Developing The Game

Creating a great video game is all about taking a good idea, getting it approved and funded, putting together a team, ensuring it stays within budget and getting it out the door on time.

Video game development costs have continued to rise since the 1980s. In the 80s, a development budget of $500,000 would be fantastic and overkill, but now it just barely scratches the surface. In today’s world, video games are big business and usually cost anywhere from $10 to $35 million to produce a first-class console game for the Xbox 360 or Playstation 3.

Why are games so much more expensive to make? Part of the reason is you. Gamers expect more and more from developers today. Back in the 90s, a “large” game like Final Fantasy VI needed 24mb of space on a Super Nintendo cartridge. Compared to the Playstation 3 Blu-ray disc which holds 50gb, the SNES cartridges were practically invisible. 24Mb may only cover a small cutscene in today’s games. But it’s not the media itself that is the expense – it’s what fills this media. The sound, the graphics, the presentation, and so on. It takes a lot more talent, more power, and more money to make a game look like Mass Effect 2 than it did to make Super Mario World.

As previously stated, the launch price for video games has been around $50 for many years, yet the cost of game development has risen. This has caused some game developers to be weary of taking big chances, simply because it might bankrupt them if they fail. Electronic Arts gets a lot of criticism for releasing sequel after sequel, but the economics of game development makes this a wise move. If you knew you could make another football game that would sell millions guaranteed, wouldn’t you do it? With that said, I will quickly mention that EA has actually taken a lot of chances with new ideas, but we’ll save that discussion for another article.

Microsoft and Apple have eased the cost of entry for smaller video game companies. There’s a lot of potential for success with Microsoft’s Indie games on Xbox Live and Apple’s iPhone store has made more than a few phone game developers a pretty penny or two. Besides these platforms, we also see many games being made online in Flash. Game developers can profit from these with advertisements, subscriptions, or use it to lead to bigger projects, like The Behometh did with their fantastic Alien Hominid series.

Marketing the Game

Besides the obvious costs of development, another huge expense is marketing the game. Depending on the game, the marketing costs may be up to two times the costs of developing the game. The best game in the world won’t make any money unless people know about it. I believe the Internet has made video game marketing even easier, because companies are more easily able to create their own viral marketing instead of having to shell out large amounts of money for television ads or other more traditional avenues.

The Costs of Selling the Game

Many people don’t realize that the cost of selling you the game itself can be expensive. Getting your games onto the shelves of big stores like GameStop or Wal-Mart isn’t something anyone can do, yet it is vital to the long-term success of a game. Some developers have even changed their games to appease a demand by Wal-Mart, and they do it because they know they need to in order to recoup their production finances.

When a $60 game sells a million copies, some gamers may think that means the publisher just made $60 million for themselves. But unfortunately, that’s not how it works.

Of that $60 million, approximately $18 million will make it back to the publisher. The rest goes to the wholesaler/retailer, marketing costs, unit costs, co-op advertising, and return product (large retailers can return unsold games to the publisher). These high costs are partially why more developers are using digital distribution of their games. It is much cheaper for Valve Software to let you download their game with their Steam service. In addition, they can use Steam to advertise more of their games directly to you. Since they’ll be able to keep a higher percentage of the profits, they can afford to lower the prices and lower the costs to the consumers.

It’s a very competitive and expensive business at the top, but there’s a lot of hope. Indie developers have many ways to get their games into the hands of thousands of gamers, and considering recent studies show that over 70% of Americans are now playing video games, the opportunities for future developers are boundless.

Share your thoughts in our comments below. Do you think games will become cheaper to develop in the future? Has the increased cost of game development stifled creativity?

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