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[cormack12]

It looks like he takes amortisation into account by saying in reality a $70 game will in lifetime be in actuality a $50 game. Breakdown is:

• $15 - Manufacturing & shipping. This is a fixed cost for physical releases
  • The retail cut included here but varies over lifetime, promotions, sales etc.
  • Digital storefronts take exactly $15 (steam, MS, PS)
  • Publishers prefer this as it reports as 100% profit as no manufacturing, shipping, inventory management.
• $5 Marketing
• $5 Overheads (corporate support and teams like HR)
• $15 Shareholders/profit
• $10 Return to developers/studio for premises, staff, equipment, benefits

Old Game Dev Advice: So game prices are going up to 70$? Where's that money go exactly? Let's break it down.

Timestamps:
0:00 Intro
0:10 50$
0:23 Retailer
0:59 Digital Distribution
2:00 35$
2:43 Marketing
3:19 Overhead
3:44 Margin
4:13 10$
5:19 Doing the Math at 60$
6:00 Summary

 

[IntentionalPun]

The numbers are very “pulled out of his ass.”

But yes, $15 a month, which is the target for a certain sub service once all the discounts are dried up, is $180 a year. Which is actually a lot for a casual to spend.

Problem is, if there is one... well, it’s a lot for a casual to spend... so are they and will they?

Sony really is just in the better position. Way ahead in revenue from games and MTX, and way ahead in subscribers to the basic service (PSN vs XBLG.)

PSNow hasn’t quite made a massive impact but Sony could invest more in it if the model ever actually threatens them. For now there is zero indication of that.

 

[GHG]

The only fact we know is that the likes of Steam, Sony, Microsoft and Nintendo take a 30% cut.

What the publisher does with the other 70% is unknown. If the developer has self published on Steam then they can keep all of it, if it's an indie dev that has partnered with a publisher to get a game on console then they will have a pre-agreed percentage cut. How they redistribute that money back into the business is up to them.

The developers that work directly for larger publishers get paid fixed salaries in accordance with the structure of the overall business. The people who work in the marketing and other support areas of the business need to get paid too. The business will also have external costs, any partners need to get paid.

If developers at the larger companies don't like the fact that they get a "small" piece of the pie then they can go indie and deal with all the overheads themselves.

 

[ZywyPL]

No surprise here, most of the time it's the publishers who fund the entire development costs, or who are covering all the salaries and R&D expenses of their owned studios. People often talk about the devs in various discussions completely ignoring the fact that it's the publishers who are on top of the food chain and dictate what the devs are doing. I don't even think the devs get any cut at all from each copy sold, as far as I'm aware they usually get a bonus whenever a gamed does well and that's it.

 

[Mokus]

The numbers are very “pulled out of his ass.”

Yes, from the very beginning it's obvious he has done no serious research on this matter. From over a decade ago there were official comparisons between digital and retail, and how much better are the digital distribution for developers. From retail the game distributor ended up with 30% vs 70% on Steam. He has no clue about it, he only presumes that retail take and cost about 30% from the final game price.

The guy simply is pulling numbers out of his ass.

 

[eyesabitdull]

I totally understood everything.

 

[ethomaz]

I had the impression developers received 5%.
And retail cut is 30% (around $20).

 

[fatmarco]

To put this into perspective you get roughly 1 dollar for every book sold at full retail if you're a normal author.

 

[Great Hair]

• $15 - Manufacturing & shipping. This is a fixed cost for physical releases
  • The retail cut included here but varies over lifetime, promotions, sales etc.
  • Digital storefronts take exactly $15 (steam, MS, PS)
  • Publishers prefer this as it reports as 100% profit as no manufacturing, shipping, inventory management.
• $5 Marketing
• $10 Overheads (corporate support and teams like HR)
• $15 Shareholders/profit
• $10 Return to developers/studio for premises, staff, equipment, benefits

15+5+10+15+10 = $55

 

[DaGwaphics]

Problem is, if there is one... well, it’s a lot for a casual to spend... so are they and will they?

