Acceptable level of profit

MartinBabl
516 postsMember, Battlefield 3, Battlefield 4, Battlefield, Battlefield 1 Member
So I am not an expert in business but the recent batch of AAA games which were unfinished products and loaded with micro-transactions got me thinking why companies would do this to their products. Even half baked expansion packs and premium accounts. Do they, as some of them claim, actually need more money to develop the expansions and DLCs? That the $60 we pay is not enough to cover that cost?

Let us do some math or maths:
If each of us pays $60 for the base game and we know that lets say on average for a AAA game 10 Million copies are sold. That is a total of $600 000 000

If we look at one of the best games to date: Half Life 2
It released in 2004 with a price of $40 and sold 1 million copies in the first year for a total of $ 40 000 000
The following years it was sold at half price and by 2008 8 million copies were sold. That's a total of about $140 000 000
The following years after 2008 it sold another 4 million copies at $10 each netting another $ 40 000 000

So in total they made about $ 220 000 000 worth of sales.

Half Life 2 had a development cost of about $40 000 000 and continued support which cost them another $40 000 000 just to be generous.

$220 000 000 - $40 000 000 - $40 000 000 = $ 140 000 000 of profit
They made 175 % profit to date.


Now if we look at a new game such as Battlefront 2:

It released in 2017 at a price of $60 and in its first year and it sold... oh wait they only sold like 1 million copies to date. And I doubt they will sell that much more.

Now moving on or rather back I say. Let us look at Battlefront 1

It released in 2015 and also at the price of $60 and it sold 13 million copies in its first year. That is $780 000 000 of sales.
Let us say that somehow developing a AAA game increased in cost 3 fold over the time from 2005 to 2015. So to develop a AAA game now should cost $120 000 000. I know 3 fold increase is a bit unrealistic but just bear with me.

Somehow their game support costs also increased 3 fold to become $120 000 000.

$780 000 000 - $120 000 000 - $120 000 000 = $ 540 000 000 of profit. That is half a billion dollars in profit? (225% profit)

And they say they do not have cash to make a expansion pack? With that profit they can make another 3 AAA games.
They whole argument that they need to add micro-transactions is totally crap. And somehow they cannot make a decent AAA game even with 3 times the budget which Half Life 2 had????

What is a reasonable level of profit? 50%? 100%? 200? 225%?

Comments

  • StarscreamUK
    4750 postsMember, Moderator, Battlefield 3, Battlefield 4, Battlefield Hardline, Battlefield, Battlefield 1, CTE, BF1IncursionsAlpha Moderator
    well going by your arguement once a level of profit is reached it should be free? good luck convincing your boss that once he makes x amount of profit he should not charge anyone for anything and continue paying you
  • TheSaviorSix
    205 postsMember, Battlefield 3, Battlefield 4, Battlefield Member
    Companies should get as much as people are willing to spend. There are some exceptions, though. Hospitals, medicine, insurance, and utility services should be regulated because they are services people actually need. Like, to live. Food shouldn't have to be regulated because there's actually competition.

    But as far as goods that are unnecessary for your own existence, supply and demand. That's how it'll always work. Just remember, games in the past were more expensive. Super Mario Brothers 3 was $59.99, which is $110+ dollars today.
  • HonestSoul333
    1150 postsMember, Battlefield 3, Battlefield 4, Battlefield, Battlefield 1 Member
    edited January 14
    I think i see what you are getting at.

    One thing to consider is despite the price not changing, is,the market is getting bigger and bigger. 25 years ago if you played video games you were probably a nerd. Nowadays everybody, their mom, and their dad plays video games grom time to time. So naturally, as your data shows, companies are making well enough proffit.

    Makes you really wonder why good modern games with content and gameplay are coming harder to find... if your research is accurate they should be making plenty of money to make a finished product.
  • xxxCoOlBr33zExxx
    2512 postsMember, Moderator, Battlefield 3, Battlefield 4, Battlefield Hardline, Battlefield, Battlefield 1, CTE, BF1IncursionsAlpha Moderator
    Also keep in mind that a big company probably doesnt keep all the money made from a triple A game solely in that Dev's studio meaning they spread it out among other projects. Also take into account, licensing fees for everything, other type of fees, salaries, benefits, advertising, hardware, software, making the game in different languages, taxes, game support, fees that must be paid in other countries, etc that must be taken into consideration before coming to the conclusion on profit. Just a lot of factors to consider.

    The price on video games has not really changed for 15+ years however the cost of making one has increased drastically.

    I would be curious to see after everything is factored in, what the actual profit margin is.
  • MartinBabl
    516 postsMember, Battlefield 3, Battlefield 4, Battlefield, Battlefield 1 Member
    So after some research I found this financial report of EA.
    nasdaq.com/symbol/ea/financials?query=income-statement

    EA is making $ 967 000 000 of pure profit. They also have a profit margin of 20% which is double that of a healthy company which usually stands at 10%.

    From this financial statement alone one can see that EA is a very healthy company and does not need any extra micro-transactions in order to develop extra content.
  • StarscreamUK
    4750 postsMember, Moderator, Battlefield 3, Battlefield 4, Battlefield Hardline, Battlefield, Battlefield 1, CTE, BF1IncursionsAlpha Moderator
    Yeah. Perhaps you should look at the figures again
  • x_Undaunted_x
    2833 postsMember, Battlefield 3, Battlefield 4, Battlefield, Battlefield 1 Member
    MartinBabl wrote: »
    So after some research I found this financial report of EA.
    nasdaq.com/symbol/ea/financials?query=income-statement

    EA is making $ 967 000 000 of pure profit. They also have a profit margin of 20% which is double that of a healthy company which usually stands at 10%.

    From this financial statement alone one can see that EA is a very healthy company and does not need any extra micro-transactions in order to develop extra content.

    It's a free market and they are allowed to add anything they want to their game within the bounds of the law. It's not up to you to decide how much profit is too much or too little. All EA is doing is something their customers are condoning. It's simple - if people don't like it, don't buy it. If enough people boycott the product, the company will make a change in order to profit. You can't blame the company when people still buy it even though they complain.

    I tell you what - why don't you start your own business. It doesn't matter what type of business or what field it's in. When you have worked for years to develop that business into a profitable company and can finally reap the rewards of your hard work, I want you to cut off your profits at 10% and give the money away to people who have nothing to do with your company. When you do that, you'll be one of the first people in the history of business to do so. I seriously doubt you (or anyone for that matter) would ever do it.
  • Rev0verDrive
    6158 postsMember, Battlefield 3, Battlefield 4, Battlefield, Battlefield 1, CTE Member
    edited 6:41AM
    In financial statements you need to pay attention to the (in 000's) statements. Meaning you must append ,000 to all values shown. Thus a statement showing a gross profit of $3,547,000 actually means $3,547,000,000 ... e.g. $3.547 Billion ... not million.

    GROSS PROFIT (before any deductions) $3,547,000,000 ... $3.547 Billion
    NET PROFIT (after deductions) $967,000,000 .... just shy of 1 Billion.

    $2,580,000,000 in payables. This is just over two thirds meaning as a whole there's less than a 33% profit margin.

    These financial statements cover the entirety of the business....all revenue streams.... all studios ... all games.

    You'd need to see the P&L's for a specific studio and a specific title before pushing "we deserve free content". The margins tell the full story.
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