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Greg Rice

Production Update #1: Where does all the $$$$ go?

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Sure, the comparison isn't apples to apples on the goods production side, but from a developer's standpoint it's a legitimate comparison. If the benefits of all that physical overhead cause sales to be so much greater that the developer's total earnings end up higher than they would be with a higher royalty but no physical infrastructure, that's great. But that's probably not going to end up being the case for a small developer without a massive marketing budget.
Ah, so when do you start up your marketing kickstarter now that the dev one has finished? Haha.

Thanks for the info, I hope our dialogue has answered some questions for other backers.

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Ah, so when do you start up your marketing kickstarter now that the dev one has finished? Haha.
Who needs marketing? They've got no development costs to recoup.

A wild thought appears! When this game goes on sale, who gets the money? Do the members of the dev team get any stake in the game's success besides their salaries and their resumés?

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Ah, so when do you start up your marketing kickstarter now that the dev one has finished? Haha.
Who needs marketing? They've got no development costs to recoup.

A wild thought appears! When this game goes on sale, who gets the money? Do the members of the dev team get any stake in the game's success besides their salaries and their resumés?

I think it will essentially be a self-published game when it's released, and all the profits from the sales go back to Double Fine.

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I think it will essentially be a self-published game when it's released, and all the profits from the sales go back to Double Fine.
Right, but what does that mean exactly?

Does it go into the Double Fine Corporate Bank Account? Does a portion of it go to the project's dev team? Does it fund the next project? Does Tim take it all and buy drumsticks and headbands?

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I think it will essentially be a self-published game when it's released, and all the profits from the sales go back to Double Fine.
Right, but what does that mean exactly?

Does it go into the Double Fine Corporate Bank Account? Does a portion of it go to the project's dev team? Does it fund the next project? Does Tim take it all and buy drumsticks and headbands?

Headbands, definitely. I'd think it would go back into the company overhead type account, to help keep the things going and workers salaries. Personally I'm super excited to see this much extra go into making a game from my favorite people! Getting even the minimum amount that DF needed I always had faith we are going to get something special!!

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....

Thanks for all the great answers, Nathan. :D It's always great to get a better view of the industry. I felt your post was a bit too broken up into pieces, so I'll only reply to those points where I felt there was a need to reiterate.

One thing that's becoming very clear is that the days of a single price for software are coming to a close. We're finding that some people will buy a game at almost any price (which is why $100 collectors editions can easily sell out) while other people are so price sensitive that even $1 is a lot to spend. Freemium games are a great example, where many folks spend (next to) nothing, while serious fans will spend hundreds or thousands on a single title. Even DFA is a good example, where for some people, the chance to play another Tim Schafer adventure game (plus some rewards) was easily worth hundreds or thousands of dollars.

Though to be fair, the selling of CEs and the hundreds or thousands of dollars donated to this project and other Kickstarters, well it kind of shows that the rumours of the big boxes' death are greatly exaggerated. ;) Might even be a market for them in some way. :P

To me there are two things that make me want to buy the CEs.

1. Great developers (putting out quality games and having some degree of integrity) that I want to support.

2. Great value in the package. A lot of the times I feel that the CE boxes just doesn't contain anything interesting. Sometimes it just seems they cut the cost by a lot or completly misunderstand what the fans want.

You've touched on the very heart of crisis affecting modern, high end video game development. To be competitive, publishers have to spend vast sums of money. However, if someone in a similar category spends even more vast sums, the winner-takes-all nature of entertainment will richly reward the latter and leave the former with little more than a big hole in their balance sheet.

The reason pubs mainly publish same-y games is, to be 100% frank, largely because the majority of video game consumers don't particularly value new ideas. There are, literally, millions of people who would rather spend $60 on a small upgrade to their football game or realistic military shooter, than a game they've never played before. There are exceptions, but they are rare, especially this late in the console cycle. Many publishers have lost a lot of money financing cool new games while their competitors are richly rewarded for sequels and spinoffs. This consumer hunger for modest improvements on familiar combined with very high costs is what is fueling the samey-ness and sequelitis we see today.

Well, the consumers within the video game industry aren't really homogenous. So while there's a lot of the "jocks" who buy multiplater FPSes and sports games, there's also a wide variety of consumers. More so, competing against a market leader of too large a size within a market that is too oversatured, well, it's far more risky than doing market research, finding a niche group or a different segmentation which you might try to establish a leader position. Might earn a lot of money splitting into smaller teams with smaller budgets.

