Used Games - yeah lots of people buy them but not me.
165 days 22 hours ago
| by:
JoelR
As a consumer I tend not to buy used video games - it's actually one of the small areas in my life that I would never consider used product as it is related to an industry that I love and unlike things like houses and cars - it really does cannibalize sales of new products (usually due to the fact that the used games hit the market within days of the launch of a new product)
I purpose two radical (and very controversial solutions)
1) No new release can be sold used by a retailer until at least 6 months has past
this would make it so a new release has time to earn the developer some money before used games cannibalize sales at the retailer.
2) Tie games to the console in which they are first played by some serial number/game id scheme.
This one is a bit more extreme as it would remove the used console game market entirely and game rentals (and might create a rise in actual piracy) but it opens some doors to developers that most people would not see initially
a) they could tie special rewards to the purchase of games
b) developers could cut retailer costs due to a more guaranteed sales environment.
c) it would invigorate developers in that they could reinvest more money into projects.
used game retailers:
http://next-gen.biz/index.php?option=com_content&task=view&am
p;id=8697&Itemid=2
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Publishers lose money:
http://www.mcvuk.com/news/29878/Revenues-down-and-losses-grow-for
-Take-Two
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hurts the industry:
http://www.next-gen.biz/index.php?option=com_content&task=vie
w&id=8632&Itemid=50
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Development costs and actual profit margin - if no used sales (used sales change this sales equation for the worse)
to show developer's require at least 60$ a game on the x/ps and a min of 500,000 games sold to break even and over a million to make money on a normal development budget:
http://www.igda.org/columns/lastwords/lastwords_Jan07.php
500,000 copies to break even at 60$ a game on developmental price of 8.6 million
Development cost ~ 17.20/unit
Publisher Overhead ~
Marketing ~ 10/unit
Cost of Goods ~ 6/unit
Sony Platform Fees ~ 15% gross or 7% if exclusive
Amortization of cancelled projects ~??? depends on each company
No royalties paid until all of the $8.6 million in development costs had been recouped at the developer's effective royalty rate.
Even if that rate, net of all reductions, is a generous $8 per unit, over 1 million full price copies must be sold for the developer to recoup
And that is why 60$ a game is and will be for this generation the normal price for a PS3 game.
Profit margin ~ 1-3% to publisher, 1-3% to developer, 1-3% Distributor , 11% Retailer
(many titles cost much more then 8.6 million to develop)
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information as per the IGDA (International Game Developers Association)
http://www.igda.org/
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Dec. OXM, the breakdown for a 360 game that sells 500,000 goes like this.
Retailer Cut: $12
Microsoft licensing and manufacturing: $12
Marketing: $7
Development: $20
Publisher overhead: $9
= $60.
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Do you know publishers only make 1 dollar per game? *linked by many sites*
How come Uncharted and Assassin’s Creed cost 60 dollars, while Super Mario Galaxy cost 50 dollars on the Wii? The first answer jumps to mind is “lower development” cost, but what does that mean? Do you know that when Konami publishes a game like MGS, they only make 1 dollar per game? In this special segment, we take a look at where your dollars go! We’ll break it down for you in a nice pie, because it’s always nice to know who’s taking a bite out of your pocket pie this Christmas.
Art/Design: 25% (about $15)
The rippling oceans, expressive faces and explosive action sequences gamers want to see don't come cheap. Publishers pay millions for computer-generated graphics, animation and motion-capture talent. "It's just like making a movie," says ABI Research's Michael Wolf.
Programming And Engineering: 20% (about $12)
This expense includes the gaming "engine"--the software equivalent of a game's guts--which can be bought, developed in-house or licensed, such as Epic's Unreal engine. Also included: artificial intelligence programs, online game-play systems, video compression software and "localization" for international markets. Engineering and development costs can quickly escalate when publishers agree to port a game title to an additional platform--and most of them now have to do so, notes ABI Research's Wolf. Some third-party developers secure deals to receive a cut of royalties based on how well a game sells.
Retail: 20% ($12)
Most games wholesale for about $48, giving retailers like EB Games, or Best Buy $12 of markup; at best, a dollar of that may drop to the store's bottom line.
Console Owner Fee: 11.5% (about $7)
This is why Sony, Microsoft and Nintendo are laboring so mightily to make their machines to success: Each gamemaker that wants to roll out a new title has to fork over a fee for each unit sold. This may vary per console maker--some publishers say creating games for the PlayStation 3 is more expensive because of fees Sony charges to use its Blu-Ray DVD standard. "But that number can get smaller depending on the publisher's status," says Peer Schneider, vice president of content publishing at IGN, News Corp.'s gaming portal. "The fee can be waived for exclusivity to a platform--that will buy you a kickback."
Marketing: 7% (about $4)
The game marketing budget is smaller if a game belongs to a well-known franchise, such as one of Activision's Tony Hawk titles, or can benefit from the marketing extravaganza tied to a movie budget (like Activision's Spiderman games). But good luck trying to market a brand new game concept. "To say, 'This is our new universe that you've never heard of,' that'll pile on additional marketing costs," says Luke Smith, news editor of Ziff Davis Media's gaming site 1up.com.
Market Development Fund: 5% (about $3)
It's not just enough to end up on a retailer's shelf--if you want good placement, or a spot in a retailer's advertising, you'll have to pay up again. This includes paid placement for print circulars, banner ads and highlights within a retailer's TV spot.
Manufacturing Costs, Packaging: 5% (about $3)
Blu-Ray discs might cost more, and so will collectible "special edition" sets. Otherwise, this amount covers the blank DVD media, the game imprinting, the sturdy plastic case and the included instruction manual.
Licensing: 5% (about $3)
From athletes and sports leagues to Marvel characters and movie studios, if a game title takes its name and plot from a well-known pop culture icon, publishers can expect to pay top dollar for the licensing rights. Headlining voice talent, such as Marlon Brando in Electronic Arts' The Godfather game, may even receive a percentage of retail revenues; unnamed voice actors and musicians get a flat fee. Costs vary widely here. For original-concept games, this cost is zero.
Publisher profit: 1.5% (about $1)
After all other parties--including the in-house or outsourced development teams--have been paid, the publisher collects about a buck toward the bottom line. As these pricey consoles become more mainstream, those dollars will add up.
Distributor: 1.5% (about $1)
If a small publisher wants to reach mass audiences, or a large publisher wants to sell to a small-time retailer, they'll need help from a game distributor, such as Ingram Entertainment.
Corporate Costs (quantitative analysis, management overhead): 0.3% (about 20 cents)
Number crunching is cheap, says Sega of America president Simon Jeffrey. Lawyers are not. But publishers need to pay all of them. And if they find themselves in legal trouble--as Take-Two Interactive did when it had to defend its Grand Theft Auto game's racy content in federal court--this number will shoot way up.
Hardware development costs: 0.05% (less than 3 cents)
Before a game developer can begin its craft, it must have access to the hardware the game will run on. For Xbox 360 and PS3 games, engineering teams pay tens of thousands for access to developers' kits and demo units--some of which get destroyed in the process.
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