It's basically like the monthly gym membership vs. the a la carte classes of old. No question that you get access to more content over time with the subscription vs. just purchasing 10 or 12 games per console generation. We'll see if the smaller monthly fee is accepted by the masses as time goes on. It is MS's job to sell the service and really drive home the $15/mo. aspect, history has proven that costumers will spend more when prices are broken into small installments.

 

[STARSBarry]

I used to work for Toy's R Us many moons ago and I could see what the buy in price for products where, if you wonder why the "teentronics" was the first area to disappear in the years prior to it going under this is because it was the area with the worst margins by a country mile.

Depending on the publisher the retail take was closer to 5-10% profit from the purchase price at least for us. This is why we went for the likes of Skylanders and Disney Infinity hardcore, sure the game might only net us £2.50 profit on that £50 RRP but those plastic figures? We got over half around 55% on top of the buy price for stock when you worked out the by the box price, little bit less on the more unique figures like the light up ones. So when they bought those games they would buy tons of Figures with it, solid profit.

This tells me the numbers are pulled out his ass, unless retail has changed in the last 6-7 years after over a decade working with margins like that. Manufacturing costs especially in bulk will amaze people same for shipping it can very easily fall within 2-3 quid for the lot, it used to be more but there using cheaper boxes now and not including a manual so it will have dropped again. Some of the product margins where 80% even more if they where first party sub brands that we had control of production over.

 

[M1chl]

Well I totally don't care what they do with the money. It's nice insight, but also seems speculative at best, it's not like every publisher works the same. And especially first party gets whole lot more than 15USD. So no need to charge extra for your own shit.

 

[cormack12]

15+5+10+15+10 = $55

Deliberate mistake there

 

[TheThreadsThatBindUs]

The upfront $70 price is irrelevant these days when a game can make billions in recurring revenue from MTXs.

 

[yurinka]

Fake and wrong numbers.

Around ~20-25% of that money goes to VAT or similar tax depending on the country. Then there are additional costs like for retail the revenue share for the retailer/shop/distributor, or the mandatory age rating for big games or retail games: PEGI, ESRB, USK, ZERO and more. Then the 30% platform holder revenue share for Sony, Nintendo, Microsoft and so on.

But yes, $15 a month, which is the target for a certain sub service once all the discounts are dried up, is $180 a year. Which is actually a lot for a casual to spend.

Problem is, if there is one... well, it’s a lot for a casual to spend... so are they and will they?

Sony really is just in the better position. Way ahead in revenue from games and MTX, and way ahead in subscribers to the basic service (PSN vs XBLG.)

PSNow hasn’t quite made a massive impact but Sony could invest more in it if the model ever actually threatens them. For now there is zero indication of that.

At the end of a generation, on average people bought ~8-12 games/console. As of now PS4 has a record of almost 13. Consoles have traditionally a life of 6-12 years.

Let's say that on average a console life is 9 years and on average they sell 10 games per console after all its life cycle, and let's assume people buys games during half of that console life cycle because didn't buy it at launch or got bored of the console.

So maybe on average people buys around a couple of console games per year. Even if we ignore cheaper indie games, old games discounted, and we only look at a couple of full priced AAA $70 games, that is $140/year.

So yes, even assuming the player stops buying ALL games and stops paying for Plus/Gold, $180/year pretty likely is more than console players already spend on gaming.

 

[Jigsaah]

The numbers are very “pulled out of his ass.”

But yes, $15 a month, which is the target for a certain sub service once all the discounts are dried up, is $180 a year. Which is actually a lot for a casual to spend.

Problem is, if there is one... well, it’s a lot for a casual to spend... so are they and will they?

Sony really is just in the better position. Way ahead in revenue from games and MTX, and way ahead in subscribers to the basic service (PSN vs XBLG.)

PSNow hasn’t quite made a massive impact but Sony could invest more in it if the model ever actually threatens them. For now there is zero indication of that.

This post makes my head hurt.

What's with all the generalization, assumptions and comparisons.

It just reads like you're taking an opportunity to make pointless statements about how Sony is great. The thread is about how devs don't get anywhere close to the lionshare of the revenue for their IP.

Where does this come from?

 

[Keihart]

So what about it? don't devs get most of the money beforehand as operation budget? If the game got funded the dev got paid, that's how Platinum games is still in business.
Now, if we are talking about indies that is another story, that is the only real time a dev gets paid.

