Gaming profit/turnaround

[nightwolf]

So I'm writing an essay about the games industry as we know it, one question stands out that I'm not sure how to answer.

 

How does money in the til at say GAME get back to the company? How does the team get paid, is it at the end when the project is finished, does the company set aside money to pay them each month..?

 

I did get some insight from a person at team 17, but it only really covers one company and I'm not sure if this is a general rule for companies or if it differs entirely.

 

HELP!

[Raining_again]

A big company like game would have a finance dept I would think, everything goes there and is organised and farmed out.

 

I would say every shop probably has a certain number of "hours" that they can employ, decided on what kind of cover is needed.

 

The NHS works that way, they have 4 WTE (working time equivalents - aka a 37&1/2 full time hour worker) in a department and they can use this to employ staff, and temps depending on staff levels.

[nightwolf]

Nooo I mean specifically a game company who makes the game, not game itself.

[jayseven]

She wants to know how much the game creators get back from general sales, I think.

 

I'd imagine most employees will get some form of salary, paid monthly, regardless of when the game is released.

[nightwolf]

I know for team 17 they decide how much it'll cost to fund the project by wages/software etc and decide how much to sell the game for to make a turnaround.

 

But I'm not sure if this is the case with other companies, given how small Team 17 is (about 70 people), this could be completely different for say Valve/blizzard or for an even smaller team like the behomoth..

[Will]

It's a complicated process with money and products flowing both ways, along a number of channels. It really depends on how many links of the chain you want to cover and the amount of detail you want to go into as to how this would look.

[AeroScap]

Its just one of those questions I think that can really be answered by the companies themselves, since it involves business practices. I would imagine that it could work like the music industry where they get royalties based on the copies sold as well. Also I think with companies like Blizzard ignoring the fact that they are big, they also have wow which provides them with a constant source of income via subscription, I cant imagine other normal games only last like 1 year at the most.

On a slightly different note, I remember a forum member posting that they did work experience at Square enix, I cant quite remember who..

[Dan_Dare]

Team 17 are a bit weird. Pretty sure they self publish, and they only make online games now.

 

I have the recent Worms on XBLA so I can check later

[nightwolf]

It was daft who worked for square enix.

 

Team 17 do self-publish, which is why I've mentioned them in my essay, but companies like Valve are completely different and there's no real way to get ahold of them to ask about it all.

 

I think my tutor assumes otherwise..

[flameboy]

god you are opening a minefield questions here!

 

Stores buy from the suppliers etc..but say if they return x amount of stock then they'd get credit against other stock, so you can't trace it as a flow direct sales and cash that works through the system and goes straight to the publisher/developer. I'd wager suppliers would get them on credit from publishers/distributers as well and then settle their account every so often and then the money goes bakc that way. I don't think it can be seen linearly unfortunately...

 

AGES ago there was an episode of giant bombcast where they discussed how it works in the US at least...but i'd be damned if I can remember which episode.

[Dan_Dare]

It was daft who worked for square enix.

 

Team 17 do self-publish, which is why I've mentioned them in my essay, but companies like Valve are completely different and there's no real way to get ahold of them to ask about it all.

 

I think my tutor assumes otherwise..

 

Valve self publish to. Try some other UK devs like Rockstar North (Leeds) they might have a bit of sympathy for a Sheff student

[nightwolf]

god you are opening a minefield questions here!

 

Stores buy from the suppliers etc..but say if they return x amount of stock then they'd get credit against other stock, so you can't trace it as a flow direct sales and cash that works through the system and goes straight to the publisher/developer. I'd wager suppliers would get them on credit from publishers/distributers as well and then settle their account every so often and then the money goes bakc that way. I don't think it can be seen linearly unfortunately...

 

AGES ago there was an episode of giant bombcast where they discussed how it works in the US at least...but i'd be damned if I can remember which episode.

 

Argh, this confuses the hell out of me tbh..

 

It means going through nearly every company I wrote about (over 40!) finding out who self-publishes and who doesn't, then finding out the ones who don't who they get to publish..

[flameboy]

Argh, this confuses the hell out of me tbh..