Or trying to do something different within that oversatured market, so you might stand out for the consumer amongst all the same-ness (Deus Ex: HR, being a great example. See, no multiplayer, yet sold a really respectable amount. Though you also have the case of "Syndicate", which didn't do so well, but the genre they chose deviated from the original franchise and I felt it didn't market really well).

Personally, I haven't bought a multiplayer fps since CS, haven't bought a sports game since the 90s. However, I've bought a ton of adventure games, rpgs, action games and platformers. Rarely ever buy used games. Of course I'm me and not the entire market.

Like Chris, I cannot agree w/ that last sentence enough. If consumers valued originality and creative integrity more directly, our medium would be vastly more healthy. This is part of the reason I am hugely grateful to all our backers as well as to companies like Apple and Valve that at least make it cheap and easy to make original games and still reach millions of potential consumers.

I'm not really sure that it really conflicts with what I said. Originality simply for originality's sake, can be devastating. Just look at Alpha Protocol and Mindjack: really great creative concepts, horrible execution.

If we have consumers who refuse to buy games that are little more than 1.1 versions of the previous game or that do ridiculous things like cutting off initial development resources to sell them of as DLC (on-disc even), and have consumers who are a bit more brave in their purchases, well, we might have us a healthy industry.

Supporting 1.1 versions of previous games kind of go against the creativity part after all.

Games shouldn't sell on concept alone, but by concept and execution.

As a last point, what do you think of the tendency that large AAA games are getting 2-2.5 year development schedules? It seems like a dangerous thing to me, although it'll make it easier to prevent a game series to die out (but also make it get milked dry faster).

Not only must the working conditions suffer I guess, but it might even more discourage creativity.

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Right, but what does that mean exactly?

Does it go into the Double Fine Corporate Bank Account? Does a portion of it go to the project's dev team? Does it fund the next project? Does Tim take it all and buy drumsticks and headbands?

It means that it's completely up to the company to decide. The point of kickstarter is to get the project going and that's our reward along with the perks at the level we joined. Profit from the project acts like a normal business. Some will go into bonuses whether that's directly into their paychecks or a super office pajama party (waitresses walking around with hot cocoa and irish hot cocoa to hand out), some will likely go into retained earnings for future products (which I'm very excited about), and there's not much else since there aren't investors, so to speak, just owners/employees and the company itself.

Businesses take money and apportion it accordingly. So I wouldn't be surprised if it's all the above if there's enough of a profit. Remember, the people who are most excited about the game and caught the news in time have already purchased it through kickstarter or paypal. The question is how many customers exist on the other side of production? Aside from us employing the team for a year and getting a great game out of it, the company expressed success will result from those numbers. They may value being able to do what they love enough to make it worth it regardless since they got a paycheck, but a big win here on the sales side too could signal a change in market conditions towards these games. This is why it's our solemn duty to advertise the game when it comes out to everyone who will hear it (have to blackmail the ones who won't hear it, naturally...). I suspect the paypal is considered revenue at this point and not investment, which is good because having a loose ended investment running the course of the project would be harmful to "sales" since the project is already fully funded (or I hope it's considered fully funded).

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I think it will essentially be a self-published game when it's released, and all the profits from the sales go back to Double Fine.
Right, but what does that mean exactly?

Does it go into the Double Fine Corporate Bank Account? Does a portion of it go to the project's dev team? Does it fund the next project? Does Tim take it all and buy drumsticks and headbands?

The most straightforward answer is that it goes into making more games! The thing about game development which differs to movie production (for example) is that staff stay employed full-time even after their project is finished, so you need to be able to find money for payroll all the time. Usually what that means is having another publishing deal ready to go so you can just roll that staff onto that new project, but as an independent studio it's also nice to be able to roll people onto a self-funded project using money from the last project.

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Well, the consumers within the video game industry aren’t really homogenous. So while there’s a lot of the “jocks” who buy multiplater FPSes and sports games, there’s also a wide variety of consumers. More so, competing against a market leader of too large a size within a market that is too oversatured, well, it’s far more risky than doing market research, finding a niche group or a different segmentation which you might try to establish a leader position. Might earn a lot of money splitting into smaller teams with smaller budgets.

