Study: Average dev costs as high as $28m

Develop:

New research suggests development budgets are soaring dangerously fast

The average development budget for a multiplatform next-gen game is $18-$28 million, according to new data.

A study by entertainment analyst group M2 Research also puts development costs for single-platform projects at an averge of $10 million.

The figures themselves may not be too surprising, with high-profile games often breaking the $40 million barrier.

[Noctis Aftermath]

So they require around 500k copies sold to make a profit? now if it's a good quality game they will make a profit.
The majority of the time the only way they will lose money is if it's a terrible game, hell even terrible games make alot of profit sometimes.

Although i do think that costs need to be capped at some point, with the exception of huge franchises which are guaranteed to sell millions(halo, Gran Theft Auto, Gran Turismo etc).

[Fishy Fingers]

I assume your math is something like 500k*60 ($), do you really believe developers make anywhere near $60 per copy? It's far, far less than that. There are a lot of people in the chain, each of which want to make a profit (a slice of that $60). From, retailers, to distributor, transport, marketing etc etc

[Elven6]

Old figures when development costs were around the $20 million mark claimed they needed to sell at least 2 million copies for it to be a worthwhile venture. 500k for most titles may have been acceptable years ago but now for most AAA titles if you don't break 2.5 million it wasn't a good year.

Not every developer will have the marketing budget of Microsoft, Sony, Activision, etc behind them so this is a very frightening proposition. For those trying to close there eyes and pretend like this doesn't exist, we've lost so many well known developers in 2009 alone, it really doesn't look good.

I think to combat this companies will eventually stop creating inhouse engines as much and simply rely on licensing. This generation was kind of messed up since Id delayed their engine to a point where customizing the Id Tech 4 engine to bring things up to speed simply wasn't appealing in comparison to UE 3. I'm sure more companies have realized this and are probably creating their own engines to license out or use internally going forward.

[JL]

Don't 100% quote me on this, but...

You're right, developers don't make that full $60. After things like publisher fee and retailer fee, plus Sony or MS royalty fees, the developers tend to make $15-20 off of each game I think it is. Given that, a developer needs to sell about 1.25 million copies of the game total across both platforms for a multiplatform game. So 750,000 on each platform isn't unreasonable by any means. For an exclusive game (the cost drops quite a bit to $10Million), the developer needs to sell somewhere between 500,000 and 750,000 to recoup costs and begin making a profit.

You can't go on those past reports of how many games needed to be sold to make money back because development costs have come down in some areas since then with cheaper development kits and whatnot.

[sikbeta]

Devs don't make $60 per copy, but the Mathz is still simple, calculating for half of the retail price = $30 they need to sell 1m copies to make teh profitz, if you think they make less than that, lets say $15 (I refuse to believe) they need to sell 2m

$60*1000000c= $60000000
$45*1000000c= $45000000
$30*1000000c= $30000000
$25*1250000c= $30000000
$20*1500000c= $30000000
$18*1666667c= $30000006
$15*2000000c= $30000000
$12*2500000c= $30000000
$10*3000000c= $30000000

[JL]

^Your math is so very wrong. Ok let's take it and say they do in fact make $30 from each copy sold (which I don't think either, I'd probably peg it more at $20). But ok, $30. Now talking multi-plat. The average game costs 18-28 million (we're going to go in the middle and say the average is 23 million). Now in order to figure everything out we do some simple division...23,000,000/30= roughly 765,000 copies. That means they'd only have to sell about 383,000 copies on each platform (360 and ps3). So not even 1 million combined needed to make their money back on the game. Then if you look at a console exclusive it only costs an average of 10 million to make. Assuming they make 30 off each copy sold that means...10,000,000/30= roughly 335,000 copies of the game means they make their money back. So that's far from a million they need to sell if they make an exclusive game. Even doubling or even tripling that development cost would still barely mean they have to sell a million. And tripling to mean that they spend 30million to make the game means that's a high budget game and you know they're making a bunch of sales if they're investing that much. Looking at Uncharted 2 as an example (it only cost $20 million to make). So if they made $30 from each copy that means they only had to sell about 667,000 copies before they started making a profit. However if they only get, the more likely, $20 of profit per game sold (considering they have to pay royalty fees, plus publisher fees, plus retailer fee, plus transport and marketing and all that) then they'd have to actually sell 1million copies to break even and then start profiting. And that's for a big budget game like Uncharted 2.

Now going on the $20/game theory let's go back and recap again on the necessary sales. For a multiplat: 23,000,000/20= roughly 1.15million copies sold. Which means that they only have to sell 575,000 on each of the two consoles (not at all an impossible feat). Then for the average exclusive that costs 10million to make (instead of the blockbuster Uncharted's 20million), they only have to sell 500,000 to make their money back and start making profit (that's 10,000,000/20).

So I have no idea where you're getting this "1-2million needed to make profit". In the average case (now that development costs have actually dropped since the beginning of the generation) selling below a million can net you a profit.

[Bigboss19]

Well Konami said they would have to seal one million copies of MGS4 to break even everything after that was pure profit and that was rumored to cost 30-50million i think?