Why companies have to sell as many copies as possible

[Blinkman987]

A little background first: I work in marketing for a large company that does game development and publishing. We license a lot of IPs, including some video games. We do not produce video games, but work closely with video game companies.

It's crucial for companies to make the most money they can from their products. Costs aren't coming down anytime soon in the video game industry, and the money it takes to hire the best is certainly going up. Top producers are seeing big money across the board for the first time, and the cost to market games is going through the roof. It's a highly competitive market, and it's only getting more competitive.

The Home Run
This is what most companies do. You spend your money making a few games, hoping one of them is a home run. The profits from the home run's revenue can fuel development for other games and make up for the majority of games not selling well. Some games are just not going to sell, no matter how good they are. Production costs of games is rising at an alarming rate as the technology increases and expectations rise. The majority of the money is reinvested in development and paying the staff. Some is kept for ready cash and other projects, but for the most part the money earned is put right back into future games.

The Double
If your company can't afford to spend a bunch to try and release a AAA title, some companies spread the cash around multiple IPs to try and just hit doubles. Shovelware is a good, yet bad example of this. They release solid games and have much less cost to recoup. While you'll probably never release a giant hit, at least you have consistent cash coming in. Even here, revenue is typically reinvested into the company and allocated in the next year's budget for new titles or to help struggling teams.

Either way, it's important for a company to maximize revenue. More revenue means that you can keep your staff happy, develop more titles, and develop better titles. You need extra cash for when development goes over the planned timeframe, you need to train more staff, or you have bad luck and you have a few games that just don't sell.

Excellence doesn't come cheap, and companies need a reasonable return on their money. Why even be a company if you're going to see low returns? You could invest in a good hedge fund and get 20% returns on cash without having to produce a thing or hire a single person. The big hits fuel the smaller games and make them possible. When someone said in another thread that Final Fantasy 13 40mil vs 50mil copies didn't matter, that's just a ridiculous statement. The cash from an extra million copies is going to go to the investors (if you're publicly owned) and to DEVELOPING BETTER GAMES. The more money you have, the more money you can spend.

Where do you think that extra revenue goes? It goes to making better games and to the employees. S-E employees have bills to pay, groceries to buy, and kids to send to college. They're making a product and want as many people to enjoy their product. S-E doesn't care about some fan flaming war. They simply did what was best for the company. You people are far too unrealistic on how a company works and your unrelenting "moral code" doesn't apply here.

[DeathByAsh'aman]

Originally Posted by Blinkman987

A little background first: I work in marketing for a large company that does game development and publishing. We license a lot of IPs, including some video games. We do not produce video games, but work closely with video game companies.

It's crucial for companies to make the most money they can from their products. Costs aren't coming down anytime soon in the video game industry, and the money it takes to hire the best is certainly going up. Top producers are seeing big money across the board for the first time, and the cost to market games is going through the roof. It's a highly competitive market, and it's only getting more competitive.

The Home Run
This is what most companies do. You spend your money making a few games, hoping one of them is a home run. The profits from the home run's revenue can fuel development for other games and make up for the majority of games not selling well. Some games are just not going to sell, no matter how good they are. Production costs of games is rising at an alarming rate as the technology increases and expectations rise. The majority of the money is reinvested in development and paying the staff. Some is kept for ready cash and other projects, but for the most part the money earned is put right back into future games.

The Double
If your company can't afford to spend a bunch to try and release a AAA title, some companies spread the cash around multiple IPs to try and just hit doubles. Shovelware is a good, yet bad example of this. They release solid games and have much less cost to recoup. While you'll probably never release a giant hit, at least you have consistent cash coming in. Even here, revenue is typically reinvested into the company and allocated in the next year's budget for new titles or to help struggling teams.

Either way, it's important for a company to maximize revenue. More revenue means that you can keep your staff happy, develop more titles, and develop better titles. You need extra cash for when development goes over the planned timeframe, you need to train more staff, or you have bad luck and you have a few games that just don't sell.

