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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.
Often one heards that research costs drive the price of drugs high, but in fact a similar ratio between marketting and research costs exists in the drug industry.
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
Noting the success of the DS, PSP and iPhone, Hilleman slammed the price of producing console games has rocketed, with marketing costing up to three times more than the development of a title.
While the article is about handheld sales now being double that of consoles, it most certainly talks about the marketing costs. Read the whole article Sparky.
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-
I managed the business end of a Snoopy snow cone push cart once, and let me tell you...it was like Hell on Earth. I'd never wish that upon anyone. Never.
(-1, Raw and Uncut is the only way to read)
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"
In 2006, the average studio movie cost $65.8M to produce:
http://www.cinematical.com/2007/03/08/mpaa-in-2006-an-average-movie-cost-65-8m-to-produce/
In 2007, the average studio movie spent $36M on marketing:
http://articles.latimes.com/2009/apr/20/business/fi-ct-movies20?pg=1
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.
EA has been closing up shops left and right, just like most other large publishers (though really there aren't many large publishers these days, it's basically EA and Blizzard/Activision for PC games).
I think the main issue is that EA specifically, and the industry in general, has spent a lot of time in the last decade complaining about the rising costs of producing games, especially in the console and PC realms, yet EA is willing to spend 3x their development budget on marketing, the cost of which is pretty well within their control.
Of course, EA is also one of the companies that does pretty well controlling their development costs for their biggest selling games. They have a very limited time frame for development of their sports titles, and they do a fair job of deciding what improvements they can make year-to-year to still meet the time constraints and still keep most of their user base happy. They also figured out that it was worth more money to them to buy exclusive contracts with the leagues and player unions than to attempt to continue competing with other publishers and developers to make a better game in those time constraints.
-PainKilleR-[CE]
Q: Why are games so expensive?
A: Because it costs us that much to convince you you want to buy it.
Please help publicise swpat.org - the software patents wiki
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.
There is a flaw in your analogy. With food, quality seems to win over crap. With entertainment, that is rarely if ever the case. Case in point: Survivor vs. Firefly. Firefly was a well-written, interesting show, with talented actors. It failed miserably not due to poor content, but poor marketing. Survivor is a show full of amateurs screwing each over repeatedly. Such a show has been successful purely on marketing savvy. EA can churn out as much crap as it wants. As long as it douses it in enough sugar, people will keep thinking it's candy.
With my experience with the quality and stability of their games, this does not surprise me in the least. I used to work for a cyber cafe. EA games made up about 30% of our titles and 25% of the playtime, but 95% of crashes occurred while an EA game was being played. also many times patches for EA games broke them, A problem we rarely had with non EA titles.
All misspellings and grammatical errors in the above post are intentional and part of my artistic expression.
2K doesn't have a soccer game, but Konami does. Pro Evolution Soccer was considered the best soccer game for quite some time. Fifa 09 gave EA the upper hand once again and the competition has forced both of the companies to put a fair amount of innovation in their upcoming titles.
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.
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
Please. Ketchup is ketchup. Anyone can make ketchup. You can even make ketchup in your own kitchen. The only reason you perceive Heinz as being better than other ketchup is marketing. Much the same way a plastic bottle with a nice label can make you perceive tap water as gourmet.
Give me Classic Slashdot or give me death!
The issue is that the amount of money you spend on marketing vs the effectiveness is likely to take the vague shape of a bell curve. I think part of what the GP is saying is that some brands have moved to that peak in marketing vs effectiveness, and realize that spending the 50% extra on marketing is pointless.
Continuing to throw money at marketing just because your sales are low doesn't mean you'll make more sales. If you're already at that peak, due to the economy, market saturation, the quality of your game, etc., more marketing doesn't translate into more sales.
In the case of EA, I've seen a fair bit of questionable marketing from them. Commercials on channels that seem to be far outside their target audience, commercials that failed to make a game look good or worth buying, horribly obnoxious commercials that made me change the channel, etc. That said, I've been screwed by the DRM in EA games more than once, and I've played enough shitty games from them that they're off my list entirely now.
Velociraptor = Distiraptor / Timeraptor
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.