[Nirolak]

I maintain that it's dumb to count marketing as part of the per unit sales revenue.

A licensing fee and a retailer fee are costs that apply to every unit sold no matter what.

Marketing is not a fee which has a guaranteed cost per unit, much like dev costs. You get $60 - $12 (license/COG) - $15 (retailer cut), which comes out to $33.

At that point, you take (development budget + marketing budget + return fee allowance) / $33 to determine how many units you need to sell. If you have a fixed royalty rate, it would make sense to take that out of the $33. If you end up spending more on marketing than expected, that simply effects how many units you need to sell.

There are taxes, but that's something you would deal with on the year end revenue of everything combined because bracketing is important and it's a regional consideration, as opposed to applying it to each game.

Of course, that's assuming full price, so what you really do is guess what your average sale price will and then base how many units you need on that once you remove the fixed and variable (but existent per every unit sold) costs.

[Meier]

Wait, this is a full-priced retail game? I thought it was XBLA/Downloadable for $20 or something. No way a South Park game would hit 2 million copies at full price, even if it was good. They are so fucked. This thing is gonna hit the bargain bin fast.

2 million copies really isn't that much for a major release across all consoles and PC. South Park is a known property internationally as well.

This thing will do that easily.

[Jburton]

so some people still don't know about reddit I guess? the next step in your analysis would be explaining how it is that the game cost so much to make, and where all that money has gone. once you figure that out you'll be on track to understanding my post.

Nice reply ... smh.

[jett]

Wouldn't that be closer to $40 million in terms of what'd they'd get (after retail and platform cut)? Probably higher due to DD sales, since no retail cut, but still 30% to the digital store.

Well Pachter broke it down here

On a $60 retail title, $12 goes to the store, and on average an additional $12 goes to the console manufacturer. So closer to $36~ is what a third party publisher receives. So we're still talking over $70 million dollars, a huge number for this thing to break even.

[Nemo]

Not that it won't get it, but that really is high to be setting as a bar

[Mato]

Wow they are pretty liberal with their cash credit.

[WatTsu]

so some people still don't know about reddit I guess?

Apparently not; plus that kind of programming is super cheap so Viacom/CC are laughing all the way to the bank.

As far as South Park's specific ratings, I found this. It's the ratings from the last new episode of South Park. Basically it's still one of the highest-rated shows on cable, particularly among the precious 18-49 demographic. And that was actually on the low end for that season, the premiere scored 2.63 million (plus who knows how many watching online/via direct download/whatever) and a couple other episodes went even higher.

It holds pretty steady at between 2-3 million people watching the live broadcast alone. In the world of cable television that's still an insane number (it's lower than most shows on broadcast TV but that's a whole different thing because more people have access to over-the-air TV). So yeah.

Maybe you don't see as many Cartman shirts as you used to but the show is still popular and heavily profitable.

Edit: In case you wanted to compare it to broadcast television, look at this page. A rerun of BIG BANG THEORY pulled in over 8 million viewers. A. Rerun.

[Nirolak]

Well Pachter broke it down here On a $60 retail title, $12 goes to the store, and on average an additional $12 goes to the console manufacturer. So closer to $36~ is what a third party publisher receives. So we're still talking over $70 million dollars, a huge number for this thing to break even.

I feel if we assume a 35% royalty rate to Viacom/Matt & Trey, we get down $45.5 million, at which point $25-$30 million in marketing and $15-$20 million in development makes it match with "low cost in development" and "2 million units needed".

[Kintaro]

2 million copies really isn't that much for a major release across all consoles and PC. South Park is a known property internationally as well. This thing will do that easily.

Depending on the release date, I don't think it will. what is the release date? March? There are many, many huge games coming in March. Tomb Raider being one of them.

[jim-jam bongs]

Nice reply ... smh.

now the last thing I wanted was to cause you involuntary neck spasms. okay, here's a more detailed explanation.

it shouldn't cost so much to make a game like south park that 2 million sales is the break-even point. if the costs were broken down it's a pretty safe bet that a huge portion of it would have gone to marketing and greasing the palms of reviewers with cool swag, neither of which actually improve the game.

to me that represents a problem with the industry which stems predominately from the misconception that the only market worth wasting time on is the aaa blockbuster market. thq are so desperate to sit at the big kids table with the eas and activisions of this world that they're running their business into the ground.

but what do I care? let them commit financial seppuku writ-large if that's the course they wish to follow, but I'd be pretty disappointed to see the volitions and vigils in their developer-stable being sent to the glue-factory in the process.

