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OPINION
Have you ever wondered how much that game you just purchased really cost? Like, how much did it cost to actually make the thing, versus what you paid to acquire it? Sure, a company is expected to make a return on its investment, but when do they cr
To understand the price that you pay for your latest-and-greatest game, you need to know what went into the creation of your game. There's a series of steps that most games have to go through, and each step adds something to the cost of manufacture. Depending on the scale of the manufacturing process, those costs will vary. Generally speaking, the bigger the production run, the bigger the bottomline cost will be, but the cost per unit will drop. And also keep in mind that companies generally manufacture several games, of which some will do well while others bomb. In order to cover the losses caused by producing a turkey game, the prices of all games produced will be higher so that those that succeed help to defray the loss incurred by the turkey.
Here then is a general outline of "The Making of a Game":
1. Concept creation. The idea for a game comes from three sources: in-house original idea, out-of-house suggestion, or franchise tie-in. An in-house idea involves employees kicking around ideas while they're on the clock. That means even though the employees are being paid regardless, technically the time they spend brainstorming costs the company whatever they pull down in wages. An out-of-house suggestion may or may not have an associated cost. If some fan of the company sends in a game idea with a note saying, "I think it would be great if you made a game based on this idea," it most likely costs nothing, but will generate costs the same as an in-house idea as employees flesh out the details. If the out-of-house suggestion comes in a package that has most of the layout and details worked out, the company may feel obligated to pay something akin to a finder's fee. If the suggestion is thoroughly worked out, it may even involve paying royalties (and that can get downright expensive). A franchise tie-in is usually associated with a recently released or about to be released movie, such as the recent Eragon movie/game release. The game manufacturer stands to gain serious benefit from the fact that the movie's advertising raises public awareness and interest in the game they are about to create. In recognition of that fact, the game company will usually have to pay a substantial upfront franchise fee, as well as a royalty on every unit of the game they eventually sell.
2. Development. Having worked out what kind of game they want to create, the company now must actually create the nuts and bolts that make a game. That involves a LOT of programming and a LOT of computer graphics. (The two are NOT the same. A programmer does the code that makes the program run and work well using many, many combinations of computer hardware, but the graphical artist makes pretty pictures using a computer.) In the case of many games (RPG's in particular), there will be a substantial amount of voice acting. For most voices, the company can use its own employees - in which case the cost is their hourly wages - or it can hire outside talent that may cost normal wages all the way up to some really big bucks for a voice that the public will recognize as being somebody of significance (usually a noteworthy movie actor). If the company uses the star of the movie that the game is derived from, the cost for that voice acting can be practically astronomical. As a background element, music adds a lot to the ambiance of a game - and a lot to its cost of manufacture. Most soundtracks are original works, which require that composers and musicians must be paid. Some game music is occasionally taken from pieces in the public domain, but still need musicians to play the music for recording. Regardless of which method is used, the music requires an expenditure for the studio work needed to create the music tracks and the personnel needed to make the recording.
3. Quality Assurance. This is usually an ongoing process from about mid-completion. It consists mainly of playtesting by in-house employees. It may be dedicated playtesters, or more often a combination of dedicated playtesters and any employee that happens to have time on his hands. As designers and programmers complete portions of the game, the playtesters will make like generic consumers bent on deliberately trying to make the game crash: they'll start with a straightforward run through of the current chapter/module/sub-quest/whatever, followed by attempts to "go off the beaten path", and followed by trying the most perverse action choices they can conceive of. Hopefully these actions will uncover flaws, blind spots, quirks, and out-and-out bugs that the programmers and designers overlooked. At which point that portion of the game will kick back to the developers to be corrected. Unfortunately for the consumers, they far outnumber the playtesters who are seldom as creatively destructive as the consumers can be. Additionally, the number of hardware combinations that are available to be tested guarantee that no matter how thorough the testing, some lethal combinations will be missed. That aspect is compounded by the rate at which new hardware hits the marketplace: some hardware combinations can't be tested because the hardware didn't exist when the prototype game was being tested. As the game nears completion, many companies have taken to using volunteer betatesters. While the final touches are being done to the game's packaging and enclosed literature, and while the physical components are being manufactured, the betatesters (quite a few more than there were playtesters) will introduce their fresh perspectives to look at the material that made it past the playtesters. This is essentially the last opportunity to catch flaws before the CD-ROM's are actually pressed. Hopefully any discovered flaws can be easily corrected; this is the major source of fix-its that go into Patch 1.00, release date patch, or whatever you want to call it. It's also the stuff that is usually contained in the readme that so few people actually read. (And is why it is in the Readme; it was too late to correct these flaws in the manual because the manual was already at the typesetter.)
