Computer Game MarketingAdapted from John Laird’s EECS 494 notes and the Steve Rabin textSales StatisticsIndustryHit Driven BusinessChanging MarketsBusiness ModelsRevenue from $50 Console GamePlatform HoldersConsoles Closed PlatformPCs Open PlatformOutsourcingMotion CaptureArt and Animation Service ProvidersQuality Assurance Service ProvidersBusiness Model Elements - 1Business Model Elements - 2Studio SystemDevelopment Milestones: Development TimelineDevelopment Milestones: Milestone DefinitionsVertical StructureDevelopersGame Developers: Full-ServicePublishersGreenlightingPublic Relations Firms, Advertising Agencies, and Merchandising TeamsDelivery Media ManufacturersSales Channel: DistributorsDistributorsRetailRetailersThe Pitching Process: PrototypeThe Pitching Process: Pitch PresentationThe Pitching Process: Game DesignThe Pitching Process: Technical DesignThe Pitching Process: Project Schedule & BudgetDeal Dynamics: ResearchDeal Dynamics: IP RightsPayment Negotiation: OverviewPayment Negotiation: Deal StructurePayment Negotiation: Advance PaymentsPayment Negotiation: GuaranteesPayment Negotiation: MilestonesPayment Negotiation: Royalty NegotiationSlide 451Computer Game MarketingCIS 487/587Bruce R. MaximUM-Dearborn2Adapted from John Laird’s EECS 494 notesand the Steve Rabin text3Sales Statistics•60% of Americans play video games•70M+ Playstations worldwide•4M Xbox•4M GameCubes•Everquest 400K monthly subscribers4Industry•Average game costs $3-10M to develop and requires 12-24 months to complete•About 1 in 10 games breaks even or makes money•Sequels and franchises are popular•Very few self-published titles•Number of small developers is shrinking5Hit Driven Business•The focus is on entertainment not utility•Games generate emotional responses, stimulate the senses, and provide escape from reality•Quality is king•Hits are made by creative people who know games, not by marketing execs6Changing Markets•Platforms shifts change balance of power among developers and publishers•Conflicts between hardcore gamers and mass market continue to increase•Cost of projects makes it hard for small developers to survive•Publisher consolidation will changes types of games produced•Globalization affects products as well7Business Models•Software developers and publishers depend on dollars from game sales•Console developers lose money on consoles and make money from proprietary media and games sold•Internet games usually have an initial cost plus a monthly fee8Revenue from $50 Console GameAmount Purpose Paid By Paid To$3 Cost of goods Publisher Media manufacturer$7 Publishing license royalty Publisher Platform holder$13 Retailer profit Consumer Retailer$3 Markdown reserve Publisher Retailer$8 Development cost Publisher Developer$10 Operating cost Publisher Internal(overhead, freight, co-op, bad debt)$6 Marketing Publisher Ad agencies and mediaItems in bold can be converted to profit through careful publisher cost management.9Platform HoldersRevenue comes from:•Hardware sales•Licensing fees from compatible peripherals•First-party games•Licensing fees from third-party games•Licensing fees from development tools•Revenues from sales of proprietary delivery media10Consoles Closed Platform•Console companies (Nintendo, Sony, Microsoft) control nearly every aspect of games on their platforms–Proprietary development hardware and software–Permission to become a licensed publisher–License to use console company trademarks in marketing materials–May require permission to start a game–Certification of a finished game•Investment in hardware must be offset by revenue from software (around $7/unit for third-party games)11PCs Open Platform•CPU (Intel, AMD) and graphics chip (NVIDIA, ATI) manufacturers provide developer support and market their technology benefits directly to consumers•Application software providers give developers free tools to ensure compatibility•Box manufacturers (Dell, HP) may bundle hot software titles to add value to their sale•Low barrier to entry for developers, but high competition for shelf space12Outsourcing•Tool developers create engines and middleware to sell to game developers•Contract services–Motion capture–Art–Cut-scenes–Audio–Software Quality Assurance13Motion Capture•Used to automate animation process for more realism in human characters•Magnetic or optical systems•Internal motion capture studio at publisher or external service provider•Services include accompanying software and technicians, and post-capture data processing and tuning14Art and Animation Service Providers•Developers can outsource art and animation assets to external companies•Specified at contract and included in development budget•Art houses can become full-service developers with judicious addition of programming talent•Cost is a function of quality, team location, and volume of assets15Quality Assurance Service Providers•Alternative to maintaining team of full-time salaried testers•Established in PC publishing, due to amortization of multiple hardware configurations over multiple projects•Gaining ground in console publishing; security of sharing proprietary console equipment is a perceived concern16Business Model Elements - 1•Unit sales (predicted vs actual sales with returns)•Advances and royalties–First party manufacturers get about $7/unit–Developers get 10-40% based on past performance–Licensors get 5–15%17Business Model Elements - 2•Product development ($2-10M)•Marketing–Typical budget $1-3M–TV ads cost an additional $1-2M•General administrative costs–Management, legal, HR, finance, etc.18Studio System•Developers paid for delivered milestones out of “royalty advances”•Studio assigns management to an executive producer an staff•Producers encourage developers to complete milestones and provide creative input, as well and management19Development Milestones: Development TimelineHere are some example development periods for different platforms: •4-6 months for a high-end mobile game •18-24 months for an original console game•10-14 months for a license / port•16-36 months for an original PC Game20Development Milestones: Milestone Definitions•An example milestone schedule for a 20-month development cycle:P r e - P r o d u c t i o n - C o r e C o n c e p t D o cF u l l C o n c e p t P r o p o s a lP r o j e c t S c h e d u l i n g a n d C