Beisde bonuses and shit like that, the publisher it's the one making trucks of money with big numbers sold and more expensive games.

 

[Vandole]

Just looking at how he breaks down the marketing cost, I can immediately tell he's making up these numbers. Any inclination I had to actually listen to his rationale is just dead in the water based on that number. Big companies will spend as much as 30% of the development costs to market a game if it's a AAA title. Other companies will try to do it for nickels and stick with press releases and social media and think that's enough.

Anyway, I'm going to just go back into my own marketing hole and go read feedback from everyone else in the company who knows my job far better than I do.

 

[Jigsaah]

I'd be interested to see how much money publishers put up to bring a game to market. They handle marketing and distribution. They have a hand in the creative direction of the game, especially when it comes to Microtransactions.

Self publishing seems to be the way to go if you can afford it.

 

[StreetsofBeige]

Interesting how he splits up dev teams costs ($10)and overhead ($5) because companies typically lumped that all into SG&A. Your average corporation doesn't splice out HR dept costs from the IT dept.

Never the less, $10 out of $70 Gross Sales or out of $50 Net Revenue (which no company factors in shipping and manufacturing costs baked into sales discounts but I'll ignore that) seems pretty good to me.

That means the people and gear used to make the game have SG&A costs of 14% of gross or 20% of net. Most companies out there would love that.

 

[skakmk]

Correct me if I am wrong, but isn't it like this in almost every industry/business?

Also, developers returns increase with sales, since the overheads are fixed, they'll form a smaller proportion if the game is a hit and I am pretty sure profit distributions come after developer costs. I guess 15-20$ to the developer will be a better number if the game sells reasonably well.

 

[wipeout364]

I didn’t watch the video but that analysis looks wrong to my quick look at the numbers.
1. 15 dollars for shareholders is completely arbitrary, could be zero depending on the company and shareholder dividends are based on profit not some fixed number. Board has to approve it. Google and Amazon two of the biggest companies in the world pay no dividend.
2. Marketing, HR and studio return are what they are; you need all those aspects to run a company you can’t say its money taken from the developer. Without HR and marketing you can’t run the company or sell product.
3. The publishers and developers know the score and the risks, raising prices is just a diversion, they are allowed to charge whatever they want but they are in a competitive environment so they do so at their own peril. This is why Sony is so dirty with their arbitrary price raise it’s complete bullshit and everyone knows it. They are free to raise the prices on their first party games but most publishers won’t go along because the intial sale is only the tip of the iceberg for EA, Activision, 2k, Paradigm etc. and that’s why they discount so fast. DLC makes a lot of the profit and in some cases the majority of the profit.

 

[StreetsofBeige]

Correct me if I am wrong, but isn't it like this in almost every industry/business?

Also, developers returns increase with sales, since the overheads are fixed, they'll form a smaller proportion if the game is a hit and I am pretty sure profit distributions come after developer costs. I guess 15-20$ to the developer will be a better number if the game sells reasonably well.

Developers should be lucky they even have the opportunity to make profit.

In most companies, most stuff is done internal, and the employees grinding away to make product get paid wages and benefits. It's not like the 300 employees have opportunity to bank profits acting like their own company within a company.

But with gaming you got a studios acting as a company trying to max out profit, and a publisher doing the same. So two companies working together to max out profits throughout the chain with their own employee pools.

That would be like Colgate selling toothpaste like how they do now making money, but they also contract out everything for another company to handle and they make profits on top of Colgate's profits. But Colgate says fuck you, we'll do it ourselves.

If developers want a bigger cut then just go direct like the million indies. Nobody says you got to link up with Activision or EA. But if you dont got the expertise to market and distribute games and write MS and Steam e-store contracts, then thats what publishers are for. But they arent going to do it for free.

 

[Excess]

Where does this come from?

Wanting Game Pass to fail is ironically the most implicit way of revealing how you truly feel about it, as if the competition determines the standard of which something is successful.

 

[SLB1904]

So what about it? don't devs get most of the money beforehand as operation budget? If the game got funded the dev got paid, that's how Platinum games is still in business.
Now, if we are talking about indies that is another story, that is the only real time a dev gets paid.