Very true. I think what you suggest is a smart strategy. In fact, splitting into smaller teams with smaller budgets is pretty much what DF has been doing since BL. It's also what the indie part of the industry is doing in aggregate. I was mostly just trying to point out that small bets are hard for established publishers to make due to their built in bureaucracy/costs. Many pubs would be smart to do something other than the status quo, but they have a lot of institutional inertia to fight against.

Or trying to do something different within that oversatured market, so you might stand out for the consumer amongst all the same-ness (Deus Ex: HR, being a great example. See, no multiplayer, yet sold a really respectable amount. Though you also have the case of “Syndicate”, which didn’t do so well, but the genre they chose deviated from the original franchise and I felt it didn’t market really well).

I don't personally see Deus Ex: HR as being an exemplar of risky/niche development. It's a big budget, 3rd/first person shooter, set in a pretty straight-ahead dystopian sci-fi setting, and a sequel in a very successful/established franchise. It's certainly a very good game and is probably in a less crowded space than, say, Homefront or Medal of Honor, but I wouldn't really call it a niche play, either.

Games shouldn’t sell on concept alone, but by concept and execution.

This is very true, but in practice it's extremely difficult to do both. Generally, originality comes at the cost of execution (within a given amount of money). Anytime you do something new, you spend a ton of time trying things that don't work, reacting to unexpected downstream effects, feeling totally stumped about what to do, etc. All of the time you spend doing that is time not spent on raw execution/polish or perhaps on polish but at the cost of length.

Certainly, there are examples of amazing games that get it all just right, but more often than not, one comes at the cost of another. I think it's fair to say that you can see this dynamic at play in many DF games. The games we make are generally much more original than, say, what Epic makes, but also not as crushingly well polished. Compare the sales of original games to polished games, and you'll see a strong preference for the latter, especially in the console space. Even games that are way more original and only modestly less polished get punished at retail.

As a last point, what do you think of the tendency that large AAA games are getting 2-2.5 year development schedules? It seems like a dangerous thing to me, although it’ll make it easier to prevent a game series to die out (but also make it get milked dry faster).

Not only must the working conditions suffer I guess, but it might even more discourage creativity.

I think it's just a symptom of these other macro trends we've been discussing. Right now the tech is pretty well sorted out and most games are sequels, so it's not a big deal. 2-2.5 years is plenty of time to crank out a solid iteration on a proven franchise. Certainly, there's significant risk of consumer fatigue and accelerated franchise decay (milked dry as you say), but I think the solution to those problems is more about which games get greenlit and what consumers support with their money more so than the average amount of time a game is in development.

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The most straightforward answer is that it goes into making more games! The thing about game development which differs to movie production (for example) is that staff stay employed full-time even after their project is finished, so you need to be able to find money for payroll all the time. Usually what that means is having another publishing deal ready to go so you can just roll that staff onto that new project, but as an independent studio it's also nice to be able to roll people onto a self-funded project using money from the last project.
Thanks, Chris! That's the information I was looking for, and I suspected that might be the case.

One thing that sticks out to me is that it seems like almost all aspects of game development (especially in a case like this) are creative endeavors. I don't picture many "clock in, follow employer's flowchart, clock out" tasks. From artists and writers to engine and tool programmers, I get the impression that there's a degree of individual creativity at work.

With so much individual investment, it makes sense to me that the individuals involved should have a special stake in the success of the product.

Now, I suspect that most (if not all) of the folks at Double Fine get personally invested in games out of a genuine desire to make something good, and I do believe that a job well done is its own reward. It just feels nice to be a part of a worthwhile endeavor. I'd feel incredibly privileged just to take home a salary from a place like DF. (For the record, I feel incredibly privileged to take home a salary from my current place of employment.)

That said, it makes sense to me for the devs on any given project to share financially if that product is financially successful. (Bonuses, a small percentage, some other means, etc.)

On the other hand, I can see where that would raise concerns about the drawbacks of rewarding Rufus "Pulled-Onto-The-Team-At-The-Last-Week-To-Spellcheck-The-Credits" equally with Joaquin "Drew-All-The-Environments-And-Characters", or otherwise attempting to reward based on "relative contribution".

Is that how you wanted me to say it, Oliver?*

*Not really asked to say that by Oliver. I wanted to make the joke, but I REALLY don't want to get anyone in trouble.

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I think it will essentially be a self-published game when it's released, and all the profits from the sales go back to Double Fine.
Right, but what does that mean exactly?

