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Nirolak · Feb 22, 2017

So the main point of this article was about the voice actor strike, but I thought this would be more interesting as its own thread.

VICE said:
Patrick Walker, VP of insight and analytics at the video game industry research firm EEDAR, estimates that a big-budget game in 2016 costs anywhere between $50 and $200 million. He said the biggest hits in this space can make up to a billion dollars per game, but that overall big-budget-game revenues haven't kept pace with the cost of development.

"At a certain point, the risk is too much," Walker said. He added, "The revenue made by the top five game publishers on console has stayed the same, from 2008 to 2016."

Source: https://motherboard.vice.com/en_us/article/walk-the-line?utm_source=mbtwitter

gigantor21 · Feb 22, 2017

"The revenue made by the top five game publishers on console has stayed the same, from 2008 to 2016."

...well, shit.

Zukkoyaki · Feb 22, 2017

Hence the shift to a service-based business model by most big publishers

5taquitos · Feb 22, 2017

Incoming loot boxes in your favorite series.

AHA-Lambda · Feb 22, 2017

The revenue made by the top five game publishers on console has stayed the same, from 2008 to 2016."

Which makes you wonder what the point even is

Lime · Feb 22, 2017

So the solution is either to:

1) Expand the consumer base or audience (how will a conservative industry with a lot of financial risks achieve this?)

2) Double down on existing audience and monetize them further

Nirolak · Feb 22, 2017

AHA-Lambda said:
Which makes you wonder what the point even is

Well, there's a few factors.

1.) EA released 86 games in 2008, and they released around 7 games in 2016, so the same revenue is generated from notably less games.

2.) Digital revenue is way more profitable than retail revenue, so making half your revenue on DLC and full game downloads makes a lot more profit even at the same revenue amount.

3.) The top 5 publishers are not sharing that revenue the same way they did in 2008. The biggest winners are successfully pushing out their competition and making more money.

Obliterator · Feb 22, 2017

AHA-Lambda said:
Which makes you wonder what the point even is

The main point is that's actually not an accurate representation.

Activision, EA, Ubisoft, and 2K have all had record Years this gen.

I'm not entirely sure what he's basing that statistic on

Zukkoyaki · Feb 22, 2017

AHA-Lambda said:
Which makes you wonder what the point even is

It's because the market keeps expecting bigger and better looking games. But after the rise of indies this generation and games like Minecraft and Rocket League being meteoric successes, it kind of makes you wonder if the big companies are throwing away money trying to make these massive games. Rocket League cost 2 million to make for crying out loud. Maybe, just maybe, gamers are willing to buy stuff that doesn't have top of the line graphics and a massive open-world if it's just pure, well-designed fun.

Edit: Obliterator and Nirolak provided some more context. Thanks!

qanters · Feb 22, 2017

This is only a certain practise for super-large companies.

I very much doubt that companies like Capcom, Koei Tecmo, Bandai put over £50 million into a single title.

I'd be surprised if Resi 7 even cost 50 million.

The solution is for Companies not to be so shit at resource management.

Kimgaz · Feb 22, 2017

We should be concerned at this point. Doesn't sound healthy at all that revenue hasn't grown in 8 full years. Even more microtransactions, horse armor-esque DLC and specialultimatehyper editions incoming.

Ushay · Feb 22, 2017

Digital is likely the solution to this. The profit margins are higher and there is more visibility on the costs.

Nirolak · Feb 22, 2017

Obliterator said:
The main point is that's actually not an accurate representation.

Activision, EA, Ubisoft, and 2K have all had record Years this gen.

I'm not entirely sure what he's basing that statistic on

He's saying on console though. Did Activision make more *console* revenue than any previous year this year, or did King and Blizzard drive a lot of that?

EA similarly has a much better mobile business than they used to.

