Going gold?

[Heliocon]

Originally Posted by Vevster

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....

Going back and quoting your statements earlier that you made. Because you contradict yourself/dont know what you are talking about. Quoting you "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:"
- This is what I addressed earlier - you are comparing profit from retail store sales to steams sales on the basis of number of units shipped, NOT % profit margin which is what the 30% vs 70% is. Thats a gross profit margin, not % of end gross profit.

"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%)."

- Thats a lie, Steam DOES NOT publish anyone elses games but Valve's (the company that owns/created Steam. Your numbers are not true, Steam never acts as a publisher, just a distributer. The only time it may act as a publisher is posting advertisements in the console which is advertisement and not "publishing". Steam does however charge royalties for using the Source engine but that is a different matter.

"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."

-Gross margin does not include manufacturing costs. You are now contradicting yourself in later posts. Also you are interchanging and confusing terms and numbers. Again like I hae tried to point out earlier, you are confusing yourself. Also again the point is wrong anyway because if I make 30% gross profit per sale and my other costs are only 5% of the products cost then I can easily cover my expenses.

-The EA and Ubi financial reports you gave do not include any accurate data that is relevant to your argument. Their gross sales profit is a conglomerate from many products, many distribution methods and many regions. It does not support the argument you are making. Also EA is a developer AND publisher, while Ubisoft is a publisher. The argument is over publisher vs no publisher and its effects on the development studios end profits if publishing on steam. Again you did not show developer figures. Also your assesment of a decline in profit due to digital sales as you said in your post is idiotic. First these profits include CONSOLE game sales aswell, second there is currently a recession and that reduces sale quantities among other things. Basically your full of it.