Does it go into the Double Fine Corporate Bank Account? Does a portion of it go to the project's dev team? Does it fund the next project? Does Tim take it all and buy drumsticks and headbands?

The most straightforward answer is that it goes into making more games! The thing about game development which differs to movie production (for example) is that staff stay employed full-time even after their project is finished, so you need to be able to find money for payroll all the time. Usually what that means is having another publishing deal ready to go so you can just roll that staff onto that new project, but as an independent studio it's also nice to be able to roll people onto a self-funded project using money from the last project.

I'd be so happy if my money did not just back ONE game but the start of a new adventure game era. So if there's some money left after your project is finished and if you earn some with that game, take your 2 or 3 OOO days and then start the next game. And take all your backers with you to the next backers forum ;)

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Will there be an update with regards to the Slacker Backers? I'm interested in how many people have gone for that (like myself) as they missed it, or didn't have the funds at the time.. And how much this increases the budget if any?

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Will there be an update with regards to the Slacker Backers? I'm interested in how many people have gone for that (like myself) as they missed it, or didn't have the funds at the time.. And how much this increases the budget if any?
As far as I can tell it's just money in the company's earnings which can translated into more game if deemed necessary and enough is received.

The fact is, the company doesn't have to use that money the same way they used the backer money. This is essentially a really early preorder. So this money could just fall into revenue territory and that's fine with me. They have stated here and there that it is going to make the game better, so they may be self-imposing this even though they really shouldn't have to. I want this game to make money too, not to just fund itself into growing ever larger. More money in DFA's pocket means more works of art like this.

My question is at what point the option to slackerback is going to go away or to stop generating a forum link?

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I don't personally see Deus Ex: HR as being an exemplar of risky/niche development. It's a big budget, 3rd/first person shooter, set in a pretty straight-ahead dystopian sci-fi setting, and a sequel in a very successful/established franchise. It's certainly a very good game and is probably in a less crowded space than, say, Homefront or Medal of Honor, but I wouldn't really call it a niche play, either.

While I agree it wasn't a great risk, it certainly seems to be the impression of publishers nowadays that producing a non-multiplayer FPS outside a military setting with stealth-elements and hacking being focus is more risky.

The Syndicate reboot released about 6 months later on the other hand didn't do so well, despite being a reboot of an old franchise, an fps and set in a dystopian sci-fi setting.

One interesting thing that is very relevant to the topic is the issue of game development costs and retail pricing. The pricing of retail games has been pretty stabile, while development costs have skyrocketed over the years (source: http://www.raphkoster.com/gaming/moore.shtml), as well as marketing costs. So to a point I do have some sympathy for the publishers, especially since I imagine that the administrative costs have increased as well.

What are your thoughts about this? Has the distribution of the budget money between the various elements in a game changed as well?

To me it seems that either the budgets need to go down or prices need to go up or being supplemented by DLC or subscriptions or the market needs to expand to increase sales.

When I think back the amount of games I owned and played were far less than they are now, so an increase in game price would make competition harsher, since a lot of the 2nd priority games would be a harder purchase. Sure, for a good game that catches my interest I'd be willing to pay a lot, but there are lot of games that I buy that I see little risk in buying because the price isn't too high.

So decreasing game consumption might have a negative effect as well, so it's really a huge problem.

Personally I want more cost-effective graphics, cost-effective sound and music production and more focus on the gameplay. I have nothing against DLC as long as it's not minimizing the original game, would subscribe to a game with the right benefits. I also would pay more for a really good game.

I also wish more games had demos for me to play. A lot of times a game that catches my interest seems too risky for me to buy since I don't get a real feel of the game. That's the thing about games, the interactivity really matters. I can watch a game being played, but playing it I might get a completly different perspective on whether or not it's good.

I still remember how much demos influenced me in buying certain games back in the 90s. Back then I bought OPM and played all kinds of demos on the disc that came with it and watched all the cool videos of games to come. I remember seeing a video of Metal Gear Solid, a game that was released and really feeling hyped. Then later the demo came out and I was ecstatic, replaying the demo part a ton of times, begging my mom to buy the game for me, which she eventually did and I instantly fell in love with the game and its story. Sure, the game can be finished really fast, but I wouldn't be surprised if it took me 16-20 hours to finish the game the first time I played it.

