Even Wii games not immune to dilution of industry profits

by James Ransom-Wiley on Mar 31st 2009 2:43PM

Get this: Game publishers would be charging more for their console games if it wasn't for your consumer choice. Despite continued sales growth in the game industry, its biggest companies are still losing money. While ballooning production costs are certainly to blame ($25 million is a typical bill before marketing), the proliferation of low-cost games -- and means of distribution -- has been singled out as the underlying culprit of profit dilution, according to a NYTimes.com report. And these cheapo games are also keeping price tags low (at least, lower than big companies would like).

And let's be clear: Low-cost games aren't the ones sitting in the Wii rack at your local retailer. Even a Wii game needs to sell at least one million units to be profitable, by Reggie Fils-Aime's estimates. (And Only 16 out of 486 Wii games have crossed that threshold as of March 1, by NPD estimates.) So who's gobbling up all the pie? Well, just about anyone. Have you searched "free games" in the Apple App Store lately -- or just googled it? To counter the proliferation of consumer gaming options, companies are bringing down production and marketing costs (laying off, outsourcing, recycling IP, etc.) and tapping additional revenue streams (e.g., subscriptions, in-game ads, and DLC).

So what's our professional takeaway? Here, we'll give it to you for free: We see big-budget sequels (made in Egypt) and many, many casual games (made by Joe the Developer) in your future.

[Via Eurogamer; image credit: hyperscholar]

Source

Tags: Nintendo, npd, reggie-fils-aime, sales, Wii

Reader Comments (83)

Depressing news.

Go see pagliacci the clown, he is in town tonight.

But doctor...

Good joke. Everybody laugh. Roll on snare drums. Curtain.

look on the bright side. At least game prices wont go over $60, according to this article at least.

"And Only 16 out of 486 Wii games have crossed that threshold as of March 1, by NPD estimates."

You know... videogames are sold all around the world, not only USA. There are currently 47 million seller Wii games.

In that case, everything's fine, people. Nothing to see here.

true but USA still think that they are the world and there is nothing outside its borders but US clones

Oh yeah, you got it. Clearly, that's what's at play here. Because there's some statistical confusion, obviously the solution must have something to do with some generalized Communists' dream of America where everyone is somehow dumb enough to not know that something exists beyond US borders. I definitely see how we arrived at this conclusion.

. . . ?

ITS MILEY!

IT'S STILL A FELONY!!!!!

ONLY IF YOU GET CAUGHT!

Relax man, only two 2 more B-movies and a country album before she does porn. Like Jessica Simpson.

Jessica Simpson and Porn?

Link or it didn't happened! (unless you're talking of fat Jessica Simpson. If that's the case, we are cool, it doesn't happened;) )

"a Wii game needs to sell at least one million units to be profitable"

Waaat? Either that's complete bullshit, or Wanat knew more than a lot of you gave him credit for (I'm going with bullshit though).

It's bullshit.
The entire article is about how the traditional console game market is dying, to be inevitably replaced by stuff like iPhone games and OnLive. The writer almost surely took the quote out of context to arrive at a conclusion that fits with the article (this is the NYT wriging about games, after all). Reggie has previously sad it only takes 400,000 in sales to equal a million on PS360 sales, too.
Reggie isn't stupid. He or any executive would NEVER admit that, true or not.

That said, I wouldn't be surprised if a huge budget game like Galaxy or Brawl didn't see profitability until it sold a million copies. It's possible, at least.

Dude, it's got to be bullshit. We read blogs, there is no way a director at a video game developer knows more about the game development process and budgets than I do, reading a blog. He's only had to budget for a few games, I read Joystiq, so that guy has no idea what he's talking about!

Ah yes, the casual gamer at work.

That up there is an entire casual gaming herd. I want to join.

At Banana Boat:

Your saying you want a Wii and want to play casual games or that you like white women?

Or that you like 12 year old white girls?

