Are games too expensive to develop?

[DieGrootHammer]

Our microtransaction talk is continuing with the biggest reason anyone gives as to why microtransactions are in a game. Cost of game development has increased over the years with the price of games staying at $60. Surely it stands to reason that publishers needs lootboxes to keep the lights on. For a long while now, this has been my biggest point that I've made. Until now...

You see it's financial statement season, with plenty of publishers publicly showcasing their financial positions for their fiscal year 2016/2017. And it makes for really interesting reading. Well, interesting to me, and there are a lot of points to make from these statements. So lets look at some charts, shall we?



I looked at these 4 key areas in the financials of the 3 biggest publishers, Activision Blizzard, EA, and Ubisoft. These reports have been really interesting to read, but there are a lot of damning evidence in all of them. Also, Activision Blizzard's spike in 2017 is due to the aquisition of King having an impact in their financial statements, and will be ignored for our purposes, as it dilutes the issue.

For starters, these graphs clearly show that, these top 3 publishers are not spending huge amounts more on R&D, and in fact across the board COGS is coming down. This was really interesting to me. All three list the impact of digital sales as one of the biggest drivers to lower COGS. What they fail to show is that all 3 of them are releasing much less games per year than ever before.

Another point to make is that where we always thought the marketing budgets of these games are getting out of hand, it's clear that the overall spending on marketing has not increased to that extent for these publisher. All the while profits are increasing, in some cases in double digits.

So there are a few notes that I would like to make about this information:

1. Games may be increasing on cost for individual titles, but their costs are mitigated by Publishers just releasing less games. Less games equals less cost. It's why EA had such a boring E3 presence, they literally don't have anything to show.

2. Marketing spend is not "getting out of hand" and increasing the cost of development. In fact, with less games being released, each individual title can get a bigger slice of the marketing pie

3. All 3 Publishers showed a profit, even if you disregard income generated from microtransactions. They have carefully crafted their businesses to such an extend that they do indeed turn a profit for the year, even if some games failed dismally.

So, in conclusion, yes, individual games are increasing on cost, but these publishers are big businesses, and run as such. Which means they will just release less games and effectvely decrease overall cost and higher profit margins.

 

[ArchieChoke]

Our microtransaction talk is continuing with the biggest reason anyone gives as to why microtransactions are in a game. Cost of game development has increased over the years with the price of games staying at $60. Surely it stands to reason that publishers needs lootboxes to keep the lights on. For a long while now, this has been my biggest point that I've made. Until now...

You see it's financial statement season, with plenty of publishers publicly showcasing their financial positions for their fiscal year 2016/2017. And it makes for really interesting reading. Well, interesting to me, and there are a lot of points to make from these statements. So lets look at some charts, shall we?

View attachment 25195

I looked at these 4 key areas in the financials of the 3 biggest publishers, Activision Blizzard, EA, and Ubisoft. These reports have been really interesting to read, but there are a lot of damning evidence in all of them. Also, Activision Blizzard's spike in 2017 is due to the aquisition of King having an impact in their financial statements, and will be ignored for our purposes, as it dilutes the issue.

For starters, these graphs clearly show that, these top 3 publishers are not spending huge amounts more on R&D, and in fact across the board COGS is coming down. This was really interesting to me. All three list the impact of digital sales as one of the biggest drivers to lower COGS. What they fail to show is that all 3 of them are releasing much less games per year than ever before.

Another point to make is that where we always thought the marketing budgets of these games are getting out of hand, it's clear that the overall spending on marketing has not increased to that extent for these publisher. All the while profits are increasing, in some cases in double digits.

So there are a few notes that I would like to make about this information:

1. Games may be increasing on cost for individual titles, but their costs are mitigated by Publishers just releasing less games. Less games equals less cost. It's why EA had such a boring E3 presence, they literally don't have anything to show.

2. Marketing spend is not "getting out of hand" and increasing the cost of development. In fact, with less games being released, each individual title can get a bigger slice of the marketing pie

3. All 3 Publishers showed a profit, even if you disregard income generated from microtransactions. They have carefully crafted their businesses to such an extend that they do indeed turn a profit for the year, even if some games failed dismally.

So, in conclusion, yes, individual games are increasing on cost, but these publishers are big businesses, and run as such. Which means they will just release less games and effectvely decrease overall cost and higher profit margins.

It really depends what they making, games that include 3D models with skeleton models are generally alot of work, they have to worry about attaching weapons to hands, animation cycles, blend spaces, animations for jumping, crouch....Thats excluding the weapon animations.

If you are talking about 2d games where its generally animated gifs, its easier to pump out content.
Also has to be included is the costs of living, star citizen made a pretty good point that they have strategically placed staff at locations such as Germany and NewCastle where they state the cost of living is far cheaper and also governments also give them tax breaks.


Also it all depends how fast you want to get it out there. I watched Overwatches developement process (https://www.youtube.com/watch?v=yH0GsOKZHMQ) as you can see their development process was dam long, given that they wrote an engine for the game, which comprises of importing physics engines, netcode etc.

So when people say its getting expensive, It all depends on whats being made, the scope and the target delivery date.