Makes me kind of think about the feeling of infinite possibilities. While not in any way infinite, all games I loved to play all had a certain feeling of possibility and freedom. Large RPGs, Metal Gear Solid, Tomb Raider, GTA, Resident Evil, Silent Hill, Super Mario 64, etc. All of them had a sense of wonder and possibility. I'm still not sure if it was something in the game themselves or if it was just the mind of a child, but I'd like to think it's the former, especially since playing old games I never played back then like Daggerfall, I still get that feeling or when playing some games nowadays. Somehow I suspect it's both, since I have matured I lost some of the innocence of a child's mind, but there definitely is a certain feeling inherent in some of those games.

I think the problem with point'n'click adventures is that while they had that feeling, it could quickly backfire if you were really stuck on a puzzle (most likely a couple of puzzles). Especially in DotT getting stuck in some puzzles to the point where you just try everything on everything possible kind of ruins that feeling of possibility. While other games will have other options, adventure games fall into the "all done to further the plot" scheme. This is both good and bad, since that feeling when that weird item you got seems to be the perfect thing to solve the current problem is incredible, but it also can bottleneck you pretty badly.

I wonder if sidequests/mini-games where you can earn an alternative solution to said problem would be better than offering direct hints, or perhaps sidequests really giving a good idea of what you should be thinking without saying or hinting explicitly might be the thing. The worst thing in an adventure game to me is that moment just getting completly stuck in one puzzle needed to solve all other puzzles or simply stuck in a lot of puzzles and having nothing to do but backtrack and try to find what you haven't thought of, hunting the screen for whatever objects you can interact with and trying all kinds of items and verbs hoping for some way to untangle the mess.

Then again, it could be worse, like losing the momentum of the game when you suddenly find yourself having to grind/collect a ridiculous amount of arrowheads to advance. ;)

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its good to actually see where some of this money goes. Its often easy to forget that its not all just going to the game, and there are other obligations.

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te] One interesting thing that is very relevant to the topic is the issue of game development costs and retail pricing. The pricing of retail games has been pretty stabile, while development costs have skyrocketed over the years (source: http://www.raphkoster.com/gaming/moore.shtml), as well as marketing costs. So to a point I do have some sympathy for the publishers, especially since I imagine that the administrative costs have increased as well.

What are your thoughts about this? Has the distribution of the budget money between the various elements in a game changed as well?

Just sniping at this bit, since its 2:27am and omg why am i still up. I think they have touched upon this in one of the past videos as well. One of the promo ones i think with ron and tim talking.

Prices stayed the same. Development cost have gone up. But the audience for games has also skyrocketed so they can potentially ship a lot more units.

This is what has led to the 'only funding for blockbuster titles' behavior though. Old 'niche' games are still as popular as they used to be in terms of number of players. But by comparison, the multil million audience for new generic first person shooters or casual games completely dwarfs them in scale.

I would probably argue that the marketing side is over inflated. And there is a lot of middle management bloat in larger studios, where a long list of credits goes to people who probably hadn't even touched the game. But I only have the most rudimentary of anecdotal evidence to that and am to tired to research.

That and graphics are probably over invested in, while leveraging re-used technology is probably not is prevelent as it could be. Many man hours / cash spent on reinventing the wheel in parts of the industry...

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I really don’t have that much info on how sales work within the gaming industry, but I assume that retailers stock games based on sales estimates, which I suspect they also use pre-orders to more easily estimate.

Estimates are part of it. However, there is also a lot of quid-pro-quo. For example, many buyers tell pubs that they'll order more if the pub spends extra money on that retailer. Custom game content/codes (i.e. get the gold gun if you buy at X retailer), in store advertising (i.e. banners and end caps), custom packins (get free figurine if you buy at X retailer), and other promotional expenditures are often negotiated as a way to get the buy to order more than they otherwise would. Of course, close friendships, expensive dinners, fun parties, etc. are all also effective ways of convincing a buyer to order more copies. It's the high cost of these relationships and quid-pro-quo arrangements that make publishers an absolute necessity for anyone looking to sell games at retail.

As a side note, the core function of E3 is to connect the people who make those estimates (called buyers) with the sales people at publishers. PR and all that is important, too, but mostly it's very bright/loud window dressing to get buyers stoked to order lots of copies.

I can easily see how it’s better for everyone that people pre-order; the publishers and retailers tie buyers in, meaning safer sales, since I guess the drop-off at pre-orders are low, especially with them usually requiring a fee.