Beisde bonuses and shit like that, the publisher it's the one making trucks of money with big numbers sold and more expensive games.

Thanks for saving me time to type all this stuff

Are people really this stupid?

 

[StreetsofBeige]

So what about it? don't devs get most of the money beforehand as operation budget? If the game got funded the dev got paid, that's how Platinum games is still in business.
Now, if we are talking about indies that is another story, that is the only real time a dev gets paid.

Beisde bonuses and shit like that, the publisher it's the one making trucks of money with big numbers sold and more expensive games.

Good point. I forgot about pre-budgets.

At other companies that don't have lots of money, you rely on bank loans to keep afloat and selling product to bankroll paying people.

The company is obligated to pay back the loan with interest.

If a game bombs, the developers still get paid. Do they have to give any money back? Doesn't sound like it. Sounds like a nice one way street. On the other hand, that local bakery down the street probably has a business loan to keep afloat the rent, leased equipment, months of ingredients and paying workers every two weeks.

There's no publisher to partner with budgets and being able to push off tasks for them to do.

If any devs out there reading this want a bigger piece of the pie, then do it yourself. You cant expect to make giant profits if you need to pay someone else to:

- Sell it for you
- Market it for you
- Manufacture it for you
- Bankroll a starting budget for you because you don't want to (or cant) get a bank loan because you want no obligation to pay anyone back
- I bet the publisher even handles all the retailer and e-store contracts, admin, invoicing and nit picky shit
- I wouldnt be surprised if the publisher even drew the cover art

Oh, and for MP games needing tons of servers, who would handle that? EA? Or the small studio?

 

[GHG]

If any devs out there reading this want a bigger piece of the pie, then do it yourself. You cant expect to make giant profits if you need to pay someone else to:

- Sell it for you
- Market it for you
- Manufacture it for you
- Bankroll a starting budget for you because you don't want to (or cant) get a bank loan because you want no obligation to pay anyone back
- I bet the publisher even handles all the retailer and e-store contracts, admin, invoicing and nit picky shit
- I wouldnt be surprised if the publisher even drew the cover art

Oh, and for MP games needing tons of servers, who would handle that? EA? Or the small studio?

And to top it all, do all of that while having no steady income stream from any of those activities.

I honestly have no idea when people got so entitled, the irony is that none of the people moaning have the balls to ever take any risk to step away from their cushy job that pays a monthly salary.

 

[jakinov]

the numbers seem made up because.
- why are they paying a profit to shareholders for every copy before it even makes an actual profit
- this disregards subcontractor work or deals where games are fully funded by the publisher
- you don’t pay $5 for marketing for each copy of the game....
- overhead is same as studio or publisher cut

 

[NickFire]

Putting aside whether the estimates are realistic or sensical, what is the point of misleading people into believing that expenses mean the dev gets less money? Is it to demonize the people who fund the game? Is it to pressure people in the product chain to work for free? I just don't get it. Whoever owns the game gets every penny of the sale price minus the commissions to platform holders, no? What they pay in expenses is irrelevant to what revenue they received.

 

[Sentenza]

This breakdown is incredibly disingenuous.
Of course if the devs aren't the one FUNDING the game they'll get just a salary and at best a bonus on top of it.
They aren't the ones doing the financial investment and taking risks, so they aren't the ones profiting from it if things go well, either.

 

[Astral Dog]

Those numbers are awful! they need to increase the price of games by some $20 asap

 

[StreetsofBeige]

the numbers seem made up because.
- why are they paying a profit to shareholders for every copy before it even makes an actual profit
- this disregards subcontractor work or deals where games are fully funded by the publisher
- you don’t pay $5 for marketing for each copy of the game....
- overhead is same as studio or publisher cut

Probably because he's looking at the big game company financials (which have all done great the past few years when covid and mtx have really jumped, while ignoring a decade ago when companies like T2 were losing money), and assuming a straight line approach to all games.

 

[StreetsofBeige]

This breakdown is incredibly disingenuous.
Of course if the devs aren't the one FUNDING the game they'll get just a salary and at best a bonus on top of it.
They aren't the ones doing the financial investment and taking risks, so they aren't the ones profiting from it if things go well, either.

