Publishing/Developing Costs and Profits

[Nick]

Obviously not for me, but when big companies sell a game, I know, from working at GameStop, that about $48 of a $50 game goes back to the producers being the publisher and developer. How much of this actually gets back to the developer? I'd hope they'd get close to the same as the publisher.

On a related note, what are the costs and such of publishing your own game as opposed to getting another publisher to do it?

[Malarkey]

Obviously not for me, but when big companies sell a game, I know, from working at GameStop, that about $48 of a $50 game goes back to the producers being the publisher and developer. How much of this actually gets back to the developer? I'd hope they'd get close to the same as the publisher.


In my experience, unless the game does really well, either not much or none at all. This assumes a separate publisher and developer house (for example, Blizzard and Swinging Ape or LucasArts and The Collective). Usually, the developer and publisher work out how much total the developer will get paid to create the game which then gets paid out in monthly (or some other time interval) installments as work progresses. Obviously, if not enough work is completed for a given time frame, payment from the publisher can (and often is) withheld.

Then, once the game is completed and gets on the shelves, if enough copies are sold AND the developer and publisher have worked out a payment plan based on royalties, then the developer will probably see $1 or $2 for each copy sold. Again, the developer only sees this money if the game sells beyond some certain amount (like say, 250k units in North America).

On a related note, what are the costs and such of publishing your own game as opposed to getting another publisher to do it?

Published as in seeing the game in your local game shop, BestBuy, Walmart, etc? Not a chance. Retailiers are picky about which games go on the shelf and how long they'll be there. Plus they wield enough clout to make the publishers give in to their wishes (like forcing publishers to sell games in the DVD size boxes we see nowadays).

[Nick]

What I meant by my second question was concerning the costs of actually making a development company into both a developer and publisher.

[Taxxodium]

What I meant by my second question was concerning the costs of actually making a development company into both a developer and publisher.

You can't do that. Well, you can in theory, but you will have no free time at all and you will never sleep again. Being the 2 is really not good idea.

I worked on a game company as part of my internship and the guy that ran the company was day and night busy with publishers. And not just one, but several, so imagine if he was a publisher aswell. He wouldn't have a life anymore.

I didn't talk about the costs because I truely have no idea, but I imagine they are very high.

[Malarkey]

You can't do that. Well, you can in theory, but you will have no free time at all and you will never sleep again. Being the 2 is really not good idea.

Well, to point out, Blizzard, EA, Activision, Interplay (R.I.P.) were all originally developer houses that turned into publishers and were still doing development. However, that was after they made tons of money on their games and had enough money to start investing in other independent developers to publish games.

Also, both Ambrosia Software and Freeverse Software were originally developer outfits and have moved on to doing publishing and developing concurrently. But yeah, at that point it just becomes your entire life. You pretty much stop programming so you can handle managing the company.

[Dan Potter]

You guys might find this interesting...

http://www.igda.org/articles/hhalpin_retail.php

And yeah, from everything I've heard, the Developer->Publisher->Retail cycle is depressingly similar to the RIAA Musician->Publisher->Retail cycle. Maybe not quite as slimey and cut-throat yet, but not terribly far from it. On average you end up basically getting paid a salary to make a game, and that's about all you can expect. If you do awesomely well it can go better for you. But hey, if you're a commercial developer that's what you want, right, to make a salary writing your games? :) Some end up going beyond that but it's tough.

[funkboy]

How can we beat this rap? Do we really need such middle men? Retail stores we obvious need... but publishers, what about that? Could there be a better way to do it?

[Dan Potter]

FYI, before anyone takes a serious swipe at that, I recommend reading this :)

http://www.chrisbusch.com/2005/03/free_bootstrapp.html

Trying to compete with the big guys on their turf probably isn't an optimal road to success...

[JustinFic]

What I meant by my second question was concerning the costs of actually making a development company into both a developer and publisher.

