Alan Wake 2 developer Remedy Entertainment is making a big change with one of its next games

[Windows Central]

Remedy Entertainment's upcoming Control 2 will be an action-RPG, while Alan Wake 2 is closing in on two million copies sold.

Alan Wake 2 developer Remedy Entertainment is making a big change with one of its next games : Read more

 

[fjtorres5591]

3-4M sales to recoup costs?
So, $200M development cost?
No wonder they were able to buy back the IP rights.

This and the highly rated multiplatform ALAN WAKE 2 moving 1.8M units and still being underwater are two datapoints to remember when discussing the state of the blockbuster gaming sector. It's challenging.

They might hit breakeven but some profits might be nice...
(edited)

 

[GraniteStateColin]

$3-4M sales to recoup costs?
So, $200M development cost?
No wonder they were able to buy back the IP rights.

This and the highly rated multiplatform ALAN WAKE 2 moving 1.8M units and still being underwater are two datapoints to remember when discussing the state of the blockbuster gaming sector. It's challenging.

They might hit breakeven but some profits might be nice...

I think that's 3-4 million copies, not dollars. But even so, 3M copies x $40/to Remedy per sale = $120M, so that would seem to be a problem for profitability with $200M in dev costs. Are there different cost dynamics for a AAA publisher (like Hollywood film costs, where they need to earn double the cost just to break even due to marketing, but in reverse)?

 

[fjtorres5591]

I think that's 3-4 million copies, not dollars. But even so, 3M copies x $40/to Remedy per sale = $120M, so that would seem to be a problem for profitability with $200M in dev costs. Are there different cost dynamics for a AAA publisher (like Hollywood film costs, where they need to earn double the cost just to break even due to marketing, but in reverse)?

Yup.
Got carried away with the sign.
Will edit away.

 

[fjtorres5591]

I think that's 3-4 million copies, not dollars. But even so, 3M copies x $40/to Remedy? per sale = $120M, so that would seem to be a problem for profitability with $200M in dev costs. Are there different cost dynamics for a AAA publisher (like Hollywood film costs, where they need to earn double the cost just to break even due to marketing, but in reverse)?

I was calculating off a $70 price, and a (typical) 30% store fee. So $49 gross for the publisher. If they need 4 M units sold to break even that is around $200M.

For movies, the theater (chain) typically gets 50% of the reported gross (which is typically just an estimate). Except for many Disney/Marvel/Lucasfilm movies where Disney has charged as much as 75% of the gross. Thus most other movies generally need revenue twice the (reported) production cost (which can be both inflated or under-reported as required by standard Hollywood accounting).

Game costs these days are more likely underreported to allow for underperformance. And that is when there is any report as the platform owners rarely talk. Mostly it is the publicly traded third party publishers that (grudgingly) admit the blood letting. WB-D had no choice since they're so deep in hock.

And that admission gives my $200M estimate a bit of backing.
Which, btw, breaks down to $40-50M a year for typical AAA games.

(A burn rate that aligns with the report that CONCORD burned $400M over its 8 years.)

It wasn't that long ago that $50M would produce a good AAA game over 2-3 years.

The other half of the problem is the sales. ALAN WAKE 2 at 1.8M matches DEATH STRANDING' Playstation lifetime sales. Even with a delayed PC release DS barely made it to 2M. the Alan Wake DLC had better sell well.

 

[GraniteStateColin]

I was calculating off a $70 price, and a (typical) 30% store fee. So $49 gross for the publisher. If they need 4 M units sold to break even that is around $200M.

For movies, the theater (chain) typically gets 50% of the reported gross (which is typically just an estimate). Except for many Disney/Marvel/Lucasfilm movies where Disney has charged as much as 75% of the gross. Thus most other movies generally need revenue twice the (reported) production cost (which can be both inflated or under-reported as required by standard Hollywood accounting).

Game costs these days are more likely underreported to allow for underperformance. And that is when there is any report as the platform owners rarely talk. Mostly it is the publicly traded third party publishers that (grudgingly) admit the blood letting. WB-D had no choice since they're so deep in hock.

And that admission gives my $200M estimate a bit of backing.
Which, btw, breaks down to $40-50M a year for typical AAA games.

(A burn rate that aligns with the report that CONCORD burned $400M over its 8 years.)

It wasn't that long ago that $50M would produce a good AAA game over 2-3 years.

The other half of the problem is the sales. ALAN WAKE 2 at 1.8M matches DEATH STRANDING' Playstation lifetime sales. Even with a delayed PC release DS barely made it to 2M. the Alan Wake DLC had better sell well.

I'm with you. So where I estimated $40 to Remedy, you say it's actually $50, and where I went with the low end of the range with 3M copies sold, you figured on 4M, that's the delta between 3x40=120 vs 4x50=200. Got it.

Another thing you said that I did not realize (off topic from gaming): Disney's studios earn up to 75% of the gross on ticket sales. Interesting. I didn't realize they managed special terms vs. other movies.

 

[fjtorres5591]

I'm with you. So where I estimated $40 to Remedy, you say it's actually $50, and where I went with the low end of the range with 3M copies sold, you figured on 4M, that's the delta between 3x40=120 vs 4x50=200. Got it.

Another thing you said that I did not realize (off topic from gaming): Disney's studios earn up to 75% of the gross on ticket sales. Interesting. I didn't realize they managed special terms vs. other movies.

Don't be so sure it isn't relevant to gaming: Disney licensed games aren't cheap to license. That's why they shut down their in-house studios in favor of licensing. Big upfront charge plus a rolling percentage of revenues.

We can be sure the cost of Indiana Jones and Blade will be significantly higher than comparable XBOX IP.

BTW, 75% is the high end of the range. 65-70% was more common. And that was pre-pandemic. Given Disney's string of flops in 22-23 that won't be doable for anything this side of AVATAR. Also, western movies are lucky to get 25% out China. If they are allowed in at all.

https://celluloidjunkie.com/2017/11/04/disney-can-demand-65-box-office-star-wars-last-jedi/

No wonder the theater chains were so weak the pandemic pushed some to bankruptcy.