Going gold?

[Vevster]

Originally Posted by Kikuchiyo

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)

Originally Posted by Kikuchiyo

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.

Originally Posted by Kikuchiyo

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)

Originally Posted by Kikuchiyo

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.