Depends on if you mean develop and publish your own games, or develop your own and publish other peoples' games as well. And it also depends on whether these are commercial titles we're talking about, or shareware. I have zero experience with commercial games, but I can comment a little on shareware:

You can develop and publish your own shareware title for beans. You can spend nothing and simply stick it on download sites, or blow all kinds of money on ads, as well as getting your game to certain places (I've heard download.com charges $80 per listing, and it's $500 to get it on the MacAddict CD unless they come to you first.)

If you're thinking about publishing other people's titles, don't bother until you're another Ambrosia or Freeverse. Focus on your own games first :)

How can we beat this rap? Do we really need such middle men? Retail stores we obvious need... but publishers, what about that? Could there be a better way to do it?

Similar thoughts in this thread:
http://www.idevgames.com/forum/showthread.php?t=469

It's worth reading. From that thread and my own experience with Freeverse, the publisher handles way more responsibilities than just slapping their logo on your game, one result of which is allowing the developer to focus on writing more cool games.

[funkboy]

Similar thoughts in this thread:
http://www.idevgames.com/forum/showthread.php?t=469

It's worth reading. From that thread and my own experience with Freeverse, the publisher handles way more responsibilities than just slapping their logo on your game, one result of which is allowing the developer to focus on writing more cool games.

Thanks, great thread. And maybe I was too harsh sounding in my tone - I do know publishers take care of a lot of things, yes. And I love Ambrosia, by the way :)

[MarkJ]

Introversion (http://www.darwinia.co.uk/) published the PC version of Darwinia themselves, and it's just three guys. They have a boxed retail presence in every franchised UK game shop, and I think they went through other publishers to get boxed in the US, although they may have done it themselves as well.

We have the PC version at our apartment, and it came in a very nicely packaged DVD case with all the trimmings.

[BigBlueBubble]

Obviously not for me, but when big companies sell a game, I know, from working at GameStop, that about $48 of a $50 game goes back to the producers being the publisher and developer.

This is not true. I find hard to beleive that someone who worked at GameStop doesn't know how much is the average retail fee.

[Nick]

That's what our store manager told us and he's technically the second in charge in the region. I'm pretty sure he knows what he's talking about.

[kodex]

NIck is right i have worked at computer stores and the mark-up on software (not sure about games) is very low.

[phydeaux]

I think there was some confusion about the publisher and developer.

Your game costs $50;
GameStop gets $2;
The publisher/developer get $48.
Of those $48, the developer gets (commonly) $2 from the publisher.

You can imagine then how happy Valve is when they sell copies of Half-Life directly off their sites from downloading. But tons and tons of sales come in from retail, which is why developers put up with this system. The big name publishers have the power to put your game on the retail shelves- if you, right now, decide to become a publisher/developer you won't be a big enough fish to get your game on nationwide retail shelves.

One day hopefully this will change when more people are buying things off the internet. This is one reason the RIAA is so scared and is freaking out about the music downloading thing- the same I said above goes for musicians and the recording industry (essentially publishers again.) You can get the publishers to put your album on retail shelves and make very little off each copy, but you can also publish yourself off the iTunes store with very little overhead, which some big artists like U2 are doing.

[Badmanagement]

I think there was some confusion about the publisher and developer.

Your game costs $50;
GameStop gets $2;
The publisher/developer get $48.
Of those $48, the developer gets (commonly) $2 from the publisher.

You can imagine then how happy Valve is when they sell copies of Half-Life directly off their sites from downloading. But tons and tons of sales come in from retail, which is why developers put up with this system. The big name publishers have the power to put your game on the retail shelves- if you, right now, decide to become a publisher/developer you won't be a big enough fish to get your game on nationwide retail shelves.

One day hopefully this will change when more people are buying things off the internet. This is one reason the RIAA is so scared and is freaking out about the music downloading thing- the same I said above goes for musicians and the recording industry (essentially publishers again.) You can get the publishers to put your album on retail shelves and make very little off each copy, but you can also publish yourself off the iTunes store with very little overhead, which some big artists like U2 are doing.

Hi - hope you don't mind me being forthright, but the above financial info is more or less completely wrong. The comments about the problems getting into Retail are spot on, however. :)

To the numbers...........

Typically, retail takes way more than 2USD per box. C'mon chaps - how could a shop survive making 2USD on a 50USD item?

