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EEDAR: 96 Percent Of Games Unprofitable?

According to media reports, research and analysis group EEDAR says that only 4 percent of games turn a profit, and given the high risk in development budgets, takes a close look at whether adding a second platform, a multiplayer mode, or working within a
Managing a development budget means many tough calls, of course, because the risk is high -- according to EEDAR analysts, only 4 percent of games ever make a profit. Analyst Geoffrey Zatkin told Forbes that 60 percent of a game's budget gets sunk into reworks and redesigns during the development process, discussing a hypothetical model the research group had developed to illustrate the challenges of turning a profit on big budgets. "Every game I have ever worked on, we've gone in blind as to which features would sell the game better," Zatkin, a former designer, told Forbes, adding that not knowing whether investing an additional $500,000 in a multiplayer mode would be worth it "would scare the crap out of me." Working with a hypothetical model based on a fictional Ubisoft title for the Xbox 360, Zatkin found that the average for games sold on that platform is about 216,000 units, while the middle 50 percent sell between 75,000 and 250,000 copies. And blending, specifically, the action genre with mature themes can raise that number, EEDAR's study found. On the high end, M-rated action titles can sell up to 500,000 units on the Xbox 360, better than teen-oriented titles. The study also found the wisdom in multiplatform development. The hypothetical title used in the research model, if also released on PlayStation 3, would raise its unit sales by close to 200,000. As is expected, co-op and multiplayer modes can further drive sales, drumming up a possible additional $1 million in revenues, provided that multiplayer modes are "robust," as with Call of Duty 4 -- and provided that the cost of developing a co-op mode stays under $300,000. [UPDATE: Following the publication of this article, EEDAR issued the following clarification to Gamasutra, claiming the 4% statistic was cited by them to Forbes, but is not part of their research, and is taken anecdotally from a game textbook released in 2003: "The actual statistic is only 4% of games that enter production will return a significant profit. Of games that are released to the market, only 20% will produce a significant profit. (Source for the second sentence: Secrets of the Game Business by Francois Dominic Laramee). We understand that miscommunications can happen, especially during phone interviews, but given the inaccuracy of the statistic and how many other sites have picked up on the story, we wanted to ensure that the major media outlets received the correct statistics on the subject."]

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