She is holding a psp game, lol.

I don't mean that herd in particular. I mean I'd like to find a similar herd of hot blonde chicks that want to play some Wii.

My girlfriend can't handle Wii Tennis. She lacks the skills. I yearn for someone that will volley balls at me until the break of dawn.

Yearn for someone to volley balls at you until the break of dawn... OH CMON MAN YOURE MAKING IT TOO EASY

I wonder how much of a game actually goes to the devloper. 1 million copies sold would total $50 million for a $50 game, but obviously that money is split several ways (retailer, Nintendo, publisher, etc).

I've posted this before and I'll post it again.

Article:
http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames.html

Slideshow:
http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_slide_2.html?boxes=custom&thisSpeed=20000

It breaks down how much money of your game purchase goes to who and what.

Article - http://tinyurl.com/uzmty
Slides - http://tinyurl.com/dbcrzd

For those who don't want to read the detailed analysis here are the raw numbers according to Forbes.

25% art design ($15 of the $60 you pay)
20% programming & engineering ($12 of the $60 you pay)
20% retail markup ($12 [at best] of the $60 you pay)
11.5% Console Owner Fee ($7 of the $60 you pay)
7% for marketing ($4 of the $60 you pay)
5% market development fund i.e. shelf and ad placement ($3 of the $60 you pay)
5% manufacturing costs, packaging ($3 of the $60 you pay)
5% Licensing Fee if applicable ($3 of the $60 you pay)
1.5% Distributor if applicable (small studio) ($1 of the $60 you pay)
1.5% publisher profit ($1 of the $60 you pay) - this is after EVERYONE has been paid including the in-house or outsourced development teams.
0.3% Corporate Costs (quantitative analysis, mgmt overhead) (about 20 cents)
0.05% Hardware Development Costs (less than $.03 cents)

If the future holds mostly casual games and big-budget (predictable) sequels, then I think we may one day look back to the N64-GameCube era as the golden days of gaming.

I already do feel that way, in a sense. Long live the Virtual Console!

Seriously I am already paying $60 a game if they raise the price I am not going to be purchasing games, it was already crazy with the last console being $50. They think their gamers are made out of money, they need to find a way to lower production costs, I mean come on they sit in front of a computer all day it's not like they have a lot of material to work with.

Yes i know it's a tedious job, but costs should be minimum, after purchasing computers for processing power it should be cake - how about they stop getting actors to do realistic motion for every game and stop getting highly known actors to do voices - that will lower production cost. Did I care that Seth Green was the voice of the ship driver in Mass Effect? Hell no, it was cool, but I didn't care it could have been Billy Bob and I would have been happy. I thought my family was bad at money management, this guys are redic.

I agree, I rarely buy games if ever. I rent most of my games, and its been working fine for me, ever since I purchased Mercenaries 2 right off the bat Ive been carefully researching games I plan on buying. I actually only buy 2 or 3 games a year if that.

I feel the same way about movies. Im tired of Samuel L Jackson, in this economy other people need money too.

development costs don't have so much to do with computers, voice over (didn't the guy who did Niko's voice in GTA4 only get like $150k?), motion capture....they have to do with the insane amounts of man hours needed to make a game in this current generation of consoles. developers aren't cheap. they probably make somewhere around $50k a year at least. multiply that with say.....50 developers on a game (probably a lot more, i don't know....MGS4 had over 200 didn't it?) over 2 to 3 years, sometimes more, plus QA testing, and i'm sure a lot more steps, and you have already spent A LOT of money.

Actually, Billy Bob Thornton costs more than Seth Green.

Would have been funnier too.

see my post above (reply to Taylor about 2-3 posts up) to understand why a game costs $60. To be honest games probably need to cost $65 before taxes to sustain viability.

