Capcom on the price of developing games

Christian Svensson and Seth Killian were on the Unity Boards to offer a bit of insight into what the profit/loss margins are for video games.

While this doesn't directly deal with Street Fighter, it gives you an idea of what kind of money publishers get in return for a title.

If a game sells 250,000 copies at a Suggested Retail Price of $50, that comes out to a total of about $12,500,000 worth of total business. Would it be fair to say approximately $10,000,000 of that makes it way back to the publisher?

Obviously there are development, marketing, shipping and production costs that have to be factored in before any kind of profit can be weighed out. I've heard you guys can't really discuss this, but I was curious.

Seth: It's true that it's not something we can discuss in detail, but it can involve a lot more factors even than those listed here. Off the top of my head, two potential "biggies" would include a possible deal with a developing studio (we create and publish some games totally in-house, while we work with specific studios on parts of others), or licensing fees for characters/contents in the game (think Marvel in Marvel vs. Capcom 2, Harvey Birdman, etc.). It's also not a simple matter of percentages, since many deals involve clauses like, "if sales are X, you get Y," potentially based on sliding scales, etc.

In general, what I'm driving at is that it's usually an unhelpful simplification to say, "game X had this many sales, so the company made Y dollars." Obviously more sales translate into more money, but beyond that, it's different in almost every single case...

Sven: A Suggested Retail Price title is sold to a retailer at a price below that [...]

On top of that, a publisher has to pay for the retailer's co-op reserve, defective allowance and carry a price protection reserve to manage inventory out of the channel. That's usually somewhere between 12% and 20% depending upon the publishers' forecasting abilities, how aggressive they've been placing it and the platform and the title specifically.

So for a proper "net sales" figure, you're talking about $34ish of that making it to the publisher. At 250K units, you're looking at about $8.25M actually recognized by the publisher as a net sales figure.

THEN you have cost of goods sold (which is SIGNIFICANT on consoles but no, I can't share what those are for NDA reasons), product development spend, variable marketing spend, fixed marketing costs (staff), sales commissions, technology, licensing or development royalties, and SG&A (finance, legal, executive salaries and other overhead).

Interesting statistics. Would that many copies sold usually be regarded as any level of success after all the factoring out of variables? — Redblaze27

Sven: It depends entirely upon those other costs.

If it were a 360/PS3 game and it had a $10M product development budget and a $5M marketing worldwide budget (both of which are VERY low figures), before you even factored in cost of goods (which is the largest single cost after retailer margin), fixed marketing, overhead etc. the game has lost $7M. With those other factors, it'd probably be more like $11M+ underwater for most publishers.

If it were a $20M product development budget and a $10M marketing budget, you'd be $21M underwater, etc.

If it were a $3M product development budget and a 1M marketing budget, you'd be profitable, but I'm not aware of any 360/PS3 games with those sorts of budgets. :)

Would it be safe to assume the latter example you gave would be closer to the statistics for a Wii title? — Redblaze27

Sven: There are Wii games around the industry with those sorts of budgets (at both spectrums). Games often cost a lot more than you'd think to make.

Posted by First on November 11, 2009 at 3:48 p.m. #1

First!~

But yeah, games cost too much.

Posted by akuma on November 11, 2009 at 5:19 p.m. #2

street fighter 4 sold ova 20 mill copys for both 360 and ps3 capcom made a sht load of money that why they wona make another cash in on us fans but it good of then to half the price this time they sell 40 million copys of ssf4

Posted by @akuma on November 11, 2009 at 5:26 p.m. #3

What?

Posted by Peloun on November 11, 2009 at 5:27 p.m. #4

What the f is as to do whit street fighter?

HUH?

Posted by @Peloun on November 11, 2009 at 6:04 p.m. #5

It's the business side of video games, Capcom included. The fact of the matter is a lot of resources are put into video games with an expectation of a good return. Unfortunately, there are people who actually believe that video game developers make all their money from the retail price of $60 per copy.

Posted by aussidude on November 11, 2009 at 6:36 p.m. #6

in Australia games cost around $100 to $120 here its rare to find new games under $90.

Posted by Strider-RagnaroK on November 11, 2009 at 7:05 p.m. #7

it takes a lot of money to make a game much more now cuz of the high tech consoles which is a big gamble you never know if the game gonna flop or sale and games at retail get prices drop after a few month that could also affect the profits of the developers if it affects then a game that sold 250,000 not necessarily get 12,500,000

Killzone 2 cost around $40M & Gran Turismo 5 about $60M
thats the 2 highest budget ever that is some ridiculous money

Posted by baz on November 11, 2009 at 8:04 p.m. #8

I would like to see some examples of small in house developer budgets.

Posted by @aussiedude on November 11, 2009 at 9:03 p.m. #9

Wow, that really is expensive...and the difference in value between US and Australian currency isn't that large either.

Posted by @aussiedude on November 11, 2009 at 9:06 p.m. #10

easy fix: import your games.

the australian retail (online and ..offline) are still gouging consumers with prices which made sense when the AU$ was only buying .50 us cents.
since the recent collapse of the US economy our dollar has been up as high as .98 (that was around 08), it's now at around .92, but all of our prices remain the same.

it's now cheaper to import games from overseas (including the postage) than to buy them new in store.

of course you'll need to make certain whatever system you're importing for is not region locked.

Posted by devboy on November 11, 2009 at 11:15 p.m. #11

The reason games cost so much to make is because of the costs of skilled labor. It used to be one artist could fully crank out a finished character model per week. Now with shaders and high quality animation, one character model not only takes 10 as long, you need to hire specialist. You need an animator, rigger, texture artist, and modeler. that's just the art side. That does count all the specially skilled programmers you need. Web programmers cannot be game programmers. It is all very different.

Posted by cheers on November 12, 2009 at 4:10 a.m. #12

thanks for the insight guys
i found this interesting looking at it from a business perspective more so than the coding.

Posted by AKUMAHAX on November 12, 2009 at 4:45 a.m. #13

I wanna be a marketing guru like Seth when I grow up.

Shenmue's cost of goods not sold is where it got them.
Square's 1st CGI Final Fantasy Movie too.

I own both, I did my part there.

Posted by DDave on November 12, 2009 at 9:24 a.m. #14

they did good work!
SO THEY SHOULD GET MORE MONEY FOR THIS TO MAKE MORE GOOD WORK!!! YEY
MHUAHAHAHAHAHHA! ;D ;D ;D

Posted by akuma is dumb on November 13, 2009 at 8:37 a.m. #15

SF4 sold around 2.5 million across both platforms. I don't know where you got that insane 20 million number.

Posted by Captain Science on November 13, 2009 at 2:04 p.m. #16

All I ever hear from Capcom is crying. Those wimps have been selling us the same weak sprites from street fighter Alpha for decades and they bitch about production costs.

Screw Capcom, I'm gonna go play some more Tekken.

Posted by foo doo on November 13, 2009 at 2:24 p.m. #17

Galactic Civilizations II had a $1 million development budget and it was widely considered to be one of the best games of the year. Sins of a Solar Empire was developed by the same company (stardock) for a similarly low budget and was received with very good reviews.

The point is developers have lost sight of what makes games really good. It's not necessarily the high end graphics. Story and game play are important also. After playing Street Fighter IV for a while I truly believe that Super Street Fighter II was a better game in terms of game play. SFIV is incredibly broken in many respects. The best role playing game of all time is Final Fantasy VI, which came out 16 years ago.