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tintifaxl 03-04-2011 10:46 AM

The one thing I don't like about Steam is if you can't login, you can't play. This happens to me a few times a year, so I will not buy IL2 via Steam.

Kikuchiyo 03-04-2011 11:13 AM

Quote:

Originally Posted by Vevster (Post 230496)
I don't quite understand your first sentence "Steam sales cost *Meant "give"* the company(s) offering games through them a higher margin of profit "

Do you mean Steam takes a higher cut? That would be exact but contradictory to what you write further


Steam, as a publisher often take a higher % than a retailer. That's because they act both as publisher & retailer for some games. They can take as much as 80% of price for some indie games....They take the risk with infrastructure as a retailer takes the risk with shelf space.

So when you say "it is technically more profitable to offer your games solely through steam than through Steam and B&M stores. " I'll answer "it depends, and sometimes it's quite the opposite". Each case is different; too many parameters to sum up.

Some people do not like DLing games, via Steam or else.


Best thing today is to offer both DL & boxes, gives a broader audience. That's why publishers like Ubi also offer games on steam.

Not sure what you are having trouble understanding with that first sentence. Companys that sell their games through Steam tend to see a 70% profit vs 30% profit for box copies. Sorry for the miswording it has been corrected

No it technically is more profitable to offer a game solely through a DD than it is to offer a boxed copy. Less overhead = less cost to publisher.

I'd like to see some citation on that Steam charging 80% to a developer to use Steam. I find that highly unlikely, and even less likely that a indie publisher would accept such a steep cost to get their game on the market. I am actually using estimates made by market analysts, and have never seen anything that suggests that Valve takes such a huge chunk of anyone's profits.

oh and so we are clear I am getting my info from a small financial company you may have heard of Forbes.

Vevster 03-04-2011 12:14 PM

Quote:

Originally Posted by Kikuchiyo (Post 230554)
Not sure what you are having trouble understanding with that first sentence. Companys that sell their games through Steam tend to see a 70% profit vs 30% profit for box copies. Sorry for the miswording it has been corrected]


Please define profit, but in any case, the % are wrong.
I think I have seen more profit and loss statements of video games (products) than you do. Unless you have worked for a major editor or studio, that is.
My source is my job experience in the video game industry


Quote:

Originally Posted by Kikuchiyo (Post 230554)
No it technically is more profitable to offer a game solely through a DD than it is to offer a boxed copy. Less overhead = less cost to publisher.

There are many cases here, and not always less overheads:
- the company distributes online by its own means (no steam): has to buy servers, pay for bandwith etc... compared to manufacturing costs. Manufacturing costs are very low and essentially variable. Servers are fixed costs (could be variable if externalized). If you distribute a lot online, then fixed costs can be offset well.
Main drawback of boxes, again, are the unsold inventory: in some countries, they can be send back by retailers; in most, unsold copies will see price decline rapidly, and those unsold to retailers will have to be destroyed (while manufacturing costs have been incurred)
- the company distributes onlina via steam: they pay a service, steam charges for it, depending on the level of service & risk ; see below


Quote:

Originally Posted by Kikuchiyo (Post 230554)

I'd like to see some citation on that Steam charging 80% to a developer to use Steam. I find that highly unlikely, and even less likely that a indie publisher would accept such a steep cost to get their game on the market. I am actually using estimates made by market analysts, and have never seen anything that suggests that Valve takes such a huge chunk of anyone's profits.]

