'Your game flopped' – is that true?

I always ask myself: What should I contribute to the Gamasutra Blogging-Sphere? And whenever I ask people, they tell me to just write about the things where I think they are basics. So yeah, why don’t we start talking about sales? Not a detailed analysis of a project but sales numbers in general. When is a game a success, when did a game bomb?

I’ve been in this industry for years now and more than once I’ve read comments about sales numbers. The funny thing is: In many cases it did not really matter if these comments were made by developers or customers in the end. I’ve read them in forums for games I’ve worked on. I’ve read them on NeoGaf. I’ve read them in the comments section on gaming articles.

Usually the comments are quite similar. The range goes, at least to my experiences, from “If the game doesn’t sell a million copies it’s a flop” to “Oh I’ve seen the numbers for this game, it bombed hard times”. I’ve read these things about games I’ve been involved in. I’ve read these comments about games I wasn’t involved in. Of course, they are mostly made by a vocal minority who doesn’t seem to have a clue. But if you ever argue with one of them, feel free to drop them a link to this mess of words.

First of all, one thing should be clarified once and for all: A game does not need to sell a million copies to be considered a success. In fact, a game can sell less than 10.000 Units and still be a huge success. And that’s for a reason: If you don’t know what it did cost to make a game, you have no idea how many copies need to be sold to hit the break even, that magical point where the generated revenue is equal to the amount of money which was spent during development and marketing the game.

In my last blog entry I explained how you can roughly estimate the costs of a project if you know certain values. So lets say you’ve read my last entry and know roughly how much a game did cost in production. And lets say you even know roughly how much money was spent on marketing. With enough time and some experience you can definitely come up with a number which isn’t completely unrealistic.

Okay. Next thing you need is the price at which the game gets sold to the customer. Cause that is what matters. Revenue is different if you sell a game for 14.99$ or 59.99$. Lets go with the 60 Bucks example here. And lets calculate with an overall budget of 20 Million US Dollar. How many copies need to be sold to hit that amount of money? Exactly: 333.334 Units till break even.

But that’s not enough. You should ask yourself some questions: Is the game on Steam or any other digital store? Cool. Has it also been released on consoles? Great. Now you can deduct roughly 30% of the revenue. Also, how many units were sold digitally and how many on retail? Because that makes a difference. Usually the publisher / developer earns more if a unit gets sold on a digital store. Why? Because only the platform takes a cut of the revenue. For retail, distributors, packaging and etc. etc. – everyone needs to get paid in the end. And the store which sells the game also wants a dollar or two. Take all these factors into consideration.

You now understood that the math can become quite complicated, right? Cool. Lets add another factor. What about, you know, uhm, taxes? The VAT in Germany is around 19%. What about your country? Deduct the VAT as well. And slowly we’re getting closer to the money which actually arrives at the publisher / developer.

What does this math do with our 20 Million Dollar example? Well. It depends. Is it a game which is strong in retail (In Germany for example, simulators are quite popular in Retail. So is FIFA for the consoles etc.)? Without knowing these details, it is hardly possible to come up with exact numbers. But it is, however, easier to get a rough idea.

Usually the math is done with roundabout 45 – 50%. Deduct this number to be on the (more or less) safe side. It may differ per country. It will always differ per product. But in our example, it would result in 666.668 Units to hit the break even. In reality, it will most likely be a bit less, but you get the point I think.

Cool beans. So, am I now able to tell if a game is a hit or miss? I mean, now I can calculate how many copies are needed to hit the break even, so I can finally troll around and claim that this or that game failed, right? I’m sorry to tell you this but the answer is still: No. You can’t.

While you now know how to get a feeling for numbers, you cannot know what the initial target was. I know examples of games, where it was never the aim to hit the breakeven because the development of a project was so expensive it was clearly impossible to hit the break even. At least with one game. But its successor made up for the costs of the first one. In some cases it took two more games to finally hit the breakeven. But in the end this strategy paid out cause all costs were recouped at some point and the success itself was even bigger.

In other cases the breakeven was passed but not enough. Like, lets imagine a company is listed on stock markets. Breakevens alone won’t make a company happy. Or well, their investors. You should keep that in mind.

But… but. Why the hell did you write all that stuff in that case? To be honest: I don’t know. I wanted to give people out there a better understanding of how to guess if a game is a hit or not. I should also add that I did not add all factors here and that things are even more complicated in the end. But that’s always the case, right?