[Dreams-Visions]

Isn't this a 50 dollar retail title? They are fucked.

/thread.

this isn't getting to two million.

[jett]

I feel if we assume a 35% royalty rate to Viacom/Matt & Trey, we get down $45.5 million, at which point $25-$30 million in marketing and $15-$20 million in development makes it match with "low cost in development" and "2 million units needed".

Is that the standard cut for this kind of deal? Seems huge. Your numbers make more sense though. It's crazy how much money is being spent on marketing these days.

[Vibri]

As someone who has run point on closing publisher deals for billion dollar IP, marketing should be as baked into costs as production.

The marketing team will have a full media plan with expenditure and real impact to P&L months before the game even wraps production.

Marketing cost on a game varies between $5-$25 a title per unit cost. Lower end, I.e. pushing it out the door - closer to $5 per game. For a major event product push, like CoD or brave new heavily promoted IP (Gear 1) it can be 25% of cost per title.

[mujun]

I will definitely contribute one sale.

[Derrick01]

/thread. this isn't getting to two million.

What's wrong with full price?

[HawksWinStanley]

What's wrong with full price?

I don't think some people are wrapping their head around the fact that this will be a full on RPG developed by Obsidian. They just see it's a licensed game of a show or movie and assume it will suck as a full priced title (and rightly so in most instances).

[WanderingWind]

I maintain that it's dumb to count marketing as part of the per unit sales revenue. Marketing is not a fee which has a guaranteed cost per unit, much like dev costs. You get $60 - $12 (license/COG) - $15 (retailer cut), which comes out to $33. At that point, you take (development budget + marketing budget + return fee allowance) / $33 to determine how many units you need to sell. If you have a fixed royalty rate, it would make sense to take that out of the $33. If you end up spending more on marketing than expected, that simply effects how many units you need to sell.

Each game has it's own marketing campaign driving it. Depending on what's being done with that campaign, it can fall back on systems already in place. For instance, if GameCo has a long standing contract with MarketingFirm, then that cost is spread out over several different products. It's still a piece of the overall operational budget for that game, so yeah, it totally makes sense for it to be considered a part of the overall cost of the game. This is magnified when companies use outside marketing firms for specific launches, which many companies do while still growing and before they can cut costs by having an in-house marketing team.

And yeah, in a great many cases, marketing does in fact have a guaranteed cost per unit. A great many companies will launch something and have a (example) 2 cents on the dollar allotment for the total marketing budget of that product. For instance, I work my marketing budget and separate around 55 percent for on-site activations.

I don't think some people are wrapping their head around the fact that this will be a full on RPG developed by Obsidian. They just see it's a licensed game of a show or movie and assume it will suck as a full priced title (and rightly so in most instances).

Yeah, exactly. That's a major perception problem they need to be fighting, like, yesterday.

[tenchir]

It's things like this that makes me think that Nintendo is going in the right direction when it comes to making games and designing their hardware. It's not a surprise that developers are getting more attracted to mobile games because a console AAA could easily break them if it doesn't sell a decent amount of units.

[Coolwhip]

Yeah, this industry is really running itself into the ground.

[AHA-Lambda]

Yeah this seems like a ball park figure for a AAA game. I'm more surprised people are shocked at this, it's been taken as a good guesstimate figure for awhile that the average AAA title need approx 2m units to break even (usually fluctuating more due to increased marketing costs).

Yeah, this industry is really running itself into the ground.

I don't know if that's fair, Hollywood seems to be doing ok with far higher budget blockbusters and games have more expensive AAA games that go on to make billions like CoD. It's all about calculated bets and this gen too many companies have made poor choices with AAA development. Plus let's face it that sector of the industry is too damn crowded so I guess alot of failures should be expected.

[timkunedo]

Day 1. I'll buy 2.

[Nirolak]

Each game has it's own marketing campaign driving it. Depending on what's being done with that campaign, it can fall back on systems already in place. For instance, if GameCo has a long standing contract with MarketingFirm, then that cost is spread out over several different products. It's still a piece of the overall operational budget for that game, so yeah, it totally makes sense for it to be considered a part of the overall cost of the game. This is magnified when companies use outside marketing firms for specific launches, which many companies do while still growing and before they can cut costs by having an in-house marketing team. And yeah, in a great many cases, marketing does in fact have a guaranteed cost per unit. A great many companies will launch something and have a (example) 2 cents on the dollar allotment for the total marketing budget of that product. For instance, I work my marketing budget and separate around 55 percent for on-site activations.