Totally.

In these situations where a publisher is controlling the game with the studio making it, I see it as basically the dev team as being like a contracted out team. They get paid to do work, it's guaranteed money as they dont need to pay any back if it sucks or they are late, and they get to focus on one task while the big org handles the rest of the stuff.

It's like working at Apple and the dev team is the R&D labs churning out product. Very important cog. But the rest of the company handles everything else. Just because your dept makes the product doesn't mean you all get millionaire salaries and every other worker in a different dept gets pennies on the dollar and scrapes by.

 

[Astral Dog]

So what about it? don't devs get most of the money beforehand as operation budget? If the game got funded the dev got paid, that's how Platinum games is still in business.
Now, if we are talking about indies that is another story, that is the only real time a dev gets paid.

Beisde bonuses and shit like that, the publisher it's the one making trucks of money with big numbers sold and more expensive games.

well, they still use that money to fund your favorite AAA games so its not too bad.

 

[IntentionalPun]

This post makes my head hurt.

What's with all the generalization, assumptions and comparisons.

It just reads like you're taking an opportunity to make pointless statements about how Sony is great. The thread is about how devs don't get anywhere close to the lionshare of the revenue for their IP.

Where does this come from?

I'm addressing his comment in the screenshot; that's where it comes from.

It's the only part of this really worth commenting on as everything else he is saying is just completely made up numbers.

So I commented on it, and how it relates to the 2 biggest console manufacturers..

Have anything specific you want me to address? I never said anything about Sony being "great." They are the clear market leader in revenue, this thread is about money.

 

[Tams]

I can obviously only speak for myself, but I am not prepared to add yet another monthly cost. Sure, one more probably won't be noticeable, but I'm at breaking point (not financially, just in tolerance).

I have my normal monthly living expenses of course, then Spotify, Amazon Prime (mainly for the shopping benefits), MS Office (mainly for the storage), Nintendo Online, an online newspaper subscription, and a couple of education subscriptions. All sucking up money. I just really don't need yet another subscription.

And for game subscriptions, I for whatever reason don't see it the same way as I do for an online game service. The latter I see as ongoing costs for the services owners that users need to meet, whereas games (and books and films) I see as one-off purchases.

 

[IDKFA]

I can obviously only speak for myself, but I am not prepared to add yet another monthly cost. Sure, one more probably won't be noticeable, but I'm at breaking point (not financially, just in tolerance).

I have my normal monthly living expenses of course, then Spotify, Amazon Prime (mainly for the shopping benefits), MS Office (mainly for the storage), Nintendo Online, an online newspaper subscription, and a couple of education subscriptions. All sucking up money. I just really don't need yet another subscription.

And for game subscriptions, I for whatever reason don't see it the same way as I do for an online game service. The latter I see as ongoing costs for the services owners that users need to meet, whereas games (and books and films) I see as one-off purchases.

I'm the complete opposite. I'll sub up for anything.

If MS made every game available on GP day one and made sure no game EVER left the service, I'd pay them whatever they wanted.

 

[Rubik8]

Anyone that thinks Gamepass is going to stay $15/month once those big upcoming exclusives start hitting is delusional. By the time the next Elder Scrolls comes out, I expect the price to be 25.

 

[Dane]

I used to work for Toy's R Us many moons ago and I could see what the buy in price for products where, if you wonder why the "teentronics" was the first area to disappear in the years prior to it going under this is because it was the area with the worst margins by a country mile.

Depending on the publisher the retail take was closer to 5-10% profit from the purchase price at least for us. This is why we went for the likes of Skylanders and Disney Infinity hardcore, sure the game might only net us £2.50 profit on that £50 RRP but those plastic figures? We got over half around 55% on top of the buy price for stock when you worked out the by the box price, little bit less on the more unique figures like the light up ones. So when they bought those games they would buy tons of Figures with it, solid profit.

This tells me the numbers are pulled out his ass, unless retail has changed in the last 6-7 years after over a decade working with margins like that. Manufacturing costs especially in bulk will amaze people same for shipping it can very easily fall within 2-3 quid for the lot, it used to be more but there using cheaper boxes now and not including a manual so it will have dropped again. Some of the product margins where 80% even more if they where first party sub brands that we had control of production over.

