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EA Spends 3x More On Marketing Than Development
G3ckoG33k writes "According to Electronic Arts officer Rich Hilleman, 'the price of producing console games has rocketed, with marketing costing up to three times more than the development of a title.'" Sounds pretty insane, but does anyone know how this compares to the film industry?
Well maybe if they spent more money on the development they wouldn't need so much money into marketing... *sigh*
Software development is a lot like a having a baby. 1 woman, 9 months = 1 baby. You can't add 8 more women to the equation and get a baby in one month. And as projects get larger, the success is dependent on cohesive management, not necessarily additional resources.
However, with marketing -- you can send any number of suit-monkeys out to cut deals with drink manufacturers, t-shirt companies, magazines.. etc. All without detracting from the potential quality of your final product.
If it's in the game, it's likely because one of these marketing people said it needed to be in the game. Thank them for in-game advertising and in-game shops that accept real world money.
That would certainly be a very good reason that EA doesn't seem to be able to turn out decent games, or turns out games that have little to no polish on them. It also puts into perspective the "rising cost of game production." Probably they are over-marketing it, or marketing it the wrong way and to the wrong people. I've always thought that their TV adds for a lot of games were really wide of the mark, and probably a poor investment.
Maybe if they would make better games they wouldnt have to spend so much on advertising.
In this thread we get to read over and over how Slashdotters would run a gaming company, if they ran a gaming company.
Putting a headline like this on a web site like this is a guaranteed flamebait page impression generator. With a readership composed of mostly help desk employees who program in their spare time and aspire to be engineers the natural jealosy of more socially adept types, like marketing people, can be easily manipulated. Point out that the most comercially successful game company in the world budgets 3x more for marketing, where geeks don't work, than development, where they do, and you are sure to get comment after comment saying this is the wrong thing to do. Comments from people who couldn't manage the business end of a Snoopy snow cone pushcart.
So yeah, sure, everyone is waiting with bated breath to see what Slashdotters think of EA's business decisions. EA makes a mint. EA is sure to keep turning out games. EA isn't closing shop or laying off or in danger of never getting a game to stores. EA knows that staying in business takes more than making great games and hoping people show up to buy them.
Cue more out of depth stupidity.
Umm, no decent games. Their sports titles are often the best. They get the best reviews and most sales.
That's because EA has signed exclusive agreements with so many relevant leagues (NCAA, NFL, NHL, FIFA). By definition, the only player in a market will get the best reviews because it gets the only reviews.
Seems to me, the best products don't need advertising. The ones that don't sell themselves need others to run around selling them instead.
He also said that a lot of his movies tank in the theaters and then do really well on DVD. People see the movie in theaters and then tell their friends to grab the DVD. That's why the Weinsteins let him make "his" movies without a lot of oversight. He makes enough money so nobody loses anything which keeps them happy.
However, it could go the other way. Everyone sees your movie/game/etc and they tell their friends it sucked. Nobody buys the DVD. I feel about the same with marketing. If your commercial looks like shit and I see it over and over, I am less inclined to buy your game/movie/etc. Even if I were thinking about it (fan of IP or whatnot) but am spammed with ads, I'll not buy it out of spite. Which is to say, too much marketing can hurt in my opinion.
-SaNo
Source please? I think you would be astonished by the cost of developing a new drug. Also bear in mind that drugs are only marketed strongly in the US. Most countries do not allow prescription drugs to be advertised to consumers.
While there are a lot of not so obvious revenue streams for smaller movies, it is not necessarily true that they turn in the black. Hollywood execs are businesspeople looking for profit and so they naturally want the blockbusters, but most of their human capital likes to consider themselves artists. Many of the good movies we see from major studios (I'm not talking about the arthouse movies) - those sleepers that fall under the radar but are very good (e.g. Shawshank Redemption, L.A. Confidential, etc.) are sometimes made as a business expense to keep the talent happy so that they can churn out the tentpole memorial day spectacular filled with explosions and such. If they turn a profit, all the better, but their intent is to keep the high end stuff in production. Put another way, the art fanfare is a business expense to keep the team assembled to produce the schluck that makes the big bucks.
-THE END-
The problem with this scenario is that marketing helps in the initial, but it does not help in the long term...
Marketing can make caviar from crap. Seriously they can. BUT if EA keeps producing crap people will realize it is not caviar, but crap. Then to make it caviar again you need more marketing. It is a never ending race.
Had they not made crap in the first place then they would not have to spend that much on marketing.
While marketing is needed, the best marketing is when people tell other people that they should buy the product.
Here is an example; Heinz Ketchup. I have lived throughout Europe, and North America, and there is no way I will buy anything but Heinz Ketchup. Yes they have a marketing campaign, but Heinz does do a pretty good job making ketchup. They don't take their clientel for granted. With marketing Heinz could expand. Another example; nutella, Coke, Pepsi, etc...
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
Imagine if they spent that cash on development instead?
gamers don't need TV commercials.
Madden and other crap franchises are the bulk of the ad budget.
They're using their grammar skills there.
But you're ignoring the costs of gaining approval to actually sell a drug in a given country. In the US, gaining FDA approval on a new drug easily costs an order of magnitude more than research and marketing combined. The level of regulation and oversight of every tiny detail of the whole process is incredible and this adds significant cost. Your safety is the main reason why drugs are so expensive, not research or marketing.
