For major AAA video games it costs $20-100 million. Holy cr@p! That is a fortune! Where do companies get that kind of money? Do they actually make profits? Where does the money go to?

... ?___?

Movies are expensive, too...
Think of what it takes to make a movie and where all that money goes. It's kinda like that with games. And most other projects requiring many people, and millions of dollars. City infrastructure and skyscrapers, for example.

A decent sized studio might have a couple hundred people or so. Assuming two years of development time at 50k per person, that's 20 million in salaries alone.

As far as I know, salaries are where the bulk of the costs go, aside from maybe some hefty marketing in some cases. Middleware is comparatively very cheap.

I think it's money well spent. I'm not appalled at all.

Do they actually make profits?

It's pretty risky. Not all games have that mysterious formula that attracts enough players to pay for development. Though, once a good formula IS found you'll almost always see sequels. These are more efficient than making a totally new game: You can reuse parts of the first game (most of the code, perhaps some of the art and sound effects, etc), you have a team which has streamlined its development processes (well, hopefully), and you have an established fan base who are more likely to buy something they already know they enjoy.

Well I read that GTA V had a thousand people working on it, that may not be 1000 full time, could be some contract work, salaries will range from $35k - $120k.

Then all the software licenses, Maya is about $3k per year I think for 1 license, then Visual Studio, new hardware, OS's, loads of other software also, source control, security, anti-virus, backup, tons of other stuff also, you can do the maths, then all the music needs professional producers/studios, voice actors, then motion capture needs actors, then it depends if the $20M-$100M takes into account marketing and publishing costs but I doubt it does, you could easily tally up to $100M for a 1000 strong team. Also things like lawyers, accountants, testers, other staff in the company.

Do they actually make profits?

No they don't look at all points bulletin one of the biggest flops of all time lost tens of millions.

http://en.wikipedia.org/wiki/List_of_commercial_failures_in_video_gaming

• Where do companies get that kind of money?
• Do they actually make profits?
• Where does the money go to?

• Investors. Most AAA games are backed by large divested multinational corporations. Ownership is generally factored over a number of large institutional investors and many smaller shareholders.
• Did you know no Hollywood movie has ever turned a profit? Ever? Weird, right? I imagine Big Entertainment is Big Entertainment (considering they're the same people), so it's likely that no AAA title has ever turned a profit either. In some industries, accountancy has been moved from the administrative side to the creative side of the ledger.
• Just because you torrent your movies and games for free does not mean the people who create them don't need to feed and clothe their children, not to mention their Red Bull and cocaine habits. The two main places the money goes to are development costs for the game and covering the losses for other games. The rest goes in to corporate cash coffers to either be disbursed to the shareholders as dividends, reinvested in capital, or used to buy out smaller development houses and kill their threatening ideas.

Just because an entertainment is intangible does not mean it has no value and costs nothing to produce. You will probably find the bulk of the costs for the production of any good are for intangibles.

Bit OT but, Hollywood movies will never make a loss, they are paid for before they are even made, here is an example, it will be similar for AAA video games I imagine.

http://www.indietalk.com/showthread.php?t=39122

Millions of dollars really is not as much as people think it is.

Employing 10 game developers for a year costs over a million dollars (going to far more than just salary). Big games have large teams, often one hundred or more people. Big projects can take more than a year. Do the math, it multiplies together into some rather large numbers.

For a lot of fast food eateries, being a "million dollar store" is the critical point of stability in the US. The critical point is actually a little bit lower, about $750K, but once the establishment hits a million dollars in business every year it is considered stable and established. Their products are cheaper and employees paid far less than a game studio.

While people time is the overriding expense, lots of things cost millions of dollars. Equipment, furnishings, and buildings cost quite a lot as well. A relatively small 3-floor commercial building costs in the $3M - $5M range around here, although most businesses will just rent out a portion of the building. One of my friends ran a small retail furniture company in one of our commercial districts. The business was considered small with only about 10 workers; the building was about $4M, the inventory was about $25M at any given time.


Thinking in terms of an individual household, the point where money changes from simple cash flow to planned expenses is often around the thousand dollar mark. Businesses are usually made up from a lot of people, and they have a similar transition point. It depends on the size of the business, but a few hundred thousand dollars for a moderately sized business is often much like an individual deciding to go to a nice restaurant for lunch. It can be easily absorbed in the budget. It isn't until you start taking about millions that they require a good deal of planning.

Just consider how much a team-wide or studio-wide meeting actually costs a business. 10 people for 2 hours is 1-2 thousand dollars. 100 people for a 2 hour meeting is 20 grand. When a company like EA has their global town hall meeting that pulls in every studio around the globe for roughly a 90 minute disruption, that's well over a million dollars for the human cost.

One of my former studio leads allowed team leads to take every team out to a nice lunch about once a month. He figured (quite correctly) that the lost time (people left at about 11:30 and returned about 1:30) of the extended lunch with the 60 minutes costing about $1K and the $200 lunch bill were a small price to pay for the bonding and team building that it provided.

Did you know no Hollywood movie has ever turned a profit? Ever? Weird, right?

How is that possible?
Frozen (film, 2013) had a total budget of $150 million and a box office of $1.27 billion.

http://www.boxofficemojo.com/movies/?id=frozen2013.htm