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Report: StarCraft II Budget Has [Not] Exceeded $100 Million
by Chris Remo [PC, Console/PC]
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July 16, 2010
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[UPDATE: According to a Wall St. Journal correction, StarCraft II has not in fact cost more than $100 million to develop. The cited budget pertains to World of Warcraft.]
Publisher Activision Blizzard is expecting its upcoming real-time strategy game StarCraft II to be a significant long-term success for the company -- and developer Blizzard has so much faith in the game that it has reportedly spent more than $100 million on it over the course of its production.
That figure comes from a Wall Street Journal piece based on an interview with Activision Blizzard CEO Bobby Kotick, although the Journal didn't explicitly state whether the total was obtained from Kotick or another source. Its budget likely includes a significant expenditure on the new version of online multiplayer service Battle.net, whose first showcase will be StarCraft II.
"There is no shortage of consumers for StarCraft," Kotick said. "For a game that is more than ten years old, there's millions of people still playing it." StarCraft launched in 1998, and along with its Brood War expansion has sold more than 11 million units worldwide on PC.
Although not announced until 2007, development of StarCraft II began in 2003; the game went into more dedicated production in 2005, following the release of World of Warcraft.
Kotick recently called StarCraft II, which launches on PC this month, one of Activision's "seven pillars of opportunity." More than half of those pillars are derived straight from Blizzard. Also on the list are the WarCraft franchise, whose World of Warcraft is one of Activision's key profit drivers; the Diablo franchise, whose third main entry may release next year; and an untitled MMO known to be in development at Blizzard.
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![Report: StarCraft II Budget Has [Not] Exceeded $100 Million](http://www.gamasutra.com/db_area/images/news2001/29485/starcraft2.jpg)
Personally, I'm severely turned off by the Buy 3 Games for One aspect, and the changes to battlenet 2.0 make me not only concerned on how that budget was spent, but if they actually spent millions of dollars to make some aspects worse!?
I'm old enough to remember when video and computer games were created by teenagers who lived with their parents, or college kids in their garage. The idea of even spending tens of millions on a single production - one game! - is so outlandish, so outrageous, that I'm left speechless.
One blockbuster here and there may be able to turn a profit, but the game industry as a whole cannot survive in an environment such as this. This business model is simply not sustainable.
They actually have two TV channels dedicated completely to Starcraft & Starcraft tournaments, where famous video game champions pit off against each other. They actually view it as a sport. With 48 million people living in Korea, and a huge bulk of them addicted to the current Star Craft, I'm telling ya... if the game was ONLY released here it would still profit.
I think investors have nothing to worry about here folks. It will be the biggest game of all time. And that's coming from someone who's never even touched the game once...
Even at $60 USD a piece, the product would have to sell 1.67 million copies to generate $100M in revenue. I don't know what their margin will be on every sale and what their overhead is going to run them but that just going to drive the amount of revenue required to generate above $100M. Finally, what are they expecting for net profit on a product that took $100M over 7 years, you've gotta add that on top on the revenue required to be generated.
Again, seems to me this is just to create conversation.
Edit: Roby your right, missed a zero. 1.67M which actually makes this make more sense.
(this is assuming the marketing budget is accounted in those 100M)
Also, remember this "supposed" cost includes battle.net which is a huge investment for Blizzard for future games aswell (WoW, Diablo 3 etc) so it's more of a shared cost than an exclusive SC2 dev cost.
That being said: with the huuuuuuge users base Blizzard is connected to with WoW, the fact that the PC market has just been given up almost exclusively to Blizzard - i.e almost NO serious competitor at ALL - (after everybody ran away from it, saying it was "dead"), the fact that SC is a cult game that sold 11 Millions units in years were the market was smaller, the fact that SC - as hinted above - is a national phenomenon in Korea, it really looks like Blizzard is almost sure to sell more than 15 Millions of this game worldwide - and I'm betting they're going to sell 5 Millions+ in the first week only. (and I'm not even talking about the expansions) But of course, these are just guesses (or me trying to look smart;) we'll see in two weeks what happens in the end!
One thing is sure > Blizzard made the smartest move ever when they decided to stick to PC exclusively when everybody dropped it. A "theorically" bigger user base (as long as you release games that people can actually play with their PC), less competitors & less intermediaries to distribute revenues to when you release a game.. Big win.
Finally, I understand it seems crazy to spend so much money on a single game, but if you look at AAA video game sales history, generally, the games that generated the more revenues are also the ones that cost the more to develop - because LOT of iteration / polishing resulting in a perfect gem in the end for gamers (for instance: GTA, HL2). So it would be easy to understand why some people are not affraid to spend that much money (even more when we're talking about a developer with the track record of Blizzard). I'm not saying it should be the norm in video game development, nor that it's a riskless move, just pointing out that it's not a first time in history & it actually worked out previously.
