To Gain a Better Understanding...
by David Silverman · in Torque Game Engine · 11/17/2001 (1:02 pm) · 6 replies
Let's say I make a game and GG and I publish it on GG's site for $19.95.
Let's say this product sells 500 units, pulling in a revenue of: $9,975
Am I correct in assuming that 50% of this revenue is taken by the developer, and 50% is taken by GG? so each would take $4,987.5 ?
So now the product has sold enough units on GG site to be eligible to sell this product via standard brick and mortar channels(through Sierra). Sierra decides to put the product on the shelves to retail at $29.95 and it sells 20,000 copies, yielding $599,000 in revenue.
Now the licensing deal says, if you go to traditional brick-n-mortar the developer now upgrades to 80% and Sierra takes 20%. Does this mean that the developer gets
$479,200 and Sierra comes away with $119,800?
Where do the distribution and marketing $$ come from? What about "endcap" deals and other similar merchandising techniques to lure potential buyers in?
I'm just trying to see what the numbers might come out to in a given situation.
-darktoad
Let's say this product sells 500 units, pulling in a revenue of: $9,975
Am I correct in assuming that 50% of this revenue is taken by the developer, and 50% is taken by GG? so each would take $4,987.5 ?
So now the product has sold enough units on GG site to be eligible to sell this product via standard brick and mortar channels(through Sierra). Sierra decides to put the product on the shelves to retail at $29.95 and it sells 20,000 copies, yielding $599,000 in revenue.
Now the licensing deal says, if you go to traditional brick-n-mortar the developer now upgrades to 80% and Sierra takes 20%. Does this mean that the developer gets
$479,200 and Sierra comes away with $119,800?
Where do the distribution and marketing $$ come from? What about "endcap" deals and other similar merchandising techniques to lure potential buyers in?
I'm just trying to see what the numbers might come out to in a given situation.
-darktoad
#2
The box publisher has distribution costs, marketing costs, the retailers need to make money, there are cost of goods that need to be deducted, etc. Assuming a standard deal, a developer is lucky to get even 5% of the full retail price of a product, so a $40 retail product nets a developer around $1.50-1.80 per copy.
Jeff Tunnell GG
11/17/2001 (5:43 pm)
You are essentially correct in the on-line calculations. However, the box part is way off. If the product goes to box, the developer gets 80% of the revenue that comes from Sierra (or another publisher). So if we received $100,000 from the box publisher, the develeper would get $80,000. Where you are completely off base is in trying to equate retail revenue to the amount that would be coming in to the developer.The box publisher has distribution costs, marketing costs, the retailers need to make money, there are cost of goods that need to be deducted, etc. Assuming a standard deal, a developer is lucky to get even 5% of the full retail price of a product, so a $40 retail product nets a developer around $1.50-1.80 per copy.
Jeff Tunnell GG
#3
I found this link online that calculates the numbers for a traditional publishing setup: www.makegames.com/royaltycalc.html
There are too many mouths to feed in traditional publishing and therefore the developer gets a pittance for his/her labors(at least on average).
Take the example:
20,000 units sold retail for $29.95. This yields $599,000 total revenue from the retail channel. Assuming the publisher gives the distributer a discount of 55% and the developer has a royalty percentage of 5%...the developer can look forward to pocketing about:
$13,477.50
Not exactly 'cha-ching'.
Now take same product and sell it exclusively online via GG's publishing model and see how many you'd need to sell to reach that same amount: Let's say that we reduce the unit price to $19.95 and the royalty percentage is 50%. The distribution discount is 0% (because GG acts as both publisher and distributer)
You would only have to sell: ~1352 copies of your game to equal the revenue of selling 20,000 copies retail.
Now the real question is this. How is GG going to drive traffic to buy games from their site? Doe it need a "killer app"? Does GG have plans to advertise on other sites...not just gaming. The online community may be a very small subsection of the overall gaming populace, but the number is growing...and as we see in the example, you can still make a lucrative business from only the online-folk...because you don't need as many to buy your product to make a signifigant gain.
Just some thoughts...also please correct any math errors I may have introduced in my little business rant. Let me know your thoughts...I personally think it's very exciting!!!
-David (darktoad) Silverman
CEO & Director of Game Design, MadDog Interactive
11/17/2001 (8:12 pm)
Ok, so following that line then...it's actually MORE beneficial to the developer to NEVER get boxed. Because while the developer doesn't get the same reach to the mass market...their cut is substantially higher via the online channels.I found this link online that calculates the numbers for a traditional publishing setup: www.makegames.com/royaltycalc.html
There are too many mouths to feed in traditional publishing and therefore the developer gets a pittance for his/her labors(at least on average).
