Brotherman Bill
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http://www.escapistmagazine.com/article ... xcept-Me.2
This would explain why companies are also trying to get additional revenue from their products with DLC and the like.
As with everything, economics is the answer.
All game developers, and even most gamers, are aware that it costs more to create a videogame for the latest generation of consoles than it took for prior generations. But how much more? While hard data is hard to come by, a variety of estimates are available on the web that support the following approximations:
1994: 4th generation premium videogames cost $200,000 to develop and retailed for $60-$80
1999: 5th generation premium videogames cost $1,000,000 to develop and retailed for $40-$60
2004: 6th generation premium videogames cost $5,000,000 to develop and retailed for $40-$60
2009: 7th generation premium videogames cost $25,000,000 to develop and retailed for $60-$80
We thus see a long-term trend analogous to Moore's Law, in which the development cost of videogames has quintupled every five years. Meanwhile, the retail price of games has hardly moved - indeed, it shifted downward for the better part of a decade, as CDs and DVDs replaced cartridges, only to return to $60 price points in the seventh generation.
Let's assume that the publisher has a net margin of 20% of the retail price, after paying the developer, console manufacturer and retailer their cuts. Let's also assume that the marketing budget of a game is always equal to the development budget, and assume an average $50 price point over the life of a game. What results?
1994: 4th gen videogames had to sell to 16,000 customers to break even
1999: 5th gen videogames had to sell to 80,000 customers to break even
2004: 6th gen videogames had to sell to 400,000 customers to break even
2009: 7th gen videogames had to sell to 2,000,000 customers to break even
What does it mean to say that in 1999 a videogame only needed to reach 80,000 customers to break even? It means that videogames once had economics similar to book publishing or music publishing. A low cost of production relative to retail price point creates a low breakeven point that incentivizes publishers to invest in top-quality genres that cater to specific niches. They can capture every consumer's taste, no matter how obscure, with something great. This is why Barnes & Noble has a separate section for "World War II History books" as distinct from "American Civil War history books" and it's why record stores carry bands that are pretty underground.
And it's why a publisher like Talonsoft used to be able to profitably publish premium games with cutting-edge graphics aimed at a niche audience. When Age of Sail was published in 1996, it was a premium title on retail storefronts within the mainstream genre of strategy simulations. It was competing against two other games at retail, Wooden Ships and Iron Men and Admiral Sea Battles, within the 19th century naval simulation genre alone!
This would explain why companies are also trying to get additional revenue from their products with DLC and the like.