Why video games cost so much to make

By Julio Franco · 7 replies
Sep 21, 2017
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  1. Video game publishers are notoriously secretive about the budgets behind their games, but when a number does slip out, it can be shocking. Games like Call of Duty and Grand Theft Auto cost hundreds of millions of dollars to make, which is tough to fathom—until you do the math.

    While reporting for my recently released book about how games are made, I asked a ton of developers how they calculate their budgets. A few of the bigger companies wouldn’t get into specific numbers—like I said, notoriously secretive—but all of the studios that did answer offered the same magical number: $10,000. Specifically, $10,000 per person per month.

    “That’s a good ballpark number,” said Obsidian’s Adam Brennecke, executive producer of Pillars of Eternity and its upcoming sequel. “Based on the average salary for a developer plus overhead, it costs about $10,000 per person at the studio. Some are more expensive. And that’s how you usually do budgets with publishers too.”

    That number—which might go even higher if you’re in an expensive city like San Francisco—accounts for salary, office rent, insurance, sick days, equipment, and any other costs that come up over the course of development. It’s widely considered to be a good estimate for how much a video game production will cost, no matter how big a team gets.

    So let’s do some math.

    Say you’re an indie studio that just raised some money on Kickstarter. You think you can make your Earthbound-inspired, 16-bit-style RPG in a year and a half (18 months) and you think it’ll take five people: a designer, a programmer, a musician, and two artists. 5 * 18 * 10,000 = $900,000. Hope you didn’t have any stretch goals!

    Say you’re a mid-sized team like Obsidian or Double Fine. You’re making a new console game that needs to look good, but nobody expects you to have the most polygons or the highest-end graphics. You’re putting a team of 40 on your psychedelic rhythm game, and you’re planning a schedule of around two years (24 months). 40 * 24 * 10,000 = $9,600,000. Don’t worry—at least people on the internet will accuse you of stealing money!

    Say you’re a massive publisher that’s trying to compete with the Red Dead Redemptions and Destinys of the world. You’re making a military shooter, of course. In order to hit the graphical fidelity that your fans expect, you need a staff of at least 400, and you need to give them three years (36 months). 400 * 36 * 10,000 = $144,000,000. And that’s before the inevitable delay, not to mention the marketing. Those CGI commercials aren’t gonna pay for themselves.

    I might be lowballing here. Many big games have development staffs across multiple studios, and if you go into the credits and count up everyone on a game like Destiny 2 or Assassin’s Creed Origins, you might get into the thousands. Multiply that $144 million budget accordingly.

    This is why video games cost so much to make, why video game companies are so volatile, and why observers like me worry that the video game industry’s current path is not sustainable.

    Permalink to story.

  2. Uncle Al

    Uncle Al TS Evangelist Posts: 4,112   +2,604

    The "overhead" is the number that needs to be looked at. That's the place every company hides every possible deduction they can, plus a few that are less than legitimate ..... as the saying goes, just "follow the money".
  3. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 3,002   +1,307

    So... let me sum up... video games cost money because they take a lot of people?

    $10,000 per person per month isn't all that much. Figure a salary of $75,000 plus benefits and overhead and you get there pretty easily. You could run an accounting firm for the same cost.

    it's called the cost of doing business - did anyone think game developers made like $12/hour?

    this is only half the equation. The other half is revenue and profit. No one would spend all this money on making games if it didn't pay off. I looked at the financial statement for Activision (Blizzard) for 2016. They spent over $5,196,000,000 on salary, benefits and overhead. but - they brought in $6,608,000,000 - for a nice $1.4 billion profit.

    If you divide these exact numbers out you get an operating margin of 21%. that's a fancy way of saying that for every dollar they spend they have a profit of $.21.

    If you got $1.21 back every time you spent $1, would you call that 'unsustainable'? Or would be trying your hardest to spend more money?

    The 'current path is unsustainable' as the author put it - because not everyone makes money building games like Blizzard does. But he didn't even talk about that....
    Last edited: Sep 21, 2017
  4. davislane1

    davislane1 TS Grand Inquisitor Posts: 5,161   +4,239

    It's a Kotaku article. It's going to have Kotaku omissions and talking points.
  5. axiomatic13

    axiomatic13 TS Addict Posts: 174   +98

    50 year old ex-game developer here. Games cost so much to make now because we invited "the suits" to the party. I can say with 100% certainty that they are the exact reason for the exorbitant costs. I kind of miss the days when our marketing department was just Ralph who lived in his Taunton. He didn't actually live in a Taunton. But his winter coat resembled one (and smelled like one too) so we called it his Taunton.
    Eric Mozzone likes this.
  6. JaredTheDragon

    JaredTheDragon TS Guru Posts: 388   +250

    "Why does construction cost so much?"

    "Because the contractors said it does."
    poohbear likes this.
  7. enemys

    enemys TS Maniac Posts: 168   +163

    So... Basically either we already knew why video games cost so much, or we still don't know it. Because no gamedev-specific reason was given, it's just "well, you need to pay for salaries, rents and equipment". Guess what - (almost) every business needs salaries, offices and equipment. And then we get a rough average cost of $10000 per person per month that may certainly be real... But we don't know how exactly it came to be and how much deviation from it can occur.
  8. Boilerhog146

    Boilerhog146 TS Evangelist Posts: 609   +212

    10000 per person per month is the average.like on shutdown .supervision get the big money and apprentice get the little money.and the tradesmen get the middle money.

    Er that's not enough .on shutdown at a powerhouse.7 12 hour shifts.on a condenser retube.just under 5000 per week takehome.only last 5/6 weeks though.

    So I can relate if those guys all have to put in hours like that for extended periods of time.it ain't gonna be cheap.
    imagine 300 guys all on shutdown.takin home killer cash.now you know why the damn power bill is so high.

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