 

It means going through nearly every company I wrote about (over 40!) finding out who self-publishes and who doesn't, then finding out the ones who don't who they get to publish..

 

fraid so lol...I only know vague bits and bobs from going to a games retail conference for hmv back in the day when I worked for them.

[Will]

The non-self publishers will all follow a pretty similar pattern. Is it just the developer side your looking at or do you need to cover the whole value chain?

[nightwolf]

Well I was given such a broad question I'm not really sure tbh. I assume my tutor wants to now overall how a game company makes money and how they fund further games.

 

Now it seems to be a really complicated question, which is leave me abit confused.

 

I'd like to know how a company who isn't self-publishing sells their game, I mean who does it go to first, from there how does it reach somewhere like gamestation and how does that money reach back to the original maker?

[Will]

Well in very simple terms it's just a case of:

 

Developer > Publisher > Distributor > Retailer

 

In terms of product, with money flowing in the opposite direction. For big retailers like Game you can remove the Distributor step.

 

Of course in reality its far more complicated than that, with both product and money going both ways as well as skipping stages and coming in and out from other sources. Money also wouldn't flow in a linear order, but makes its way across stages at different times.

 

I'm guessing a detailed view of a single part of this chain may be enough for what you need?

[Ramar]

From what I learnt during my course, from tutors and guess speakers is dev teams pockets get financed by the publisher, and the publisher then makes the money back from the sales.

 

As basic as it comes, though other companies might do things differently to the ones I spoke with.

[Dante]

Would this help in someway Nightwolf?

 

 

	   Sony		    Nintendo	      Microsoft	        Total
Y/E 1998     $902,811,090   $1,023,333,867                      $1,926,144,957
Y/E 1999   $1,102,563,557   $1,301,350,000                      $2,403,913,557
Y/E 2000     $722,738,949   $1,368,207,547                      $2,090,946,497
Y/E 2001    -$449,776,290     $677,576,000                        $227,799,710
Y/E 2002     $629,101,056     $895,872,180   -$1,135,000,000      $389,973,237
Y/E 2003     $935,569,253     $834,333,333   -$1,191,000,000      $578,902,586
Y/E 2004     $627,195,212     $993,161,303   -$1,337,000,000      $283,356,515
Y/E 2005     $419,888,799   $1,056,056,202     -$539,000,000      $936,945,001
Y/E 2006      $69,129,058     $774,478,055   -$1,339,000,000     -$495,392,887
Y/E 2007  -$1,970,923,859   $1,914,666,388   -$1,969,000,000   -$2,025,257,471
Y/E 2008  -$1,079,994,103   $4,322,637,887      $426,000,000    $3,668,643,783
Y/E 2009    -$577,207,240   $5,691,428,301      $169,000,000    $5,283,221,061

Y/E 10Q1    -$413,541,667     $420,843,750      $312,000,000      $319,302,083
Y/E 10Q2    -$653,333,333     $710,655,556               N/A               N/A

Total				
     $264,220,482  $21,984,600,371   -$6,532,000,000   $15,659,498,630

Full Year Average
     $110,924,623   $1,737,758,422   -$1,001,857,143      $914,270,499

Profitable Years				
		8		12		   2		    10

Non Profitable Years				
		4		 0		   6		     2

Average in Loss Year				
  -$1,019,475,373              N/A   -$1,251,666,667   -$1,260,325,179

Average in Profit Year				
     $676,124,622   $1,737,758,422      $333,000,000    $1,389,625,094

 

[nightwolf]

Not really Dante, that just shows the profits made, not how the process to gain and lose the profits.

 

That simple process will do I think will, my tutor is in the film industry (yes baffles me too), so I seriously doubt he needs to know that much detail.

[Will]

Ah thats cool then, if you want anything more detailed or specific then feel free to PM me and I'll happily flesh that out for you.

 

Out of interest, if you don't mind, what was the question you were given?

[Aimless]

What's the specification of the question? There's a lot of different ways you could go with it — case study of a single game, general overview of different current processes, focussing on future trends, etcetera — so it would be easier to help you if we knew exactly what your tutor is after. There's not much point drowning you in information if you only need 500 words, after all.

