Are companies trying to ruin PC Gaming?

[Tricks]

Someone in this thread mentioned 'opening week'... Who cares? I bet TF2 will have made more money in its lifetime than MW2 or Halo.

Sure, I’ll bite.

On the Activision analyst call, they stated that had made close to 1.1 billion dollars from MW2 alone by 2009 4Q end.

Think about TF2 for 30 seconds and then find me figures that prove you are even close in your assumption. Hell, I'll let you include Team Fortress one in your figures just to help out.

I would go as far as to say that the first 24 hours of sales for MW2 on just the Xbox is comparable to the lifetime sales volume of TF2.

http://news.bbc.co.uk/2/hi/technology/8457335.stm  MW2 Profits


Now, Valve is a private company, so profits aren't disclosed in the same way that Activision's profits are. One public quarter is 4Q 2008:

http://biz.yahoo.com/ic/119/119351.html  15 million dollars in total revenue

http://biz.yahoo.com/ic/42/42465.html  3,026 million dollars in total revenue

I'll stop for now and let you come up with TF2 figures.

[Squishy3]

[quote author=ainmosni link=topic=4222.msg137518#msg137518 date=1266512319]
Someone in this thread mentioned 'opening week'... Who cares? I bet TF2 will have made more money in its lifetime than MW2 or Halo. Valve breeds customer loyalty and doesn't stare itself blind on silly things like opening weeks. What is it with the obsession of opening $time_period anyway? The only thing that shows is how good the hype machine worked for something, something might start up slow because of lack of hype but will grow more and more if it's actually good. SO yeah, I think this 'opening week' thing is a bunch of BS.

Actually another point with console games - the used market


To a developer if you buy a used game, you might as well have pirated it, because gamestop isn't paying them a dime in commissions or anything for reselling a used disk.


Pirate a PC game or buy a used console game, its exactly the same economically in the developer's eyes
[/quote]Used games still benefit the developers in a way. Even if they make no profit off of Gamestop selling them, tons of people trade them in after they're done towards new games. Now Gamestop is the one taking in the used games towards the new game, and it still allows Gamestop to buy more new games from companies to sell because a used game traded towards a new one is still a sale, just not a guaranteed one, it's a timed one or the game may never sell. It still spurs new game sales, even if the developer/publisher doesn't get direct money from the sales of used games. Also it helps because if they're coming out with a new version of something that hasn't been made in awhile, someone might be interested and go back and buy a used copy of the previous game, they like it and they'll go and get the new version when it does come out.

[Tricks]

[quote author=Caffeine link=topic=4222.msg137519#msg137519 date=1266512719]
[quote author=ainmosni link=topic=4222.msg137518#msg137518 date=1266512319]
Someone in this thread mentioned 'opening week'... Who cares? I bet TF2 will have made more money in its lifetime than MW2 or Halo. Valve breeds customer loyalty and doesn't stare itself blind on silly things like opening weeks. What is it with the obsession of opening $time_period anyway? The only thing that shows is how good the hype machine worked for something, something might start up slow because of lack of hype but will grow more and more if it's actually good. SO yeah, I think this 'opening week' thing is a bunch of BS.

Actually another point with console games - the used market


To a developer if you buy a used game, you might as well have pirated it, because gamestop isn't paying them a dime in commissions or anything for reselling a used disk.


Pirate a PC game or buy a used console game, its exactly the same economically in the developer's eyes
[/quote]Used games still benefit the developers in a way. Even if they make no profit off of Gamestop selling them, tons of people trade them in after they're done towards new games. Now Gamestop is the one taking in the used games towards the new game, and it still allows Gamestop to buy more new games from companies to sell because a used game traded towards a new one is still a sale, just not a guaranteed one, it's a timed one or the game may never sell. It still spurs new game sales, even if the developer/publisher doesn't get direct money from the sales of used games. Also it helps because if they're coming out with a new version of something that hasn't been made in awhile, someone might be interested and go back and buy a used copy of the previous game, they like it and they'll go and get the new version when it does come out.
[/quote]

Exactly right, but Caff stated "in the developer's eyes" so unless they are using one Activision game to turn and buy another Activision game, this isn't necessarily true. You are right that there, once in a while, has to be some benefit back to the developer.

[CaffeinePowered]

Now, Valve is a private company, so profits aren't disclosed in the same way that Activision's profits are. One public quarter is 4Q 2008:

http://biz.yahoo.com/ic/119/119351.html  15 million dollars in total revenue

http://biz.yahoo.com/ic/42/42465.html   3,026 million dollars in total revenue

I'll stop for now and let you come up with TF2 figures.

