Oftentimes I’ll happen across a discussion about the business side of games and someone will bring up sales figures, saying things like “but the game sold great, so they must be doing fine,” or “why do these big dumb publishers keep making such crappy games that sell so poorly?” Assertions like these are usually backed up by no data at all, or some anecdotal evidence that doesn’t inform how successful the title actually was from a financial standpoint. Unless you’re a higher-ranking employee of the publisher that released the game, it’s safe to assume you don’t know the complete picture of how a particular game is doing– even if you work for the developer that made the game (sometimes especially if you are the developer, since someone might decide that keeping you in the dark about the numbers that lead to your royalty payments is the best strategy).
Everyone, of course, gets the basic idea: sell enough copies of the game to make back more than what you spent to make and market it. But as soon as you start trying to find real numbers to plug in to our easy equation, things get much more complicated. Firstly, the initial budget of the game, a crucial piece of information if you want to talk about this sort of thing with any leg to stand on, turns out to be one of the most closely guarded numbers in the industry. If you are an industry veteran, some knowledge of the team size and length of development cycle might allow you to come up ballpark figure, but ballpark figures are just that, and can be off by a factor of two or three. There are also industry rumors, figures heard from a friend of a friend who works at a certain company; these are usually wrong, and in any case, not the kind of source upon which you would want to base an argument.
In addition to the budget for development, we must also figure in the expense of marketing, since that too must be made back by the game before it can be said to be profitable. The marketing budget number is often shared more readily, especially if it’s to be a large campaign. The publisher will use the figure to impress retailers, saying “look how much we’re spending to advertise this game— you’d better stock up a lot of copies for your shelves.” The scope of a marketing plan can be estimated by looking at how much is done in the mainstream, not in gamer-centric media, since that’s usually a given. A television spot during Monday Night Football, for example, is absurdly expensive, and a sign of a huge marketing push. But a giant marketing budget just means the game must sell all the more to recoup the outlay.
Now that we’ve laid our shaky foundation in the realm of expenses (not counting numerous other complications that can arise there, such as payments to an intellectual property holder for a licensed game), let’s move onto the second half of the equation: how do we know how well a game has sold?
When a publisher announces it has “shipped” one million copies of its latest game, this means the copies were shipped to retailers and that they are waiting to be purchased by consumers. It doesn’t mean consumers have actually bought a million copies yet. In fact, if nobody picks up the copies sitting on the store shelves, the retailers have the right to return the unsold merchandise back to the publisher. So, while we hope the publisher has accurately forecasted demand, and that those one million copies will really end up on customers’ shelves, we must also keep in mind there’s a big difference between “shipping” a copy of a game and having the copy “sell through” (to the consumer). The publisher only collects money in the latter case.
Gamasutra and Next Generation, two of our inadequate industry news publications, publish “sales charts” based on Amazon.com Sales Rank, which is already freely available. Basing a purportedly informative and industry-wide sales chart on data from a single retailer, no matter how big or well-established, is disingenuous. Amazon.com in no way makes a claim to represent a cross-section of the general consumer landscape; in fact, in their own marketing they claim the very opposite (they say they possess a “unique customer base of high-income, highly-educated consumers”). Furthermore, the algorithm that generates the Amazon.com Sales Rank is proprietary, unknown to anyone except themselves, and rankings are updated every hour, whereas the charts are republished by these industry sites weekly. None of these “charts” can be used as evidence for much beyond an anecdotal level. And, even after all that, no numbers are actually published– only relative rankings.
Much better are the numbers compiled and released by NPD Group, a company that tracks retail and consumer data for its livelihood. NPD charts are credible since they compile actual sell-through numbers from a wide variety of retailers nationwide. However, because this is how the company makes money, it charges handsomely for its reports and they are not widely available to the public at large. Even if we do have access to the NPD numbers for a title, we must keep in mind they don’t track, but only estimate, sales made at Wal-Mart and Sam’s Club stores (potentially many), nor do they track any sales outside the US. This is important because the European markets can account for half or even more of a game’s overall sales, depending on the kind of title. An NPD number is a solid piece of information, but it’s just another piece of the puzzle that isn’t too useful unless put in the context of other metrics. Only then do we begin to get a complete financial picture of the game in question.
Publishers like that it’s difficult to determine from the outside if a particular game has made money or not. They will always announce positive news about their products, such as a title achieving a certain sales mark, but will rarely discuss how much money a specific title is actually bringing in. Sometimes it’s obvious when a game is a great financial success, but more often than not, the picture is more complex than we initially assume. It’s possible that a big, highly anticipated game ended up being so expensive to make that even though it sold extremely well, it only broke even from a financial standpoint. So, instead of speaking about the relative financial successes or failures of games as if we know what we’re talking about , we ought to keep in mind that such talk is largely based on conjecture and invention. Only a few know how much money a game has actually made, and they aren’t about to say.