In the end, for developers, I think the real question is: "How can a 'regular' studio compete with such high budget games when they only have 1/10 of the money to make their own game?" I would say: with creativity! :)
I would bet that SC2 will sell between 5-10M units in the West which means that they can get $225-450M of sales from the West, plus probably another $100-150M from Korea, and then probably another $100-200M per year from China. In total this suggests SC2 could generate $425M-$800M of revenue....in the first year. Thereafter, there will be two more expansions plus the Battlenet marketplace and potential virtual items that will be sold. Battlenet is also going to be a revenue driver.
So bottom line, its a no brainer of an investment. By the way, The Old Republic MMO from EA and Lucas Arts is costing well over this $100M. WoW also cost over $100M initially. Also Red Dead Redemption apparently cost $80M to make. Big blockbuster MMO's and big AAA games are now costing this level.
Koreans can choose between buying a flat-fee boxed game, or using the combined WoW/SC2 subscription model.
This is a PC game. No royalties to pay to console makers. Yes, typical retail take is ~20-25%. Also No royalties to pay since Blizzard owns the IP. Therefore the product gross margin will be 75-80% on SC2. You are correct that for console games, the margin is 15-20% lower because of the console royalty fee.
Also, no SC2 is going to be sold for $60 not $50 retail. Activision is taking on premium pricing similar to what it did with MW2.
I see a lot of people associating the $60 price point with Activision, but bear in mind that Blizzard has used that price point for most of its other PC games that aren't WoW, which obviously has an extra subscription fee.
That's not to say Activision wouldn't have pushed for it anyway, but WarCraft III--Blizzard's most recent RTS, predating the merger--also retailed for $60, which would be about $70 now accounting for inflation. Diablo II (which I bought day one) retailed for $60 in 2000; that's about $75 now.
So while, yes, it's similar to MW2, it's also similar to other Blizzard games.
Which will lead to assume that each game will be significantly different than the first.
Another point is no one has confirmed these numbers, it could just be a hype, just because it’s in the news it "must be true"
That can't be the case, assuming the wording is correct and Blizzard has already spent $100 million--that's the amount spent so far, not the total future budget. The expansions are not fully developed yet, meaning Blizzard will keep funding development until they are done, and I don't expect all three to have been released until at least two years after the original game. Two years of full development isn't free.
You are right, however, that the numbers have not been confirmed (unless the Wall St. Journal indeed got them directly from Activision).
75% of the retail price goes to the publisher? This seems a little bit to high for me, cause it would mean, whenever a retailer is selling a PC game that has a suggested retail price of 60$ for just 40$ one month after the launch of the game, he would make a loss of 5$ per game sold. Such a price drop is very common in todays PC market.
and people have to realize that the "its done when its done" philosophy (which is fantastic btw) equates to higher production costs. i think its fantastic that they put quality first, no matter what the cost. when the sales figures come in, i think they will be more than justified.
You are referring to the typical price discounts after launch for a game. In that scenario, the publisher provides price protection to the retailer. If they cut the price from $60 to $40, the retailer margin would still be the same in that scenario. The publisher would be the one ensuring the markdown protection for the retailer. This is what has been done since the beginning of time for retailers.
@Chris
You're right on past Blizzard games being in the $60. I was referring to Activision as the same as Blizzard because Activision owns 100% of Blizzard lol. I know Blizzard is operated as a separate subsidiary, but revenue projections, pricing etc. are all coordinated with corporate. There is also no coincidence that SC2 will priced as same price as MW2. They don't want to leave any money on the table at launch. They now the early adopters will be indifferent to the price whether its $60 or $50 so why not capture the extra $10. Console gamers already conditioned to this level, but PC gamers are not or at least not yet.
Chris you are also bang on in regards to future budget for SC2. They still have to develop the 2 expansions and they will have to spend on future Battle.net updates so the $100M cost doesnt reflect this. Also regional customization, in particular for the China market will also need to be done. The China biz model for this game could be quite different to any other region for SC2. In every region the game is essentially still sold as "packaged good" but it might be more "subscription/service-like" in China. That will take more investment also.
If this statement is correct, then $100MM is not surprising. Investing in network infrastructure is very expensive. Some of these CRS cabinets are over a million dollars. My guess is they're laying the ground work for whatever business model they've worked out over the next few years.
There's a subtle difference in there but that's what keep Blizzard separated from the rest of the group. It's not just a detail if the group was named "Activision Blizzard" (and not just "Activision") after Vivendi bought a majority stake in Activision. All the Vivendi assets were then put under Activision Publishing direction EXCEPT Blizzard.
Blizzard & Activision Publishing are basically at the same "hierarchy" level within the group, with two CEO leading each parts - and independantly from each other - (Morhaime for Blizzard, Griffiths for Activision Publishing) & both reporting to a single person: Robert Kotick. So I don't think Activision Publishing price tag policy would be "naturally" applied to any Blizzard games, since Blizzard is basicaly not under them nor reporting to them.