I understand the concept of a run rate, but if you figure 15% of your base unit cost is going to be spent in marketing, have a $5 million campaign based on this, and you only sell five units, that ended up being a significantly larger percent of each unit's cost than you actually expected.

I do think it makes sense to factor in marketing costs, absolutely, but I still don't think it makes sense to do it on a per unit basis unless you feel the company has 95%+ accurate predictions for all their products.

Is that the standard cut for this kind of deal? Seems huge. Your numbers make more sense though. It's crazy how much money is being spent on marketing these days.

I'm unsure, but I've seen analysts use that kind of number as a basis for royalties before. I mean, I feel this would be large, but Matt & Trey are actually working directly on the product for a long period of time, which is much different than a regular license deal where you just get to use the IP instead of having extreme support from the license provider.

[jim-jam bongs]

Yeah this seems like a ball park figure for a AAA game. I'm more surprised people are shocked at this, it's been taken as a good guesstimate figure for awhile that the average AAA title need approx 2m units to break even (usually fluctuating more due to increased marketing costs).

here's the rub; is a game aaa because of the content or the marketing budget? because if the answer is the latter then we have a serious problem.

I don't know if that's fair, Hollywood seems to be doing ok with far higher budget blockbusters and games have more expensive AAA games that go on to make billions like CoD. It's all about calculated bets and this gen too many companies have made poor choices with AAA development. Plus let's face it that sector of the industry is too damn crowded so I guess alot of failures should be expected.

the film industry also has a larger addressable audience, a broader range of budgets and a more diverse set of revenue opportunities than the games industry.

[RiderKairuu]

They have my money at least. Don't know about two million though, would be nice.

[AHA-Lambda]

here's the rub; is a game aaa because of the content or the marketing budget? because if the answer is the latter then we have a serious problem.

That's probably neither here nor there in dev terms alone it'd be considered AAA as well. A good ball park figure is to assume that marketing costs for your game are equivalent to the dev costs. Some games DO exceed this and by quite ALOT but the ones that do are the absolute megahits and dead certs like CoD and BF3.

the film industry also has a larger addressable audience, a broader range of budgets and a more diverse set of revenue opportunities than the games industry.

Oh yeah I agree with that and can see it working more n film's favour than games but I don't believe that high budget games are inherently a bad thing, they just need to be careful with their investments and many publishers seemingly aren't.

Apparently Max Payne 3 needed 4m to break even, GR:FS had been rebooted like 3 times and the new Rainbow Six seems to be going in this direction. Plus, the XCOM FPS has been in development for how long? This is the sort of crap publishers shouldn't be doing.

[WanderingWind]

I understand the concept of a run rate, but if you figure 15% of your base unit cost is going to be spent in marketing, have a $5 million campaign based on this, and you only sell five units, that ended up being a significantly larger percent of each unit's cost than you actually expected. I do think it makes sense to factor in marketing costs, absolutely, but I still don't think it makes sense to do it on a per unit basis unless you feel the company has 95%+ accurate predictions for all their products.

I mean, that goes for every piece of the overall cost though. You can't just arbitrarily exclude pieces from the cost of the total development of the game. If you ship five copies, you've wasted whatever you've set aside for shipping costs, packaging, salaries, incidentals, etc.

I'm really not understanding the dividing line here. Marketing is not separate from the making and sales of a game any more than any other part of the process that is figured into the per unit cost of production. They need to sell 2 million to break even on dollars spent, full stop. It does not matter to the red/black line where those dollars were spent in the process. (Obviously, they make sense, but hopefully you're tracking here).

If they spent 30k on widget polishing and it's part of the process of making games, they'll say they need to sell X more copies to get back that 30k to break even. That's their source of income. The costs needed to stay afloat come from that and marketing is one piece of operations budgeting that is funded through that income.

[jim-jam bongs]

That's probably neither here nor there in dev terms alone it'd be considered AAA as well. A good ball park figure is to assume that marketing costs for your game are equivalent to the dev costs. Some games DO exceed this and by quite ALOT but the ones that do are the absolute megahits and dead certs like CoD and BF3.

now that I read it again, that was a little obtuse of me. that's all correct of course, my main point was just that, when we talk about aaa games, we always take cost into account, but if the bulk of that cost is going towards things which don't inherently improve the product then we've made a wrong-turn somewhere.

personally I fully intend to buy the game. obsidian are the only dev out there right now I buy from sight-unseen.

