Top
850°

Why Can’t 3.4 Million in Sales Be Profitable for a Game?

Gamnesia: "I've been waiting days to cover this story because I wanted to better frame my approach. See, 3.4 million copies sold of a game are some pretty lofty numbers. Sure, maybe that's a poor number for say, a console Zelda release, but it's still a profitable number. Tomb Raider's original popularity may never be matched, but since the 90's the franchise has been pretty pathetic in sales numbers, failing to even top 1 million.

In comes a highly touted and well reviewed reboot of the whole franchise. It moved 3.4 million physical copies across all platforms, the most the series has moved since the 90's. In addition, if you add digital sales, you're likely looking at a number north of 4 million total sales. That ranks it as the 3rd best selling game in the series and probably when it's all said and done, potentially the 2nd best. That, to me, seems like a very successful reboot. The fans are raving, the critics are raving, people bought the product, and things seem fine.

Until we find out that Square lost money on the project. So much so they themselves called it a failure. So, what's wrong?"

Read Full Story >>
gamnesia.com
The story is too old to be commented.
Sandmano1153d ago

I believe that they said that they missed their mark or aim not that it wasn't profitable. I mean across 3 platforms its not that great but not bad either.

fermcr1153d ago (Edited 1153d ago )

This game with 3.4 million sold (not counting digital sales) is most likely very profitable. Tomb Raider will probably sell 5+ million in it's lifetime.... i can't believe a game with these sales is not profitable, unless someone is stealing.

Square wanted more sales, because they probably wanted to cover the expenses on other well over-budget games they have in the making for sooooo loooong, like Final Fantasy 13 Versus and Final Fantasy 14 online.

matgrowcott1153d ago (Edited 1153d ago )

5 million sales is only enough if stores, publisher, platform holder and developers collectively paid less than $300,000,000 for this game.

That sounds like an awful lot, but you have to split it four ways (not evenly) and then look at individual costs to figure out how profitable it's been.

First, knock off probably almost a third of that for stores. Cleaning, staff, transportation (including petrol and petrol, extra if transport is handled by external company), storage, security, advertising materials, bonus DLC. In the end, the game store probably makes a profit, but of that $100 mil, they've spent an awful lot before they even see penny one. Factor in interest as well.

I don't know what licencing fees are for platform holders, so I'm not going to include that here. I once heard it was as high as $13 a game sold, but can't source. I've also seen it been called as low as $30,000. I guess it depends, but either way, this is something that needs to come out of the overall cost.

So that leaves $200,000,000 to split between the publisher and the developer. The developer doesn't get a huge amount of that, enough to cover their costs and make a small profit, I imagine. Let's call it an optimistic quarter. A cool $50 mil. The game was in development for several years, including a few failed starts, so you're probably looking at 6 years wages for, what, 30 people? 30*$40,000*6. That's just shy of 7,500,000 - more than 10% of their profit - and that's before we talk licencing engines and tech.

Then you've got everything from petty cash to the end of development party to pay for. They probably pay for QA themselves, and patches (and work on patches).

So Square are handling $150,000,000, except they're not. A lot of that is paying off what they've already put into the game - hiring the dev team, BUYING the franchise, marketing it, paying wages, PR in each country - and then they have to pay interest on the loans they took out to pay for the game in the first place. They have to pay internet connections, trips around the world for games conventions.

In short, of the $300,000,000, Square Enix probably haven't seen much that wasn't already spent. And these figures are presuming that it hits 5 million sales at $60 (which we know isn't true).

If you want to know why everyone is pushing DLC so much, just check out the figures. Games just are stupidly difficult to make a profit from.

XBBONED1153d ago SpamShow
jony_dols1153d ago

Square Enix's purchase of Edios has been the only sensible decision they've made in years!

Gaming1011153d ago

People just don't get it. Companies are not just interested in breaking even. They are interested in profits, and increasing company value for shareholders. Don't forget that the vast majority of Western companies will always put profits ahead of everything else. It will completely dump a franchise that is profitable but is not making ENOUGH profit (see: what EA does with Dead Space after less than 5 million sales of DS3).

Plus, developers all want to get paid. Once all devs have been paid, on top of that it's profit.

