Questions about Business Model

[RobDinsmore]

I am just curious about the business model and what assumptions are being made about the total cost of development and earnings estimate. I have jumped in on all the new wRPG kickstarters but I know very little about how much real game development costs. I just think it's a neat idea to be able to help games you like get developed.

 

The mainstream industry and the mainstream gaming publications always talk about how AAA games cost 100+ M to develop, how they are a dying breed, etc. Kingdom of Amalur probably sold over 1M copies but was a huge failure. The creative content in that game did not strike me as any different from what I am expecting out of PE. By this I mean dialog, artwork, story, etc. Sure the game is an action 3D game and the combat engine must have taken a lot of work, but that alone can't be the full cost because even Skyrim was said to cost over 100M and that is just FO:NV with Swords. Are marketing costs that high?

 

For PE, full on development of the game seems to be estimated at 17 months. If kickstarter is the only source of funding and it hits 2.55M then that gives around 150k per month. So unless there are less than 15 people working on this it won't fund labor and overhead. Also, assuming an average pledge of $25 that amounts to 102,000 copies sold.

 

So how much funding is coming from sources other than Kickstarter? Is Obsidian matching Kickstarter funding to some level and then banking on a certain number of sales to break even, and eventually make a profit? What is that number? I am sure a similar model is being used by the other kickstarters. So I just want to understand it a little more.

[Knott]

Obsidian have done a lot of other games, and have already done some pre-production on this project. So they should have some cash laying around, but the scope of how much of that they are willing to risk ultimately depends on the success of this Kickstarter. Even taking up a loan would be plausible if they are realistic about what they can expect from post-launch sales. (Though, loaning-terms in the US are very unforgiving and a soulless affair)

 

AAA Games usually have a lot of cost ascosiated with marketing, but also with hiring a lot of external help from expensive/renowned contributors. And sometimes simply adding more money will exponentially increase costs even though the effects will be diminishing.

 

The cost/result ratio will entirely depend on good management.

[Hurlshort]

There won't be many people working on this, the number thrown out was a team of 20. You can bet that quite a few of those will be splitting time with other projects, so 150k a month should be enough to cover labor and overhead.

 

Marketing is also a huge cost, as is voice work, so cutting those out helps a lot.

[MinotaurWarrior]

Voice work, 3D art, physics software, and pre-rendered cutscenes are just a few of the costs obsidian is hopefully going to be able to dodge with Project Eternity.

[NerdBoner]

I'm thoroughly uneducated in the economics side of the gaming industry--but isn't producing an Infinity Engine style game a Gajillion times cheaper than it is when producing something that uses one of those bleeding edge 3D monster engine games that make your circuit boards cry out in agony every time you fire up the game?

 

I mean, if you commissioned a studio to make Baldur's Gate or Planescape in 2012 would it really cost as much as the Witcher 2 or Dragon Age 3 to produce?

[hideo kuze]

Bioware spy detected j/k

 

Skyrim was said to cost over 100M and that is just FO:NV with Swords.

I see what you did there... and I don't like it.

Edited September 23, 2012 by hideo kuze

[NerdBoner]

Voice work, 3D art, physics software, and pre-rendered cutscenes are just a few of the costs obsidian is hopefully going to be able to dodge with Project Eternity.

hold your horses there young'n! I don't want an entirely silent game...

 

I can't even fathom a BG2 with a silent Irenicus. Blasphemy i say!

[hideo kuze]

Voice work, 3D art, physics software, and pre-rendered cutscenes are just a few of the costs obsidian is hopefully going to be able to dodge with Project Eternity.

hold your horses there young'n! I don't want an entirely silent game...

 

I can't even fathom a BG2 with a silent Irenicus. Blasphemy i say!

 

there will be voice characterization

http://psotter.com/news/exclusive-interview-project-eternity-part-2/

[MinotaurWarrior]

Voice work, 3D art, physics software, and pre-rendered cutscenes are just a few of the costs obsidian is hopefully going to be able to dodge with Project Eternity.

hold your horses there young'n! I don't want an entirely silent game...

 

I can't even fathom a BG2 with a silent Irenicus. Blasphemy i say!

Yes, but the scale is completely different. PE is going to have VO accents, compared with a AAA title, where they have to record a half hour of just villagers shouting at you as you walk by.

[Knott]

Heh, one of my many memories from BG2 was that in some areas there was plenty of ambient sound reminiscent of a lively and flourishing city, but on the screen the populance was as scarce and lively as the downtown of Nowhere on a rain heavy sunday.

[NerdBoner]

Heh, one of my many memories from BG2 was that in some areas there was plenty of ambient sound reminiscent of a lively and flourishing city, but on the screen the populance was as scarce and lively as the downtown of Nowhere on a rain heavy sunday.

haha yeah i remember i could actually hear the voice of a harlot propositioning me every so often in the background...**** was great.

[JediMB]

Kingdom of Amalur probably sold over 1M copies but was a huge failure.

