The AAA games industry has been struggling with rising costs for a while. Whether it be the rising costs of production or the ever-increasing expenses of modern marketing campaigns, games cost exponentially more to make today than they did in the last decade.
This also means that profitability is more challenging to achieve for modern games than ever. In fact, a former EA executive states that AAA games need to sell at least 6 million copies to break even.
Kiwi Talkz recently spoke to Bryan Walker, who previously worked as a producer at EA, Activision, and Retro Studios.
Discussing the cost of modern AAA development, the former producer discussed how even high-quality mobile games can cost a whopping $100 million today. Of course, this would be an incredibly modest budget for a AAA production, with most titles requiring much bigger budgets to ship.
Bryan Walker states that a game with a $100 million budget must sell at least 6 million units to break even. This is because factors like the 30% storefront cuts from PlayStation, Xbox, Steam, etc. He also suggests that this calculation is applicable primarily to digital sales, with retailers taking a slightly larger cut from the overall revenue.
Elsewhere, Bryan Walker noted that refund costs and other expenses must be taken into account when looking at the overall figures. He estimates that refunds alone can lead to a 15% decline in the overall revenue.
Even a high-quality is gonna cost 9 digits to make start to finish. At $100 million, you’ve probably got to move about 6 million to break even. – Bryan Walker
The interesting part here is that most AAA games have budgets 2-3x higher than the $100 million figure. This means that they must sell upwards of 10 million units to become profitable when relying purely on revenue generated from unit sales. However, this is also why other means of generating revenue are so popular today.
According to Bryan Walker, battle passes, microtransactions, and other DLC releases play a huge role in keeping games profitable today. These secondary revenue streams eventually allow AAA titles to reach big numbers that would not have been possible otherwise. In particular, the live-service model has become a gold mine for developers who have found success within the genre.