Publishers don't have to pay the stores to stock games. Stores buy the games from the publishers and then sell them at a profit. A store must buy so many units that it think it can sell. Once stock is empty then it reorders. This is why you often see "Total games shipped" figures, as the publisher makes money on everything it ships to retail. Whether the game sells after that is the retail outlet's problem.

Platform holders are paid either a lump sum or a per unit profit, depending on the contract each platform holder sets up.

Therefore, profits for publishers are dependent mostly on development costs, and the publisher's ability to effectively market the game. This is why publishers are so adamant that deadlines are met, because extra time in development means costs go up, and that potentially eats into profits. If companies cared whether a game was good or not, there would be no deadline, it would be "ship the game when it's ready" attitude that is usually given to much more lenient and respectable developers like the Bioshock team. The publisher understands that a game MUST have the quality there to sell games, and uphold their reputation for great games.

In the case of other publishers, developers are pushed to meet deadlines no matter what, particularly to meet the Christmas rush since that tends to be a very important sales period for a lot of publishers. Whether you agree with one strategy or another isn't the point.

vulcanproject1153d ago

Arguably even if they have not made simple straight up profit from this release, they have surely improved the value of the IP.

The quality of the release and the sales put the Tomb Raider IP back up there in the big leagues as it used to be much as the article muses on.

This alone does increase the value of the IP for the company. It is more of an asset than what it was when they bought it.

rainslacker1153d ago

Well...if the game did have a $50 million dollar marketing budget(not sure if that's accurate), then with 3.4 million sold, and assuming the publisher recouped $15 per unit sold(general average I've seen reported per copy sold of most games), then they only brought in $51 million dollars in revenue to the company itself.

All these numbers don't take into account future sales(over the next few months or lifetime), or digital sales, but even so it's easy to see how the marketing budget could have made what could have been a profitable game into an unprofitable game. On top of that even that $15 brought in doesn't all go into the coffers to recoup investment...some has to be paid out to investors or the developers themselves.

That was the point the article was making. When determining an investment(particular in marketing) a company should be responsible with how much actual return they will get for that investment. Realistically we can assume this game costs $30 million to develop, and if the $50 million marketing is true then target sales would have to be 5.3 million to recoup initial investment before seeing a profit(excluding costs that need to be paid out after the fact). In this case it was irresponsible if they hoped to sell that many in this short a time based on the history of the series.

Lifetime will probably make this game profitable, but not the success financially that SE was hoping for. Shame because it's a fantastic game.

soniqstylz1153d ago

@matgrowcott

Your numbers are way the fuck off. First of all, one of the most expensive games ever made ran around $100 million in total expenses (GTA4). Really, you don't see games even cross the $50 million mark often in expenses.

Gamestop/Best Buy/Target, etc., get $12 per disc sold. Sony/MS get $12 as well (part of the reason PC games are cheaper as far as disc sales). From there, that leaves $36 per disc for the publisher (who, in this case, owns the developer).

Tomb Raider did not take 6 years to make. CD had released TR:Underworld only a few years ago. They developed their own engine in-house, so no licensing fees for tech. And a good-sized studio like CD has roughly 100 people making about $100k each (less so for artists, more so for dev leads, directors, etc.).

Really, even with a much more massive marketing campaign, this game shouldn't have cost more than $30-40 million to make.

http://www.gametrailers.com...

fatstarr1153d ago (Edited 1153d ago )

everyone thinks their game is the next call of duty and a 10 million+ seller.

its just greed. im my book 400k-1million is a success.

extermin8or1152d ago

there's no way that should have not been profitable no way at all, unless they spent wayy too much on development...

aCasualGamer1152d ago

The most truthful answer to the question in the title is:

Because the publishers are a bunch of greedy mother-hubbards.

If their payrolls weren't as high as they are, alot more would be considered as profits out of those 3.4 million copies sold.

Soldierone1152d ago

@Matgrow

If you are going to dive into all their expenses, you need to dive into all their revenue too. With the game comes licensing, websites paying for exclusives, co-advertising with Game stores, etc.... You see a Tomb Raider shirt? Well either they are selling that 2 dollar shirt at 25 dollars on their own, or another company paid for licensing rights to do it. I saw shirts, posters, statues, and action figures for the game. They could also license out to DC or Marvel and create comic books. It isn't just a game making them money, its a product.