Oh yeah I agree with that and can see it working more n film's favour than games but I don't believe that high budget games are inherently a bad thing, they just need to be careful with their investments and many publishers seemingly aren't. Apparently Max Payne 3 needed 4m to break even, GR:FS had been rebooted like 3 times and the new Rainbow Six seems to be going in this direction. Plus, the XCOM FPS has been in development for how long? This is the sort of crap publishers shouldn't be doing.

yeah we're on the same page :)

it's simply not necessary for every single game to cost $100 million+

[truly101]

Its one of the only games at E3 I'm genuinely looking forward to so I'll buy it, but 2 million copies? $120 million? How does that even work?

There is no way console gaming survives next gen. This is the end.

[KMD]

Anyone have stats on how previous south park games have sold? Love shack, racing, etc? Also, this game had a budget of 120 million!?

[AHA-Lambda]

now that I read it again, that was a little obtuse of me. that's all correct of course, my main point was just that, when we talk about aaa games, we always take cost into account, but if the bulk of that cost is going towards things which don't inherently improve the product then we've made a wrong-turn somewhere. personally I fully intend to buy the game. obsidian are the only dev out there right now I buy from sight-unseen.

Yeah that is a fair point but as far as I can see the only games that do do that are the ones that truly sell in the 10s of million of copies so it wouldn't fundamentally be an issue then, by then those games are making serious bank :P

And agreed, Obsidian working on this makes me very intrigued :)

yeah we're on the same page :) it's simply not necessary for every single game to cost $100 million+

Oh yeah absolutely! GTA costing that much? Fair enough. Max Payne 3? No way!

[Nirolak]

I mean, that goes for every piece of the overall cost though. You can't just arbitrarily exclude pieces from the cost of the total development of the game. If you ship five copies, you've wasted whatever you've set aside for shipping costs, packaging, salaries, incidentals, etc. I'm really not understanding the dividing line here. Marketing is not separate from the making and sales of a game any more than any other part of the process that is figured into the per unit cost of production. They need to sell 2 million to break even on dollars spent, full stop. It does not matter to the red/black line where those dollars were spent in the process. (Obviously, they make sense, but hopefully you're tracking here). If they spent 30k on widget polishing and it's part of the process of making games, they'll say they need to sell X more copies to get back that 30k to break even. That's their source of income. The costs needed to stay afloat come from that and marketing is one piece of operations budgeting that is funded through that income.

I think you're confused as to what I'm saying and we don't actually disagree.

I feel saying "Bob makes $20 for every $60 unit of a game sold because $20 of those dollars per unit goes to marketing." doesn't make sense, because really all that matters is that money they actually receive from retailers > dev costs + marketing costs + other costs.

So like, if you are going to charge $60 for a game, and you pay $12 up front to Microsoft just to have that disc printed, you can receive a maximum of $48 in profit from selling that unit.

If you then sell that game to a retailer for $45 dollar, that means you have received $45 for that unit, and already given $12 to Microsoft, so you're at $33 dollars.

Now, that $33 * however many units you sell has to be greater than marketing + development costs + return fees + any other such costs.

It doesn't make sense to me however to say "Well, we spend 15% of that $60 on marketing in projection, so we should count each unit sold as $24 and pretend our marketing costs don't exist, and only compare our final revenue result to development costs."

That is what some people do and that seems crazy to me. It doesn't matter if you project to only have 15% marketing costs. If you spend $20 million on marketing and $20 million on development, you have spent $40 million on your product. If you then sell 1 million units at $33 dollars, you have made $33 million, and you're short $7 million dollars of the $40 million you spent. It doesn't matter that $24 * 1 million units is more than the development cost because you assumed 15% of your $60 per unit price would be spent on marketing, because in reality you spent more than 15%, so it makes zero sense to remove that from the $60 the unit costs on a per unit basis.

[WanderingWind]

I think you're confused as to what I'm saying and we don't actually disagree. I feel saying "Bob makes $20 for every $60 unit of a game sold because $20 of those dollars per unit goes to marketing." doesn't make sense, because really all that matters is that money they actually receive from retailers > dev costs + marketing costs + other costs. So like, if you are going to charge $60 for a game, and you pay $12 up front to Microsoft just to have that disc printed, you can receive a maximum of $48 in profit from selling that unit. If you then sell that game to a retailer for $45 dollar, that means you have received $45 for that unit, and already given $12 to Microsoft, so you're at $33 dollars. Now, that $33 * however many units you sell has to be greater than marketing + development costs + return fees + any other such costs. It doesn't make sense to me however to say "Well, we spend 15% of that $60 on marketing in projection, so we should count each unit sold as $24 and pretend our marketing costs don't exist, and only compare our final revenue result to development costs." That is what some people do and that seems crazy to me. It doesn't matter if you project to only have 15% marketing costs. If you spend $20 million on marketing and $20 million on development, you have spent $40 million on your product. If you then sell 1 million units at $33 dollars, you have made $33 million, and you're short $7 million dollars of the $40 million you spent. It doesn't matter that $24 * 1 million units is more than the development cost because you assumed 15% of your $60 per unit price would be spent on marketing, because in reality you spent more than 15%, so it makes zero sense to remove that from the $60 the unit costs on a per unit basis.