<volleys the serve>

Revenue doesn't mean jack, Activision is a much much more massive company and employs a ton more people than valve likely ever will. What always matters is the net profit at the end of the day. Cash is king, if you're insolvent it doesn't matter how many billions in revenue you earned.

How much of a return did you earn in all of the spending to get that revenue?

They make 72 cents per share (est for 2009), that's not bad at all, especially considering they lost 11 cents a share last year, and that they had an operating loss of 245 million last year. And had a gross margin of ~20% (from 2008 IS, not including Marketing, G&A, and Restructuring).


Valve by comparison has a much smaller apparatus, , in fact, no one knows what the real steam sales figures are, they publish the top 10 games, but never any numbers. No one knows what they make or how many units they sell, and I can't even begin to conjecture on what their costs of goods sold are.

However, I can make a few reasonable assumptions...


#1) Valve spends considerably less on their COGS (percentage of rev)

#2) Valve has magnitudes smaller market capitalization

#3) Valve spends less in operating cost space (percentage of rev)

#3a) As a private company they do not have additional accounting costs required of a public company

#4) Valve has grown considerably since the initial releases of HL and HL2

#4a) This growth has placed them into a spot where they stand poised to wholly control online distribution for PC games, earning them better margins and putting them out front in a _worldwide_ market segment that can be just as large as any singular console

#5) The PC market is underestimated, while in the US consoles may "dominate" take the size of the PC and Console markets world wide, also, split the console market up by manufacturer, the PC is just as large, if not larger, than any single console. Pay particular attention to Chinese, Korean, Japanese, and Western European markets when thinking about the PC. It would be like saying the Detroit three make more cars than Toyota, well of course, thats because its three companies versus one, individually however, Toyota is still larger.

[Tricks]

[quote author=TR1CK link=topic=4222.msg137524#msg137524 date=1266514872]

Now, Valve is a private company, so profits aren't disclosed in the same way that Activision's profits are. One public quarter is 4Q 2008:

http://biz.yahoo.com/ic/119/119351.html  15 million dollars in total revenue

http://biz.yahoo.com/ic/42/42465.html   3,026 million dollars in total revenue

I'll stop for now and let you come up with TF2 figures.

<volleys the serve>

Revenue doesn't mean jack, Activision is a much much more massive company and employs a ton more people than valve likely ever will. What always matters is the net profit at the end of the day. Cash is king, if you're insolvent it doesn't matter how many billions in revenue you earned.

How much of a return did you earn in all of the spending to get that revenue?

They make 72 cents per share (est for 2009), that's not bad at all, especially considering they lost 11 cents a share last year, and that they had an operating loss of 245 million last year. And had a gross margin of ~20% (from 2008 IS, not including Marketing, G&A, and Restructuring).


Valve by comparison has a much smaller apparatus, , in fact, no one knows what the real steam sales figures are, they publish the top 10 games, but never any numbers. No one knows what they make or how many units they sell, and I can't even begin to conjecture on what their costs of goods sold are.

However, I can make a few reasonable assumptions...


#1) Valve spends considerably less on their COGS (percentage of rev)

#2) Valve has magnitudes smaller market capitalization

#3) Valve spends less in operating cost space (percentage of rev)

#3a) As a private company they do not have additional accounting costs required of a public company

#4) Valve has grown considerably since the initial releases of HL and HL2

#4a) This growth has placed them into a spot where they stand poised to wholly control online distribution for PC games, earning them better margins and putting them out front in a _worldwide_ market segment that can be just as large as any singular console

#5) The PC market is underestimated, while in the US consoles may "dominate" take the size of the PC and Console markets world wide, also, split the console market up by manufacturer, the PC is just as large, if not larger, than any single console. Pay particular attention to Chinese, Korean, Japanese, and Western European markets when thinking about the PC. It would be like saying the Detroit three make more cars than Toyota, well of course, thats because its three companies versus one, individually however, Toyota is still larger.
[/quote]

Company overhead was fair game because I used the word "revenue", but has nothing to do with overall profitability of MW2 vs. TF2. The ironic thing is, as TF2 gets older and older with more and more free updates the overhead increases over time. Unless sales increase exponentially with updates, ironically the stated argument because LESS true over a longer period of time.

The revenue comparison was simply a comparison in scale. Clearly MW2 wasn't out in 2008, so it has nothing to do with the argument. I mean comparing accounting overhead costs on a gaming forum is probably not the best use of our time.

The argument was TF2, over a long period of time, has made more than a Billion dollars for Steam (as in more than MW2).