Yes, definitely. Also, pre-sales are always new sales, not pre-owned copies. Pubs and devs see (virtually) no revenue from the sale of pre-owned games, so of course prefer the guaranteed new sales that pre-orders provide.

So, physical releases usually have a short time-span in which the game sells, with the retailers trying to order just enough to not be left with too many copies of a game left

Game retailers actually don't care about this as much as you think. Another important but opaque detail of game sales is that publishers generally agree to buy back any inventory that a retailer can't sell or, if the retailer decides to sell of inventory at firesale prices, to compensate the retailer for "losses" incurred by selling for less than full price. That huge companies like EA, MSFT, Sony, etc. agree to terms like this gives you some idea of the massive clout physical retailers have. Digital is slowly eroding this clout, but not as fast as you might think. Many millions of people still prefer to buy their bytes in a physical store.

...especially since there are a lot of game releases and not that much space on the shelves...

Shelf space is tremendously precious. Big retailers actually have data about how many dollars per day each inch of shelf space earns them. Everything in the store takes shelf space, and they are always looking for the thing that will maximize that number. The number one cause of games getting removed from stores is when their sales drop so low that it makes more sense to stock something, anything, else.

...that kind of narrows down the success of a game to the build up of hype, pre-orders and the sales of a couple of weeks.

Yes, this is common. The first couple months of a traditional retail release are incredibly important. For really huge games, it is, as you say, the pre-orders and first week sales are even more critical. Also, the longer the game is out, the more used copies are in circulation, further decreasing the rate of new game sales.

There's actually a specific marketing term for this "build up the hype" - it's called crescendo marketing and is the dominant strategy for pretty much all AAA games.

I imagine there are games that sell enough so that the publisher earns money solidly afterwards as well (like CoD, most of the Nintendo 1st party developer games like Mario, as well as other big-hitters), but mostly it’s really dependent on the momentum of the pre-orders and first weeks of sales.

Yes. People refer to this as the "long tail" or as "evergreen" titles. Nintendo generally has the longest, fattest tails of all, part of the reason they can be profitable (or well, were profitable) with very little support from 3rd party.

Interestingly, some games are now so huge/expensive that they require both a huge launch and a very long tail to be really profitable. If you read some of the analyst comments from Activision's last quarterly report, you can see that everyone is afraid of the fact that MW3 seemed to be having a shorter, thinner tail than Black Ops did the year before.

I guess that is kind of where the digital stores have an advantage (besides taking a lower cut of the final price, though they also tend to be sold at a cheaper price when it’s digital), with the potential for revenue always being available, meaning there’s no loss of sales from lack of supplies (either from underestimating the sales potential of the game or from eventually phasing out the game from the shelves).

Yes. Digital stores have (effectively) infinite shelf space and much lower replication costs (just the cost of bandwidth and storage or a few cents vs a few dollars). Crucially, there's no used/pre-owned market for digital games.

Is the big cut the retailers take the reason why the physical releases of games have become extensively stripped? I was thinking especially when it comes to the good old “manual”, as well as collector’s editions or special editions (which aren’t really special) have become really minimized nowadays? Sure, some of the big AAA games do at times have tons of things in the collector’s edition, but I feel that usually it comes to one thing that’s supposed to sell it and more than often a lot of the content is digital.

The main reason is just that manuals cost money to print, maybe a dollar for a regular color, 20 pager. Now that pretty much every game has a built-in tutorial and often dynamic hints, and many games are iterations on familiar, fairly simple/streamlined mechanics, a physical manual feels a lot less necessary than it did back in the day. Of course, very few people ever read the manuals anyway, so it's hard not to see it as an unnecessary expense.

I kind of miss real solid physical box releases with tons of cool things inside, especially if it’s tied in with the game in some way. The game medium is really special in that way, since interactivity isn’t restricted to only the game world.

Many people who grew up during the golden age of 90s computer gaming agree with you. However, the economics aren't what they once were, and history is not on your side. Eventually games will go entirely digital and even collectors editions will go away, or they will just contain a code for the game and you'll really just be buying a box of merch.

Oh well, I guess they have researched and found out that it doesn’t increase revenue in contrast to the cost of including them.

Nope. It does the opposite in fact.

