We heard the price, we have been told about "Extras", we reacted emotionally, but now lets ask:
State of the Game #43: How Expensive is it?
Why not put all arguments aside and break out the calculator to answer that question. Our story begins the other day in Germany, when a 55 copy of GW2 was in a shelf at the store. I put the cash on the table and watched where my money went.
8,78 go directly to "Das Merkel". 19% VAT tax from the glorious nation of Germany, whose inhabitants roam free and where 100mph are considered a gentle stroll down the Autobahn at a slow speed.
4.56 is roughly what the retailer earns on the game. If you are wondering why so many smaller stores went out of business and only chains remain, then look no further than here. If you order 13 copies of a game and one is left, you will not have made any money.
3.21 is what the wholesale retailer gets. Professional distributors who can make sure that a freight container, or plane full of computer games gets split up and sent out to 1000 smaller points of sale. A big chain, such as Gamestop, are both retailer and wholesale, so they, earn 7.77 per game. I know, GameStop then sells for 10 more than anybody else, but that is besides the point.
?.?? go to those big chains who can negotiate even more aggressively. For those days when GameStop is cocky, or Media-Saturn group says it will keep 50.000 copies in stock at all times for 3-6 months. They will offer to give your product good shelf space, instead of tossing it on the ground where nobody sees it. They also use these deals to start price wars. You might see them sell StarCraft 2 for 40, instead of the suggested retail of 50. Good news for the consumer, bad news for the publisher and the competition of Media-Saturn. This is also how small game shops were obliterated.
Without the mystery benefit of the largest of chains, 38,44 of the original 60 end up at the publisher. But wait, for NCsoft games released in Europe, the publisher is not NCsoft, they have to license that out to local publishers with the infrastructure to release a game. By that I mean people who deal with the port authorities, the customs and the large chains. In Germany, that is a company called Flashpoint. I do not know the details of their contract, but my educated guess is they take 3.5 of those 38,44 as their fee.
That leaves 34,94 for NCsoft to work with. From here on out it gets muddy and depends on the game. How was the money for the game raised and do investors have to be paid? How is the wording on the contract splitting up the money between publisher and developer? Usually, the publisher will keep 30-50% for himself. That sounds like a lot, but usually half of that money is spent advertising the game and the other half to keep the company running and investors happy. If a developer gets 23, they can consider themselves lucky. Now the developer can use that money to pay back its investors, which usually is their publisher. ArenaNet is owned 100% by Ncsoft to begin with, they are an internal team, meaning those 23 are somewhat theirs to spend, but ultimately NCsoft owns that money as well. As long as Ncsoft thinks ArenaNet is worth it, they can even make a loss. A more independent developer has to use that money to pay back investors. After all, he who pays the money for development will end up receiving those 23, until he has his investment back with interest. That could be a shady consortium of Russian business men, but in most cases it is a publisher such as EA, or THQ, or Take2, or Activision, etc., you get the idea.
Giving an Interview to Forbes Magazine is basically common sense. Even if ArenaNet does not need to search for investors, Ncsoft might want to calm theirs.
An average developer of a game as big and expensive as guild Wars 2 is usually happy, if break-even is achieved. The people working there can be happy, if management found new investors for the next game. Best case scenario: the sequel to the game which just sold so well. If the game hits certain predetermined sales benchmarks, everybody gets a bonus. Another way to get a bonus payment is review score. Many developers have contracts which pay better, if the review average is 9/10, instead of 8/10. You can see where the phone calls to game reviewers start and why each review copy comes with at least a 12 page document to make sure the reviewer 'gets' the game. The press itself lives off advertisements, so buying those two color pages for three months go a long way for getting those extra 5% of review score. Toss in a minipet-code, which basically amounts to guaranteed fan sales, and the poor guy writing the review will be under pressure from all sides. Granted, the developer has to have a good game in the first place, but do you want the 8.5, or the 9.5? Former 1Up writer
Shawn Elliott put it best in one of his songs. A weird codependency between people wanting a bonus and people dependent on advertisement Dollars emerges. The politics between publisher, developer and press are even more complicated. Sometimes the publisher simply does not want to pay the 9/10 bonus and will not go the extra mile to promote the game. Sometimes, the developer will spend that money necessary to get the press on their side. If not hard cash for ads, or other bribes, then certainly valuable time spent on giving interviews. Publishers are fine with this system, they thrive on it, developers, at least the ones I heard of, do not like it that much. They want something better, something special.
For a long time, MMOs which charged a subscription fee were special. If such an MMO is a hit, the subscription will bring in money to stay in business. No more lending from investors to make the next game, no more being mortally dependent on a good release. Flagship Studios, creators of Hellgate: London, famously gambled on subscribers keeping them afloat as a company. There was no plan B, no investors lined up to pay for the development of the next game (i.e. Mythos, which later became Torchlight). Flagship wanted to gain true independence based on subscribers paying money each month. For Blizzard the gamble worked, for Flagship it did not. This is one of the reasons everybody wants to make a subscription based MMO (or whatever business models is the latest hype). Publishers might want to have one because it means big business these days. For developer who do not have to hand the subscription money over to their publisher, it means independence. It means going to investors, having an easy time getting stupid money, by promising larger interest rates on investments. Subscription games are convenient for the industry in every way imaginable. It only takes 60.000 subscribers to earn $10 million per year. You should remember this figure, for what I am about to write two paragraphs down. And what is the worst that can happen? The subscription run dry and you make it f2p to get a second round of revenue? After that, the game made its money back, so who cares? Certainly no publisher and hardly every developer.
