I am appalled by how much it costs to create video games
. 22 Racing Series .
- Big games are made by lots of people. Watch the credits from a big-budget game and see how many people are involved. A lot of those people are skilled employees that draw good salaries, and also require expensive benefits/equipment/software.
- Big games are complicated engineering efforts that require time and money. You're talking middleware, expensive programmers, and lots of time for making features and/or ironing out bugs.
- Big games have *insane* amounts of content. Every single bottle/chair/wallpaper/hat/car/whatever requires time and skill to model, sculpt, and texture. Characters often require even more time.
- Big games need hi-quality animation. In most cases this means mo-cap, which is complicated and expensive. Depending on the studio the pipeline might involve several external studios for things like cleanup and facial solves. If the voice actors are doing mo-cap then this adds another layer of complexity and expensive, since actors have busy schedules.
- Big games need lots of marketing. If a publisher is sinking lots of money into game, they're also going to spend a lot on marketing to make sure that the game has a chance at selling enough copies to turn a profit.
If a game doesn't cost a lot to make, then it's almost certainly making compromises in one or all of these areas. Indie games are often made by a handful of people using a licensed engine, with limited and/or simplistic content.
How is that possible?Did you know no Hollywood movie has ever turned a profit? Ever? Weird, right?
Hollywood accounting.How is that possible?
Did you know no Hollywood movie has ever turned a profit? Ever? Weird, right?
This kind of thing goes on in the games industry as well. There's a whole category of studios, called independent 3rd party developers, who don't have the money to make their own games, but who have the talent. These people are basically in a work for hire arrangement under a publisher. The publisher tells them what game they want, and pays for it to be made.
Until recently, most big console games probably came from this category. During and directly after the GFC, a huge percentage of independent 3rd party developers went bust, and another large percentage of them were bought outright by publishers -- converting them into publisher-owned 3rd party developers.
Usually, these agreements involve the studio being paid lump sums to cover costs (salaries, etc) in milestone payments (e.g. monthly, quarterly...), but often include royalty payments as well.
Almost always, in almost every single case I've seen personally, zero royalties are actually paid to the developer. The contracts state that the publisher will first use the profits to pay off all expenses, and only then will royalties begin to flow. So, say that development cost $10M (e.g. they already paid you $10M), they'll tell you that their internal publishing services are worth $10M, their internal management and QA are worth $5M, they spent $10M on printing and distributing discs, they spent $20M on marketing and advertising, and so on... Suddenly, their 'expenses' show that they're down $55M on a $10M game, and you'll only ever see royalties if the game sells exceptionally well.
Experienced 3rd party developers are aware of this, and know to ignore the royalty agreements, and only work on negotiating fair milestone payments.
Unfortunately, many newer developers aren't aware of this and get ripped off by publishers... There's one in particular who approaches finished indie games, offering to publish them onto a popular digital distribution service for free -- however, they then go on to take 100% of the profits until their expenses are paid, which is basically forever. When your game stops selling quickly enough, they take it down to put up the next sucker's game, and you don't see a cent!
Thankfully, most of the major digital stores now allow "self publishing", where developers can deal with the gatekeepers (Sony, Nintendo, MS, Steam, etc) directly, instead of being forced to go through a publisher!
. 22 Racing Series .
Usually, these agreements involve the studio being paid lump sums to cover costs (salaries, etc) in milestone payments (e.g. monthly, quarterly...), but often include royalty payments as well.
Almost always, in almost every single case I've seen personally, zero royalties are actually paid to the developer. The contracts state that the publisher will first use the profits to pay off all expenses, and only then will royalties begin to flow. So, say that development cost $10M (e.g. they already paid you $10M), they'll tell you that their internal publishing services are worth $10M, their internal management and QA are worth $5M, they spent $10M on printing and distributing discs, they spent $20M on marketing and advertising, and so on... Suddenly, their 'expenses' show that they're down $55M on a $10M game, and you'll only ever see royalties if the game sells exceptionally well.
Experienced 3rd party developers are aware of this, and know to ignore the royalty agreements, and only work on negotiating fair royalty payments.
Oftentimes it's even worse than that, because is not uncommon for publishers to not apply the full profit to the "development costs", but only the portion of profit that would be paid out as royalties - and suddenly your $10 million game has to generate hundreds of millions of dollars of revenue for you to get any royalty payments.
And this is why you avoid royalty deals based on net (i.e. profit) - creative accounting can "hide" vast amounts of profit, and it's usually perfectly legal.
It's also widespread in the recording and publishing industries.
Here's a good little article on the topic:
http://www.polygon.com/2014/7/31/5949433/the-cost-of-a-game-studio
According to that, a little 5-person startup company would require about $250K per year to run.
A big company could easily cost $1M per month to run.
. 22 Racing Series .
According to that, a little 5-person startup company would require about $250K per year to run.
That was during the time of the article when they didn't actually pay people.
He continued: "Our operational costs are somewhere around $40,000 per month for a team of 7 salaried developers. ... I had to spend roughly $80,000 over three years to get the business going until its first significant source of income. Had I been able to pay for salaries during the first three years, it would have cost me about $700,000 more. "
Salaries vary widely based on location. There is a good reason that about 15 years ago many game studios left downtown silicon valley, which has become one of the most expensive areas for cost of living.
If you can develop your game that makes the same revenue but for half the cost simply by relocating, that is an idea to consider.
I am appalled by how much it costs to create video games
I assure you, everyone in the industry is also appalled. Deal with it.
-- Tom Sloper -- sloperama.com
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?
It is a lot more than that now. The company pays the team to make the game, then the company has to pay for marketing (EA spent $100 Million in marketing Battlefield 3 alone, not counting the money the paid to make it), have to pay for manufacturing the discs, then you have customer support, dlc, etc. Does this make an indie game costing $50k+ minimum a little more believable now? Serious game development takes serious money, there is no way around it.
