I’ve been waiting days to cover this story because I wanted to better frame my approach. See, 3.4 million copies sold of a game are some pretty lofty numbers. Sure, maybe that’s a poor number for say, a console Zelda release, but it’s still a profitable number. Tomb Raider’s original popularity may never be matched, but since the 90’s the franchise has been pretty pathetic in sales numbers, failing to even top 1 million.
In comes a highly touted and well reviewed reboot of the whole franchise. It moved 3.4 million physical copies across all platforms, the most the series has moved since the 90’s. In addition, if you add digital sales, you’re likely looking at a number north of 4 million total sales. That ranks it as the 3rd best selling game in the series and probably when it’s all said and done, potentially the 2nd best. That, to me, seems like a very successful reboot. The fans are raving, the critics are raving, people bought the product, and things seem fine.
Until we find out that Square lost money on the project. So much so they themselves called it a failure. So, what’s wrong?
For starters, if this was a one off issue you could simply just say that Square spent way too much on the product and expected sales numbers far higher than are feasible for a series that back in the 90’s, with far less platforms and a more focused gaming community, best selling game sold just north of 5 million copies. However, they had two other notable failed games last year that sold well and other publishers have experienced the same ordeal. Even Nintendo sold under expectations for Skyward Sword, though they didn’t complain about any financial loss, suggesting it was still marginally profitable.
You see, the problem I am noticing in the industry comes down to the allocation of funding. Developers are under an impression they have to push the bleeding edge of capability even in generation 7 consoles to generate interest. Beyond that, they fell like they need to drop 50+ million dollars on marketing just to get a game noticed. They are simply spending money foolishly for a quicker turn around to meet “supposed” demand.
Some companies are notorious for taking their time, bucking that trend. Take, for example, Nintendo and Valve. Both companies have some mega block buster titles, and neither of them seem to be in a big rush to get these games out. They are ready when they are ready. They don’t balloon the budgets to get it done faster. They don’t worry about pushing the abosolute maximum out of a system. They just want a game that, in general, is a fantastic experience to play for various different reasons. That’s the first priority. Everything else is secondary, including pushing hard deadlines.
Pikmin 3 went from a launch game to a launch window. Now a launch window game to possibly a summer release. Valve has been teasing Half-Life 3 here and there for years, yet they wont be giving any sort of exact date until it’s good to go. Both of these companies are relatively healthy, with Nintendo being the one worst off because they are still pushing hard in the hardware business – but either case neither company is losing billions. Not like Square Enix.
In the case of the ever growing gaming budgets, developers and publishers are under this impression that the more you spend, the more sales you’ll get. Despite the fact that model has never been true. They look at games like Call of Duty, which sell 20+ million copies annually, and think they too can balloon their budget and get that same success. Call of Duty’s success never started with a massive budget. It started with a decent following from previous World War II games combined with a more modernized war shooter that built upon the multiplayer aspects Halo introduced to consoles. They took what was working and made it work even more. They essentially created Goldeneye from the N64 era, and they are going to milk it until people no longer want it.
The thing is, they can balloon their budget, because the revenue was realized before the decisions was made. I work for a small time software company and the biggest no-no in any budget plan is spending money before you have it – especially spending large amounts of money before you have it. It’s true that you do need to take risks and spend money to make money, but you need to make those risks reasonable.
So reasonably, a million sales or more should be considered a profit margin. Look at a million sales as a benchmark, what are the profits you would make off of that, and start your budget there. That’s how you do good business. You should never over budget and expect sales that put you in the upper echelon of games sales, especially when it’s a series that was never up in those numbers to begin with.
The same is true for new IP. Dishonored came out last year from Bethesda. It had a very modest budget with almost no expected sales for revenue (I think the profit turn around was just 800k in sales). They moved 2.45 million units, and that’s only counting physical product. It was a success, and this is the same company that tips the scales with games like The Elder Scrolls – something they can do based on previous sales of former games in the series (so, they have the money and a decent expectation for sales).
Dishonored’s next game will likely have a bigger budget because their is now an established base of at least 2 million to sell to, and they have a high profit margin off the first. This is further proof of a few things that seem counter productive to the general train of thought. Those are as follows:
– You have to have cutting edge graphics for success.
– You need a big budget to even consider making a AAA game.
– Again, Graphics, Graphics, Graphics.
For those unaware, Graphics are the #1 cost right now in game development. They are skyrocketing. What you need to do is simply make a great product, and then market it in the correct avenues, and you will see success. Can you eventually make some bleeding edge visual stunner that is also profitable? Sure, but only after the profits already existed to make this a possibility.
Too many companies are just spending big, hoping to cash in. Game prices aren’t rising to compensate, so they need to change their budgets to adjust. They continue to not do so, and this is why the AAA industry is “crashing” as it were. Can it be turned around? Of course, but not until the budget makers get their heads out of their asses. Stop feeling pressured to release big games quickly. Ballooning projects and having 300+ employees. Cut back and return to what really makes games fun. A select few studios get it. The rest? Those are the ones we keep hearing about in the news, and not for good reasons.