If you read french, buy the PC Magazine Canard PC and read their article about steam. Will look it for you and find the game they mentionned (said the studio got 10% on reatail price - have to take out VAT to calculate each chnk, but that would be around 85% for stema, 15% for the studio

Also, do not forget that Steam acts 2 ways:
- online distributor, for instance for some THQ, Ubi etc... games: in that case, they take the equivalent of a retailer's chunk (20 to 30%)
- publisher AND retailer: when an indie game for instance is distributed via steam: in that case, they take the equivalent of a retailer (20-30%) plus a chunk as publisher. And that can go high depending on the contract (40-60%).
Main difference is , afaik, Steam doesn't prefinance a lot of games the way editors do; so their contracts with studios are quite different, and studios get money on each unit sold. On the other hand they get no guaranteed minimum (as is the case in most editor-studio deals; that's an advance on royalties system)

The % given by Forbes are for publishers, not studios. And frankly, these are not at all the figures I've looked at (retailers take 20 to 30% max, including returns etc...). Gross margin includes manufacturing costs (Net revenues - Manufacturing costs, that's all)
If they got 30%, they would all be bankrupt.
As I said, average is above 50% (60%) on a full year and there are not enough online copies (at 70%) to offest the larger number of boxes sold (at 30% according to Forbes). I call BS on that one. Probably a question of wording:

EA gross Margin (p107): from 60% in 2006 to 49% in 2010 with an increase of online distribution ...)
http://files.shareholder.com/downloa..._Arts-2010.pdf

Ubi gross margin:
http://www.ubisoftgroup.com/gallery_.../1042/2360.xls
around 60% on a full year (59% to 66%)

To reach a 60% gross margin with the % (30% - 70%) given by forbes would mean that Ubi sells 3 times more games through steam than through retailers. and that is just plain wrong


Steam is certainly a great platform and a good publisher for small studios, but asserting that these studios always get more than if they'd taken another (mainstream) editor is wrong. Some get more, some get less.

If you don't need to prefinance your game, best deal can be steam (but hey, you can negociate with other editor)
If you need to prefinance your game, today, I'm not certai at all that Steam is helpful.
And you have to take into account that advance on royalties paid by an editor in the % of profit you mentionned in the first place....

Kikuchiyo 03-04-2011 01:08 PM

Quote:

Originally Posted by Vevster (Post 230568)
Please define profit, but in any case, the % are wrong.
I think I have seen more profit and loss statements of video games (products) than you do. Unless you have worked for a major editor or studio, that is.
My source is my job experience in the video game industry




There are many cases here, and not always less overheads:
- the company distributes online by its own means (no steam): has to buy servers, pay for bandwith etc... compared to manufacturing costs. Manufacturing costs are very low and essentially variable. Servers are fixed costs (could be variable if externalized). If you distribute a lot online, then fixed costs can be offset well.
Main drawback of boxes, again, are the unsold inventory: in some countries, they can be send back by retailers; in most, unsold copies will see price decline rapidly, and those unsold to retailers will have to be destroyed (while manufacturing costs have been incurred)
- the company distributes onlina via steam: they pay a service, steam charges for it, depending on the level of service & risk ; see below




If you read french, buy the PC Magazine Canard PC and read their article about steam. Will look it for you and find the game they mentionned (said the studio got 10% on reatail price - have to take out VAT to calculate each chnk, but that would be around 85% for stema, 15% for the studio

Also, do not forget that Steam acts 2 ways:
- online distributor, for instance for some THQ, Ubi etc... games: in that case, they take the equivalent of a retailer's chunk (20 to 30%)
- publisher AND retailer: when an indie game for instance is distributed via steam: in that case, they take the equivalent of a retailer (20-30%) plus a chunk as publisher. And that can go high depending on the contract (40-60%).
Main difference is , afaik, Steam doesn't prefinance a lot of games the way editors do; so their contracts with studios are quite different, and studios get money on each unit sold. On the other hand they get no guaranteed minimum (as is the case in most editor-studio deals; that's an advance on royalties system)

The % given by Forbes are for publishers, not studios. And frankly, these are not at all the figures I've looked at (retailers take 20 to 30% max, including returns etc...). Gross margin includes manufacturing costs (Net revenues - Manufacturing costs, that's all)
If they got 30%, they would all be bankrupt.
As I said, average is above 50% (60%) on a full year and there are not enough online copies (at 70%) to offest the larger number of boxes sold (at 30% according to Forbes). I call BS on that one. Probably a question of wording:

