The cost of developing xbox is goodvelopers become more familiar with the platform. Companies may invest heavily on a new IP upon which they can create sequels and/or spin-offs in the future.
IGN: The Economics of Game Publishing
the costs of developing games for the next-generation of consoles such as Microsoft's Xbox 360 and Sony's PlayStation 3 is estimated to be roughly $10 million as compared to $3-$5 million for the Xbox, PlayStation 2 and GameCube.'The exact licensing fee varies based on the manufacturer (Nintendo, Sony, Microsoft), as well as any deals they may give a publisher, but it can generally be anywhere from $3 to $10 per unit.'Wholesalers typically pay around $30 per game and with the costs of getting the goods to the wholesalers, any co-op advertising or marketing, and return of good contingencies being roughly $14 per game, the publisher is going to typically get $16 for every unit sold.
A 2008 system comparison analysis by Ubisoft
Leading on from this, an Ubisoft executive gave a breakdown of the company's average development costs per game - with a DS title costing between 500,000 to 1,000,000 euros ($785,000-$1.57m), PS3/Xbox 360/PC titles averaging 12 million to 18 million euros ($18.8m-$28.2m) to create for all 3 SKUs, and a Wii game expected to cost 5 million to 6 million euros ($7.8-$9m) to develop.
In June 2009 Ubisoft reiterated that major titles for PS3/X360 cost $20-$30 million to make and that games for the next-generation may exceed $60 million.
EA CEO John Ricitiello said in January 2009: "Development is typically a third to a fourth as much for a Wii game then it is for a PS3 or an Xbox 360 game. That is really a function of the capacity of the hardware, and the fact that it is not a high-definition gaming box, so we're producing less art than for high-definition games."
Sierra founder Ken Williams argues that high production costs hinder risk taking and video game innovation.
Here’s the problem as I see it: Production values have risen to a level that games are starting to cost $3 million to $10 million to produce. Double this amount to get the true cost to a company, by the time they promote and manufacture the product. At this level, companies can’t afford to take chances on defining new categories.
Nintendo's own Reggie Fils-Aime states developing games for the Nintendo DS is cheap, costing only a few hundreds of thousands of dollars to develop and only needing to sell 100k units to make a profit. Wii games require about $5-10 million in the average case, including marketing costs. He asserts PS3 and X360 games need much more resources, from $20 million up to a staggering $50 million with sales of 1.3 to 1.5 million units to make money on them.
Ubisoft boss Yves Guillemot has predicted game budgets will rise to an average of USD 60 million in the future. Games for Xbox 360 and PS3 cost between USD 20 million and USD 30 million to make.
In 2002, as game software and hardware become more elaborate and the profit potential grows, the development budgets of hit software titles are swelling as well. Costs now routinely fall between $3 million to $6 million, and $10 million is no longer unusual. The development team for the latest Lara Croft game, which is being produced in England, has jumped to 50 from 15.
And when the costs of translating games to multiple formats and marketing them are included, expenses may reach as high as $50 million to $60 million, software executives said. Valve's spent $10 million marketing Left 4 Dead.
It took between $5 to $10 million to develop a PS2 game versus $800,000 to $1.7 million for the original PlayStation.
Namco Bandai Holdings President Takeo Takasu said rising development costs for next-generation games mean companies need to sell at least 500,000 copies in order to make a profit. Mr. Takasu said graphics for PS3 games can cost nearly $9 million to create — more than double the price tag for Wii titles.
It was estimated in 2005 that only 80 games a year make a profit. Development costs in the next generation are set to rise from $3 -$6 million per title to $6-$10 million, with some cases surpassing $20 million. Licensed games, such as Madden NFL or James Bond titles, generate about 23% more revenue than original content.
Game development on the seventh generation consoles typically requires a budget of around $10 million or more and according to IDC analyst Billy Pidgeon. [/b]"You might be able to weather one title coming in at 500,000 in sales," he said. "But two or three failures like that and even big publishers are going to be hurting." David Jones, who's worked on some of the industry's iconic titles such as Grand Theft Auto and Crackdown said he'd struggle to make an online game with a budget less than $20 million.[/b]
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