Going gold?

[Kikuchiyo]

Originally Posted by Vevster

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.