EA gross Margin (p107): from 60% in 2006 to 49% in 2010 with an increase of online distribution ...)
http://files.shareholder.com/downloa..._Arts-2010.pdf

Ubi gross margin:
http://www.ubisoftgroup.com/gallery_.../1042/2360.xls
around 60% on a full year (59% to 66%)

To reach a 60% gross margin with the % (30% - 70%) given by forbes would mean that Ubi sells 3 times more games through steam than through retailers. and that is just plain wrong


Steam is certainly a great platform and a good publisher for small studios, but asserting that these studios always get more than if they'd taken another (mainstream) editor is wrong. Some get more, some get less.

If you don't need to prefinance your game, best deal can be steam (but hey, you can negociate with other editor)
If you need to prefinance your game, today, I'm not certai at all that Steam is helpful.
And you have to take into account that advance on royalties paid by an editor in the % of profit you mentionned in the first place....


Personally I am want to trust the figure estimates of a large established financial market expert like Forbes over a gaming magazine whose name (if I am not mistaken) is commonly used to indicate satire in the French language. What's more is indie developers are a different animal from established developers like 1C who I am sure gets a more fair deal due to a decreased risk of loss on the part of Valve.

What's more is I said profits on retail copies are 30% I think you are misinterpreting what I am saying here. 30% would be after costs from publisher and costs of manufacturing, and costs from retailers. You can't fairly include the profit margins of co-dev/publisher houses in that figure. We are talking about Developers (not indie) that have to use a 2nd party for publishing. I am sure Forbes has done their research on these things. I highly doubt they just guessed. Likely extrapolated those figures using financial algorithms. That said I am sure there is give and take as even Forbes would have some fuzzy area considering Valve's contracts with developers and publishers alike prohibit them from disclosing exact percentages.

I can't seriously take into account anecdotal evidence as validation of proof either. Not intended to be insulting. It is a very interesting conversation, and I am rather enjoying it :D

Heliocon 03-04-2011 01:16 PM

Quote:

Originally Posted by Vevster (Post 230568)
Please define profit, but in any case, the % are wrong.
I think I have seen more profit and loss statements of video games (products) than you do. Unless you have worked for a major editor or studio, that is.
My source is my job experience in the video game industry




There are many cases here, and not always less overheads:
- the company distributes online by its own means (no steam): has to buy servers, pay for bandwith etc... compared to manufacturing costs. Manufacturing costs are very low and essentially variable. Servers are fixed costs (could be variable if externalized). If you distribute a lot online, then fixed costs can be offset well.
Main drawback of boxes, again, are the unsold inventory: in some countries, they can be send back by retailers; in most, unsold copies will see price decline rapidly, and those unsold to retailers will have to be destroyed (while manufacturing costs have been incurred)
- the company distributes onlina via steam: they pay a service, steam charges for it, depending on the level of service & risk ; see below




If you read french, buy the PC Magazine Canard PC and read their article about steam. Will look it for you and find the game they mentionned (said the studio got 10% on reatail price - have to take out VAT to calculate each chnk, but that would be around 85% for stema, 15% for the studio

Also, do not forget that Steam acts 2 ways:
- online distributor, for instance for some THQ, Ubi etc... games: in that case, they take the equivalent of a retailer's chunk (20 to 30%)
- publisher AND retailer: when an indie game for instance is distributed via steam: in that case, they take the equivalent of a retailer (20-30%) plus a chunk as publisher. And that can go high depending on the contract (40-60%).
Main difference is , afaik, Steam doesn't prefinance a lot of games the way editors do; so their contracts with studios are quite different, and studios get money on each unit sold. On the other hand they get no guaranteed minimum (as is the case in most editor-studio deals; that's an advance on royalties system)