I adore Steam, and I only buy games off of Steam because I love the delivery system and ease of restoration when I get a new computer/reformat.

That doesn’t make a really, really untrue statement true.

[CaffeinePowered]

Company overhead was fair game because I used the word "revenue", but has nothing to do with overall profitability of MW2 vs. TF2. The ironic thing is, as TF2 gets older and older with more and more free updates the overhead increases over time. Unless sales increase exponentially with updates, ironically the stated argument because LESS true over a longer period of time.

The revenue comparison was simply a comparison in scale. Clearly MW2 wasn't out in 2008, so it has nothing to do with the argument. I mean comparing accounting overhead costs on a gaming forum is probably not the best use of our time.

The argument was TF2, over a long period of time, has made more than a Billion dollars for Steam (as in more than MW2).

I adore Steam, and I only buy games off of Steam because I love the delivery system and ease of restoration when I get a new computer/reformat.

That doesn’t make a really, really untrue statement true.

I guess I misinterpreted some of your post then  :

TF2 (or the OB + all its games) have not made valve a billion dollars, but I think they likely gave them a better return on their investment, strictly in percentages than MW2 did for Activision.

And its been shown whenever they do an update TF2 sales spike, so rather than charging for the update the extra interest generated drives the revenue for the cost of the update.

I just hate using revenue as a comparison for anything other than size, just to get at the original argument "Console gaming is more profitable", because its not, company might make "less money" but the money they do get is at a higher gross/net margin.

[Tricks]

[quote author=TR1CK link=topic=4222.msg137531#msg137531 date=1266517398]
Company overhead was fair game because I used the word "revenue", but has nothing to do with overall profitability of MW2 vs. TF2. The ironic thing is, as TF2 gets older and older with more and more free updates the overhead increases over time. Unless sales increase exponentially with updates, ironically the stated argument because LESS true over a longer period of time.

The revenue comparison was simply a comparison in scale. Clearly MW2 wasn't out in 2008, so it has nothing to do with the argument. I mean comparing accounting overhead costs on a gaming forum is probably not the best use of our time.

The argument was TF2, over a long period of time, has made more than a Billion dollars for Steam (as in more than MW2).

I adore Steam, and I only buy games off of Steam because I love the delivery system and ease of restoration when I get a new computer/reformat.

That doesn’t make a really, really untrue statement true.

I guess I misinterpreted some of your post then  :

TF2 (or the OB + all its games) have not made valve a billion dollars, but I think they likely gave them a better return on their investment, strictly in percentages than MW2 did for Activision.

And its been shown whenever they do an update TF2 sales spike, so rather than charging for the update the extra interest generated drives the revenue for the cost of the update.

I just hate using revenue as a comparison for anything other than size, just to get at the original argument "Console gaming is more profitable", because its not, company might make "less money" but the money they do get is at a higher gross/net margin.
[/quote]

Nope, we are on the same page. Is it possible that TF2 has had a higher ROI over time? Maybe. Considering the shit coding they push out every patch (no spray for you), they can't have a ton of money sunk into upkeep and development.

I don’t have a cute link for it, but on the call the development for the games (all systems, across the board) was around $155 million dollars. Compare that to a Billion of sales and you have a decent idea of the percentage of return. What about TF2? As you said, without the financials in my hands it is difficult to say on a percentage-based return. Again, that wasn’t the statement made. It was “more money” which does mean revenue. MW2 wins a pure numbers game hands down.

Also, when TF2 updates come out, it nearly always gets marked down to $5 or $10 dollars which only makes the argument even less true. The sales spike could be just as much due the new pricing point as the update, so that correlation doesn’t equal causation. Even IF it was due to the update, the margin is way down because it is on sale in the first place! 

[CaffeinePowered]

I don’t have a cute link for it, but on the call the development for the games (all systems, across the board) was around $155 million dollars. Compare that to a Billion of sales and you have a decent idea of the percentage of return. What about TF2? As you said, without the financials in my hands it is difficult to say on a percentage-based return. Again, that wasn’t the statement made. It was “more money” which does mean revenue. MW2 wins a pure numbers game hands down.

Also, when TF2 updates come out, it nearly always gets marked down to $5 or $10 dollars which only makes the argument even less true. The sales spike could be just as much due the new pricing point as the update, so that correlation doesn’t equal causation. Even IF it was due to the update, the margin is way down because it is on sale in the first place! 

Ok, so lets run with that 155 million dollar figure, now, if it did indeed make one billion dollars, assuming $60 per unit, thats 16,666,666 units sold, we'll round that up to 17m for a nice even number.

