A Question of Revenue

[Hiro Protagonist II]

You also have to take into account ongoing costs after the game is released. It's not all profit. There are still wages and running costs to pay out. While the game sells for the next 6 months after release, you also have 6 months of costs to take out as well. It keeps Obsidian in business.

[BruceVC]

Let's assume for a minute the game does sell poorly.

 

So what?

 

Obsidian didn't have to fund the game.  You have to remember in the publisher model it is important a game sells a lot.  Not because it makes the developer a ton of money... because it makes the publisher a ton of money.  The publisher then uses these profits to fund your sequel.  No profits, no sequel, and maybe no more publisher deals at all.

 

With Kickstarter Obsidian doesn't have to pay anyone back.  Every single post release sale is automatic profit.  They don't need to sell 1mil copies to recoup their investment, they didn't invest anything.  (well they did but we don't know how much and it isn't the point )  Even if it only sells 100k copies (it will sell more than that) at say... 40 bucks a copy (low ball for these days) that is 4 million dollars.  You know... what the kickstarter made in the first place?

 

Just trust me, they don't need maybe... 200-300k copies to be sold post launch and they will be capable of self funding the sequel.  So unless the games sales totally tank they are in very little danger.  Worst case scenario they (god forbid) have to go back to kickstarter for part 2.  Just remember... the goal for a developer isn't to become their own publisher, it is to wake up tomorrow and have another game to develop and the money to do it so they can pay their checks.  No matter how this plays out Obsidian will have the money for Eternity 2 one way or the other.

 

 

 

My main concern is not that Obsidian will lose money, just that they will not get enough money to make another game as great as the original (if it does turn out to be great, which I surely hope it will). If Obsidian breaks even, it would be impossible to continue the franchise on account of the lack of revenue. Only if a publisher gets involved will they be able to make a second game if this is true. But of course, problems with publishers abound.

Uh.... you understand it is impossible for them to break even right?  They didn't fund the game, it was done through donations.  Even if it flops and only sells 5 copies they still lost nothing.  All they need is one copy to sell post release and they have made profit.  Also... it is going to sell plenty of copies.

 

 

No my friend the reality is that Obsidian really does need to generate revenue through new sales of PoE because end of the day they are a business that needs show a healthy net profit in order to be viable.  No one goes into a private business with the intention of just breaking even.

 

I'll keep it simple but lets say for example  that Obsidian generates $ 100,000 from sales of PoE. This is not pure profit ( net profit ). From this they need to deduct  indirect and  direct costs. So from this you will deduct the following ( and this list is not comprehensive)

• Rent of business building
• Water and electricity
• All office costs like telephone and admin staff
• Advertising and Marketing
• Travel expenses
• Hardware and Software maintenance cost
• Overtime
• Taxes

 

Then you need to incentivise the staff apart from there salaries, do they get bonuses based on percentage of  sales? Do they get a  fixed lump sum or a 13th check? And all this will come off the sales revenue

 

I imagine the KS pledges are used to pay the salaries of staff members for the 2 years that the game takes to make because remember those developers don't generate revenue while they are working on the game but they still need to get  paid there salaries or contracting fees. Of course none of us can say with complete certainty what the running costs of Obsidian are but one thing I can guarantee you is they have to generate decent sales figures or what would be the point of being in business or producing anymore PoE ?

Edited July 1, 2014 by BruceVC

[Gnostic]

This game is niche and shall sell comparitively poorly, but Obsidian should do quite well out PoE2, which will be an on-rails cover-based shooter.

You forgot the "online" features too, and the extra quest / task / mission to log in "online" server. After all PE has no multi-player and will lose out as such.

[Nonek]

Not really any of my business, I certainly hope Obsidian has massive success with Poe, but so long as I recieve my game then our transaction has been satisfactory. It would be nice to see one of the few developers who make intelligent and reactive games succeed, especially considering my enjoyment of their previous properties, but I personally judge only on what a company does for me as any smart consumer should in my opinion. Sorry if that sounds a little selfish.

 

Edit: I do believe there is a market beyond our grognard niche, and I believe it's been largely abandoned due to various reasons.

Edited July 1, 2014 by Nonek

[Karkarov]

I'll keep it simple but lets say for example....

I will keep it even simpler.  Most new businesses don't make any actual profit until they have been running for five years.  No joke.  If they aren't making any money how are they in business?  Why does Microsoft keep making Xbox when they have to this day never made money on any of them except the Xbox 360 and that took years of release?

 

If the worst thing that can happen to you in the world of business is "breaking even" (which is the worst thing that can happen to Obsidian since they did not fund the game) then you are in a pretty damn good position.  For that to happen this game would have to sell like crap though.  Therein lies the rub... it won't break any sales records, but it won't sell like "crap" either. 

 

Meanwhile maybe you guys didn't notice but they are running other projects to.  This is not a indie start up of five guys, they are not going to go out of business if Eternity doesn't sell 1 mil copies and Metacritic over a 90.

Edited July 1, 2014 by Karkarov

[Helz]

• Rent of business building
• Water and electricity
• All office costs like telephone and admin staff
• Advertising and Marketing
• Travel expenses
• Hardware and Software maintenance cost
• Overtime
• Taxes

 

Then you need to incentivise the staff apart from there salaries, do they get bonuses based on percentage of  sales? Do they get a  fixed lump sum or a 13th check? And all this will come off the sales revenue

 

 

All of these things are operating costs associated with developing a game.  They were paid for through Kickstarter.  Getting all the money up front is the whole point of the program.  Now assuming they've managed their money properly and were able to predict these costs reasonably accurately, all sales from this point forward should be mostly profit.  Staff bonuses and things are hardly a concern if they're predicated on sales, seeing as no sales means no bonuses.