Not confused, just stating that the per unit approach is how to best visualize those costs as something inextricable from the game creation process. Anybody who thinks the way you mentioned in your example is functionally brain dead and shouldn't be allowed outside without close adult supervision. I believe the politically correct term for them are "managers."

[Nirolak]

Not confused, just stating that the per unit approach is how to best visualize those costs as something inextricable from the game creation process. Anybody who thinks the way you mentioned in your example is functionally brain dead and shouldn't be allowed outside without close adult supervision. I believe the politically correct term for them are "managers."

Haha, okay, I can definitely understand the logic in doing that when deciding how much you want to spend on marketing and keeping that cost prominently in mind, but I still think it's important to consider it both ways since things can go wrong.

[PairOfFilthySocks]

If by "breaking even" they mean "THQ execs getting more than their standard salry bonus" then yeah I can understand.

[Decado]

The monthly cost of keeping Obsidian running is $1 million, so basically they need at least two large scale projects to keep themselves going. Whenever they don't have that, they have to lay people off.

Damn, that's a lot of money. How many ppl do they employ? I always thought of them as a very small studio.

[PaulLFC]

What the?

What's the game being sold at? $15? That'd make it a $30 million investment. Even $10 would mean it cost $20 million. That's hardly low budget, is it?

[Derrick01]

What the? What's the game being sold at? $15? That'd make it a $30 million investment. Even $10 would mean it cost $20 million. That's hardly low budget, is it?

$60. It's a 20+ hour full budget RPG. Why do people keep thinking it's not? Because it's 2D?

[lunchtoast]

This is probably my most looked forward to game. A south park game that looks like south park and plays like paper mario, with Matt and Trey along the whole way. I don't care about numbers, I know I'm going to enjoy it.

[SpacePirate Ridley]

Well, that means I will need to buy a lot of them, because this game needs to suceed.
Obsidian, dont go dying on me. :(

[The Technomancer]

$60. It's a 20+ hour full budget RPG. Why do people keep thinking it's not? Because it's 2D?

To be fair it could be because there have been like two downloadable SP games in the last five years

[James Woods]

The industry is bloated and very top heavy.

Sounds like my ex.

[Forever]

Well, that means I will need to buy a lot of them, because this game needs to suceed. Obsidian, dont go dying on me. :(

I doubt they'll see a single cent of revenue. They're probably being paid a bulk sum like usual. All dollars go to THQ, which might be better off dead sold at this point.

[Odrion]

$60. It's a 20+ hour full budget RPG. Why do people keep thinking it's not? Because it's 2D?

Yeah, seems like it.

Everyone bitched about Rayman: Origins not being a $15 downloadable game. Guess why?

[udivision]

Yeah, seems like it. Everyone bitched about Rayman: Origins not being a $15 downloadable game. Guess why?

People demand that NSMB adopt a 2D, painterly style and they'll demand it be $15 digital only game if that ever happens.

[Derrick01]

Yeah, seems like it. Everyone bitched about Rayman: Origins not being a $15 downloadable game. Guess why?

I was one of those guys :(

Not because it was 2D though. I just don't see the value in a $50-$60 platformer. RPG is a much different story though.

[LOCK]

I will buy this, so they must be doing something right, being a casual fan and all.

[LiK]

Here's hoping all South Park fans like RPGs

[Coolwhip]

Damn, that's a lot of money. How many ppl do they employ? I always thought of them as a very small studio.

So they need 1 million more sales to keep the company alive for the coming 2-3 years. That sounds awful. It starts to make more sense to me why so many of them go under recently.

[PaulLFC]

Edit: poorly worded point on my part.

[kswiston]

I was one of those guys :( Not because it was 2D though. I just don't see the value in a $50-$60 platformer. RPG is a much different story though.

I think that publishers (and developers) need to face the reality that, unless your 2D game is heavily tied to nostalgia like NSMB, Donkey Kong Country Returns, or any of the fighting franchise revivals, the majority of console gamers aren't interested in paying full retail price.