Now, I also believe that its commonly accepted that a console developer makes $10/$15 per game net after packaging, licensing fees to the hardware companies (MS/Sony/Nintendo), marketing and all the other costs associated with making selling the game itself. Licensing fees and packaging are variable costs, and the development costs are fixed.

ROI - I will consider the Net Income to be the gain on the investment and the investment to be the development cost

At $20 net after variable costs per unit
- $340m Net
- 54.4% (Net Income vs Development Cost)

At $15
- $255m Net
- 39.2% ROI

At $10
- $170m Net
- 8.8% ROI


Now the difference with Valve is, they will make nearly 100% of whatever the sale is (Assumptions - Distribution on steam has negligible costs and STEAM as a platform is considered a separate investment), even if TF2 is marked down to $10 say, that's still equal to the low end of what Activision makes for each sale of a $60 MW2. I would gander that they make somewhere between $10 and $15.

[Tricks]

I think I’ve worked on this example more than my actual job today. Somebody is going to work late tonight.

$155 mm wasn’t just development. Marketing fees and licensing fees were rolled up in that as well. I think actual development was around 100 mm? I didn’t take notes on the call (not my sector, not my problem), but trying to play around with ROI wasn’t the question four posts ago, and it still isn’t now.

[quote author=TR1CK link=topic=4222.msg137537#msg137537 date=1266518666]
even if TF2 is marked down to $10 say, that's still equal to the low end of what Activision makes for each sale of a $60 MW2. I would gander that they make somewhere between $10 and $15.

[/quote]


?


You are still trying to calculate figures based upon complete guesses. No financials=shot in the dark.

[CaffeinePowered]

I think I’ve worked on this example more than my actual job today. Somebody is going to work late tonight.

$155 mm wasn’t just development. Marketing fees and licensing fees were rolled up in that as well. I think actual development was around 100 mm? I didn’t take notes on the call (not my sector, not my problem), but trying to play around with ROI wasn’t the question four posts ago, and it still isn’t now.

[quote author=Caffeine link=topic=4222.msg137540#msg137540 date=1266519719]
[quote author=TR1CK link=topic=4222.msg137537#msg137537 date=1266518666]
even if TF2 is marked down to $10 say, that's still equal to the low end of what Activision makes for each sale of a $60 MW2. I would gander that they make somewhere between $10 and $15.

[/quote]


?


You are still trying to calculate figures based upon complete guesses. No financials=shot in the dark.

[/quote]

Licensing fees to hardware manufacturers are on a per unit sold basis, here's the skinny

http://www.hollywoodreporter.com/hr/sear...1000955338

I think I’ve worked on this example more than my actual job today. Somebody is going to work late tonight.

Hey, its more interesting than work at least, I enjoy these kinds of conversations

[Tricks]

[quote author=TR1CK link=topic=4222.msg137542#msg137542 date=1266521029]
I think I’ve worked on this example more than my actual job today. Somebody is going to work late tonight.

$155 mm wasn’t just development. Marketing fees and licensing fees were rolled up in that as well. I think actual development was around 100 mm? I didn’t take notes on the call (not my sector, not my problem), but trying to play around with ROI wasn’t the question four posts ago, and it still isn’t now.

[quote author=Caffeine link=topic=4222.msg137540#msg137540 date=1266519719]
[quote author=TR1CK link=topic=4222.msg137537#msg137537 date=1266518666]
even if TF2 is marked down to $10 say, that's still equal to the low end of what Activision makes for each sale of a $60 MW2. I would gander that they make somewhere between $10 and $15.

[/quote]


?


You are still trying to calculate figures based upon complete guesses. No financials=shot in the dark.

[/quote]

Licensing fees to hardware manufacturers are on a per unit sold basis, here's the skinny

http://www.hollywoodreporter.com/hr/sear...1000955338

I think I’ve worked on this example more than my actual job today. Somebody is going to work late tonight.

Hey, its more interesting than work at least, I enjoy these kinds of conversations
[/quote]

Totally agree. Good times on the BRB forums.

I imagine it was just good times for us, as anybody else reading this must have fallen asleep looooonnnnnggggg ago.    ???

[KarthXLR]

I wish I could argue on BRB,U at my school. But I managed to attract too much attention and the website was blocked.

[Trace]

Ahh yea we're too cool for school  8)

[KarthXLR]

Oh penny arcade.

[Eschatos]

I wish I could argue on BRB,U at my school. But I managed to attract too much attention and the website was blocked.

Proxies, my friend.