Are there any major studies regarding the sales of video games? Categorized into geographical location, age, sex, physical, digital, collector’s editions, it would probably help designing and marketing a game with regard to profit much easier.

Yes, lots, though not many of them totally public. Good data is hard to come by in this business and marketing departments (and the research companies they hire) do not give it out willingly. When it is released, it's often done as a PR move which means it's been heavily spun or decontextualized.

One thing that's becoming very clear is that the days of a single price for software are coming to a close. We're finding that some people will buy a game at almost any price (which is why $100 collectors editions can easily sell out) while other people are so price sensitive that even $1 is a lot to spend. Freemium games are a great example, where many folks spend (next to) nothing, while serious fans will spend hundreds or thousands on a single title. Even DFA is a good example, where for some people, the chance to play another Tim Schafer adventure game (plus some rewards) was easily worth hundreds or thousands of dollars.

What surprises me most nowadays is how publishers seem to force upon themselves to produce games that are similar to top-selling games. Not only is the quality of a game really easy to notice, but they’re forcing themselves to compete in a market flooded with competition. It’ll take a lot to topple a solid market leader in such conditions, which should really promote doing something different instead, but you rarely see that.

You've touched on the very heart of crisis affecting modern, high end video game development. To be competitive, publishers have to spend vast sums of money. However, if someone in a similar category spends even more vast sums, the winner-takes-all nature of entertainment will richly reward the latter and leave the former with little more than a big hole in their balance sheet.

The reason pubs mainly publish same-y games is, to be 100% frank, largely because the majority of video game consumers don't particularly value new ideas. There are, literally, millions of people who would rather spend $60 on a small upgrade to their football game or realistic military shooter, than a game they've never played before. There are exceptions, but they are rare, especially this late in the console cycle. Many publishers have lost a lot of money financing cool new games while their competitors are richly rewarded for sequels and spinoffs. This consumer hunger for modest improvements on familiar combined with very high costs is what is fueling the samey-ness and sequelitis we see today.

To me it seems weird that there haven’t been done more attempts at distinction or niche-markets: no gamers are completly alike, there are real potential for segmentation within the video game market. Indie-development has been most of the time the forefront there, or some publisher has taken a chance and the product bad quality or not enough effort used on marketing/advertising or simply missing the market (which can happen despite a lot of data).

See my earlier comments on why non-large bets (i.e. niche bets) are hard for pubs to make.

As you say, indies have been doing well creating successful business that target niche genres, a trend that I think we'll see continue for a while.

Another notable exception are the social games companies. As much as we all love to hate companies like Zynga, they really did see an opportunity to reach a new kind of gamer and have reaped massive rewards for it.

Interestingly, the video game market seems to be filled with everything from the product oriented (people thinking “oh, a good game sells itself”), the sales oriented, the market oriented and even to a degree the relations oriented.

Yes. The truth is that entertainment is preposterously hard to predict. Pretty much no one knows what will be popular a year from now. The only sure bet is that a sequel to a huge hit will be a huge hit, except even that's not true if you spend too much money, fail on execution, or find that consumers have finally grown tired of whatever thing they used to love. It's a hard, hard business.

I imagine that the cost ratio decreases the bigger the project, with really large games having an amount equal to 33% of the developer-side budget. Of course, it also depends on what marketing strategy they’re taking.

Chris spoke to this already. To be clear, I was only taking about the costs pubs incur in order to make a game. Marketing and promotion are often equal to or more than the dev costs, especially for huge properties like Call of Duty.

However, I’ve always wondered about the impact the marketing research has on development. After all, being blind of the market can be devastating. You don’t want to develop a game for a too small group of people, especially with the minimal price variation in the video game market.

Usability research can help refine a game. Focus groups are really good ways to refine the marketing message. However, no one yet has a good tool for predicting which new, unproven ideas will blossom into the next big thing. There are just too many variables and the culture moves too quickly.

The video game market seems different nowadays though with people buying games more often and with the gaming experience being shorter at times. I kind of wished that the average gamer would be more aware his role as a consumer, so that we reward quality games and publishers with healthy policies.

Like Chris, I cannot agree w/ that last sentence enough. If consumers valued originality and creative integrity more directly, our medium would be vastly more healthy. This is part of the reason I am hugely grateful to all our backers as well as to companies like Apple and Valve that at least make it cheap and easy to make original games and still reach millions of potential consumers.