+ Show (8) more repliesLast reply 1152d ago
Persistantthug1153d ago

They'll likely never recoup the losses from that MMO.

ICECREAM1152d ago

It is released on three platforms, it means nearly 1.1 million per system which is not enough. Expenses are way much higher.

Persistantthug1152d ago (Edited 1152d ago )

At approx $30 gross per each sold unit......That's over $90 million gross (approx) to the publisher.

Not to mention the game is still selling and will continue to sell.

That's profitable bro.

Kran1153d ago (Edited 1153d ago )

That's still a lot of people :/

knifefight1153d ago

It is.

And if Tomb Raider actually DID sell 3.4 million, it would have been fine.

But it didn't.

3.4 million was listed as the "sales expectation," but the report said that it was not met. They expected 3.4 million, but didn't get it.

InTheZoneAC1153d ago

only counting the known 3.4 million sales, $60 a pop equates to $204,000,000

$204 million.....

how does that miss the mark for anyone's projected income?

did advertisements cost them $203 million?

JasonXS121153d ago

The publisher or game developers don't get the full $60 or so has a few dollars has to go to the store that distributes it or else the retailer won't make money. I'm not sure exactly how much retailers get from the full price but the projected sales of 3.4 million was probably as estimate to how much sales they needed in order for a proper sequel or to have enough for development of the next game.

rainslacker1153d ago

Most breakdowns I've seen of how much the publisher gets per unit sold is around the $12-15 mark. It can vary throughout the games lifetime, as when it goes on sale a month or two later the publisher may get less. Most sales are actually because the publisher offers it to the retailer, with the retailer sometimes taking in less profit per unit sold in order to move stock.

Realplaya1153d ago

But it was only two platforms.

showtimefolks1153d ago

SE; useless online and weak story, now improve the single player story and make it 15-20hrs and get rid of online. TR is a 8-10hrs game and to a lot of people that's not worth the full price

tomb raider is good but there is huge room for improvement, it reminds me of how the 1st uncharted game was and how much the 2nd improved

for a reboot and selling quick 3.4 million at full price not including the digital sales at EA Origins,PSN and XBlive is pretty good. SE must have expected it to do 10 million plus but you look at last 6-7 years of past gen how many games got to over 10 million?

I don't think this game cost SE 100million and not even 7080 million, i believe the development cost of this was aright around 40-60 million the average for most AAA games unless its a open world game like GTA

200 employees equals to 20 million a year times 2 and that's 40 million, but that's considering if full 200 people were on one project for whole 2 years, most of the times teams move on to other projects within the company

tomb raider 2 won't even do 10 million, this is a series that has to settle somewhere between 5-8 million and 8 being the maximum.

one of the biggest things the sequel needs to improve is the story, because it was the weakest part of the reboot, also get rid of MP and focus on single player and making that last 15-20 hours

bunt-custardly1152d ago

Where does it say this game sold 3.4 million units?

I remember seeing Square's expected units sold at 3.4 million for the quarter, but not seen any reports which give actual sales (not shipped) at 3.4 million.

Citation needed.

+ Show (4) more repliesLast reply 1152d ago
smashcrashbash1153d ago

Across three systems I think is a bad thing..That is only like one million units per game system.

RememberThe3571153d ago

Tomb Raider has been dead for years. This is a knowingly ignored franchise by gamers and Crystal Dynamics had to completely reinvent this franchise. What they have done is great one of the best games this gen. Easily in my top ten.

Those sales are fine, Square constantly seems to miss it's sales targets even when games move millions of units. I don't know if they expect these games to sell Call of Duty numbers but all these games from Edios are moving millions of units and Square keeps saying they're missing their target. Seem like Square is still living in an other world where good money isn't good enough, even when Edios keep handing them gems.

Imalwaysright1153d ago

Selling more than 3 million copies in less than a month is a bad thing?

Swiftfox1153d ago

Tomb Raider 2013 didn't sell 3.4 million copies. The number referenced was Square Enix's expected shipping. They were hoping the game would ship 3.4 million units.

In truth, the game shipped far less than these unreasonable expectations. If they shipped far less than expected, then they sold far less than expected.

