Successful Publishers

Next Generation has this piece up with actual sales data for the US market last year (usually you have to pay for this stuff). I'm extremely glad to recieve this data for free, but I have to take task with one of their conclusions:

Any would-be game publishers looking at these stats would come away with one of two strategies. Either, to create an absolutely amazing game on few platforms (Gears; Zelda; Oblivion; New Super Mario; Guitar Hero) or to sign up an animated movie and release it on every platform conceivable.

Well I can't disagree with the second point - if you wanted to create a new profitable publisher, you would be sensible (in commercial terms) to focus on licensed product, because nothing works better in the mass market than a ready-marketed franchise, and since the license is what's selling your game a platform exclusive gets you nothing.

But I can't agree with the former. How exactly can a new publisher hope to produce "an absolutely amazing game", exactly? And of the games cited, only Guitar Hero is the product of anything but giant investment plus established studio/franchise  (and I am doubtful anyone could have predicted the success of Guitar Hero, despite its obvious strengths).

A new publisher cannot plan for an absolutely amazing game. An existing publisher cannot easily plan for an absolutely amazing game, for that matter, otherwise we'd be inundated with them. Absolutely amazing games generally happen when absolutely amazing developers get absolutely amazing sums of money, absolutely amazing quantities of marketing support - and either make a sequel to an already successful game, showcase new technology on a virgin platform, or get lucky.

Does anyone think otherwise?

Comments

[Patrick]

I agree, but the rules are about to radically reshuffle thanks to digital distribution and new business models. Whats next-gen going to base that article on next-gen when the highest grossing games are free to play?

[Patrick]

That report was as depressing as it was interesting.

I think the new model of publishing is going to seize the opportunities that free-to-play business models and digital distribution offer, combined with a stage-gate incubation process that fields funding for a wide variety of prototypes, and then constraines from there through succesive iterations of culling and funding.

How is Next-Gen going to write that report when the biggest grossing titles are free to play?

[Chris]

Well, before that becomes an issue the entire games industry needs to be utterly transformed. Even if this is on the cards (and I'm uncertain), I don't think this is going to happen very quickly. :)

[Jose Zagal]

I think that we might be looking at the question from the wrong angle. Another way of putting it is that Next Generation is reporting a very one-sided picture that can be misleading if you want to talk about being a profitable and successful publisher. Profitability is about selling at a price higher than cost, the higher you can sell for, at a lower cost, the more profitable you are... So, looking at sales figures for different titles doesn't really get you that far since we have no idea what the costs of each of those games was...

Licensed product is a tricky proposition because, while you may get higher sales, there is the question of how much did you pay for that license. Do you have to sell 3 times as much in order to just break even?

I was always amused by the fact that Nintendo was seen as a huge loser for the last hardware generation despite the fact that they were making money on GC sales from the start! So, they were highly profitable, even if the total dollar amounts weren't that high.

[Chris]

Jose: this is an extremely fair point - without development budgets, which are seldom if ever disclosed, you only see part of the picture. Still, nothing that sells millions of units is developed for less than millions of dollars.

And like you, I was amused that Nintendo have been scorned for their lower unit sales of home hardware - despite having some of the most successful consoles around (their handhelds), and never losing money on hardware sales.

Best wishes!

[Patrick]

Yeah, on that note, I do know a little bit about the general costs involved in developing AAA for different platforms. A lot of these titles, developed in the 5-10MM range, seemed to be barely breaking even. DS titles, like Star Fox, can be produced for less than a million, and something like Star Fox for probably less than three. So its clear that DS titles are making massive profit margins compared to their more expensive counterparts.

[Chris]

Check this out... this is European sales data from 2003, and is quite typical of the modern games industry:

Unit Sales // Titles // Percentage of Revenue

2 million+ // 4 titles // 10%
1.5M to 2M // 5 titles // 8.4%
1M to 1.5M // 6 titles // 7.4%
750K to 1M // 9 titles // 7.4%
500K to 750K // 17 titles // 11.3%
Remainder // 559 titles // 55.5%

Or:

Total > 1M // 15 titles (2.5%) // 25.8%
Total > 500K // 41 titles (6.8%) // 44.5%

So 2.5% of the titles were making one quarter of the revenue; about 7% of the titles were responsible for just under half of the revenue.

Most games are making a loss. Publishers only make money by having portfolios of titles, where a few successful titles will pay for the rest.

Take care!

[Kataphraktoi]

Absolutely amazing games are possible when publishers give a game studio with great people sufficent control over the game and enough time to get it done. Most of the very best games were made in the formation years of the games industry-Age of Empires, Starcraft, Civilization,etc. In particular, Age of Empires was the very first game of Ensemble Studios(ES), which was not comprised of veterans. The game was published by Microsoft(MS), whose gaming branch was somewhat new to the games industry. So why was the first game of a bunch of newbies so hugely succesful? A group of GAMERS that could make games were allowed to take it and run with it, and made a highly innovative game that introduced a fey things that are now defining elements of RTS games. Age of Empires is an AAA game(at least in quality) and when it was made that is easily determined by looking at its credentials.(innovative makers that are not on a short leash)

Todays games are crap because they are made solely for profit, as trained tech monkeys grunt out steaming piles of code they call games. The key problem is that publishers aproach the games industry as a factory-style business and expect to crank out goods from their factories for whatever price the market will bear, without consideration of things such as quality or the input of creators. You point this out yourself when you note that there is no mechanism for rewarding innovation, instead, publishers do the same old-same old because its safe and comfortable. This can still work with companies like blizzard that make up for lack of innovation with top notch quality, but on the whole it results in failure after failure.

A game made on a small bugdet with good people allowed to go all the way with innovative ideas will decimate mutlimillion dollar projects wih spawnlings merely coding to the specifications of their publishers.

I continue to be amazed that people-specificly the people who make top level $$$ descisions in the game industry- think 'Big Business' style thinking will ever prevail. A game's success is all about quality, not money, and you need only take a look at the ratio of collosal failures to money invested to prove that. Take a look at tetris. What was the development cost on that? Yet its one of the most enduring games around.

IMO

[Chris]

Nice rant, Kataphraktoi. :) I agree with you that the 'packaged goods' mentally still dogs the games industry, but alas, there doesn't seem much risk of this changing any time soon.

Thanks for commenting!