 

Actually, Kingdoms of Amalur: Reckoning was considered a success.

 

The problem was the 38 Studios was also developing an MMO, which was funded by the state of Rhode Island, and the new Governor (who was opposed to the project from the start) decided to screw them over.

[MinotaurWarrior]

Kingdom of Amalur probably sold over 1M copies but was a huge failure.

 

Actually, Kingdoms of Amalur: Reckoning was considered a success.

 

The problem was the 38 Studios was also developing an MMO, which was funded by the state of Rhode Island, and the new Governor (who was opposed to the project from the start) decided to screw them over.

 

Every time I hear that story, I'm surprised. I just can't get it to stick in my mind that, yes, Rhode Island was funding the Amalur MMO.

[Delterius]

Heh, one of my many memories from BG2 was that in some areas there was plenty of ambient sound reminiscent of a lively and flourishing city, but on the screen the populance was as scarce and lively as the downtown of Nowhere on a rain heavy sunday.

 

Which is kinda weird, its not like the BG series was above adding pointless villager NPCs whose only existance is to speak in a proto-british accent seemingly unique to the lower class.

[NerdBoner]

speak in a proto-british accent seemingly unique to the lower class.

god i love that trope...

 

ah, nothing like hearing broken Brittanian to make me feel like I'm walking amidst the unwashed masses.

 

"Oy guvnah, trouble you for a pence!" <~~~~lol whatever that means!

[Gatt9]

I am just curious about the business model and what assumptions are being made about the total cost of development and earnings estimate. I have jumped in on all the new wRPG kickstarters but I know very little about how much real game development costs. I just think it's a neat idea to be able to help games you like get developed.

 

The mainstream industry and the mainstream gaming publications always talk about how AAA games cost 100+ M to develop, how they are a dying breed, etc. Kingdom of Amalur probably sold over 1M copies but was a huge failure. The creative content in that game did not strike me as any different from what I am expecting out of PE. By this I mean dialog, artwork, story, etc. Sure the game is an action 3D game and the combat engine must have taken a lot of work, but that alone can't be the full cost because even Skyrim was said to cost over 100M and that is just FO:NV with Swords. Are marketing costs that high?

 

There's actually a pretty fantastic amount of fud flying around from Publishers about this. What's actually happening is this...

 

-The Publisher adds ~25% - 30% to the cost of the game alone. One full quarter of "How much game X cost to make" is actually money spent on people who don't actually generate any real work. These are suits with fairly large salaries who make decisions based upon what they think will generate the largest bonus for them.

 

-Marketing a product can end up quite expensive. Tens of millions of dollars to do commercials that don't improve a game's sales, buy out the entire background of websites, give the "Gaming Journalists" VIP treatments to aquire perfect scores, etc.

 

-Publishers add internal overhead as well. Publishers do not like teams that act on their own, so Publisher introduce hefty levels of middle management. One interviewer recently spoke about how two artists who sat beside one another at a big publisher couldn't collaborate on art, they couldn't talk to each other, they had to go through a manager. I think it was The Witcher's devs in an interview talking about friends.

 

-Then there's the favors given to retailers. Those pre-order items are things requested by retailers, that cost dev's money to create, just to get a contract with the retailer.

 

AAA games could easily have a budget at least 30% lower, and likely even less, without all of the crap Publishers introduce that don't contribute to a game in any way. A 20 million dollar game likely only had between 10 million and 15 million actually spent on making the game.

 

You can get a sense for how this works by pulling out the credits for an AAA title, and looking them over. You'll find half of the people credited don't actually do anything at all for the game.

 

AAA Game Development today, if it were a government, would be a feudal system. Where a sizeable number of people don't actually do any work but take a sizeable amount of resources.

 

Edit:

 

If you want a better sense of how it works, and feel like doing math, pick a game you know how long development was. Then...

 

-For each programmer figure an average of $85,000

-For each artist figure an average of $65,000 or $70,000

-For each sound figure an average of $65,000 or $70,000

-QA's a crapshoot. Good QA would be $85,000ish (CS trained people equivalent to programmers), bad QA would be $35,000ish (College grads, no experience). Most publishers will use the latter.

 

Add it all up, get a year's worth of expenses, multiply by the years it was in development. It'll be low, but an approximation. The numbers are coming from an article I recall on Gamedev.net about 5-6 years ago.

Edited September 23, 2012 by Gatt9

[alanschu]

Tens of millions of dollars to do commercials that don't improve a game's sales

 

It's tough to substantiate a claim like this unfortunately. There's certainly a belief that it does. I have no idea how marketers substantiate it from the other perspective, either, though.

 

The Publisher adds ~25% - 30% to the cost of the game alone. One full quarter of "How much game X cost to make" is actually money spent on people who don't actually generate any real work. These are suits with fairly large salaries who make decisions based upon what they think will generate the largest bonus for them.

 

Are you saying that the executives are factored into the budget?