I remember reading somewhere that for videogames, AAA best sellers titles had lower margins, they were bought at like 45-47 dollars, lower performing games were bought low as 38 dollars.

 

[alabtrosMyster]

To me that seems like the arguments were for the music artists who think they don't get enough per CD (Spotify now I assume).

The counter argument is that if Justin Bieber or Santa Monica are not happy with their cut they can sell their games from their website or create their own store front assume marketing, distribution, etc. To get recurring revenues for their work.

It's even worse for the musical artists because it's even clearer that the musicians don't do most of the work (however the rest of the chain would not exist without the music)... But printing a CD (or the tech to stream your music) promoting the content, paying those who work on recording and mixing, etc. I mean, if you are an artist who is for workers rights then you turn around and complain that you have to pay people to do various work to get your career going it's kind of hypocritical.

If you don't want the overhead do the work alone and see how it goes.

 

[N1tr0sOx1d3]

Well I for one expected devs to get more than that.

Naturally they will make money from other sources including merchandise, but I expected more than $10 cut per unit.

 

[DaGwaphics]

Anyone that thinks Gamepass is going to stay $15/month once those big upcoming exclusives start hitting is delusional. By the time the next Elder Scrolls comes out, I expect the price to be 25.

Why? There is literally no reason for that to be true. They are already covering the ongoing development costs for their big upcoming exclusives right now. We talk about $X per game, but that's not how it works, in reality they are just paying the dev teams as the development process progresses. They can get major revenue growth just by pushing more users to the full price. I wouldn't expect a price increase until subscription growth stagnates over a determinant amount of time. That's when they will start to look at what they have going in vs. the expenses (just like Spotify). As long as there is sustained growth, it's much more important to keep that going. That's why the conversion deals have stuck around for so long, even if revenue from that itself is limited, they know what their rate of conversion to $15/mo. is. As long as that is healthy enough, they will keep the promos going, though I would expect them to limit avenues of abuse as time goes on.

 

[truth411]

Why? There is literally no reason for that to be true. They are already covering the ongoing development costs for their big upcoming exclusives right now. We talk about $X per game, but that's not how it works, in reality they are just paying the dev teams as the development process progresses. They can get major revenue growth just by pushing more users to the full price. I wouldn't expect a price increase until subscription growth stagnates over a determinant amount of time. That's when they will start to look at what they have going in vs. the expenses (just like Spotify). As long as there is sustained growth, it's much more important to keep that going. That's why the conversion deals have stuck around for so long, even if revenue from that itself is limited, they know what their rate of conversion to $15/mo. is. As long as that is healthy enough, they will keep the promos going, though I would expect them to limit avenues of abuse as time goes on.

You really think there going to stay at $15 forever? There not profitable now, when AAA development cost 100 million dollars per game come to the service they will be even more in the Red. They still have to pay all the devs thats in the service for each download. Like ALL subscription services they will increase the price. They have to.

 

[DaGwaphics]

You really think there going to stay at $15 forever? There not profitable now, when AAA development cost 100 million dollars per game come to the service they will be even more in the Red. They still have to pay all the devs thats in the service for each download. Like ALL subscription services they will increase the price. They have to.

While I'm just guessing same as you, I seriously doubt they are purchasing 3rd-party content based on downloads. That's actually counter to what the devs would want as well. When devs stick something on there they would want everyone on the service to give it a go, just for popularizing the IP if maybe there will be a sequel, to sell the game on other platforms via word of mouth, or to gain the maximum number of new users to increase monetization from in-game items.

They are already paying those AAA development costs right now for the in-house studios, it's an ongoing thing. I think they can do a lot with $15 a month, that's over $4b a year with 23m subscribers. Still $2.7b when figuring things at a more reasonable $10 (leaving the Gold money and costs to itself). I'm sure they are looking to push those subscriber numbers further as well, the big first-party content will be part of that push. Plus GP is just one stream of revenue for Xbox game studios, they do still sell games individually on both Xbox and PC (many of their titles have done quite well on Steam). How many AAA games do you think MS will release in a year? 3 or 4, maybe 5 is realistic, sounds like you think they will release 10 or 15.

