A recently-released investment report from Ibis Capital highlighted the growing costs of game development, the risks of being independent today, and that the Wii holds 47 percent of global console revenue.
The report estimated average development costs for Xbox 360 and PlayStation 3 games at $15-$30 million per title. With games that cost that much, game companies need to sell between 500,000 and 1 million units to break even, excluding overhead. Marketing costs can amount to as much or more than the cost of actual game development, the report said.
That’s compared to Xbox, PS2 and GameCube games that cost around $3-$5 million to make on average, Ibis said, while Wii games cost $5-$7 million.
Total video game sales were $77 billion in 2009, Ibis said, which compares favorably with $85 billion in global film revenue last year. Online, mobile and new consoles will drive growth in the years to come, the report said.
Rising Independent Risks
Rising costs mean that publishers are wanting to mitigate risks as much as possible, and publishers are now looking more carefully at the third-party, independently-developed games that they choose to fund.
With fewer advances distributed to independent developers, there’s greater competition for funding and greater risk of not landing the next publishing deal, Ibis’ report said: “Hit driven, high risk market has lead to many independents struggling to adapt and survive.”
Wii “Domination” And The End Of Consoles?
The report said that the Wii “dominates” the current console generation in terms of revenue share. Ibis said the Wii captures 47 percent of global platform revenue, followed by Xbox 360 with 35 percent and PlayStation 3 with 18 percent. 2009 console revenues were over $30 billion.
Ibis forecast $40 billion of global console-related revenue by 2013, driven by growth in North American and European markets and new “eighth-generation” platforms expected to arrive 2013-2014. Asian console growth is expected to be limited by piracy and MMO and casual games.
Beyond the next generation of consoles, Ibis speculated that digital distribution could eradicate disc-based consoles as we know them. “Digital downloadable content and game delivery reduce likelihood of a ninth generation console cycle, creating potentially significant long term issues for Sony, Microsoft, Nintendo and GameStop,” said the report.