GregLombardi · Feb 22, 2017

This general problem is one of the key underlying truths I was trying (and probably failing) to communicate in the Nintendo piracy thread. When pressure like this hits the top, you think the top is going to suffer because of it? Absolutely not. They will cut wages, cut people, or increase monetization.

Obviously piracy isn't the only problem here. In some ways, capitalism / economics is the problem. But it's not a great situation.

Arulan · Feb 22, 2017

Perhaps they should scale back and target core audiences instead of continuing to bloat on budget with an ever-increasing need to widen their audience, the last of which generally leads to shallow games.

Obliterator · Feb 22, 2017

Nirolak said:
He's saying on console though. Did Activision make more *console* revenue than any previous year this year, or did King and Blizzard drive a lot of that?

EA similarly has a much better mobile business than they used to.

It's mostly console and PC frankly.

This is painting a pretty inaccurate picture. Profitability in these companies is record high, even with game budgets being higher. Because digital margins and add on / DLC have completely changed how companies monetize their AAA games.

You can make fewer games and sell less total copies and actually make more money now days. Maybe revenue will appear somewhat flat on a surface level, but actually profitability is significantly higher

Aostia · Feb 22, 2017

That is a pretty big range/gap

Nirolak · Feb 22, 2017

Obliterator said:
It's mostly console and PC frankly.

This is painting a pretty inaccurate picture. Profitability in these companies is record high, even with game budgets being higher. Because digital margins and add on / DLC have completely changed how companies monetize their AAA games.

You can make fewer games and sell less total copies and actually make more money now days. Maybe revenue will appear somewhat flat on a surface level, but actually profitability is significantly higher

I made that post right above your first one, but PC revenue would not be caught in his statement.

jamwater · Feb 22, 2017

The Budgetary figures are so astronomical it's hard for me to believe them. How can they cost that much?

Obliterator · Feb 22, 2017

Nirolak said:
I made that post right above your first one, but PC revenue would not be caught in his statement.

I feel ya, but I'm just commenting on his one specific statement. It's bit of an inaccurate representation of the industry at large. All people have to do is read the big 4s financial reports for the last 2 years or look at their stocks and see AAA isn't hurting in any way at all. In fact it's the most healthy in terms of financials it's ever been

Triggerhappytel · Feb 22, 2017

What game that came out in 2016 cost $200 million to develop?! I'm racking my brain trying to think of something, and coming up blank. Surely Watch Dogs 2, Battlefield 1 and Uncharted 4 were nowhere near that number?

Nirolak · Feb 22, 2017

jamwater said:
The Budgetary figures are so astronomical it's hard for me to believe them. How can they cost that much?

Well, it's pretty easy to generate this.

Let's take an average AAA team size of 300 people on a three year development cycle.

To pay for an employee, you have to pay for their salary, their benefits, their hardware/software, and the office they work in. That would put the average cost of employing someone at around $100,000 if they're in a somewhat, but not tremendously cost efficient location. This is averaging out the higher and lower salaries.

$100,000 * 300 people * 3 years = $90 million in development budget.

Now consider the publishing people and all the outsourcing work, and you're probably around $100+ million for your average big game.

Then consider games like Destiny 2 with 1100-1200 staff on them for 2-3 years and suddenly you can see how it gets much higher than that too.

Obliterator said:
I feel ya, but I'm just commenting on his one specific statement. It's bit of an inaccurate representation of the industry at large. All people have to do is read the big 4s financial reports for the last 2 years or look at their stocks and see AAA isn't hurting in any way at all. In fact it's the most healthy in terms of financials it's ever been

I don't disagree with that sentiment. There's a reason the biggest publishers created the scenario we have today. It actually favors them.

Triggerhappytel said:
What game that came out in 2016 cost $200 million to develop?! I'm racking my brain trying to think of something, and coming up blank. Surely Watch Dogs 2, Battlefield 1 and Uncharted 4 were nowhere near that number?

You would mostly be looking for games with 600 staff for 3 years or 300 staff for 6 years (or some combination that adds up to that).