So far, I did not mention one cost. If you buy a console game, then 15 will go to Microsoft, regardless. That's unfair? Well, they say it is their Xbox, you want your game on there it is 15 per copy, go suck it up. By the way, Microsoft will charge per disk in the box, so you might want to cut down on the size of that 25GB MMO of yours. Console games sell better, but that does not mean it's all sunshine, especially, when publishers get only 25-30 from each sale. PC games are cheaper for a reason and licensing costs are that reason. I hear you think, but GW2 is not cheaper, it is as expensive as a console game. About that....
Is Guild Wars 2 really expensive charging those 60, of which NC ultimately gets only 39? What about the costs of development? Analysts have crunched the numbers of many publicly traded companies to be able to give good estimates on what game development costs. One team member will cost you roughly $100.000 on average. His pay, his taxes, his equipment, benefits, office rent, etc. Sure, some earn more, quite a few earn less, but as far as studio costs go, a team of 100 good people, creating a triple-A game, will run up costs of $10 Million per year. You can dig up financial reports from Ncsoft, if you do not believe me. Back in the past, they listed ArenaNet as separate costs, so you can see for yourself. Guild Wars 2 is in development for 4.5 years. During that time the team grew from 100 people to over 200, you do the math. $60 million for making the game sounds like a conservative number to me. Divide that by 35 and you know how many games they have to sell to make back the money they spent on developing the game. Roughly between 1.3 and 1.6 million units to break even, which for a PC game is a lot. If they were not owned by their publisher and had to pay that off 23 at a time, GW2 would be an insane risk, having to achieve sales of 2.4 millions. Even more, if my conservative $60 million estimate was too low. Battlefield 3 for PC and console was probably cheaper than Guild Wars 2.
Plenty of reasons for Ncsoft to be nervous and insist on every additional monetization option there is. You also have to bear in mind, that most of those 200 people developing the game now, will neither be fired at the end of development, nor moved to a project financed by somebody else, as is usually the case. That makes another $20 million in the next 12 months then. Guild Wars 2 will have to generate the money, or the promise of multi-million sales from an expansion will. At least that next expansion will not take 4.5 years to make and it will bring in money, so there is a bright light at the end of the tunnel. Still, even if the game is the best around and the review scores are high because NC did the smart thing of buying ads in magazines, they will have to go head to head against Activision and EA, who are both no strangers to advertise a $60 million game, by launching a $200 advertisement campaign. That is more than the total gross of an entire quarter at NC. For those Megapublishers the normal laws of games publishing have long since been suspended. Ncsoft is a dwarf compared to the resources, the options and the connections of those juggernauts. EA in particular, can crush your console by simply not releasing games for it. EA are not scared of anything coming out of Korea and could easily buy ArenaNet, if they felt like it on a Tuesday (provided Ncsoft had to sell them, of course).
But enough of that an onto another minefield called online stores. ArenaNet could only charge 35 there. Naturally, das Merkel will want to have its VAT taxes, so that is 41,.65 then. Money never exchanges hands for free on the Internet, a little something called payment processing fees. The buyer will not even notice them being there, a seller will. That is 43 then, for the online version. But wait, now the brick and mortar retailers, such as GameStop, Walmart, and Media-Saturn will be at your throat again. They will not stand for you undercutting their price, hurting their business. Either you immediately raise your online price to suggested retail, or they will not stock the game. That is not something a publisher can afford, so the game is back at 55 at the online store.
However, some retailers, such as the Media-Saturn group will lower their prices during the crucial first week to below suggested retail, making the publisher look like a dick for charging full price at the online store. That is, if ArenaNet have their own online store, which they do. If they were forced to go through Steam, then Gabe Newell would roughly charge them 30%. Why? Because he can! How much of a 55 Steam game is reaching the publisher? Deduct VAT tax, deduct 30% Steam share, oh, you guessed it, it is 35.50 again. But at least Steam reaches a giant audience, one cannot complain about that, so 30% is still a fair deal.
Amidst all that, not one word was uttered about the exchange rate. It is a phenomenon, where $1 is worth 1. A $55 will cost 55 in Europe instead of its real value of 42. There are two things you can do about that in Germany. Either you bend over and take it (while screaming, if you are so inclined), or you get yourself a credit card and enter the shady world of proxies and creative billing information. You see, your credit card is linked to your five digit zip code somehow. Germany and the U.S. both have those five digit codes. So if your card is registered to 12345 Berlin, you simple enter 12345 Schenectady County, New York. Just keep your name and your German address the way it was and done. You just bought Guild Wars 42, fooling all the regional locks. You win retail.
If you feel like ArenaNet should win retail for making such a great game, then buy at their online store and only at their online store. Screw all the trinkets, the one use items, the ring of +2 on all attributes in a game with triple digit attributes later on. Just buy the game from the people who made it. It is an extra 10 bucks which do not end up at some reseller, but go directly to those who deserve it. If you think the game is worth it, buy some digital deluxe edition. Do not think about whether the extras are worth it, because they are not. Ask yourself, whether the game is worth that price to you, or not. As for the collectors edition, it truly deserves a special place in that black hollow and cold heart of mine. Sure, the stores are happy, because they earn more money per unit and sure ArenaNet get more money, because those trinkets are barely worth $5. In a world where I can pick up a phone and order a freight container of Chinese pullovers at 14 cent a piece, do you really think that some plastic statue is worth anything? If you are into that sort of this, good for you. If you just want to give ArenaNet your money, fine. If you want to give ArenaNet a lot of money and demand more bang for the buck, then buy multiple copies of the game.
Now you pretty much know everything there is to it. You know the price, the costs, the easy roads not taken, the people who make money off it. Still too expensive? Feel free to discuss.