The % given by Forbes are for publishers, not studios. And frankly, these are not at all the figures I've looked at (retailers take 20 to 30% max, including returns etc...). Gross margin includes manufacturing costs (Net revenues - Manufacturing costs, that's all)
If they got 30%, they would all be bankrupt.
As I said, average is above 50% (60%) on a full year and there are not enough online copies (at 70%) to offest the larger number of boxes sold (at 30% according to Forbes). I call BS on that one. Probably a question of wording:

EA gross Margin (p107): from 60% in 2006 to 49% in 2010 with an increase of online distribution ...)
http://files.shareholder.com/downloa..._Arts-2010.pdf

Ubi gross margin:
http://www.ubisoftgroup.com/gallery_.../1042/2360.xls
around 60% on a full year (59% to 66%)

To reach a 60% gross margin with the % (30% - 70%) given by forbes would mean that Ubi sells 3 times more games through steam than through retailers. and that is just plain wrong


Steam is certainly a great platform and a good publisher for small studios, but asserting that these studios always get more than if they'd taken another (mainstream) editor is wrong. Some get more, some get less.

If you don't need to prefinance your game, best deal can be steam (but hey, you can negociate with other editor)
If you need to prefinance your game, today, I'm not certai at all that Steam is helpful.
And you have to take into account that advance on royalties paid by an editor in the % of profit you mentionned in the first place....

1. you are completely wrong. There has been many articles about profit margins in Steam vs normal retailers and steam takes a FLAT RATE for each game sold (in %) and steam itself released the statistics on profit margins. His numbers are correct I have seen them myself (and will track the link).

2. Stop the: "I am a game developer" because its the internet and anyone with half a brain knows you can claim whatever you want and there is no way to verify it. So please tell me your name and the company you work for so I can verify your statements. If not dont make stuff up.

Steam gives a FAR LARGER profit margin to devs because 1. They dont require a publisher (and steam IS NOT a publisher, purely distribution and in console advertisement). 2. They dont have to pay for the physical distribution and creation of the hard copies.
This gives steam sales a far far larger profit margin then normal retail sales especially with a publisher.

- calling you on your bs, this article is from Darryl Still the 1C Publishing director and his opinion on Steam vs retail: http://www.mcvuk.com/features/808/OP...etail-vs-Steam

Forbes confirming similar numbers: http://www.forbes.com/forbes/2011/02...ne-mayhem.html

*cleaned up the language

Vevster 03-04-2011 01:47 PM

Kikuchiyo,

no problem. You do not have to believe me or something you haven't read :-P

Just explain me how Forbes figures (30% -70%) can be accurate when I showed you financials from two publishers showing a profit margin (gross margin) of 50% or 60% .

To reach an average of 50% with Forbes figures, that would mean EA sells as much through Steam than on boxes (70+30)/2 = 50 ; at the same average price
I do not think that is the case. Therefore, the 30% figure seems highly doubtful

To reach 60% average (Ubi) , that would mean 3 sales on steam to 1 box (70+70+70 +30)/4; at the same average price.
Not possible either.


Therefore, 30% gross margin on retail business is just wrong. As I said, Forbes probably means something else, though they say: "Publishers earn a gross margin of around 70% on Steam, compared with 30% via retail stores"

Again, look at the figures I presented from two publishers, and tell me how that works with what Forbes say. Figures from the publishers are official ones (listed companies)


Heliocon:
1- there has been many articles saying that Steam does not take the same % for each game too. So a broad statement (stam gives more to all compared to others) is not necessarily true. That was one pf my point.
2 - I never said I am a developper, just that I have experience in the industry, and given the way your request for name & company, you won't get anything. It's the internet, correct, and there are some bullies out there. :)
I frankly do not care if you believe me or not regarding my experience.
Those who count for me know, and some are on this forum.

I don't even ask them to vouch for me, as it is utterly useless.


You're mixing some suff here: you talk about the % given to publishers then conclude that Steam gives more to studios (devs).

Problem is, Steam gives only something per copy sold (your own words).

A publisher (EA, Ubi etc...) sometimes (often) prefinance the game.
So you do not have to compare only the % given after release, but also incluse the advance on royalty paid to make an hones comparison of what the devs receive. I hope you agree with that...