Had the game actually sold 3.4 million copies in a month, we wouldn't be having this conversation.

rocky0475861153d ago (Edited 1153d ago )

@Swiftfox, they did indeed sell 3.4m units approximately. Financial Year 2013 ends in 2 days as of right now. This number is the actual sales to date plus 5 days out forecast as of the time of the graph being put out. You're misunderstanding the word 'expected' in this context. These are as close to actual figures you're going to get before before year end. That's what the original neogaf graphs from SE were showing us. They weren't the expected shipped numbers, they were the numbers they were expecting to have and DO have in their forecast and reports, and even at the bottom it said something about "These numbers are expected to be the same when the actual reports shift out in April." or something in that context. So yes, it really did ship 3.4m units and SE is saying that missed it's mark but they didn't disclose by how much.

Transporter471153d ago

just saying how much profit do they get per game sold = the true profit, they get plenty of money but not to cover for their bad investments such as FF13/FF13-2/Lightning Returns, but they have nobody else to blame

Qrphe1153d ago

How much did they REALLY spend on the marketing?

Amigaengine1153d ago

In the U.S. they spent a ton. Prime time TV slots and they was on once an hour for a week.

Aerialbots1153d ago

i just don't understand why they waste so much money on tv Advertizing i don't know about yall but a gamer knows when a AAA game the day its coming out

rainslacker1153d ago

And the article pointed out that companies should be smarter with their marketing budgets. For instance, you can spend less on marketing, sell less units, but still turn a profit.

Primetime is great for getting the word out, but I believe for games it doesn't really translate to copies sold in a meaningful enough number to make the cost worth it.

In store marketing(retail displays), strong viral marketing tactics, and print advertising a much cheaper, and tend to return more on investment any day over primetime TV. Particularly for a product that isn't something that everyone uses, or feels they might need.

Arai1153d ago (Edited 1153d ago )

More like gamers should expand their horizon and try different types of games instead of just shooters.
Let's say there are 200 million gamers in total across all platforms, then 3.4 million copies is just a fraction of the total user base.

Without our support there won't be any new/innovative games as developers will fear to take risks.

Cam9771153d ago

I blame a tightly-congested market. I would've bought it but I'm saving up for The Last Of Us, BIOSHOCK INFINITE, Killzone Mercenary, J&D:HD Vita, Beyond: Two Souls, GRAND THEFT AUTO V, Sniper Elite V2 GOTY and more indie titles for my Vita. To say that I'm overwhelmed by games would be an understatement. My backlog is also phenomenal.

ginsunuva1153d ago

this game is pretty much a shooter disguised as an adventure game

DwightOwen1153d ago

@Ambrosia

I would say it's more like 100-150 million users when you account for multiple-platform gamers, people who have had to buy new systems to replace faulty ones, etc.

Still 3-4 sales for every 100 or so gamers is pathetic. I wonder if this is the result of gamer fatigue? I know plenty of people who are sick of being nickel and dimed by DLC, microtransactions, and will usually avoid paying for a game since they're completionists and simply don't want to spend $90+ for the entire experience.

PopRocks3591153d ago

We have to assume it simply did not cover the costs. 3.4 million units sold would go to about $204,000,000 earned from sales and Square simply spent more than that to have the game made, shipped and marketed.

Shame too. I've been itching to try this game out since a lot of my friends really liked it. I'll still play it, don't get me wrong, but it seems like it's one of those games that should have been more successful.

SlapHappyJesus1153d ago (Edited 1153d ago )

I honestly don't believe they spent anything close to that for development and marketing.
Square was simply hoping for astonishing, not just strong, sales for the game.
Considering the lack of interest for the series through the years, hitting three and a half (so far) million in sales is not a bad thing at all.

PopRocks3591153d ago

If it made them money, it would have been deemed a success. Failures typically lose money and don't earn it back. Even breaking even can be considered a success depending on how you look at it.

Either way, we need more details to be sure in this particular case.

Aloren1153d ago

Yeah, they didn't make this game to just "break even", and they usually don't predict sales based on how much they need to break even. I'm pretty sure this game made money, just not as much as they hoped it would.

When you pass an exam with a lower grade than what you expected, you still pass, but do you call it a success ? ;)