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Majesco Goes To Bargain Bin For Videogame Profits
Thanks to Fortune.com for its article exploring the apparent success of often 'budget' publisher Majesco, which allegedly "scores extra points (and stays alive) by going where other publishers won't: the discount bin." The article explains: "Because the average value game costs a mere $250,000 to produce, Majesco needs to sell only 15,000 to 50,000 copies to break even, vs. anywhere from 200,000 to one million for more expensive titles." It also points to other, bigger-budget Majesco titles such as Bloodrayne and the forthcoming Advent Rising, noting: "While big publishers have the deep pockets to ride out a flop, virtually every one of Majesco's major titles - which can cost $5 million to $10 million each - had to hit big", though these larger development costs are somewhat offset by the value titles, of which it's suggested: "Those cheap games may not have flashy, big-budget effects, but parents are often more than willing to snatch one up for their kids on an impulse."
What? Your cubical, computer, the electricity, benefits, building, internet access, manager, and administrative staff (e.g., that person that sits at the front desk screening calls so you don't have to), doesn't cost money? What about packaging, artwork for the box, shipping, and distribution? Yeah, they all cost money too. It's called loaded cost. Your salary is a big chunk of it, but the total cost is greater than your salaries alone.
Simple example, that hard plastic bezel that goes on the front of a 1U appliance? Designer capable of producing the mechanical drawings for the manufacturer: $15k, cast for plastic molding: $15-20k. That's just the dollar cost for those people to do it -- there is a cost of the people involved within the company to get it done. They had to price it out using phones, from their cubicals, get paid during that time, etc. Loaded cost before the first $1.00 bezel gets stamped? About $40k.
Software is of course cheaper, however it still needs a box and packaging. Since it doesn't make sense for a software company to employee people who can do this full time, this gets contracted out. A small design project to design, layout, and generate the mechanicals for the box manufacturer will probably go for about $10k. The box manufacturer will require an upfront commitment for a certain number of boxes before they'll make them. So figure in another $5-10k up front. You gotta store those boxes somewhere (inventory), so make sure you have space for that. Then you need a manual to go with the game. It may be a simple enough game to only need a leaflet, but that still needs to get written. A project like that will cost a few thousand dollars plus the upfront printing commitment. Need any plastic molding to hold all of this in so it doesn't rattle around? Yeah, add money to that too. By the way, programmers need to be busy writing code -- so someone else has to put the CD and manuals into the plastic and put that into the box for shipping. The CD! Almost forgot that... Artwork, jewel case, artwork that goes on the CD itself... You gotta make a master for the CD which for high production runs is $1500. Thankfully those per-unit costs drop a lot after that. But then you need to commit for some number up front. Better make sure that storage that you got the empty boxes has some extra space.
Great -- you've made the game and the box looks good. Still haven't spent $250k? Oh... wait... there's telling people about it. Still need the programmers designing the next game so there better be someone doing the marketing for the product. Posters, artwork, in store displays, bugging magazines to review the product, doing events where the gamers are so you can show them you have a game. Low budget impulse buy kind of game? It wouldn't hurt to have an ad and be mentioned in Parenting Magazine -- that half page ad is $25k for one month. Plus artwork, plus the person's time to do it.
Reseller costs? Wait... you mean that $9.95 I paid for the bargain game isn't all going to the company that made it? Try about $4-$5 at best, depending on how many distribution tiers were involved.
And that's just for a US version. Want to sell in Asia? Rinse and Repeat...
That $10k advance for your 3D beat'em'up game is a small part of the total cost to sell the thing.