Anyway, I personnally like steam, use it, am grateful because I think they helped the PC market and like that retailers are whining about it while at the same time often refusing to put PC games on their shelves.
Think what you want about the figures, they do not compute in the case of those given by Forbes.

Kikuchiyo 03-04-2011 01:58 PM

Quote:

Originally Posted by Vevster (Post 230649)
Kikuchiyo,
Just explain me how Forbes figures (30% -70%) can be accurate when I showed you financials from two publishers showing a profit margin (gross margin) of 50% or 60% .

To reach an average of 50% with Forbes figures, that would mean EA sells as much through Steam than on boxes (70+30)/2 = 50 ; at the same average price
I do not think that is the case. Therefore, the 30% figure seems highly doubtful

To reach 60% average (Ubi) , that would mean 3 sales on steam to 1 box (70+70+70 +30)/4; at the same average price.
Not possible either.

Again, look at the figures I presented from two publishers, and tell me how that works with what Forbes say. Figures from the publishers are official ones (listed companies)

You're mixing some suff here: you talk about the % given to publishers then conclude that Steam gives more to studios (devs).

Problem is, Steam gives only something per copy sold (your own words).

A publisher (EA, Ubi etc...) sometimes (often) prefinance the game.
So you do not have to compare only the % given after release, but also incluse the advance on royalty paid to make an hones comparison of what the devs receive. I hope you agree with that...


Anyway, I personnally like steam, use it, am grateful because I think they helped the PC market and like that retailers are whining about it while at the same time often refusing to put PC games on their shelves.
Think what you want about the figures, they do not compute in the case of those given by Forbes.

I did address your figures from the large dev/publisher houses of EA and Ubisoft, but perhaps it wasn't clear. Their figures would be a skew to the statistics that Forbes is showing for the simple fact that they both publish and develop games so their profit margins would be a conglomerate of both aspects. Basically they can take in a much larger profit from in house development on both retail and DD sales which would seriously affect their margin of profit by the end of the year, and what's more is they don't pay out to developers, that they act as a middleman publisher for, until the end of a fiscal quarter. That means they collect interest on that money in the intervening time and can count that as additional profit.

I didn't say that Steam gave more to developer's than publishers at any point. I said the profit margin for a developer that went solely with DD rather than DD and a Publisher would see a higher profit margin per unit sold.

As do publishers. If you believe that publisher pay a developer per boxed unit produced you are sorely mistaken. They pay out to developers a percentage of sales.

As to the prefinance aspect the publisher then takes that money back off of the initial sales until the loan is paid off, because financing is a loan after all.

Edit: Sorry for the multiple edits I just dropped some talking points unintentionally and wanted to address them.

Vevster 03-04-2011 02:15 PM

Quote:

Originally Posted by Kikuchiyo (Post 230658)
I did address your figures from the large dev/publisher houses of EA and Ubisoft, but perhaps it wasn't clear. Their figures would be a skew to the statistics that Forbes is showing for the simple fact that they both publish and develop games so their profit margins would be a conglomerate of both aspects. Basically they can take in a much larger profit from in house development on both retail and DD sales which would seriously affect their margin of profit by the end of the year, and what's more is they don't pay out to developers, that they act as a middleman publisher for, until the end of a fiscal quarter. That means they collect interest on that money in the intervening time and can count that as additional profit.

There is a small problem here: Gross margin is simply:
Net Revenues - Cost of Sales (Manufacturing costs for instance):
Divided by revenues if you want to express it as a %
http://en.wikipedia.org/wiki/Gross_margin
http://www.investopedia.com/terms/g/grossmargin.asp

To explain briefly, with some simplification, pardon me:

+ Gross Revenue = what you sell to retailers (before their chunk / after, depends on the countries)
- retailers chunk (margin, rebate, returns etc...)
------------------------------------------------
= Net Revenues
- cost of goods sold (manufacturing costs, storage, delivery, ...)
------------------------------------------------
= Gross Margin

Just look at the financials if you doubt this

So, there is absolutely no difference on that between an in-house game and an external one.
Development costs are not part of Cost of goods sold.