Call of Duty is not impossible given their support structure, and there's a question of if we want to roll Titan's budget into Overwatch's budget.

Mafia III has also been in development since Mafia II came out with a lot of people. The Division has been around in various states of development since 2009.

That said, it's possible they all fell short of that mark by a bit. Red Dead Redemption 2 and Destiny 2 would be good candidates for 2017 though.

Obliterator · Feb 22, 2017

Triggerhappytel said:
What game that came out in 2016 cost $200 million to develop?! I'm racking my brain trying to think of something, and coming up blank. Surely Watch Dogs 2, Battlefield 1 and Uncharted 4 were nowhere near that number?

More than likely almost no games in 2016 cost $200 million in terms of pure development. But when marketing is included, which is part of the total budget, there were likely multiple. COD and BF1 pretty much for sure

Sir_Crocodile · Feb 22, 2017

Wonder how nintendo's AAA cost compares to this.

Do we know the cost of Breath of the Wild?

ElFly · Feb 22, 2017

Zukkoyaki said:
It's because the market keeps expecting bigger and better looking games. But after the rise of indies this generation and games like Minecraft and Rocket League being meteoric successes, it kind of makes you wonder if the big companies are throwing away money trying to make these massive games. Rocket League cost 2 million to make for crying out loud. Maybe, just maybe, gamers are willing to buy stuff that doesn't have top of the line graphics and a massive open-world if it's just pure, well-designed fun.

Edit: Obliterator and Nirolak provided some more context. Thanks!

the problem is that these companies do not know how to make smaller games for smaller audiences, which have a possibility to hit it big and becomes blockbusters

whenever I remember how EA completely killed Sim City after one botched entry I guess that these companies just cannot accept this kind of risk. Then again, SimCity had a long story and never really became huge like The Sims did, but surely having a company that can produce that kind of spin offs is worth it? Similarly to how Nintendo decided to mostly pursue games that can do 2M+ of copies, big companies are completely scared of risk and spend accordingly

Nirolak · Feb 22, 2017

Sir_Crocodile said:
Wonder how nintendo's AAA cost compares to this.

Do we know the cost of Breath of the Wild?

They had around 200 developers for quite some time and then ballooned to 300 developers in the last year or so, but I'd guess somewhere near the bottom of this range given that things do cost less to make in Japan.

Mind, that'd probably also be waaaaay more than your average Nintendo game.

KooopaKid · Feb 22, 2017

AHA-Lambda said:
Which makes you wonder what the point even is

Making fun games and entertain people?

Obliterator · Feb 22, 2017

Nirolak said:
Then consider games like Destiny 2 with 1100-1200 staff on them for 2-3 years and suddenly you can see how it gets much higher than that

Yeah Destiny 2s budget has to be absolutely enormous. The manpower on that team is huge and it's been delayed in production as well. I'm pretty bullish that it will sell very well but they better hope it does hit some crazy numbers because it has to be a $200+ million dollar game

Nirolak · Feb 22, 2017

Obliterator said:
Yeah Destiny 2s budget has to be absolutely enormous. The manpower on that team is huge and it's been delayed in production as well. I'm pretty bullish that it will sell very well but they better hope it does hit some crazy numbers because it has to be a $200+ million dollar game

It strikes me as a likely $1+ billion revenue generator, and with a high digital attach rate to boot.

Obliterator · Feb 22, 2017

Nirolak said:
It strikes me as a likely $1+ billion revenue generator, and with a high digital attach rate to boot.

Yep I agree, I think they will come out plenty fine, in fact I think it will do better than Destiny 1 which is over 15 million units.

I just still bet the budget on that thing is insane. Would love to hear what it is

Kill3r7 · Feb 22, 2017

Nirolak said:
Well, there's a few factors.

1.) EA released 86 games in 2008, and they released around 7 games in 2016, so the same revenue is generated from notably less games.

