Update: Earlier today it was reported, erroneously, that the EEDAR claimed that only 4% of games are profitable. Blues News is now reporting that EEDAR was misquoted in the original interview that spawned the earlier reports. A portion of EEDAR's explanation of the situation and original story behind the cut.
On Friday, November 21th, Forbes.com did an article on Electronic Entertainment Design and Research. The article is located here www.forbes.com/ebusiness/2008/11/21/games-eedar-developers-tech-ebiz-cx_mji_1121eedar.html. Unfortunately, there was a miss-quote in the article that a lot of sites noticed and reported on. Below is the line from the article.
“Only 4% of games that make it to market actually make a profit, he says. About 60% of a game's budget is spent reworking or redesigning a game. Armed with all this data, companies can make those tough calls early in the development process.”
The actual statistic is only 4% of games that enter production will return a significant profit. Of games that are released to the market, only 20% will produce a significant profit. (Source for the second sentence: Secrets of the Game Business by Francois Dominic Laramee).
We understand that miss-communications can happen, especially during phone interviews, but given the inaccuracy of the statistic and how many other sites have picked up on the story, we wanted to ensure that the major media outlets received the correct statistics on the subject.
Geoffrey Zatkin, EEDAR’s President and COO, has provided some clarity on the subject:
“Only 20% of games that begin production will ever finish. Of those 20% that are finished and released to the market, only 20% of them will ever realize a significant profit (Source: Secrets of the Game Business Francois Dominic Laramee).That equals 4% of games that start production return a significant profit.
Original Story:
With record-breaking sales for the likes of Grand Theft Auto IV and Wrath of the Lich King, and reports that video game retail sales have risen despite looming global recession, it may be difficult to remember that the vast majority of video games released each year are not multibillion-dollar juggernauts. Obviously, so many games must simply slip under the radar of gamers and retailers alike, but a recent study reveals that the percentage of games that are actually profitable is shockingly low.
Today, ComputerAndVideoGames.com covered a recently released report from the Electronic Entertainment Design and Research group (EEDAR) which claims that only 4% [correction] 20% of the video games that make it to market will be profitable for their developers. This claim is accompanied by the further claim that up to 60% of a game's budget is relegated to "reworking and redesigning."
The study states that the average Xbox 360 release can expect to sell 216,000 units, the average Playstation 3 release can expect to sell 192,256 and games released to both platforms will see, on average, sales of about 408,336 units. There are, of course, features that appear to boost game sales. According to the study, "implementing a co-op mode is claimed to boost sales by 12,400, while a multiplayer mode could add 25,000 copies to a game's sales roster."
The used-games market is also a major detriment to developers' sales numbers, as they see no profit from the resale of their own games. The study suggests that downloadable content can work as a reselling deterrent, keeping games in the hands of original owners as they await DLC.
So, next time you sidle up to your local GameStop's bargain bin, you may want to consider how your choice affects the game developers who make your games possible. Or, not. It's really up to you. A bargain's a bargain.
[image cropped from Philosophy & Mix Tape's Flickr.]
November 24th, 2008 at 3:25 pm
Seems gaming is following a normal Pareto's Law (80/20) distribution. I'd think the material question is what is the percentage of total capital invested in games "significantly" profitable and what does EEDAR think "significant" is.
10x returns on high investment games like GTA IV make up for a lot of milquetoast casual games.