 

Are people against them doing another Kickstarter?  As long as PoE turns out to be as good as it looks, I would have no qualms about backing more games from Obsidian.  I'm more concerned with their newfound entanglements with MMO's, the moneypits of game development.

[Ink Blot]

Of course, this is making hugely dubious assumptions.

This is the key. Keep in mind that the amount of people that post on a game's forums are only a fraction of the amount that actually buy and play the game. The amount of kickstarter backers are only a fraction of the people that post on the forums.

 

We're only a 'niche' audience in the sense that people interested in this type of game aren't on the order of the COD numbers. But plenty of people will still be interested in the game when it's released. There's no way of knowing ahead of time, of course, but I'm pretty confident they'll have good sales numbers when they release this game.

[HardRains]

Here's how Broken Age fared:

http://www.polygon.com/2014/2/21/5434300/double-fine-broken-age-split-worked-tim-schafer

 

[Chaos Theory]

Here's how Broken Age fared:

http://www.polygon.com/2014/2/21/5434300/double-fine-broken-age-split-worked-tim-Schafer

 

That's why Obsidian should release this game in segments...   1 "Pillar" at a time.  For "Eternity". 

 

It's a proven formula now, apparently. 

Edited July 1, 2014 by Chaos Theory

[Lephys]

Just as long as they don't sell the movie rights to Uwe Boll, then I'm all good.

But he's the most magnificent director/writer/producer of all time! Just ask him!

[Osvir]

I guess this is an update to my previous post (The Steam Charts for Divinity have rocketed as well in comparison to previously).

Divinity: Original Sin is selling really well:
http://www.eurogamer.net/articles/2014-07-03-divinity-original-sin-larian-studios-fastest-selling-game-ever

 

They are also still on the #1 spot on Best Selling game on Steam.

[Hiro Protagonist II]

Good article Osvir. Also shows that Divintiy: Original Sin will eventually break even and then start making some profit. Also shows a good (hypothetical) break down when taking things like Steam into consideration.

[Lephys]

So, would you say it's really... picking up steam? 6_u *hearty chuckle*

[Namutree]

If Pillars of Eternity is as good as I think it will be. It will sell at least a decent amount. Even if it doesn't sell great; they can just do crowd funding for part 2. So it really doesn't matter all that much. If PoE is great I'll do whatever I have to in order to ensure a sequel. What matters most is that this game is good. 

[Karkarov]

I guess this is an update to my previous post (The Steam Charts for Divinity have rocketed as well in comparison to previously).

 

Divinity: Original Sin is selling really well:

http://www.eurogamer.net/articles/2014-07-03-divinity-original-sin-larian-studios-fastest-selling-game-ever

 

They are also still on the #1 spot on Best Selling game on Steam.

There you go.  If Eternity just matches those sales (and it can) it will easily earn more than the kickstarter did.

[Bryy]

There is something very important that I would like to address, and I have yet to see anyone else mention this. We know that a niche group of people want cRPG's like this, and Torment, and Wasteland 2 and the like. They will pay dearly for them as we have seen, but thus remains the problem, as I see it. Usually, when one aspires to make a game, they get money from publishers, which goes into the game, the game then making revenue for the publishers, and the developers. That is, publishers give money, developers use money for game, people give money for game.

 

However, when a game is crowd funded, things are pretty much in reverse, except without the publisher. That is, people give money for game, developers use money for game, and again, people give money for game. But let us remember that this is a niche audience. For the sake of argument, let us assume that most of the people who wanted PE have already paid for it by backing it. Since one of the backer rewards is the game itself, and this reward is the most common out of all the rewards, then we can assume that the sales for this game will be very, very poor.

 

Of course, this is making hugely dubious assumptions. The question, however, still stands. Given a kickstarter game with a niche audience, wont the sales of said game be poor because most of the people who would buy the game have back the game already?

Larian made 6.5 million in the three days Original Sin was out.

 

Out of that, they made 2 million profit. 

 

I think the chances of Pillars selling well are pretty good.

[Osvir]

I thought it interesting to check Divinity's numbers a bit more, or rather, it is kind of intruiging to see how it develops analysis/information that could potentially benefit Obsidian+Pillars of Eternity?

D:OS' player base has been growing exponentially and I think there's a very simple and obvious reason for this.

Peak avg. Players*:
July 1st - Tuesday - 13'523

July 2nd - Wedday - 13'598
July 3rd - Thurday - 14'300
July 4th - Friddday - 15'400
July 5th - Saturday - 18'144
July 6th - Sundday - 21'946

It is definately growing fast, and I think that graphically and statistically it might be smart strategically to release on a Monday. You'll be able to show a steady growth in the player base (less people play games during the weekdays, but people will discover/buy Pillars of Eternity during the week and play it on the weekend, thus when the weekend hits the statistics spike exponentially and will be useful in any kind of meeting in the future "See this beautiful upwards trend?" ).

* Intentional misspelling of weekdays just to get some sort of "format" (for your eye's pleasure~)

Edited July 6, 2014 by Osvir