Study: Just 20% of released games making a profit

by Justin McElroy on Nov 24th 2008 10:10AM

We've got to be honest, we've tricked you a little bit. We put the most surprising fact from this Forbes story up there in the headline, just so you would read the story. Sure, that 96 percent of games lose money is a shocker, but game publishers are making money off of something, so we probably shouldn't worry ourselves too much.

So why all the mendacity and subterfuge? We just really want you to read the whole thing, because it's fascinating stuff. If you want to know why some decisions are made in the industry, why some features make the cut while others are left out, it's required reading.

[Update: See, we knew the figure wasn't as bad as it sounded. EEDAR just emailed us to clarify that, contrary to the Forbes piece, only 4 percent of games that go into production will turn a profit. Twenty percent of released games make money, which is still surprisingly low.]

[Via CVG]

Source

Tags: business, sales

Reader Comments (37)

study: 10% of games are actually fun.

Not being harsh...just look at the the Wii and DS's releases for the holidays. Bratz, Petz, Barbie, Scooby Doo, really?

it doesnt count when they're counting all the sucky ass games like cabella's deer hunter.

Update: yeah i doesnt count either when the game is never made in the first place. thanks for all the hyped up drama forbes. almost thought videogames were a dying industry...

:P how much money is the gaming industries making? like 20 billion a month or something like that?

40 billion per year, of which 10.3 is related to PC (retail/online)

^those are the only numbers I have memorised. Handhelds make up quite a large proportion of the total profit too.

I think this is also due to the fans, they rush through a game so fast and then want a sequel RIGHT NOW. the games don't have time to make profit! i'm going back and playing games I never new existed (stubbs the zombie, Chibi-robo) that were amazing, but ignored because the market was moving way too fast for them.

yeah thats qutie a bit of change. i think what the guy said below me that they are trying to find pity with the gamers to someday raise prices and stop the resale of games, as well as make the older people that hate games cause they think they are the antichrist happy

Don't forget all the crappy movie games.

I think the Harry Potter games are responsible for billions in cash down the drain.

It's actually Deer Hunter and the licensed games that make money. They're low-budget products with a large built-in market.

EEDAR is a research group paid by videogame publishers to publish whatever findings they want.

This is like tobacco company sponsored research that shows that light cigarettes cure cancer.

Activision, EA, want this sort of research to show that they are a financially struggling industry that is being destroyed by, for example, second hand sales from Gamestop.

You're failing to take into account all of the other non-mega-publishers out there. Sure, EA and Activision can afford to take a hit from second hand sales or piracy, but a lot of other studios can't. Take a look at what's happening to World of Goo. It's a tiny team with a gem of a game and what do they get for their efforts? Rampant piracy.

How many publishers have laid off teams lately? How many studios have closed down? Sure, the game industry as a whole makes a lot of money, but a lot of that money goes back into development of the next game, and most of that money is being concentrated in the mega-publishers...what does that mean for us? Smaller studios are feeling the squeeze, and larger studios are less likely to want to take risks...that means less innovation and more rehashes and sequels.

Yea because EA and Activision don't want shareholders, right? They paint a picture of how they are struggling to cope to scare off investors and see their stock price plummet. That's what every company wants, right?

Investors and shareholders read the quarterly reports and know damn well that the videogame business is booming, and doing remarkably well during a global recession.

This is akin to the movie studios, who actually claimed that the first Spider-Man movie never turned a profit. This was so they could withhold royalty payments, and further the argument that piracy was destroying their industry.

I don't know if anyone has read the article yet, but this guy's game sounds rad. Going back to the same future place over and over to see the changes you made in the past sounds pretty rad.

Get on it, Forbes dude.

"Zatkin also notes that a game's release date plays a critical role in its success."

DO YOU SEE THAT LBP?

Games make their money off of magic fanboy pixie dust. Everytime a troll posts, titles such as MGS 4 or Gears 2 makes a sale. Believe!

That image is responsible for 100% of the soda ejected from my nose today. Good show.

The science of fun.

It's people like this that turn great franchises into "what people really want" to boost sales.

wakka wakka wakka wakka wakka wakka wakka wakka.

Could be interpreted well or poorly. In an environment where relatively little succeeds, creativity stagnates (as we see), but also in an environment where relatively little succeeds, publishers are compelled to do their very best per title

Where's the trade-off?

it's not rocket science.

when you're asked to pay anywhere from $200 to $600 just for hardware (which doesn't even include peripherals like controllers, memory cards, HDD's, 'points' for online purchases, etc.) something has to give and, unfortunately, it's the software.

and, like assholes, they've actually raised prices by $10 instead of doing what you're supposed to do to encourage market growth which is LOWER prices.

this is why upscale pawn shops like gamestop continue to boast record earnings virtually every year and will continue to thrive so long as gamers are forced to trade in their titles seeking monetary relief, regardless of the damage it's causing the industry.

Statistics can be fudged to say just about anything. How were these numbers gathered? Are we counting cell phone games? iPhone games? Board games? Obviously publishers are still making money, otherwise they'd stop publishing games. Are they selling drugs on the side?

The Forbes piece is a good read, but I have to say, it's kinda sad to think that the decisions made in a game's infancy are so formulaic. Seems sort of antiinnovation.

what exactly does "turn a profit" mean?

does that mean all the expenses of producing, advertising and after sales support are covered and then more money is leftover? then the "20% turning a profit" would seem to make sense, because it's like that in just about any industry, isn't it?

Math. Yore doing it wrong.

Oh, now you sound like all my high school teachers.
...and middle school teachers.
......and college teachers.
.........and my dad.

Yea thats because only about 20% of games are actually worth playing.

I'd go lower, but that's just me.

I personally only want to play 1% of them at the most...

Famewhore stole that picture from GraphJam.com. :(

The 80% failure rate is nothing surprising -- that's pretty much the average across industries.

For example, less than 20% of new grocery products succeed: http://www.voanews.com/english/archive/2002-07/a-2002-07-22-2-Less.cfm .

OH MY GOD DID ANYONE ELSE NOTICE!? IT LOOKS JUST LIKE PAC-MAN!

What can I say? It's a hit-driven industry. Our best option is to attract different markets and to target them. It's unreasonable to all play on the same playing field because the playing field isn't big enough for everyone.

We need growth, we need expansion, we need to explore diversity and to nail it. Nintendo has done just that with the mass-market at the expense of its core gamer. Microsoft is polarizing the core market and Sony has diversified through Blu-Ray.

This is an important dilemma which needs to be solved in this generation of gaming, especially with the way the economy is going, and I think that cheap downloadable titles are currently the most interesting alternative: if you can thoroughly convince people that your game would either be unique or have great value for its money, you're set.

The film industry posts exactly the same kind of figures. This isn't surprising at all. Studios finance flop after flop just to keep titles out waiting for the next smash hit. Games are the same way. You can't have a Gears of War every week, but you need to keep making content.

I would go watch twice as many movies in theaters if they $8 a pop instead of the $11..

I may buy a few more games if they were $40 instead of $60

The number's lower for telly shows and theatre.

This has been true for 20 years.

That's not too surprising. Look at how many games are hastily thrown together shovelware.

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Study: Just 20% of released games making a profit

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