Game Profitability Clarification

Electronic Entertainment Design and Research (EEDAR) sends a follow-up to reports that surfaced last week saying they claim only 4% of games that make it to market are profitable. This seemed like a head-scratcher at the time, and sure enough, EEDAR clarifies that they were mis-quoted in the interview, and the proper statistic is that 4% of games "that enter production" return a profit. For clarity, here is the entire explanation:
On Friday, November 21th, Forbes.com did an article on Electronic Entertainment Design and Research. The article is located here http://www.forbes.com/ebusiness/2008/11/21/games-eedar-developers-tech-ebiz-cx_mji_1121eedar.html. Unfortunately, there was a miss-quote in the article that a lot of sites noticed and reported on. Below is the line from the article.

“Only 4% of games that make it to market actually make a profit, he says. About 60% of a game's budget is spent reworking or redesigning a game. Armed with all this data, companies can make those tough calls early in the development process.”

The actual statistic is only 4% of games that enter production will return a significant profit. Of games that are released to the market, only 20% will produce a significant profit. (Source for the second sentence: Secrets of the Game Business by Francois Dominic Laramee).

We understand that miss-communications can happen, especially during phone interviews, but given the inaccuracy of the statistic and how many other sites have picked up on the story, we wanted to ensure that the major media outlets received the correct statistics on the subject.

Geoffrey Zatkin, EEDAR’s President and COO, has provided some clarity on the subject:

“Only 20% of games that begin production will ever finish. Of those 20% that are finished and released to the market, only 20% of them will ever realize a significant profit (Source: Secrets of the Game Business Francois Dominic Laramee).That equals 4% of games that start production return a significant profit.

During the concept and design process of a game, publishers and developers often analyze every feature in a game to ensure proper implementation for a successful release. At EEDAR, we believe that enough historical information is now available to aid publishers and developers during the concept and design process of a game. The EEDAR database, which now consists of over 6 million historical data points, can help remove the burden for publishers and developers from having to justify every feature in their title. Specifically, our DesignMetrics™ reports help publishers and developers by identifying early in the development cycle the correct feature combinations most likely to meet consumer expectations. This allows developers to focus more time and resources on creating a high quality and well polished video game.”
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16.
 
Re: Game Profitability Clarification
Nov 24, 2008, 21:18
16.
Re: Game Profitability Clarification Nov 24, 2008, 21:18
Nov 24, 2008, 21:18
 
The idea is to make a lot of money, so if it makes just a little money, well, that's not enough to be deemed "profitable".

In our humble eyes, it probably would be, but you know these suits, they want enough to be able to have their cake AND eat it too.

Incidentally, 4% seems awfully low for an industry where so many sequels tend to get released. You know, Sims, Need for Speed, Neverwinter Nights, all the CSI games, Command and Conquer, all of the Blizzard and EASports sequels, GTA, Fallout, Tomb Raider, Far Cry, Call of Duty... etc... etc... etc...

If only 4% of games returned a significant profit, we wouldn't have nearly so many sequels.

Except we don't know how profitable they are exactly. The armchair economists/market researches/developers that people here act like automatically jump on a completely unfounded assumption based on their dislike of corporations. A game that breaks even plus one dollar I would not consider profitable and if included, would make the number even more meaningless. Of course by definition it would be, but the purpose isn't to be a scientific study, it's to be of value to the purchaser of the info.

Plus, the measurement takes into account games gone into production, not games released. I would expect games the percentage of games released to be higher than games in production, but we don't know how many games go into production and are canned, especially at big studios like EA or Ubi, where it is treated more like an industry of producers than some new art form.

If anything, a low percentage of profit seems like reason for more sequels. Stick with what's worked in the past.

This comment was edited on Nov 24, 2008, 21:19.
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