Take the example:
20,000 units sold retail for $29.95. This yields $599,000 total revenue from the retail channel. Assuming the publisher gives the distributer a discount of 55% and the developer has a royalty percentage of 5%...the developer can look forward to pocketing about:
$13,477.50
Not exactly 'cha-ching'.
Now take same product and sell it exclusively online via GG's publishing model and see how many you'd need to sell to reach that same amount: Let's say that we reduce the unit price to $19.95 and the royalty percentage is 50%. The distribution discount is 0% (because GG acts as both publisher and distributer)
You would only have to sell: ~1352 copies of your game to equal the revenue of selling 20,000 copies retail.
Now the real question is this. How is GG going to drive traffic to buy games from their site? Doe it need a "killer app"? Does GG have plans to advertise on other sites...not just gaming. The online community may be a very small subsection of the overall gaming populace, but the number is growing...and as we see in the example, you can still make a lucrative business from only the online-folk...because you don't need as many to buy your product to make a signifigant gain.
Just some thoughts...also please correct any math errors I may have introduced in my little business rant. Let me know your thoughts...I personally think it's very exciting!!!
-David (darktoad) Silverman
CEO & Director of Game Design, MadDog Interactive
#4
Now you are starting to get it!!! We are not exactly shouting this from the rooftops yet, but you will see us talking about this more and more in the press in upcoming months. The box channel is not the be all, end all of game development nirvana. Most developers are on the verge of going out of business. I can count the truly successful ones on two hands.
A lot of previously successful game developers are realizing that keeping small, spending little, and owning all of their IP, code, and properties is a viable method of making a living, and is much more fun than the forced marches dictated by box publishers. Always keep in mind that a publisher normally expects $1.50 worth of product development for every $1.00 put into advances, using the reasoning that you will "make it back in royalties"' even though most producst never actually break into the royalty stream.
Our plan to drive people to the site is simple and has been stated numerous times. We will use an "umbrella" strategy, i.e. create one product that is so compelling that people will come to the site to pick it up. When they come, we will upsell them on the other products that are on the site. You have to trust me that we have content in development that will bring people to the site. In the meantime, the GG name and the people behind the concept have enough clout to get a lot of press. During the coming year, you will see a lot more effort in this area.
Let's go. We are stronger together than apart. For now, our efforts will be the "umbrella" that will bring people to your game. Hopefully, some day, your game will bring people here and they bill buy our games.
Jeff Tunnell GG
11/18/2001 (4:25 pm)
David,Now you are starting to get it!!! We are not exactly shouting this from the rooftops yet, but you will see us talking about this more and more in the press in upcoming months. The box channel is not the be all, end all of game development nirvana. Most developers are on the verge of going out of business. I can count the truly successful ones on two hands.
A lot of previously successful game developers are realizing that keeping small, spending little, and owning all of their IP, code, and properties is a viable method of making a living, and is much more fun than the forced marches dictated by box publishers. Always keep in mind that a publisher normally expects $1.50 worth of product development for every $1.00 put into advances, using the reasoning that you will "make it back in royalties"' even though most producst never actually break into the royalty stream.
Our plan to drive people to the site is simple and has been stated numerous times. We will use an "umbrella" strategy, i.e. create one product that is so compelling that people will come to the site to pick it up. When they come, we will upsell them on the other products that are on the site. You have to trust me that we have content in development that will bring people to the site. In the meantime, the GG name and the people behind the concept have enough clout to get a lot of press. During the coming year, you will see a lot more effort in this area.
Let's go. We are stronger together than apart. For now, our efforts will be the "umbrella" that will bring people to your game. Hopefully, some day, your game will bring people here and they bill buy our games.
Jeff Tunnell GG
#5
Get ready to get soaked.
11/18/2001 (11:09 pm)
First of all, to anyone concerned, David is currently working for the C3 team and doing one helluva job on the Colossus SP armor. That having been established, look to C3 to be that shining example of what indie development can accomplish when an incredible design is executed by dedicated people like Dave. Stop by the Codex Interactive or C3 sites for a peek. As I've said before, we're the 600 pound gorilla doing the cannonball into the deep end of the pool where most FPS shooters hang out. Get ready to get soaked.
#6
What are the urls? I can't locate them anywhere. Thanks. :)
11/19/2001 (12:02 am)
Quote:Stop by the Codex Interactive or C3 sites for a peek.
What are the urls? I can't locate them anywhere. Thanks. :)
Paul Robertson