How do studios like Splash Damage pay the bills while developing their big game? Does it come from iD or Activision?
How much does it cost to develop a game of this magnitude (say 3-4 year dev)?
How does the studio recoup its development cost? I’m assuming the studio isn’t involved with packaging and shipping and retail, so at what point do they get paid? Or do they just paid to make the game?
Its all to do with how many coffees they buy as they get money back
from the cups!!
http://compsci.ca/blog/profitability-in-video-game-industry/
Sony, that also develops their own games, is scaling up its internal development resources. Sony is now employing over 2000 developers across 14 game studios. This makes for a 140 staff game studio, burning through $20 million to publish a game title for a single platform, once every 2 years. Sounds huge, but if you do the math, an average employee in such studio still earns less than a programmer in other high tech industries.
So, if you back out the math, this comes out to $715K per 10 developers per year, which sounds really low when you count salaries, 30% overhead for taxes, benefits, etc + infrastrucure (building, servers, etc). So let’s call it an even $1 million per 10 developers.
I imagine that some companies do like SD did in their very early days and take on side projects while the do the primary game development (map expansion backs for the GOTY version, some commercial work)
To cover the remainder though, I imagine that a publisher would have to cover some of their expenses with an advance or retainer.
wooo a fancy high tech reply, i like the tapir answer to that fancy one abt business stuffy and stuff one!!
I still think they get more money from the coffee cups though!!
since they aren’t located in the US, most of their costs at this point can be classified as ‘research and development’.
i forget what all this entitles them…outside of saving loads and loads of money. if they were located in the US all these would be out of pocket, kiss it goodbye.
sadly the accounting class where we talked about that was taken a year ago, so i’ve forgotten most of it.
good reply iffy.
So that article centered mostly on a company like Sony or MS footing the bill for an exclusive game. ETQW will ship for consoles and PC and could possibly be more lucrative than for an exclusive console (tbh I didn’t pay attention to which consoles). Yes, I know another studio is working on the console port(s) but I’d bet SD get a percentage.
So reading that article, SONY is commiting $20M over 2 years for an exclusive game. In ETQW’s case, is Activision the company footing the bill or is it iD?
To Bob Jones.
So what does it matter if it’s classified as RnD? Employees gotta eat! Where is the RnD money coming from? As one in the biotech field, I can tell you RnD isn’t cheap!
If I had to hazard a guess, it’s probably a bit of both. I doubt ATVI would take on 100% of the risk, especially if it’s ids decision about ‘when it’s done’, though they probably have much deeper pockets than id.
The $20 MM figure I quoted above, I assumed was in reference to a exclusive game, probably released across multiple platforms. However, Splash Damage is also currently running a 30-person studio.
To Bob Jones.
So what does it matter if it’s classified as RnD? Employees gotta eat! Where is the RnD money coming from? As one in the biotech field, I can tell you RnD isn’t cheap!
take food for example. for a company in the US that would be classified as an expense. but for splash damage, its classified as research and development, which is an asset.
so instead of $20million of expenses on their books, they have $20million of assets.
and since net income = revenues - expenses, they have a $20million boost for the time they spend in development.
I think our expenses count as expenses as far as the UK government is concerned. We’re not in some crazy tax-free, expense-free magical fairy land. 
This thread is good because it gives some perspective (i.e. the high costs of making games for us) to the debate on ads in maps.
My additional question, to the ones EnderWiggin.DA asked, is perhaps retorical but nevertheless of some interest to me: How has the financials of international game development changed over the last ten years? I can imagine that the costs have escalated dramatically.
Ifurita, thanks for the excellent links (Sony article above and the ones below).
Found some interesting articles:
http://www.gamedev.net/reference/articles/article867.asp <-- written in 1999, but explains how developer advances work
Wikipedia has an interesting section on Game Developer economics
http://www.etc.cmu.edu/about/press_articles/15.html <-- another interesting article discussing the split between distributor, publisher, and developer.
Props to Iffy for doing the research in this thread.
bobjones:
Things like food, travel, office space/equipment and administrative staff are always expenses, and this is a significant part of the cost for most companies.
The time spent on R&D may be counted as an asset or investment in some situations (such as when estimating the value of a company) since it has the potential (unlike jRAD’s pizza) to generate a profit in the future. At the end of the day it still has to be paid for like any other expenses, and it doesn’t really matter if you include it in expenses or “cost of sales” or whatever, it still affects the net income negatively.
Off subject!
Ive seen them old men rock 4 times and they are awesome live!!!
Eliminator(just brilliant), Afterburner(megabrill), Recycler (Milton Keynes was excellent), Antenna(was good)!!
Excellent finds Iffy!
That first article (1999) is very sobering. Interesting how the author predicts online game distribution (I’m thinking Valve) and bundling which Valve is doing with HL2:EP2. Consoles have also seemed to adapt a bundling strategy with their new hardware.
Second (Wiki) article. I had forgotten about how Activision started. Granted, Activision is now a bigger company. I wonder if the company remembers its roots and treats developers any better than other publishers. Random story: at work we have a “paper money” stock competition. I bought Activision stock hoping ETQW would come out in May. I still made money, but not a ton… /end anecdote.
Mostly these articles discuss two entites: the developer and the publisher. In ETQW’s case, Activision is the publisher, SD is the developer as stated at the bottom of the community.enemyterritory site. But we have a third entity, id. I guess I’m still confused how they fit into the picture. Perhaps id has enough money that they can fund more of the game development? They certainly provided the “base” game engine which would have been a significant investment for SD.
Bah… maybe I’m making this too complicated. From Spong’s interview.
Paul says: “And of course there are lots of developers that have to succumb to that. But id Software does it differently. They’ve always had a “when it’s done” ethic and it works okay for them.”