Take into account bugs, bugs can literally set things back drastically. Ill give you an example, I wrote a sample where a player is able to mount one object to another, it attaches but for some reason soon as force is applied they snap off as if they were not welded together. It has literally taken me a month to figure out a solution, to be fair it isn't as technical as what I expect other devs to see in their day to day activities.

 

[DieGrootHammer]

It really depends what they making, games that include 3D models with skeleton models are generally alot of work, they have to worry about attaching weapons to hands, animation cycles, blend spaces, animations for jumping, crouch....Thats excluding the weapon animations.

If you are talking about 2d games where its generally animated gifs, its easier to pump out content.
Also has to be included is the costs of living, star citizen made a pretty good point that they have strategically placed staff at locations such as Germany and NewCastle where they state the cost of living is far cheaper and also governments also give them tax breaks.


Also it all depends how fast you want to get it out there. I watched Overwatches developement process (https://www.youtube.com/watch?v=yH0GsOKZHMQ) as you can see their development process was dam long, given that they wrote an engine for the game, which comprises of importing physics engines, netcode etc.

So when people say its getting expensive, It all depends on whats being made, the scope and the target delivery date.

Take into account bugs, bugs can literally set things back drastically. Ill give you an example, I wrote a sample where a player is able to mount one object to another, it attaches but for some reason soon as force is applied they snap off as if they were not welded together. It has literally taken me a month to figure out a solution, to be fair it isn't as technical as what I expect other devs to see in their day to day activities.

Very good and interesting points you're making.

My thinking was that all three of EA, Ubisoft and Activision Blizzard do make a wide range of games, and would be interesting to see from a financial perspective how they manage their cost. And I wouldn't really call any of the games coming out of these publishers as small little projects with less development time. The fact remains that while it does vary by the type of game developed, developmental costs of the games these publishers roll out should be fairly on the high side. And yet their COGS is steadily going down?

What was interesting to note was a higher than normal cost by EA in their notes due to licensing when they created Star Wars Battlefront. At the end I also think games like BF and Fifa and Need For Speed will pay a pretty penny for licensing of material used in game.

 

[ArchieChoke]

Very good and interesting points you're making.

My thinking was that all three of EA, Ubisoft and Activision Blizzard do make a wide range of games, and would be interesting to see from a financial perspective how they manage their cost. And I wouldn't really call any of the games coming out of these publishers as small little projects with less development time. The fact remains that while it does vary by the type of game developed, developmental costs of the games these publishers roll out should be fairly on the high side. And yet their COGS is steadily going down?

What was interesting to note was a higher than normal cost by EA in their notes due to licensing when they created Star Wars Battlefront. At the end I also think games like BF and Fifa and Need For Speed will pay a pretty penny for licensing of material used in game.

That would be lovely to see the break down in costs, but it just might make you fall off your seat. There are always a handful of people who eat about the salary of 10 people in orgs, they usually stay with the company for some years so if you consider a 7% pay rise in their salaries you know where some of the money goes.

Yeah that is true, generally the studios do large projects, but what you will find scary is how much is ripped out before release. I remember reading a thread concerning Fallout 4, why is it just meh. Seems some guy went through the code and found many features that could have added depth, but was commented out for the release. The codes commented out were understandable (Like gay people in brothels etc.), as you know they attempted to target this game for all ages in some ways.

One big thing we don't hit on is reputation. For example I will never ever buy a Ubisoft or EA game again, I have literally being burnt by them. Ubisoft, they made a great Farcry 3 game, I almost finished it till there was a bug that crashed my game, I went to forums, I used all support available, but still could not finish. Come wildlands, I signed up for Beta and couldn't get in, now that reputation is stuck with me forever. EA got bunt by the BF concept, i really felt they were re-skinning the product every year, sim city don't get me started.

Now next in line was Star Citizen, I was ticked off hugely when I saw a video of them chilling having a meeting and about 6 of the devs there had Microsoft Surface Pro devices, it made no sense why they had them, especially since they are the top paid devs. I mean they could buy a apple tablet, RDPed into their pcs and made notes there or even show a problem over RDP, but no they had to have a Microsoft Surface Pro. Like sure its only $2400 but are they for real?

Oh yeah licensing is a big thing, take car manufactures licensing the rights to make their cars in their games. I picture Ferrari being a big chunk of money.


In all honesty, indie games are what will keep gaming going, not the big AAA's, we expect the world from them. When a indie makes a small buggie game, we are more lenient with them.

 

[Crzwaco]

Wonder if you posted this before or after the closing of runic games the people who gave us torchlight 2

 

[Apollo]

 

[DieGrootHammer]

Really love the video. I see we have the same figure, more or less, though he accounted for inflation which I didn't. It's eerie actually.

But his conclusion is that games are not too expensive, which I don't fully agree with. I do think the numbers don't lie, and the decrease in cost percentage does not match the percentage of less games made per year. My argument is that businesses such as EA and Ubisoft manage their cost to the point that they make less games in order to save cost.

But I'm definitely gonna subscribe to this dude. We are kindred spirits.