"Seriously I am already paying $60 a game if they raise the price I am not going to be purchasing games, it was already crazy with the last console being $50"

*cough* solderless drivekey mod chip *cough*

:D

and PJ Eden was profitable after 24 hours? This shows Physical Media is on the outs.
Cut out GameStop (please!) but i still prefer owning physical copies.

However, games are so advanced that only Sequels of big budgets can come out on top (RE 5, GTAIV) its almost like a new IP is just gambling that you can make money on a sequel.

Meanwhile downloadable games (like everyday shooter) can have a 1 man team. Less money to the middle man (again gamestop for stock and resale).

i dont know where im going w/ this, TL:DR and all but i think big budget blockbuster games are the decline.

Halo 3: ODST
Bioshock 2
Modern Warfare 2
Rock Band: Beatles
Assassin's Creed 2
Zelda DS (the one announced at GDC last week)
God of War III
Uncharted 2

Uh ... yeah ... blockbuster games definitely appear to be on the decline. Dummy.

yeah dummy they're all sequels like i said.
and some of those suck like i said and there still aren't that many.
Each year there are a handful of Huge games per console that do well.

when you can make A DL game or IMAGINE BABIEZ!!! and make a profit right away or w/ little money put in (low gamble).

The point is devs are realizing this.
(EA and Ubisoft a long time ago)

at $60 a pop, many consumers are afraid to gamble on a game too. lets just spend $5 on transgenger pac-man.

@iiijeremy

you do realize your list is just verifying what the last line of this post stated:

"We see big-budget sequels and many, many casual games in your future."

who needs new IPs when you have sequels!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

damn you beat me to it. that's the last time i defend your honor.

How did you know some of those games suck though? I haven't had a chance to play any of them yet. You must have a time machine to know that!

@ Eric E

Hey dummy, the last line in your post said that big budget blockbuster games are on the decline. That's clearly not the case, and my list proves that.

Yeah, I know that earlier in your post you mentioned sequels versus new IP, but it was the last statement I was focusing on. That much should have been painfully obvious and I'm of the opinion that only a true dummy would have failed to take notice.

So, in closing, I'll ask you, my dummy of a friend, to be a bit more concise with future posts. Um kay?

Talk to you later, dummy.

You're right i dont know that was stupid to say, really i meant some are console exclusive, most people would only get some of those games.
I for one dont like CoD games (you can start yelling now)
I wont be picking up the beatles game
I dont own a 360 and dont like HALO.
etc.

Everyone will have their own reasons for not liking a portion of those games

a big budget title doesn't guarantee sales like it used to. I will bet getting Bioshock and Uncharted almost for certain but otherwise i i'll just rent or borrow or wait until they're cheaper.

iiijeremy - So, you picked out one line of his post and disregarded his previous statement? It seems that everybody except you read his entire post and understood what he meant. Now you're just acting like an ass to try to save some face since you only quickly scanned his post before responding.

I'm hurt, Eric. You didn't even call me dummy once in your most recent reply!

LOL.

Hey, I totally hear what you are saying about sequels wearing on you over time. I'm to that point with the music games, and probably won't buy any of them this year, but I do still enjoy the FPSs and Action sequels that get cranked out every year. I'm a fiend, what can I say!

Bioshock 2 is actually tops of my list for this year, too. Fingers crossed that it's as good as the original!

@ Kodros

You're taking all of this a bit too seriously, don't you think?

Lighten up a bit, dummy.

:)

The market is now way to complex to make these kinds of general statements. There are really dozens of pricing tiers across multiple platforms, and each tier/platform will have different sales and profitability expectations. I would say some of the "news" here is just the old guard of the gaming world finally coming to terms with a changing landscape.

"OH MY GOSH MOM CAN WE PLEASE GET THIS SWEET BABY SIMULATOR I HAVE IT ON MY DSi TOO. OMG OMG OMG!

"Are you sure, mom? I thought we weren't allowed to play with Wii's until we were older?"

Hey, she's holding that game upside down.

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Even Wii games not immune to dilution of industry profits

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