2.) Digital revenue is way more profitable than retail revenue, so making half your revenue on DLC and full game downloads makes a lot more profit even at the same revenue amount.

3.) The top 5 publishers are not sharing that revenue the same way they did in 2008. The biggest winners are successfully pushing out their competition and making more money.

Well put. With respect to EA, FUT and MUT are a huge source of revenue for them as well as BF1 DLC.

Do we know what percentage of the pie Activision and EA make up? I assume it is close to 50% but would not be surprised it it was closer to 60%.

patapuf · Feb 22, 2017

KooopaKid said:
Making fun games and entertain people?

At that budget you are in it for more than that.

Nirolak · Feb 22, 2017

Kill3r7 said:
Well put. With respect to EA, FUT and MUT are a huge source of revenue for them as well as BF1 DLC.

Do we know what percentage of the pie Activision and EA make up? I assume it is close to 50% but would not be surprised it it was closer to 60%.

I think the closest thing we have to their retail market share is UK market share numbers.

That was: http://neogaf.com/forum/showthread.php?p=228156703

Market Share by Units:
1. EA: 22.1%
2. Activision Blizzard: 12.1%
3. Ubisoft: 9.5%
5. Take-Two: 7.4%
Total: 51.5%

Market Share by Revenue:
1. EA: 26.1%
2. Activision Blizzard: 14.2%
3. Ubisoft: 9.7%
4. Take-Two: 7.5%
Total: 57.5%

This lacks digital though, but would be primarily console games.

Kill3r7 · Feb 22, 2017

Nirolak said:
I think the closest thing we have to their retail market share is UK market share numbers.

That was: http://neogaf.com/forum/showthread.php?p=228156703

Market Share by Units:
1. EA: 22.1%
2. Activision Blizzard: 12.1%
3. Ubisoft: 9.5%
5. Take-Two: 7.4%
Total: 51.5%

Market Share by Revenue:
1. EA: 26.1%
2. Activision Blizzard: 14.2%
3. Ubisoft: 9.7%
4. Take-Two: 7.5%
Total: 57.5%

EDIT: nvm saw your response. Still a pretty healthy number for EA and Activision.

giapel · Feb 22, 2017

That's insane. You can build a factory with $200M

Turrican3 · Feb 22, 2017

Nirolak said:
1.) EA released 86 games in 2008, and they released around 7 games in 2016, so the same revenue is generated from notably less games.

Yikes, that's frightening to say the least.
And with those kind of budget it should come to no surprise that big publishers are scared as hell to bet on unproved/risky stuff.

I mean, we're talking about 350M$ to 1.4B$ (worst case scenario) investment here, but on a mere 7 games, right?
Even if the overall budget was the same in 2008 - I don't know -, there were a ton more games to spread the risk on. :-\

Kill3r7 · Feb 22, 2017

Turrican3 said:
Yikes, that's frightening to say the least.
And with those kind of budget it should come to no surprise that big publishers are scared as hell to bet on unproved/risky stuff.

I mean, we're talking about 350M$ to 1.4B$ (worst case scenario) investment here, but on a mere 7 games, right?
Even if the overall budget was the same in 2008 - I don't know -, there were a ton more games to spread the risk on. :-\

To be fair those other games just weren't delivering enough to justify the expense of making them. EA and Activision appear to be only interested in making big hits that sell millions and millions of units. Outside of a small indie game or a license game they are not interested in making a ton of smaller profit/revenue games. Also, they are doing better financially today than they have ever done.

Turrican3 · Feb 23, 2017

Kill3r7 said:
Also, they are doing better financially today than they have ever done.

Fair enough.

I'm just still skeptical about the whole sustainability of this business model, but most of all as a very old (40+) gamer I feel the _need_ for more variety/innovation, and as I said to me it's clear that with budgets like these very few - if any - of the big players are willing to take risks. :-\

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EEDAR: 2016's big budget games cost between $50 to $200 million to develop

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