They are booked at a lower level (Operating expenses) with marketing and royalties (giving a Margin on direct costs for some companies)


If you look at EA Financials, hey are on the Research and development line
If you look at Ubi's financials, they are also on the line R&D expenses;


all below the gross margin .

Forbes talk about the gross margin, I maintain there is something wrong in
their article (either the term, or the % , at least about retailers)





Quote:

Originally Posted by Kikuchiyo (Post 230658)
I didn't say that Steam gave more to developer's than publishers at any point. I said the profit margin for a developer that went solely with DD rather than DD and a Publisher would see a higher profit margin per unit sold.

Yes, if the developper didn't need any pre financing. Again: it depends. Don't make it an absolute truth for all cases.

Quote:

Originally Posted by Kikuchiyo (Post 230658)
I
As do publishers. If you believe that publisher pay a developer per boxed unit produced you are sorely mistaken. They pay out to developers a percentage of sales.

I know how publisher pay a developper. It can be many things:
- per unit (doesn't happen that often, but can happen in a purly distribution contract, ie the dev has already the boxes done)
- % of sales (not htat often either)
- % of gross margin (more often, still not the majority)

- % of a margin, defined in the contract as for instance:
Gross magin - some marketing (can be capped or not) - distribution costs (commissions) - own development of publisher (sometimes happen) etc...

That is the majority of the caes (each contract is different)

Quote:

Originally Posted by Kikuchiyo (Post 230658)
As to the prefinance aspect the publisher then takes that money back off of the initial sales until the loan is paid off, because financing is a loan after all.

It's not a loan per se , as it is a minimum revenue guaranteed: if, based on the calculations given in example above, the royalties to be paid exceed the advance made, the publisher (editor) will pay more to the developper.

If the royalties calculated do not exceed the advance made, the developper doesn't give money back to the editor.

Threfore, to calculate the revenue of a dev, you have to include the advance made if any and the royalties paid above that.

Kikuchiyo 03-04-2011 02:30 PM

Quote:

Originally Posted by Vevster (Post 230664)
There is a small problem here: Gross margin is simply:
Net Revenues - Cost of Sales (Manufacturing costs for instance):
Divided by revenues if you want to express it as a %
http://en.wikipedia.org/wiki/Gross_margin
http://www.investopedia.com/terms/g/grossmargin.asp

To explain briefly, with some simplification, pardon me:

+ Gross Revenue = what you sell to retailers (before their chunk / after, depends on the countries)
- retailers chunk (margin, rebate, returns etc...)
------------------------------------------------
= Net Revenues
- cost of goods sold (manufacturing costs, storage, delivery, ...)
------------------------------------------------
= Gross Margin

Just look at the financials if you doubt this

So, there is absolutely no difference on that between an in-house game and an external one.
Development costs are not part of Cost of goods sold.

They are booked at a lower level (Operating expenses) with marketing and royalties (giving a Margin on direct costs for some companies)


If you look at EA Financials, hey are on the Research and development line
If you look at Ubi's financials, they are also on the line R&D expenses;


all below the gross margin .

Forbes talk about the gross margin, I maintain there is something wrong in
their article (either the term, or the % , at least about retailers)







Yes, if the developper didn't need any pre financing



I know how publisher pay a developper. It can be many things:
- per unit (doesn't happen that often, but can happen in a purly distribution contract, ie the dev has already the boxes done)
- % of sales (not htat often either)
- % of gross margin (more often, still not the majority)

- % of a margin, defined in the contract as for instance:
Gross magin - some marketing (can be capped or not) - distribution costs (commissions) - own development of publisher (sometimes happen) etc...