Hope that DFA will get some use of us backers - the brainless army of adventure-loving zombies we are - to help with the marketing on the Internet. It’s gonna go viral! We could quickly convert all of the Internet to our side! Muahahaha! BRrrrRraaiinnnss.. pUzzzzZZzless!

I think it's already begun! The KS drive gave DFA huge publicity and my hope is that as the game grows and everyone gets more excited about it, our backers will be the first 85,000 people talking about how excited they are for this awesome new thing that soon everyone will love.

Forgive me if this has already been stated, but regardless of the take that the digital retailer receives, one HUGE advantage that a developer has distributing digitally over traditional big box retailers is there's no up front investment in Cost of Goods sold (COGS). Manufacturing costs on projects often make up 20% or more of the final boxed game. Add to that price protection, returns, retailer rebates and you're way into the red before you've even hit Beta.

In the digital realm, the only thing you have to worry about is production, marketing, and setting up the distribution channels (which are paid out of the money you earn from selling products). In this new world, our COGS are simply a portion of each game sold, you receive a percentage of each unit and you don't need to worry about having a team of 5 sales admin earning between $40 to 70k/year monitoring supply levels and constantly updating the cost of returns.

The interesting case we're in here is that all games sold above the initial lot promised to backers is all profit, unless they go into their own pockets later on. It's the dream for a PD Finance man like myself.

I have about 6 years of AAA boxed retail finance experience. I can't be too specific re: exact numbers and whatnot on my previous projects, but I can certainly field most video game finance questions from both a publisher and PD/studio side.

-s

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This reminds me of that episode of the Cosby show where Bill is teaching Theo how only a small percentage of his income will actually make it's way into his wallet after paying for daily necessities.

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and like someone said earlier, the games get more expensive to make but the MSRP stays the same.

The film industry slowly increases their ticket prices. Hell, all industries do this.

The video game industry has always relied almost solely on increase in user-base to fuel additional revenue.

Economics!

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I don't know if this thread is even monitored anymore but I was wondering if anyone at DF was considering leveraging the success of this campaign to convince some investors to invest money into the project (minus any right of creative input)?

I know we mentioned in another video that you guys are feeling a lot of pressure regarding the timeline and resources; this could alleviate some of those concerns. I don't think anyone else would care as long as those investors weren't given the right to change things. Though, you do stand to make pure-unshared profit at this point on any game sales so I guess it's up to you guys to decide whether or not it'd net a better game in the end without reducing the revenue you were expecting.

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I am probably late to the party, but how many "no-shows" were there and how much money was lost to them? People who pledge money but when the project gets funded, they don't have enough money in their accounts.

On Kickstarter it says $3,336,371 got pledged, did you really got that much from them (minus the fees)? Or does this number include "no-shows"?

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I was gonna say wow 1% is an awesome failure rate... but that's still $30k when you are talking about $3Mil lol... but I guess that's been made back in slacker backers...

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I don't know if this thread is still monitored, and it may be in bad taste, but I was wondering whether we could get any statement as to how much of the initial backing sum has been refunded to the (incredibly vocal but hopefully very few) backers who demanded refunds after the July update?

How many of us are still on board with you?

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I don't know if this thread is still monitored, and it may be in bad taste, but I was wondering whether we could get any statement as to how much of the initial backing sum has been refunded to the (incredibly vocal but hopefully very few) backers who demanded refunds after the July update?

How many of us are still on board with you?

That may be private information, but I'll say the Slacker Backers have provided much more money than money lost.

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I don't know if this thread is still monitored, and it may be in bad taste, but I was wondering whether we could get any statement as to how much of the initial backing sum has been refunded to the (incredibly vocal but hopefully very few) backers who demanded refunds after the July update?

How many of us are still on board with you?

Pretty much everyone is still on board. We definitely got a bunch of refund requests but the number is basically miniscule compared to our total number of backers. We actually made more money from new slackers than we lost from refund requests in the few weeks following the news explosion.

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So common sense prevailed after all. That's certainly good to hear. A little bit of faith in humanity restored :).

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Yah - honestly, requesting a refund given the announcement seemed a little silly. Presumably they backed because they wanted the project; and they've now... what? Decided they don't like adventure games after all? Decided they'd rather wait for retail? Decided to boycott Broken Age and Double Fine altogether?

I bet they still pick it up at retail, the sneaky cads.

Edit - Thanks for the prompt update Chris!

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