Depending on pricepoint and format and where in the world you are the discount that retail gets is much more like 40-60% off. So a 50USD item (and not many games sell at 50USD now do they) would mean, let's say, 25USD to the Publisher.

A typical royalty range would be 10-30%, so again, taking an average, it'd be about 5USD. (It's all actually a bit more complicated than this, but this'll do for our purposes).

However, the fact is that if you have a funded publisher deal, (ie the Publisher has put the money up to make the game) these advances are recoupable against royalties. So if the game cost 100,000 USD and you have a 5USD Royalty, you wouldn't get a penny more until the game had sold 20,000 units at full price.

The majority of games never recoup for the Developer.

(Let's not get into discussions about the exact figures - all the figures I've quoted are imaginary and deals vary, but these numbers are well within the ballpark if you want an idea of how things work in the dev/publisher world.)

[Nick]

Typically, retail takes way more than 2USD per box. C'mon chaps - how could a shop survive making 2USD on a 50USD item?


The reason I say $2 per box is that my former store manager and district manager for GameStop both said that we only make $2 per new game ($50) which is why GameStop pushes used game sales so much. We buy GTA for $6 (well we used to) and sell it for $35. Not a bad bit of money made there.

[Badmanagement]

The reason I say $2 per box is that my former store manager and district manager for GameStop both said that we only make $2 per new game ($50) which is why GameStop pushes used game sales so much. We buy GTA for $6 (well we used to) and sell it for $35. Not a bad bit of money made there.

Maybe that was *his* commission Nick :-)

Anyway - he lied :-)

TFR about used games BTW. I wonder now eBay is so established if it's the same?

[kodex]

Badmanagement I hate to tell you this but the info you have is incorrect.

[Badmanagement]

Badmanagement I hate to tell you this but the info you have is incorrect.

Well - I'm always happy to enter into a debate and learn something new sir.

So - what do you think was incorrect in my original post and why?

[Juuso Hietalahti]

retail (those who get your game to real physical stores) publishing
Badmanagement's figures seem quite true. Retail stores will sell the game for $50 and they will can get for example $25 profit (altough store owner has rent to pay... people to hire... advertisement to do, so the actual profits will be lower). Publisher will take the $25 cut, but he will pay the salaries of the developers, manage distribution, market the game, etc. (which is not free) - in the low end is the developers who get hourly payments... and eventually they will get maybe $2 share - but they don't need to do any advertising... no need to rent places... no nothing related to risks. They concentrate on game development and get paid accordingly.

online publishers
They typically offer 30-50% profit and some offer advance payments. They have established channels for their games and they have customers ready to buy your new game. And usually they take care of expenses like advertising or web hosting fees etc.

Self-publishing:
Self-publishing via Internet is possible to do with very light budget. Getting a decent web hosting and domain name costs only about 100 bucks (=5-10 sold games) and ecommerce providers (like plimus or esellerate) take 10% from each sold copy. So basically this is very possible to do, and it won't require much financial effort. If you wanna go cheap, you can do that even with few bucks per year.

bottom line:
Yes, retail (store) publishers will take bigger cut from the pie - but they will also take all the risk - and pay you advance payment whether the game is successful or not. So yes, it's very logical to give the biggest cut to those who take the risk.

[MattDiamond]

Just wanted to add that retail will often charge the publisher an extra fee just to place the game on their shelves, and again in their flyers. There have been a number of rants about this, I seem to remember an article by Brian Greenstone for IMG, and another one posted as a soapbox on Bungie's old website back when they published their own games (and if you read it you start to get a sense of why a company like Bungie or Poptop might want to be acquired and give up publishing entirely.)

So yes, retail takes some risk, but they minimize it by holding publishers hostage to limited shelf space. If your publisher won't pony up, the best shelf space, and maybe all of it, will go to other products. (I suppose if your product is a new Harry Potter book there might be an exception made.)

[Zwilnik]

You're also missing out an important middle man, Distributors. If you're pushing into retail, the Distributors are the main path to retailers and between Distributors and Retailers, you're looking at 50% or more of your money gone.