 

[Dream-Knife]

How much do they make when I buy it on sale for under $20?

 

[Heimdall_Xtreme]

It looks like he takes amortisation into account by saying in reality a $70 game will in lifetime be in actuality a $50 game. Breakdown is:

• $15 - Manufacturing & shipping. This is a fixed cost for physical releases
  • The retail cut included here but varies over lifetime, promotions, sales etc.
  • Digital storefronts take exactly $15 (steam, MS, PS)
  • Publishers prefer this as it reports as 100% profit as no manufacturing, shipping, inventory management.
• $5 Marketing
• $5 Overheads (corporate support and teams like HR)
• $15 Shareholders/profit
• $10 Return to developers/studio for premises, staff, equipment, benefits

Old Game Dev Advice: So game prices are going up to 70$? Where's that money go exactly? Let's break it down.

Timestamps:
0:00 Intro
0:10 50$
0:23 Retailer
0:59 Digital Distribution
2:00 35$
2:43 Marketing
3:19 Overhead
3:44 Margin
4:13 10$
5:19 Doing the Math at 60$
6:00 Summary

As much as they want to convince me, it won't work.

Games must not cost more than $ 60

 

[SlimeGooGoo]

.

 

[Tams]

Why? There is literally no reason for that to be true. They are already covering the ongoing development costs for their big upcoming exclusives right now. We talk about $X per game, but that's not how it works, in reality they are just paying the dev teams as the development process progresses. They can get major revenue growth just by pushing more users to the full price. I wouldn't expect a price increase until subscription growth stagnates over a determinant amount of time. That's when they will start to look at what they have going in vs. the expenses (just like Spotify). As long as there is sustained growth, it's much more important to keep that going. That's why the conversion deals have stuck around for so long, even if revenue from that itself is limited, they know what their rate of conversion to $15/mo. is. As long as that is healthy enough, they will keep the promos going, though I would expect them to limit avenues of abuse as time goes on.

While I do pay for and use Spotify, they do not treat music artists very well. Spotify's business model is not the most stable and I can see them eventually having to increase their prices.

The only reason I can justify subscribing to their service is that I am probably very profitable for them as I don't use it much (I have it mainly for having the convenience of access to such a large music library at hand) and because I still buy CDs and merchandise of artists I like.

 

[llien]

Digital storefronts take exactly $15 (steam, MS, PS)

EPIC says "hi".

 

[truth411]

While I'm just guessing same as you, I seriously doubt they are purchasing 3rd-party content based on downloads. That's actually counter to what the devs would want as well. When devs stick something on there they would want everyone on the service to give it a go, just for popularizing the IP if maybe there will be a sequel, to sell the game on other platforms via word of mouth, or to gain the maximum number of new users to increase monetization from in-game items.

They are already paying those AAA development costs right now for the in-house studios, it's an ongoing thing. I think they can do a lot with $15 a month, that's over $4b a year with 23m subscribers. Still $2.7b when figuring things at a more reasonable $10 (leaving the Gold money and costs to itself). I'm sure they are looking to push those subscriber numbers further as well, the big first-party content will be part of that push. Plus GP is just one stream of revenue for Xbox game studios, they do still sell games individually on both Xbox and PC (many of their titles have done quite well on Steam). How many AAA games do you think MS will release in a year? 3 or 4, maybe 5 is realistic, sounds like you think they will release 10 or 15.

A whole lot of those 23 million subscribers which I doubt its that many, are on $1 deals that last 3 years (Atleast here in the U.S.A. their largest Market). Have to see what there subscriptions base looks like during 2023 for a better picture.
Gamepass make since for small indie devs for a guarantee income, but it don't make financial since for AAA games. No matter how you slice it, there not profitable right now and development cost is rising now that they are footing the bill with more studios. Something will eventually give and that will be a price increase, its inevitable.

Thats how all subscription services start. Lowball price at creation, stay in the Red then Raise Price to be in the Black and hope not too many folks cancel their subscriptions or hope they forget that they are subscribed. (Many folks do).