I have been told that more than 90% of all games do not even reach break-even point. Can someone please confirm this? I am using this info in my thesis and need a souce to refer to.

> I have been told that more than 90% of all games do not
> even reach break-even point.

The industry average is indeed around 90%, but that''s a synthetic figure largely tainted by the PC segment. For starters there is the publisher break-even point and the developpers'' break-even point. There are also several genres and platform types for which the numbers are quite different. And finally those numbers vary each year. A little background info on how you plan to use this figure would be useful here.

> I am using this info in my thesis and need a souce to refer to.

The Biz commitee of IGDA is your best bet here. Contact them for any hard facts you need. The IGDA website also lists market data firms for which your university could already be a subscriber; talk to your library advisor for access. Also, consider IGDA''s Game Submission Guide as a primer on game business (http://www.igda.org/biz/submission_guide.php). It''s free and contains a lot of useful information.

-cb

Actually I think you will be hard pressed to come up with any solid data to back this up, simply because the necessary data isn't available.

You could use sales data such as the TRST reports to find out how many units have been sold (and an estimate of the revenue derived) but publishers don't release details of how much a title cost to develop and how much was spent on Marketing and PR so its virtually impossible to measure their break-even.

A publisher may make no profit on a game that generated $4 million in revenue because it cost $2 million to develop and another $2 million was spent on marketing (I believe acclaim's Forsaken falls into this category). Alternatively they may make a big profit on a title that generates only $1 million in revenue if the development was funded by the developer (who in this case probably gets well shafted).

That of course assumes you are limiting your definition to just publishers. Many publishers pay developers an advance on royalties to fund development. If the developer is clever they can make a profit from those advances so even if the title does not sell the developer has certainly passed their break-even, although the publisher hasn't.

The flip side of that coin is that the development runs late and ends up using their own money to complete development. Due to the way % royalty splits work the title may then sell enough that the publisher starts to make a profit but the developer does not get any further royalties. In this case the publisher is happy but the product makes a loss for the developer.

This use of "advance against royalties earned" to cover development costs often results in the account department claiming that a title made a loss, when in fact the publisher made a health profit. The accountants are making this claim based on the fact that the publisher paid the developer more than they actually earned from royalties so the development cost is never recouped even though the publisher is actually making a profit.

Dan Marchant
Obscure Productions
Game Development & Design consultant

[edited by - obscure on October 13, 2003 11:33:42 AM]

hi there, Obscure.
you seem to be really profound in this business. that makes me think you can probably enlighten me a bit on a specific matter. i spent the last three years trying to study in deep how exactly this market works, what has to be done so your game eventually hits the market anyway (not talking about profits at this time) and lately i got this particular idea stuck in my mind - how the heck to write game documentation good enough to catch a publisher and get your project moving further. i was participating in various game projects during the last 3 years. i have ti say i am not surprised none of the got any support or attention. then i started working on my own projects. writing documents and stuff. however it seems there is some missing link. do you feel like talking about the odds of success? you can email me if you want to. thanks.

To get noticed by a publisher you need an experienced development team, a great demo and all the right documentation. For more details on all of that check out:
http://www.obscure.co.uk/the_pitch.shtml and
http://www.obscure.co.uk/demo.shtml

Dan Marchant
Obscure Productions
Game Development & Design consultant

thanks for the guidelines!