Marketing is not just needed to polish turds, it's needed to get people to buy the good stuff too. In video games, or most other markets, there's a ton of competition. Without marketing, your product gets buried under the pile and no one ever sees it. Sure, you might sell a few copies to your friends, and they might get a couple of their friends to buy it, but that's it. Maybe if you're really really lucky it will go viral, but you're not going to spend tens of millions of dollars developing a game and just hope it will go viral on its own.
Marketing is more than just booth babes and TV commercials. Something as simple as where a product is on the shelf (eye level versus toward the ground, for example), or where your displays are in the store (in the back? at the entrance? How big are they?) is marketing, and it all costs money to do. The news doing a story on lines stretching out the door for the newest game release was probably prompted by a call from marketing. Tech news sites and TV shows featuring documentaries or segments about the "breakthrough" technology your game uses are all part of the marketing effort. Hell, even the guy behind the counter telling you it's a good game (or even the other "shopper" mentioning it in passing) may well be part of the marketing machine.
To claim that your household brands, especially Coke or Pepsi, get by without marketing is silly. Yes, Heinz may not spend as much on visible marketing, but they do pay for prime shelf space at your local store, and they've spent decades honing their image as a superior brand. None of that happened by accident, it was all marketing. The fact that you may not even realize you were being marketed to, and yet still have a preference for their brand, is part of what makes their campaigns so brilliant. Even word of mouth advertising can be primed by a good marketing department. And, of course, both Coke and Pepsi spend ungodly amounts of money making sure their logos are plastered all over just about everything you see. Coca Cola alone spends more than $1 billion annually on marketing.
A lot of people make the mistake of equating marketing with advertising, and in reality it's much, much more than that.
Sure about that?
Canadian meds are cheap, even though they are completely identical to their US counterparts. Why? Because the Canadian government dictates what they will pay for them. This cuts into the companies revenues. In order to make up those revenues, they need to charge someone else more. Guess who that someone else is?
"As God is my witness, I thought turkeys could fly." A. Carlson
One thing that someone in the biomedical industry told me is that the path that drug research usually takes is that a Phd candidate will do basic research at the university, carry this research with them to a small startup company, which is then acquired by a big pharmaceutical if one of their drugs looks promising, who then goes thought the FDA testing process and gets the drug to market.
According to her these marketing/research numbers that get thrown around don't include the costs of acquiring start-ups. Since it is pretty much impossible for a small company to afford to get a drug through the FDA approval process, their entire business model is to sell-up to the big phamaceuticals, either the entire company or individual drug patents. Therefore, this aquisition / patent license money funds an awful lot of research that doesn't get counted in the numbers.
And it seems to me that this system works fairly well - the university / small lab environment is really more conducive to basic research than a large company who is focused on getting products to market. And in this case, the patent system helps provide a business model for these research labs that wouldn't exist otherwise.
Thanks for the folks that posted those sources, I'll have to check them out in detail later on, and see if they confim/refute what I've heard.
Incidentally, EA bought the rights in response to 2K gaining significant market share on Madden. Additionally, 2K had started to sell their annual edition for $20 (Half of what Madden cost at the time). Rather than enter into a price-war, EA decided they could screw everybody out of their money by making a deal.
Sports games are the ones with the lowest overall development costs for EA. They get to re-use 90%+ of the assets and code from the previous year and get to charge full price. All they need to pay is marketing and licensing. It's a perfect market for a price war, and you can only sustain high prices by changing the rules.
Why would a company that has seen declining volume trends for more than a decade spend heavily to build new breweries? Cost of goods sold is where beer ingredients would be. To be fair, most of their manufacturing talent goes to making sure that no matter where and what time of year you buy a Bud, it's going to taste exactly the same every single time. Every microbrewery I know of would kill for that sort of ability.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
Everyone wishing that the money were spent on development instead of marketing is, unfortunately, living in an ideal fantasy world.
People are dumb. They follow trends, soak up advertisements, and generally do what marketers tell them to do. You personally might be immune, but remember that just by reading Slashdot (and therefore being somewhat tech-savvy) you have already self-selected against most of the population.
In modern culture, quality does not correlate with success. (Arguably, in entertainment, it never has... consider ticket sales for generic romantic comedies with famous actors vs thought-provoking art-house films.) Quantity is much stronger than quality. Exposure is all that matters.
Nobody bothers to do independent research anymore; Consumer Reports has been dropped in favor of Google search, and whoever has the most hits wins.
Welcome to the present day.
One thing that someone in the biomedical industry told me is that the path that drug research usually takes is that a Phd candidate will do basic research at the university, carry this research with them to a small startup company, which is then acquired by a big pharmaceutical if one of their drugs looks promising, who then goes thought the FDA testing process and gets the drug to market.
According to her these marketing/research numbers that get thrown around don't include the costs of acquiring start-ups. Since it is pretty much impossible for a small company to afford to get a drug through the FDA approval process, their entire business model is to sell-up to the big phamaceuticals, either the entire company or individual drug patents. Therefore, this aquisition / patent license money funds an awful lot of research that doesn't get counted in the numbers.
So big drug companies are the RIAAs of the drug world: They don't actually create anything useful, they just exploit it for huge profit. Awesome.
With the first link, the chain is forged.