Edited September 23, 2012 by alanschu

[dlux]

The mainstream industry and the mainstream gaming publications always talk about how AAA games cost 100+ M to develop

Where did you get those numbers from? Most AAA titles have development costs of about $20-30 million

 

If kickstarter is the only source of funding and it hits 2.55M

The kickstarter will very likely go higher than that.

 

So how much funding is coming from sources other than Kickstarter?

Obsidian might invest some of their cash into the game... but thats about it.

[alanschu]

Where did you get those numbers from? Most AAA titles have development costs of about $20-30 million

 

Where did you get those numbers from?

[chrisrobin]

Where did you get those numbers from?

I have a source, though it's dated back two years so no doubt the cost has increased.

http://www.wired.com/gamelife/2010/01/game-budgets/

[Sylvius the Mad]

Where did you get those numbers from?

I have a source, though it's dated back two years so no doubt the cost has increased.

http://www.wired.com...1/game-budgets/

I'm reasonably confident that "alanschu" of Edmonton might have a pretty good idea how much is spent by one particular game developer.

[Gatt9]

Tens of millions of dollars to do commercials that don't improve a game's sales

 

It's tough to substantiate a claim like this unfortunately. There's certainly a belief that it does. I have no idea how marketers substantiate it from the other perspective, either, though.

 

I'd argue that Publishers don't, from what I've seen there's virtually no market research in the gaming industry. I think like many other things, it's just that the business end keeps telling itself "This is true" until it believes it. Much like they do with "Only shooters are worth making today, nothing else sells", while blindly ignoring everything else that sells.

 

The Publisher adds ~25% - 30% to the cost of the game alone. One full quarter of "How much game X cost to make" is actually money spent on people who don't actually generate any real work. These are suits with fairly large salaries who make decisions based upon what they think will generate the largest bonus for them.

 

Are you saying that the executives are factored into the budget?

 

To some degree they will be, depending on the executive level. Project Managers, Producers, those will be factored in. Senior managers may be factored in, as well as cooporate managers assigned to a development house. It all depends on where the Publisher chooses to define the Studio as starting. Plus, in honesty, all of upper level management gets indirectly factored in as the Publisher generates no product itself, so the cost of everyone working for the Publisher will be diffused amongst the Studios/Projects indirectly, and can easily lead to misleading math.

 

Then there's the question of "How many Project Mangers/Producers are really needed?". Halo 3's a great example...

 

http://halo.wikia.com/wiki/Halo_3_Credits

 

1 Studio Manager

1 Executive Producer

2 Product Leads

4 Producers

1 Senior Business Coordinator

1 Buisness Administrator

3 Security Personell

1 Microsoft Executive Producer

3 Legal/Buisness

1 Program Manager

3 Microsoft Finances

4 Microsoft HR

4 Microsoft Researchers

1 Microsoft User Researcher Lead

2 Microsoft User Researcher Engineers

6 Microsoft Asia Researchers

3 Microsoft X-box PR

 

So that gives us 39 people whose jobs don't actually add value to the game, many of whom have their positions duplicated. If they all made just $50k/year over 3 years, they added 5.9 million to the cost of developing Halo 3, and in reality it's likely closer to 8 or 9 million.

 

That's why I say AAA games are perfectly fine, the problem is that Publishers have no idea how to manage themselves. They keep trying to cut corners in quality, treat developers poorly (By report), and complain about cost, when they could easily shed a metric ton of cost simply by eliminating all of this excessive duplication of positions and quit trying to count ancillary positions in a game's cost.

[Dianjabla]

It's an interesting question, to be sure. I note that no one includes renting office space, electricity/utilities (whatever they're called there) hardware & software over heads, etc. I can see why a company might not like to tell all about the internal workings of its finances. And that's more than fair. But it would be really nice, just for once, to be given a rough guide to how much it actually costs to create a video game and where the money goes, by someone working in the industry.

[True_Spike]

Let me say this: Witcher 2 had a budget of around 8 million dollars and the game was fully voiced, localized in a number of different languages (most of the time with voice-over, in a few cases the translation was cinematic), it run on a state-of-the-art engine they built from scratch and is probably the best looking RPG (graphics-wise) up to date. It also had a very aggressive marketing campaign, at least in Poland. The budget was low when compared to other AAA titles, because the game was produced in Poland - salaries are lower here and this reduces the overall costs a ton and because CD Projekt RED was it's own publisher (in the local market).

 

Modern games cost a lot to make, but it doesn't mean there's no way around it. There are games that cost ~100 million to make, but mostly because marketing and suits are generating a lot of additional expenses.

Edited September 23, 2012 by True_Spike

[alanschu]

I'd argue that Publishers don't, from what I've seen there's virtually no market research in the gaming industry.

 

Why would gaming commodities behave differently than other commodities in terms of marketing?

 

 

Furthermore, it all seems somewhat relative. It's not like Feargus isn't going to be getting paid during the development of the game.

Edited September 23, 2012 by alanschu