I’ve recently attended a commercial awareness training session at work. The aim was to provide insight into how our company actually runs and see how our day to day job can affect the company. But the more interesting part was the financial aspects of running a company (no real figures will be used – not that they were shared with me anyway) and how I applied to game companies.
To get straight to the point, what most people don’t think about, including employees, are the running costs of what is being sold – how much did it really cost. People only see the final figure for how much a game has sold, e.g. £2mil and think “oh my god, they’re rich!”. But that number means nothing if we don’t know how much it cost to produce. Selling £2mil is not successful, if it costs the company £2.5mil to make.
It’s obvious that there will be running costs right? But do people know that developers start projects with a negative balance. That’s right, the money used to pay workers, electricity and all the marketing comes from bank loans, sales from previous projects or money from investors. These guys are spending money that they haven’t got yet (which is why it’s difficult to start out). Companies set budgets and project timelines to make sure that at the end day, they’re still making something profitable. You may think “they’re greedy and all they care about is money” but to be honest, without money, there will be no product. This leads onto the next point.
Costs don’t stop once the project is complete. The monthly cost of running a business can’t be paused. You can attempt to lower it but there will be immoveable costs like rent. Money you made from selling your product needs to be able to cover the development cost and fund any future projects. This can be a sequel or an entirely new project in dire need of funding. This means delaying a project has a huge impact on their businesses – by delaying your project, you’re increasing development costs and potentially eating into your future funds. People who advocate delaying releases too lightly should consider that this before throwing it out there.
So what does this mean? Well, everything people are complaining about is related – annual release of franchises, games being released with known bugs, replacing content to unlock with paid DLCs and season passes. These businesses need to pay their staff and bills before their next project is released. They need income post release to help them out. Are we being realistic in what to expect with our £40? Or more importantly, is that price right for the amount of work that goes into producing a game these days?
The cost of everything in general has gone up since when I first started gaming. I paid £40-50 for a game during the Mega Drive days and I’m still paying £40-50 now. But £100 in 1990s could buy you more things than now – just look at how much petrol costs now! Used to be 70p per litre, now it’s 140p per litre. The economy has helped people to live better lives thanks to minimum wages and general increase in salaries. This is one of the biggest overhead for any company – the salary. So looking at it this way, games are more affordable to buy now than it was back then.
People claim digital downloads should be cheaper because it cost the developer less money to distribute; I disagree. Why should a business cut their profit because they’ve managed to reduce the cost somewhere? If a restaurant manages to source the same quality meat from somewhere but at a lower price, they don’t slash the prices in their menu. Game developers shouldn’t have to and in a way, it’s better for us. The logic being more money from sales lead to more funds available for their next project, hopefully meaning laxer deadlines – more time to plan and execute producing a better game all round (you know less bugs and more time to program promised features). Isn’t a better game what we all want? If they have more money in the pot, maybe season passes, DLCs and annual releases will be less common? Now that they’re established these revenues I doubt they will go away, but was it because of this business model and dated pricing that created these necessary evils? I believe people and work should be rewarded for the effort they put in and if games become cheaper, we’re doing the opposite. We not providing the businesses the means to actually spend time and money on ambitious projects. Something new will take longer to produce than if they were to recycle an existing title.
With games companies increasingly coming under pressure to deliver more for a lower price, the profitability of making games may also diminish driving away some real talents and businesses to venture elsewhere. Of course consumers always want the best for the lowest price possible – we’re all after value for money. But this should be balanced and if we tip too far the other way, these classic games may die and we’d all be stuck with Candy Crush.