4. Advertising. Usually halfway through Development and QA, the company will start actively advertising the game. If they start advertising sooner, they run the risk of discovering there are major flaws that will take a lot of time to correct, forcing them to push back the release date -- after they just got done broadcasting that they were about to deliver the latest and greatest game to hit the marketplace. This can be a major hit to the company's credibility. Accordingly, advertising usually waits until the company feels that it can accurately predict when the game will be complete. Advertising can be an enormous cost variable. Smaller companies may have to rely entirely on word-of-mouth and their own company website to get the word out. (Which is why game registration has become so important to game manufacturers. Every game you register means that those companies can get advertising to known consumers of games for next to no cost - by emailing you a "news" release.) If the company has any kind of history, it may persuade notable online forums/internet magazines or even hardcopy magazines such as PC Gamer to do a preview article. Generally, it takes a major game manufacturer to get its products reviewed by major magazines. (If the company is lucky and it's a slow news month, the magazines may do reviews just to serve as magazine "filler" features.) If a company can afford it, it will do some noteworthy magazine ads -- which can be expensive. If the company has lots of cash available, it may even do TV advertising -- which costs a LOT. Also, once the company starts to actively advertising a game, there is a possibility that the company might start to take pre-orders from final users, usually via the company's website. More often than not, pre-orders are sold at a slightly lower price than the final retail price. (This means that the company's profit margin for direct-to-final-customer sales will be HUGE. See more below.)
5. Production. This most often occurs out-of-house, because most game companies don't have their own Printing and/or Manufacturing Departments. This is generally an exchange between the company, sending the galleys (or near final draft) to the printer, who then uses it to do a layout of the manual. The printer runs off a few copies (called proofs) which then go back to the game company to be reviewed by the Copy Editor and/or proofreaders (and now you know where that term comes from). This is pretty much the absolute last possibility to catch typos, misspellings, poor grammar, unclear passages, etc. that are in the proof manual. (And as a consumer, you can see just how many errors still sneak through.) Like the manual, the game's packaging is going through the same layout and scrutiny process. Packaging usually doesn't take as much review in order to get it right, but it can be nearly as important as the game itself: a significant percentage of sales occur because the box "practically jumped off the shelf" when the customer saw it in the store. For a potential customer that hasn't seen advertising, previews, PR releases, magazines articles, etc., on the game, the package is the company's last chance to convince the consumer to purchase their product. Many companies do a mediocre - or downright pitiful job on packaging - and you will quickly see that all of them are small companies. For the first time in the creation process, the company most likely is not paying for something upfront. Most of the out-of-house printing, etc. is usually done on an account which is billed out with 30-, 60-, or 90-day dating. Which means the company has about 30+ days to make money from the sale of the game to use to pay the bill for manufacturing that game.
6. Distribution. Once the game components have been manufactured, they are either assembled at the manufacturing plant and then sent to the game company's warehouse, or sent separately to the warehouse where they are collated into the final box set. (Increasingly, assembly is occurring at the warehouse because this gives the company its last chance to insert last minute corrections or include general advertising literature.) Once the company has the final product in-house in quantity, it can start to ship out orders to the stores, and to fill any pre-orders that may have been taken direct from consumers. Orders sent to retailers fall into two categories: Free Freight and Small Order Shipping. If a distributor/retailer orders a large enough quantity of the game, the game company will pay the cost of shipping (freight free) to send the games to the distributor/retailer. "Large enough quantity" usually means orders of dealer's cost of $1,000 or more. Small order shipping is anything less than an order that would qualify for Free Freight, in which case there will be a surcharge for "Shipping & Handling" charged to the customer. Most distributors/retailers qualify for dating on their billing from the game company. This means that the game company usually won't receive payment for the games it sends out until 30, 60, or 90 days later. (The actual period is usually significantly longer than the numbers listed. Frequently, the phrase "end of month" is added, meaning that the 30, 60, or 90 don't start until the end of the month. To encourage faster payment, companies frequently offer a 2% discount to customers that pay the bill within ten days of the end of the month.) Additionally, distributors receive deep discounts off of the game's retail price: Distributors (customers that buy in large quantities and then in turn sell to the final retail outlets) usually get a 50-60% discount. ("Distributors" includes chain stores that make bulk purchases through a central Purchasing Agent.) Retailers usually only get a 30-40% discount off of the retail price.
