[GamaProfile]
Gamasutra
September 4, 1998
Vol. 2: Issue 35
| Attn: Gama Readers. This is a biweekly column. If you have any points to raise, whether anonymously or openly, please [email] the writer your thoughts. Gamasutra is a great forum for raising industry awareness. I'd like some of that to come from your input. |
The Top Ten
of Gaming
[08.21.98]
Aging Empires
[08.07.98]
Siggraph Musings on Motion Capture
[07.24.98]
Blow your own smoke in
[Threads]
Haven't joined yet? [Join
Now]
The big question on everyone's mind when they have a title in the works is, how much money is it going to make for me, the auteur, the pater of this stunning oeuvre. And every novice millionaire-to-be wants a percentage figure, or a dollar amount, or some concrete answer where none exists.
I know there are many fabulous business consultants and such types who make much money telling you the potential upside, and I know there are many, many sales and marketing types in publishing and distribution who will also tell you the upside and put a dollar figure on it, but it's time for a reality check, or at least a metric that you can wield in your dreams.
So, let's start with the basics, the basic scenario is this:
Production: put into the sink hole a cost per hour for actually writing and building a finished product. Do it in personnel hours, or whatever way you decide, but make it a real cost. If you're charging a smaller average than $55 per hour than you are cheating yourself-- Even if you wrote the title on your trusty laptop in the bathroom at work in between slinging burgers. There's a cost for everything. Overheads, labor costs, equipment costs, material costs, etc.
So, let's say I have a cost of $250,000, which is actually not unrealistic for pure production costs. You could probably find a third party engineering team to do a good title for that price providing they had exact specs and documentation for a title. And providing, of course, you are a cheap ass, conniving, back stabbing, baby stealing thief who robs developers blind. Heck, it's business. $250,000 is my final offer.
The Box: So, now we have $250,000 spent on getting something to sell, good or bad. Actually that's just for a CD full of code. Now we need to design a box. I'll say $7,500 for a shoddy, amateurish box design. Spend more than $25,000 on a box design and you are obviously mad with power.
So, now we have a box design for $7,500, and a CD full of code for $250,000.
Manuals: Let's add a $3,000 for manuals and documentation. Just for a disc with some Word files, or at best, a Quark file with a full manual layout. It's not a lot, but you need it, unless you plan on squirreling your revenues away on support calls telling people that they shouldn't use the space bar.
So, how many boxes should we make? Let's wait. We've got ourselves a publisher.
Box/Manuals Again: Goodbye box art and manual. The publisher doesn't like it. Can't use that picture of the one breasted xylophone player in Wal-Mart. Need new art.
So, now we have $250,000 plus $7,500 plus $3,000 that you have spent on some code, artwork files, and document files. Over to the producer who decides to spend $15,000 on a new box design.
You're out of pocket for $260,500, but you can't get it back until the publisher gets his money back.
Boxes of Product to Ship: The publisher has just spent $15,000 on the box and wants to build 15,000 boxes with CDs of your title for the initial launch. He figures this is going to cost at least $92,000. Publisher is out of pocket by $107,000 already, and you haven't even shipped a thing.
Total so Far: Okay, so your pathetic, cheap ass title is costing $367,500 so far just to get enough into a warehouse to ship to a bunch of retailers who may not sell any and return the old copies, unless the publisher convinces them to stick in a bargain bin for $9.99. More on that later.
The Shelf Price/Distribution/Marketing: The publisher marks your title at $44.95 for its launch, and sells it on to the retail channel at $28 a pop to the retailer. Maybe the price to retail is less to convince them to stock this newcomer. They throw in a little sales pitch, a little marketing flash (figure the cost of retail and channel marketing to be 15% of your sales cost and I am not even going to begin to figure that in to my cost model up front). Retail takes all 15,000 copies and sticks it on the shelf because the publisher has already spent $50,000 doing a press launch and some advertising. Publisher has accounts receivables of $420,000 and is out of pocket by $157,000 so far. You need your $260,500. Profit on initial sales is $2,500. You know you won't be seeing much of your money, and you know the publisher isn't going to settle for a split on $2,500.
Reality Check
I've completely skewed the figures to make a point. The publisher may sell your title to retail for $32, or $22 at market value. The publisher doesn't get a dime until a product sells through. If 2,000 of those 15,000 boxes don't move off the shelf, and come down in price by $10 then, the publisher is going to have to give the retailer something back to keep the stuff on the shelf. Price protection is the official name - unofficially it's called "Keep the damn things and don't let me see them in my warehouse." Do the math. Show me the money, please.
Of course, your title could sell 50,000 units. That makes for some profit on both sides. It could sell over a 100,000 units, which is close to a hit, or it could sell over 200,000 which is a certifiable hit. Of course, more money on marketing could help. A great title always helps. But more money on marketing. How does the publisher know that your title is a good investment to put the bucks behind Experience helps, but no one can predict the future in a hit driven business.
You're untried and untested. They like your work. You're not a known quantity. They took a risk putting down a $157,000 to give your title a decent launch. Could have lost most of it. And if they knew what was a sure fire hit, they wouldn't need you. They'd just write it up and give it to some hungry engineers to punch it up.
15,000 units out the door is respectable. That's nationally. Maybe your game plays well abroad. Maybe they make their money back on licensing the thing to a German co-publisher. There's always hope.
Next time you bad mouth a publisher, figure that they're in business to make money. Putting money into development isn't even the half of it. The real cost is in getting things on the shelf. It really annoys me when people in the business are less than honest with novice developers about these things. Take this crappy distribution financing model I've laid out here, and write up a business plan bearing in mind that just because you think you can sell a 100,000 copies of your game doesn't mean it's going to happen. I'd love to see a business plan where a guy shows me how he can make money on 20,000 copies. That's genius.
Hell, anybody can make money from a hit. How do you make money until the hit comes along, knowing that you don't know when it is going to come along but that you still have to keep producing? Why do you think so many developers work on the inside before they go solo? They get to become marketable and bankable. That's all there is to it.
What a crap shoot. Makes for an interesting life.
Omid is the principal wordsmith at Doodah, a business name that only he may find amusing, and his wife believes will lead them to Penury (a small retirement resort off the coast of Madagascar). Omid provides all manner of writing services for those in the computer industry willing to overcome their reluctance to associate themselves with a business called Doodah. He writes for numerous trade publications, as well as doing private market analysis for companies willing to pay him exorbitant amounts of money or make promises of same. In addition, he flexes his funny bone writing copy for Web sites, packaging, brochures, advertising and PR campaigns. Wherever words of wisdom and wit are required, Doodah is there. You can reach Omid at omid@compuserve.com.