 

If you want to learn more about the business behind games this book is supposed to be pretty good. Not that you should whack down the money just to answer this one question, but if it's going to a recurring theme it might be a good idea to have your uni procure a copy for you if it doesn't already have one.

[nightwolf]

Ah thats cool then' date=' if you want anything more detailed or specific then feel free to PM me and I'll happily flesh that out for you.

 

Out of interest, if you don't mind, what was the question you were given?[/quote']

 

In this assignment you should write a 3000-4000 word report on the aspect of your professional interests defined in the first assignment. In the report you describe the context in which the industry operates - how it is financed, the size of typical companies, what types of employment opportunities there are, the skills and experience needed, and some detail on the nature of the work. Remember that the topic connects a subject (3D Modelling, Digital Compositing) with a context (TV Advertising, Computer Games).

A typical structure for the report is as follows (but feel free to move away from this structure as long as you meet the general objectives). Each section could be 500-800 words.

 

This is what we were told, then they went on to mention 5 large sections we should write.

 

1. introduction into what we want to talk about. 3d modelling for me.

2. Talk about the financial side, for example how would I be paid as a 3d modeller for EA etc.

3. The types of companies and employment - this is related to a list of companies I wrote for my last assignment (40 companies) we needed about 50, with large paragrpahs for it, which was ridiculous and useless.

4. the skills and experince required for jobs. (for example use of maya, 3ds max)

5. conclusion

 

Its abit stupid really, I already know what I need for a job I don't need to write 4000words to tell a film producer what happens in the industry. Infact thats exactly what it is, FOR HIM and not me. So I better get a good mark.

[Aimless]

A-ha, so you're really looking at how and who pays an individual employee? That should make things a lot simpler as the process through which publishers earn money can be byzantine in the extreme.

 

I suppose you'd want to give an idea of the salaries a 3D modeller can expect as a permanent part of a development studio and the ways in which other benefits are awarded — I believe EA grant bonuses based on Metacritic scores whereas other publishers might do so based purely on sales. I'm afraid I've no figures for you, but I do know it'll vary a lot based on which country you're talking about so I suppose you'd want to stick to the UK to keep things simple; apparently if you go through university in Canada and are consequently hired by a Canadian studio, over half your salary is paid for by the government as opposed to the studio itself, hence everyone opening development houses in Montreal.

 

Another thing to consider might be work as a outsourcer as pretty much every developer these days will pay a freelance company to handle some of the more mundane items in world, like desks, lamps, or other generic items. As it's cheaper to hire companies in India, China or Korea I suppose that might not be too relevant to you personally, though.

 

Assuming you have time, it would probably be a good idea to get in contact with local developers and specifically ask what it's like to be a 3D modeller there, kind of a "day in the life" type affair. I know that Sumo Digital — OutRun Online Arcade, Sega Superstars Tennis, etcetera — are in Sheffield, so they might be willing to help out.

[Ten10]

Rare (remember them) may be able to give you some answers. Also I think we've got a rockstar floating about. But it may also be worth keeping in mind that certain studios are funded to make certain games, and can also be kept afloat by parent companies.

 

At the same time a game can make or break a company. Factor 5, Free radical design.

 

Anyway more inline with your questions, you would be paid a salary for the most part like anyone else, unless you are on working terms where you are paid for your time, but that mainly applies to consultants and they don't do any work anyway.

 

RE part 4. Might need to talk about game engines, as a lot of companies implement them to cut down on development times. And obviously there are stages from concept art to various levels of rendering, to final production model. Wiki page: http://en.wikipedia.org/wiki/Game_engine

 

But its up to you if it fits or not. Also could talk about licensing fees which relates to how the industry works, and financial side of point 2. Will likely add a branch to Will's model, but no need to pay license fees for games released on the PC.

[Wesley]

For most companies it's pretty simple:

 

Get backing from investors and publishers > develop title > get a percentage of the profit from the title sold > growth.

 

Take Rebellion, just did a bunch of titles to get some cash so they could buy that comic book and make a game that they want to make.

 

That's why taking risks can be difficult.

 

Look what happened with the publishers that backed the Psychonauts (sp) developer.