From the time that the company starts creating a game until that game appears in the stores will most often take between one year and 18 months. Two years is not uncommon. Creations that take less than one year frequently are plagued by bugs that slipped through the QA process. Note that for the most part, aside from revenue from pre-orders, the company doesn't make any real money on the game until a month or two from its release. That can mean nearly two years of money going out with none coming in.
And that one fact is probably the primary reason why so many of the games you acquire these days are buggy as hell. The sooner the company actually starts to sell the game - ready or not - the sooner it can start to recoup its investment. Smaller game companies have died as they neared that finish line, simply because they ran out of cash to complete the process. Many companies operate in a cycle of feast-or-famine: After they've released a game, the money eventually rolls in (if the game isn't a total dog). But half-way into developing the next game, the company may start to run out of operating capital. This may very well require the company to go to the bank to acquire a hefty short term loan (at a hefty rate of interest), just to be able to finish what was started. If you follow the industry trade gossip, you will note that many "substantial" companies downsize by laying off most of their personnel between projects. Then the company starts hiring like crazy as another new title moves along the production track. Companies with that kind of cashflow simply cannot afford to carry too many personnel year-round. However, it means that it also must be willing to let go of experienced and talented personnel only to have to recruit more at a later date. And frequently, with that kind of pattern for hiring and firing, the company will have to offer ever higher salaries to attract those talented employees - because those prospective employees understand that the job most likely will dry up after a year or two. (Hard to build up your 401K and increased annual vacation time if you have to change jobs every two years.)
This, of course, adds to the ultimate retail price the game companies must charge consumers.
One last major consideration for the retail price of games is piracy. No matter how secure the copy protection, media pirates will more than likely have counterfeits in the marketplace shortly after a game releases. Frequently, the pirates will actually release counterfeits at the same time. (Usually because of betatest copies falling into the wrong hands.) All that a pirate needs is to get samples of the manual and packaging and he can do a decent job of mimicking a legitimate product perfectly. He spends nothing for the development; his only real cost is the physical materials. That means he can sell pirated games for 90% off and still make a HUGE profit. Because of piracy, and because the technology advances dramatically every 6-18 months, a company only has about one year to make as much money as possible off of one of its products. Tops. Games that still make a noteworthy revenue for the company beyond their first birthday are exceedingly rare. So a company creates a vague formula: (Total cost of production)/(number of units likely to be sold) = approximate unit cost. To "approximate unit cost", the company will add "reasonable profit margin", which includes "stockholder dividends", "percentage to help defray products that lost money", "overhead", "fudge factor", etc. If not for the piracy, the "number of units likely to be sold" would be much higher. [This means that whenever you knowingly buy a bootleg product, you're assuring that the prices of goods that you purchase legitimately will be more expensive than they had to be. Think about it.]
In an odd sort of way, it is unfortunate that many of our most talented, creative game designers do not work for MAJOR companies. Most of them bounce around from one middling sized company to another until they get involved in their very own middling sized company. Because these are not huge companies with HUGE cash reserves, they frequently get caught in cashflow crunches. And because they need money now in order to meet the next payroll, they must release games before those games are "complete". So we as consumers must endure one buggy game after another. If the game manufacturers could actually afford to hire substantially larger staff, and keep games in the QA process until they are certified 99.99% bug free, we as consumers would spend less time cursing our monitors when the latest hot new game once again Crashes To Desktop.
But would that truly satisfy us? Once we get wind of some brilliant new game concept in production, don't we start to salivate uncontrollably? Could we force ourselves to patiently wait another year for the bug-free version to release? 6 months? Or even 3 months? We as modern consumers almost always "want it now!" Isn't it easy to rationalize, "well, if it's not too buggy"?
It is manifestly possible to make it that only trouble-free games make it to the marketplace: All that is required is for consumers to stop buying games from companies that produce buggy games. Such manufacturers would go out of business for lack of sales, leaving only companies that produce solid, dependable games. Games produced by BIG companies. Companies that can afford to take their time and do it "right". However, don't be surprised if the games are old before they ever were new - because they spent so long in development, that novel game concept lost its novelty. And, of course, there would be significantly fewer games produced each year. But that would be tolerable as long as the games came to us done. Right?
NOT!