That is the majority of the caes (each contract is different)



It's not a loan per se , as it is a minimum revenue guaranteed: if, based on the calculations given in example above, the royalties to be paid exceed the advance made, the publisher (editor) will pay more to the developper.

If the royalties calculated do not exceed the advance made, the developper doesn't give money back to the editor.

Threfore, to calculate the revenue of a dev, you have to include the advance made if any and the royalties paid above that.

What you are disounting (which has been my point) is that the publishers do not take a cut of the profits on a retail box version of a game they develop like they do on a second party developer. A publisher takes about 50% of the profit on a retail box version of a game they publish on behalf of an outside developer.

But they will not pay out on that money already paid to the developer I was saying that it is not additional revenue to the developer. It is as you said a loan made on projected sales that the publisher will not pay out on initial sales.

I never said the developer has to pay back if the game flops, but the developer will not see additional revenue either.

I agree and never refuted that, but it is not money over and above the flat percentage rate paid to the developer on sales.

Heliocon 03-04-2011 02:38 PM

Quote:

Originally Posted by Vevster (Post 230664)
There is a small problem here: Gross margin is simply:
Net Revenues - Cost of Sales (Manufacturing costs for instance):
Divided by revenues if you want to express it as a %
http://en.wikipedia.org/wiki/Gross_margin
http://www.investopedia.com/terms/g/grossmargin.asp

To explain briefly, with some simplification, pardon me:

+ Gross Revenue = what you sell to retailers (before their chunk / after, depends on the countries)
- retailers chunk (margin, rebate, returns etc...)
------------------------------------------------
= Net Revenues
- cost of goods sold (manufacturing costs, storage, delivery, ...)
------------------------------------------------
= Gross Margin

Just look at the financials if you doubt this

So, there is absolutely no difference on that between an in-house game and an external one.
Development costs are not part of Cost of goods sold.

They are booked at a lower level (Operating expenses) with marketing and royalties (giving a Margin on direct costs for some companies)


If you look at EA Financials, hey are on the Research and development line
If you look at Ubi's financials, they are also on the line R&D expenses;


all below the gross margin .

Forbes talk about the gross margin, I maintain there is something wrong in
their article (either the term, or the % , at least about retailers)







Yes, if the developper didn't need any pre financing. Again: it depends. Don't make it an absolute truth for all cases.



I know how publisher pay a developper. It can be many things:
- per unit (doesn't happen that often, but can happen in a purly distribution contract, ie the dev has already the boxes done)
- % of sales (not htat often either)
- % of gross margin (more often, still not the majority)

- % of a margin, defined in the contract as for instance:
Gross magin - some marketing (can be capped or not) - distribution costs (commissions) - own development of publisher (sometimes happen) etc...

That is the majority of the caes (each contract is different)



It's not a loan per se , as it is a minimum revenue guaranteed: if, based on the calculations given in example above, the royalties to be paid exceed the advance made, the publisher (editor) will pay more to the developper.

If the royalties calculated do not exceed the advance made, the developper doesn't give money back to the editor.

Threfore, to calculate the revenue of a dev, you have to include the advance made if any and the royalties paid above that.

Wrong - gross revenue is the profit from the number of units sold to a retailer, the chunk a retailer takes is not factored into gross revenue/returns because the retailer marks up the price from the original sales price (say the publisher/dev sells the game for $45 to the retailer that sells it for $60. The $45 is the gross revenue/profit). Therefore this is purely a mechanism of units sold x unit price. The only time you would remove revenue from this is if you were calculating that the revenue would go to more than 1 source (publisher and dev for example).

Net profit takes into account all the associated fees with manufacturing, shipping, loans/interest etc and gives you the end profit all things being equal (all factors accounted for).

What steam is giving is a higher net profit - not gross (although it is also higher because more copies are moved). So since there is less overhead and steam takes a much lower chunk then a publisher usually does there is MUCH higher net profit (30% vs 70%+).

As for the cash forwards to develope a game - yes you are correct, but it many companies have survived without it (look at EVE).


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