Levity |
Did the Game Make Money?
Oftentimes I’ll happen across a discussion about the business side of games and someone will bring up sales figures, saying things like “but the game sold great, so they must be doing fine,” or “why do these big dumb publishers keep making such crappy games that sell so poorly?” Assertions like these are usually backed up by no data at all, or some anecdotal evidence that doesn’t inform how successful the title actually was from a financial standpoint. Unless you’re a higher-ranking employee of the publisher that released the game, it’s safe to assume you don’t know the complete picture of how a particular game is doing– even if you work for the developer that made the game (sometimes especially if you are the developer, since someone might decide that keeping you in the dark about the numbers that lead to your royalty payments is the best strategy).
Everyone, of course, gets the basic idea: sell enough copies of the game to make back more than what you spent to make and market it. But as soon as you start trying to find real numbers to plug in to our easy equation, things get much more complicated. Firstly, the initial budget of the game, a crucial piece of information if you want to talk about this sort of thing with any leg to stand on, turns out to be one of the most closely guarded numbers in the industry. If you are an industry veteran, some knowledge of the team size and length of development cycle might allow you to come up ballpark figure, but ballpark figures are just that, and can be off by a factor of two or three. There are also industry rumors, figures heard from a friend of a friend who works at a certain company; these are usually wrong, and in any case, not the kind of source upon which you would want to base an argument.
In addition to the budget for development, we must also figure in the expense of marketing, since that too must be made back by the game before it can be said to be profitable. The marketing budget number is often shared more readily, especially if it’s to be a large campaign. The publisher will use the figure to impress retailers, saying “look how much we’re spending to advertise this game— you’d better stock up a lot of copies for your shelves.” The scope of a marketing plan can be estimated by looking at how much is done in the mainstream, not in gamer-centric media, since that’s usually a given. A television spot during Monday Night Football, for example, is absurdly expensive, and a sign of a huge marketing push. But a giant marketing budget just means the game must sell all the more to recoup the outlay.
Now that we’ve laid our shaky foundation in the realm of expenses (not counting numerous other complications that can arise there, such as payments to an intellectual property holder for a licensed game), let’s move onto the second half of the equation: how do we know how well a game has sold?
When a publisher announces it has “shipped” one million copies of its latest game, this means the copies were shipped to retailers and that they are waiting to be purchased by consumers. It doesn’t mean consumers have actually bought a million copies yet. In fact, if nobody picks up the copies sitting on the store shelves, the retailers have the right to return the unsold merchandise back to the publisher. So, while we hope the publisher has accurately forecasted demand, and that those one million copies will really end up on customers’ shelves, we must also keep in mind there’s a big difference between “shipping” a copy of a game and having the copy “sell through” (to the consumer). The publisher only collects money in the latter case.
Gamasutra and Next Generation, two of our inadequate industry news publications, publish “sales charts” based on Amazon.com Sales Rank, which is already freely available. Basing a purportedly informative and industry-wide sales chart on data from a single retailer, no matter how big or well-established, is disingenuous. Amazon.com in no way makes a claim to represent a cross-section of the general consumer landscape; in fact, in their own marketing they claim the very opposite (they say they possess a “unique customer base of high-income, highly-educated consumers”). Furthermore, the algorithm that generates the Amazon.com Sales Rank is proprietary, unknown to anyone except themselves, and rankings are updated every hour, whereas the charts are republished by these industry sites weekly. None of these “charts” can be used as evidence for much beyond an anecdotal level. And, even after all that, no numbers are actually published– only relative rankings.
Much better are the numbers compiled and released by NPD Group, a company that tracks retail and consumer data for its livelihood. NPD charts are credible since they compile actual sell-through numbers from a wide variety of retailers nationwide. However, because this is how the company makes money, it charges handsomely for its reports and they are not widely available to the public at large. Even if we do have access to the NPD numbers for a title, we must keep in mind they don’t track, but only estimate, sales made at Wal-Mart and Sam’s Club stores (potentially many), nor do they track any sales outside the US. This is important because the European markets can account for half or even more of a game’s overall sales, depending on the kind of title. An NPD number is a solid piece of information, but it’s just another piece of the puzzle that isn’t too useful unless put in the context of other metrics. Only then do we begin to get a complete financial picture of the game in question.
Publishers like that it’s difficult to determine from the outside if a particular game has made money or not. They will always announce positive news about their products, such as a title achieving a certain sales mark, but will rarely discuss how much money a specific title is actually bringing in. Sometimes it’s obvious when a game is a great financial success, but more often than not, the picture is more complex than we initially assume. It’s possible that a big, highly anticipated game ended up being so expensive to make that even though it sold extremely well, it only broke even from a financial standpoint. So, instead of speaking about the relative financial successes or failures of games as if we know what we’re talking about , we ought to keep in mind that such talk is largely based on conjecture and invention. Only a few know how much money a game has actually made, and they aren’t about to say.