Question: How much profit do you generate off of one sale of a game?

[demonbrawn]

So, I've been very curious and researching a lot about the gaming development world lately. I was curious if anyone knew the answer here. Say, if you bought one XBOX 360 game brand new for $60, how much is the developer of that game actually making in profit? In the first 2 months of its release, Gears of War 2 sold over 4 million copies. So, taking into consideration an average $60/unit, that's about $240,000,000. Obviously, you're not going to get back nearly that much after paying for licensing fees, engineers, developers, artists, voice over cast and crew, packaging, shipping, advertising, and the hundreds of other various costs. Just curious, thanks.

EDIT: In case anyone's interested, I found a cool Pie Chart slide that shows a breakdown. It's pretty interesting:
http://www.forbes.com/2006/12/19/ps3-xbox360-costs-tech-cx_rr_game06_1219expensivegames_slide.html

 

[Deleted member 3]

Depends on total sales and development costs. Not sure about averages.

 

[Kreij]

There are quite a few business model that come into play with this sort of thing. It depends on who the developer is, and how they entered into the production of the game at the beginning.

Let's say you have a dev studio and you are contracted to create a game for someone. The contract would probably be a flat cost (to cover the development and testing), plus some type of royalties that are dependent upon sales.

If as a studio you create your own game, then it is a completely different story. You would be the one looking for publishers and marketting. You could potentially make a mint if the game does well, but in this case if your game is a turd you are going to be hurting.

Sometimes a company is hired to produce a game and required to get their own funding for the dev and testing of the game (which should wash out in the sales portion of the contract). This can be again, quite lucritive or quite risky.

There is no real way to determinethe dollar amount of profit that a gaming company makes on any given game as there are too many variable in play that we know nothing about.

 

[demonbrawn]

True enough. I figured it would be hard. I wonder if there's a way I could find out numbers on one franchise or one game...

 

[Kreij]

Most comanies will release their sales for a given time period, but that does not tell you dollar amounts. When a company is publicly traded on the stock market (they have public shareholders) they have to release profit/loss statements. This too, does not give you exact details for a game but if you start digging, and doing the math, you can get quite a bit of informtion that would seem to be related to a specific release. An easier way is to watch the gaming business sites and watch for interviews with dev company executives. Once in awhile they will toss out information like that.

 

[1Kurgan1]

I'm gonna put it out there; if you like it, you can take it, if you don't, send it right back ... $5

 

[FordGT90Concept]

Most comanies will release their sales for a given time period, but that does not tell you dollar amounts. When a company is publicly traded on the stock market (they have public shareholders) they have to release profit/loss statements. This too, does not give you exact details for a game but if you start digging, and doing the math, you can get quite a bit of informtion that would seem to be related to a specific release. An easier way is to watch the gaming business sites and watch for interviews with dev company executives. Once in awhile they will toss out information like that.

Yeah, especially a success story to get investors excited. How pofitable a game is depends entirely on development costs compared to actual sales figures. Some games had millions of dollars invested in their creation expecting it to be wildly successful (10+ million copies sold). Some games are developed with budgets in the tens of thousands of dollars and sell 1+ million copies. Both end up with about the same amount of profit but, as with any industry Cost Over Value (COV) is a trade secret.

COV is how much it cost to bring the product to market divided by how much total money was recouped in sales. If it cost you $1 million to make a game and you grossed $10 million in sales, you had a COV of $0.1 which means for every sell you made, the product only cost you 10 cents to get it to them. Success stories to that degree are met with a lot of failures too. Very, very few titles are wildly successful.

 

[ste2425]

if its anything like a cd id say not allot of the overal amount for that cd/ or game. I mean theres so many people that comeinto play for making a cd, studio's producers, managers, record companies (take a huge slice) marketing etc the list goes on so i imagine its not just one company who makes a game so im guesing profits are split between the lot and itl state in contracts who gets how much bassed on hoe much work each company puts into the final product (or that the idea)