Economics Of Game Publishing Analyzed

Thanks to 1UP for its feature discussing the precise financial details of videogame publishing, described by Mastiff Games publisher Bill Swartz at GDC in San Jose last week. Swartz "put together various slides showing where the money goes for a hypothetical game", revealing that "a publisher can clear seven dollars on a game [after all costs are taken into account]." However, it appears that "only one of every five games will sell enough copies to make money, since publishers have to consider things like taking back inventory that doesn't sell through to customers", and elsewhere in the article, photos of the GDC slides show "a breakdown of how much publishers, wholesalers, and retailers can make, as well as what risks they face."

Comments

Re:Cutting out the middleman

[mandalayx]

The charts show that a full $15 of the price is profit to the wholesalers, and the retailers. I'm surprised that more studios don't try the direct channel, selling right to the customer. It seems that there's some serious inefficiency there.

Valve Software, the developer of Half-Life, is trying to do just that with Steam. Basically when you buy any future Valve games, they'll come with a content-delivery program: Steam. This means you're going to Valve's portal, if you will, every single time you go to play online. I imagine it must be a huge logistics problem, but they did hire Bram Cohen (the BitTorrent guy)

This is Valve's perfect target for eyeballs, and they know it. For example, after their newest Counter-strike expansion pack released, I went to go play Half-Life online and got an ad for their new game, that I could download instantly. And 99% of the profit would goes to Valve. Smart.

But this has been covered before: here and here. Read up more if you'd like, I think it's pretty interesting. While this probably won't spell the doom of EB Games quite yet, I do agree with the parent that there is some market inefficency in the current system.