Excellence doesn't come cheap, and companies need a reasonable return on their money. Why even be a company if you're going to see low returns? You could invest in a good hedge fund and get 20% returns on cash without having to produce a thing or hire a single person. The big hits fuel the smaller games and make them possible. When someone said in another thread that Final Fantasy 13 40mil vs 50mil copies didn't matter, that's just a ridiculous statement. The cash from an extra million copies is going to go to the investors (if you're publicly owned) and to DEVELOPING BETTER GAMES. The more money you have, the more money you can spend.

Where do you think that extra revenue goes? It goes to making better games and to the employees. S-E employees have bills to pay, groceries to buy, and kids to send to college. They're making a product and want as many people to enjoy their product. S-E doesn't care about some fan flaming war. They simply did what was best for the company. You people are far too unrealistic on how a company works and your unrelenting "moral code" doesn't apply here.

I know what you mean. Some people think that S-E is in the business of selling PS3s when its just not the case. There making a game for console that probably has 100 million less units sold then the console they last worked on (PS2), and the game probably costs more then their last FF game as well. I understand why people were upset but i thought the move was understandable.

[stockstar1138]

i do agree mostly with what you have to say. The 3rd party exclusive is going to be more rare in the days to come.

however, i do have some issues with the events of the past few days.

SE clearly understands business. They have known for a long time that FF development costs were going to be high. However, for years they claimed FFXIII was PS3 exclusive, magically when it appears that MS is getting very close to SE, FFXIII becomes multi-plat and its becase of high dev costs. Too coincidental, why if what you say is the case with 99% of the business did it take MS having to supposedly shell out more money than they can recoup from FFXIII sales, to make this game multi-plat if it was simply because of dev costs. More than 1 insider from across the web has claimed knowloedge of a payoff, which leads me to believe there was cash/incentives to SE from MS.

Why is Verses still PS3 exclusive?

Why is SO4, IU, and LR all exclusive or time exclusive for MS?

This doesn't add up with what you say.

However, to the people complaining about MS getting the FFs and GTAs, etc. Shut up. Because guess what, Sony has the ability to create its own games that take advantage of the system. Playstation had a perfectly good GTA clone in The Getaway, however Sony found it too financial taxing and shut the project down. I mean, if GTA was 5x bigger, it would have taken a lot longer to come out, its just not financially feasible.

[Blinkman987]

This is pure conjecture, but FF13 Vs may have a smaller fanbase or require greater infrastructure changes (XBL vs PSN) and therefore might not be worth porting to 360 financially for the company.

Personally, I believe that S-E meant FFXIII to be on the PS3. Even as PS3 kicks the crap out of 360 in Japan, system sales on both ends are less than stellar. In NA, 360 still has the greater install base. Nobody expected the PS3 to be a flop the first year. When 13 went into development, there was no reason to think that PS3 wouldn't be as successful as PS2 or PSX. Now that we're here in the present, selling to just the PS3 owners would be financially devastating to S-E. I see that they have to sell to both platforms because of the reality of the install base. 2 years ago, there was probably no worry and no reason FF13 couldn't be solely on PS3. With today's numbers, that's just not possible to allow S-E to recoup game costs and still make some cash for the next FF.

[DeathByAsh'aman]

Im going to assume that business at that level (especially w/ MS) is very cut throat. I have no idea why some games are exclusive to MS but if they paid out for FFXIII then im going to assume that S-E coffers look pretty damn good.

I for one think youre spot on Blink. Thats just how it is. If you think about it, the install base for the PS3 is still pitifully small compared to what they were working with during the PS2 era.

[stockstar1138]

what doesn't make sense to me at all is why MS paid for a JRPG....but only for the West?

JRPGs don't have the best record of selling that well in the west and given that by the time this game comes out. PS3 sales in the West (Europe+Americas) will be near equal with the 360, many owners having both consoles. Meaning 360 will have to share sales with PS3 pretty equally.