Yes, ur right Vivendi owns 58% of Activision which owns 100% of Blizzard. Operationally, Vivendi however not running day-to-day. Games division only 8% of total Vivendi revenue so its a small piece. Vivendi is a conglomerate and much more focused on their Telecom biz in France. Activision therefore runs both Blizzard and Activision Publishing.
Reporting structure has changed. Griffiths is gone. He was just replaced last week by a Hollywood guy. Tom Tippl is now the COO (formerly the CFO) of entire Activision Blizzard. Both Activision Publishing and Blizzard report into him. He definitely has a say whats going on at Blizzard.
This is exactly what I am talking about, in this scenario, you have to sell much more copies to cope developement costs of 100 million US$ and marketing costs of 50 million US$.
I am not sure, maybe the game will sell like hotcakes, but maybe not, when was the last time a PC game sold in the millions? I think it was Spore, I remember EA said, it sold several millions in the first weeks, but I didn't find any actual numbers.
It will be interesting to see how SC2 is doing. Personally I think a RTS game has no mass appeal today, it seems to much niche to me, but here I may be totally wrong.
I'm pretty sure Blizzard can make back any of the money they spend. Their fanbase is huge. What would be an issue would be if "other" developers think that they can follow the same model and succeed...because in most cases the answer would be no.
SC will sell at least 5 million copies worldwide. Bank on that.
It will sell probably along the lines of a GTA and Modern Warfare in the long-run. 10 million+ copies. Korea is much richer now than it use to be and Stacraft II is already being adopted by players over there as a superior game.
There's been much talk about the RTS market being "smaller" which is bull. That's just an excuse from developers that release bad RTS games. For example, EA with the terrible games it released in C&C franchise in Red Alert 3 and C&C 4. PC gaming is just doing badly in general in America because of consoles and terrible Microsfot support for Games for Windows.
Stacraft II is a big enough game to give the whole industry a big jolt.
They've pretty much made it a ten dollars convenience fee to get the game on time. Which is certainly their right, though it wouldn't surprise me if the increase in price hasn't accounted for the decreased sales in the industry this past year.
Of course, Blizzard already learned (the TV AD state it works for Windows and Mac... well, actually it states PC, that is wrong, but they meant Windows).
That's definitely not the case. Most PC games start at $50, including online. It's easy enough to look at Steam or Direct2Drive and verify that. The difference is, unless the games sell very slowly, they stay at $50 longer than they do at retail. The major exceptions to this are non-WoW Blizzard games, a few Activision games like Modern Warfare 2, and some Ubisoft games like Assassin's Creed 2--but even among those publishers, none of them exclusively start PC games at $60. Many of them start certain games below $50 as well; as a recent example, Activision's Transformers launched at $40.
You are right, WoW Expansions usually sell millions, but WoW is a MMORPGs and from my, purely subjective, observations, people who play WoW can hardly be defined as PC gamers, cause they only play WoW and nothing else.
5 million is quite a lot, if SC2 manages such a number, it would be a strong sign for the PC gaming market, but if it doesn't the game can easily be the coffin nail for AAA PC gaming.
There aren't much companies left and SC2 is by far the biggest PC exclusive project, I am sure, many publishers will look closely how the title performs and then make their decision how to continue with PC gaming.
Sorry for the confusion, I should have clarified better. I was trying to talk about games that start at sixty dollars and the strategy the publishers appear to be trying to employ, not trying to say that all games start at sixty dollars. Which is definitely not the case. I would own a lot fewer titles on Steam if that were true, hah.
There are few people in the industry who get to release a game "when it's finished." Blizzard is one of them. Seeing how it has been in development for the better part of a decade, I'm unsure how people could be so blown away by this.
Even if it was at $50 a pop (it's not, it's $60 *grumbles*), if they just matched Red Dead's sales, that's 250,000,000 in revenue. Seeing how it is a Blizzard game, I'd expect more like 8+ million global, along with continual sales longer than most, as well as the expansion you already know they're working on.
On $100 Mil Budget
It's a healthy thing for PC gaming to have these kind of awesome, high budget games. Thumbs up Blizzard!
On 3 Separate Games
I disagree with any criticism of this. We've had to wait over a decade to get another SC game, and now we get 3. Isn't this a GOOD thing? Knowing blizzard, there's no doubt each separate game will more than compare with any other single game in terms of enjoyment and content. If you want to buy one, no problem. If you're an addicted fanboy and want to buy 3, go for it. Nice to have options.
Developer Thoughts
As a developer, I am very thankful they split the game into 3 separate units. If it were instead released as one "mega-game", the bar for content and playable hours would be raised so high it would be almost impossible to compete with for smaller developers.