Forbes decided to run an interesting article about where costs in video game development come from, an interesting subject as video games become a major industry. Then, they decided to ruin it all by applying their analysis too broadly, and saddling it with a title that makes no sense: “Why Gears Of War Costs $60″. Just trying to grab some readers by putting something popular in the title. Idiots.
Here are just some of the problems:
- The article deals with development costs like art and engineering, and final sale costs like retailer markup and console owner fees, as though they were identical. That is absurdity on the highest order.
Development costs are a fixed number, something you pay when making the game and stop paying once the game is done. To express development costs as a percentage of the retain price, you have to divide them by the number of units sold, a number different with every game ever released. Meanwhile, the sale costs are fixed percentages, completely unrelated to the cost of making the game, and costs born directly by the consumer, not the publisher.
- The development costs change with every title, and are in some cases absurd when applied to Gears of War. Art/Design and Programming/Engineering come out to 45% of Forbes’ accounting, which is not tied to the actual game mentioned in the story’s title. Are they saying Gears of War’s development costs equal 35% of all retail costs? No, the headline writer is just a dope.
- They list licensing costs, giving examples like sports and movie-based games. Problem is, Gears of War is an original IP, with zero licensing costs. So why list it if the article is about Gears of War? Oh, right, it isn’t. Fire your headline writer.
- I’m no economist, but I know this: As you sell more units, your R&D costs per unit drop, and your profit increases. This article (by Forbes, a publication that is supposed to know better) actually classifies R&D (game development, in this case) as a constant percentage of sales, rather than a fixed cost that is alleviated by high sales of a game.
Oh, my god, am I going to have to school Forbes in some basic economic theory?
Okay, if the game costs $40 million to make, and you sell $100 million worth, then, yes, development costs 40%, and, based on other costs, publisher profit is the 1.5% quoted in the article. But if the game sells $300 million, development costs are still $40 million! In that case, an extra $80 million goes into the “profit” pile, and the publisher profit is now over 30%!
Seriously, is Forbes just stupid? This is the kind of miscommunicated shoddy journalism I hate. Poor research, generalizations, complete lack of depth, zero context, over-exhuberant headline writers. Yuck. Why do these guys get paid for churning out this crap?
(via GameProducer > Digg)