAF: my new HOME
Don't forget MS and Sony's cut of every disc (last I checked it was around $15 or so bucks per DISC).
Pureauthor
Member
Not enough.
Xyphie said:
That's about right.
There was a breakdown for Xbox or 360 games a little while back. I can't remember exactly, but it was something like this:
Costs:
Developer - $15
Publisher - $20
Licensing - $10
Retailer - $12
Manufacturing and Distribution - $3
Royalties - give or take
I may be missing something, and values are definitely not completely right, but it's an idea. Of course, the developer cost there is variable. Development costs are upfront, so the money is still actually just going to the publisher. Once development costs are covered, the money becomes profit.
Can someone clarify on the developer point? Does the developer actually make money other than their salary in most cases?
McBradders
NeoGAF: my new HOME
TheExodu5 said:
It's a case by case basis. Some guys can negotiate for royalties, others are simply 'guns for hire' and get paid $X regardless how much the game does or does not sell.
TheExodu5 said:
It depends on the contract. Sometimes the actual developer guys, the engineers, designers make nothing but salary. And the actual developer company (say Naughty Dog) makes what you see there in the breakdown, and then any residual profits once the investment is covered. Whether there are bonuses it all depends on the individuals' employment contracts.
My friend works as a design engineer for various games for Activision, and he makes salary only. But they do get annual bonuses and other perks based on the overall performance of the company (its games).
Last I heard Circuit City and retailers made a little less than 8 dollars off a game. They bought it for about 12, but the shipping/storage/advertising costs would leave a pure 8 dollar profit on a 50-60 dollar game that sells within a reasonable amount of time. That is a huge margin for essentially simply displaying it on a shelf. Imagine getting 10 dollars off flat out by doing digital distribution if it were possible. Or letting that 10 bucks go to the developer instead.
Cromulent_Word
Member
this is not at all right. in fact, i would go so far as to say its really, really, really wrong.TheExodu5 said:
Cromulent_Word
Member
re-re-re edit: misread DEVELOPER as their share of profit. my bad.Farnack said:
bumpkin
Member
Well, when I worked part-time at Best Buy a Christmas or two ago, I could get a new $50 game for something like $42. Their discount is supposedly "cost plus 5%," so you can probably do the math from there.
Granted, I wouldn't put it past BB to pretend their cost is higher to give employees less of a discount on them.
Granted, I wouldn't put it past BB to pretend their cost is higher to give employees less of a discount on them.
Callibretto
Member
Cromulent_Word said:
I think the word developer in that breakdown indicate development cost, not how much the developer get the money.
Dark Octave
Banned
I remember the $12 retailer part a few years ago. That part sounds right, but makes no sense why a retailer should make that much, when they can and will turn around and double and tripple dip on the same disc anyway.TheExodu5 said:
The developer is the one doing the heavy lifting, so I feel they should get the most, next to their pimp the publisher of course, who takes all/most of the financial risks.
VanMardigan
has calmed down a bit.
I pay my distributor $50-$52 for X360 and Ps3 games, $40-$42 for Wii/new Ps2 games, and $26-$28 for DS games.
The smallest margin is for Nintendo first party DS games. You can end up paying $30-$32 for a DS game you're supposed to sell for $34.99. Game like Pokemon and Mario titles simply do not go down in price, sometimes even a year after release. The margin can be small for greatest hits titles too. Most titles that retail for $20 can cost $15-$17.
The smallest margin is for Nintendo first party DS games. You can end up paying $30-$32 for a DS game you're supposed to sell for $34.99. Game like Pokemon and Mario titles simply do not go down in price, sometimes even a year after release. The margin can be small for greatest hits titles too. Most titles that retail for $20 can cost $15-$17.
Oh, I know what cost I forgot. Marketting and advertisement. As with development costs, that will be covered by the publisher, so part of the publisher's revenue will go towards that expense.
And yes, Cromulent Word, it's pretty close to correct. Give or take for some of the items (as Van said, retailer profits seem to be more around $8-$10). It's a rough approximation to what was posted about Xbox or 360 games a few years back (or maybe it was just a year ago). I think it was on GamesIndustry.
And yes, Cromulent Word, it's pretty close to correct. Give or take for some of the items (as Van said, retailer profits seem to be more around $8-$10). It's a rough approximation to what was posted about Xbox or 360 games a few years back (or maybe it was just a year ago). I think it was on GamesIndustry.
industrian
will gently cradle you as time slowly ticks away.
industrian said:
This. A ~$12 of which only about $1 is profit after all other expenses are considered.
The profit margins on video games for retailers are assy. Hence, used games.
To be fair, the profit margins aren't a whole hell of a lot better for publishers, and they're worse for developers.
PixelJunkie
Member
McBradders said:
Majority of the time it's salary these days. There is no case by case basis for most companies unless your speaking of independent developers negotiating contracts. There are a few that still pay royalties, Gearbox for example last I checked, but it's increasingly rare.
This may or may not seem fair but salary usually makes more on their annual pay than someone paid royalties will. For example Gearbox starting out was usually around 35k ~ 40K plus royalties, you have to ship a game for this to matter usually, where as someone like Raven might pay around 50k~60k (this is level designers by the way).