Selling just on the PS3 would not have been a financial disaster, but would also not be optimizing profits.

I just don't see why MS dropped all this money on JRPGs and isn't trying to revive the 360 name in Japan at all. Seems like a waste to e, they would have been better off buying a studio or trying to get a big IP exclusive like GTA, DMC, etc.

An exclusive IP would do a lot more for them than taking away a PS3 exclusive and making it multi-plat.

Kind of weird and shady, almost like they just want to steal some of the PS3s thunder, becase I do believe they PS3 has the better lineup and given MS didn't show much of anything new at E3 makes me think not much is in the pipeline.

And I do think the 360 will be nearing the end of its life cycle by the time FF XIII comes out in the West, which makes it even more puzzling.

Why not lock something up for their next-gen console?

[Marquoz]

I honestly doubt that FF13 will sell that well on the Xbox. This was more a move by S-E to pocket a bunch of instant cash from MS, and a way for MS to prevent the sales of the PS3 when FF13 comes out. S-E basicly admitted that they knew it wouldn't sell any Xbox's by keeping FF13 PS3 exclusive in Japan. With the sales of 360s being so low there, that would have been the prime market for MS to be able to muscle in and sell some consoles. It could be a number of reasons that it is still exclusive, national pride, money concerns (why port something that won't sell anyway?), time (they want to get it to the japanese public ASAP).

[Proteus]

Originally Posted by stockstar1138

Kind of weird and shady, almost like they just want to steal some of the PS3s thunder, becase I do believe they PS3 has the better lineup and given MS didn't show much of anything new at E3 makes me think not much is in the pipeline.

That is exactly why they did it.

And I do think the 360 will be nearing the end of its life cycle by the time FF XIII comes out in the West, which makes it even more puzzling.

Why not lock something up for their next-gen console?

Again, exactly why they are doing it. It creates the perception that they will have all of the good jrpg's as well as Playstation so when they do drop their next console (I'll bet sooner than later) more people will drop in assuming it won't be locked onto FPS as Xbox has been historically.

It's a long term plan to diversify their line up and influence future perception, I imagine.

For Squenix it's a win... especially if the $$$ rumors are true. Ever think that it was Squenix that demanded it stay exclusive in Japan and not Microsoft not wanting Japan? I'd be willing to be Microsoft came in the door adamant that Japan be included but Squenix showed them the door with only the West in their grubby little hands.

[Clark Kent]

Money talks point blank. I have a hunch that Sony had already paid a boatload of money to keep Metal Gear Solid IV off the Xbox 360 and wasn't willing to top Microsoft's offer to Square to keep Final Fantasy 13 exclusive to the PS3. I think it was a shortsighted position myself as it shows the weakness of Sony's strategy. Microsoft does this to every industry they've ever gotten into. They use their immense cash reserves to crush the competition.

[Elandyll]

... To make money.

[richieb1971]

JRPG's on the scale of FFXIII are just not financially viable. Has anyone thought of that?

If I'm not mistaken, as the consoles get better, less and less games come out for the most powerful consoles. The DS gets probably 3-8 titles a week, PS3 is lucky to get that in 2 months.

Being a nextgen gamer is about waiting and waiting. When those big hitters come along, they better hit big and hard.

[Mikeblu]

Originally Posted by Clark Kent

Money talks point blank. I have a hunch that Sony had already paid a boatload of money to keep Metal Gear Solid IV off the Xbox 360 and wasn't willing to top Microsoft's offer to Square to keep Final Fantasy 13 exclusive to the PS3. I think it was a shortsighted position myself as it shows the weakness of Sony's strategy. Microsoft does this to every industry they've ever gotten into. They use their immense cash reserves to crush the competition.

but MS has already tried that once and failed, I'm sorry but even with all the money in the world people won't buy your product if its crap. Sony have taken over Japan and EU (when the xbox was out 16 months before the PS3) from MS, the only place they still hold strong is America.