A new report from market analysts Screen Digest is discussing methods in which major game publishers will have to choose their publishing strategies carefully, as the cost of a failed next-gen game becomes even more pronounced.
Screen Digest estimates in the report, "Games Software Publishing: Strategies For Market Success", that the number of profitable titles per year could fall as low as 80, as developers and publishers are forced to focus on fewer and higher quality titles. The report also predicts continued industry consolidation and the demise of smaller publishers which lack viable growth strategies.
As for development costs, Screen Digest comments: "The current cost of console game development typically ranges between $3 and $6 million per title. This is set to increase to $6 to $10 million for the forthcoming new machines from Microsoft, Sony and Nintendo, with extreme cases surpassing $20 million." Though arguably somewhat low, these figures align with the recently reported
assertion that Infinity Ward's Xbox 360 launch title Call Of Duty 2
cost $14.5 million to develop.
Also particularly relevant is use of licensing: Screen Digest's analysis shows that in the U.S. in 2004, titles based on licensed IP, such as Madden NFL 2005
, sold 23% more units than titles based on original content. However, the report's author suggests that short term revenue gains of licensed IP, does not necessarily translate into greater profits, and that licensing costs are rising as IP owners become increasingly aware of the growing importance of the game medium.
The report concludes that currently, the large American publishers seem best placed and most capable to succeed in the mark. It suggests that many Japanese and European publishers, although creatively successful, will need to get their houses in order and focus on other key aspects of running a games business strategy, marketing, finance, licensing and human resources.
The author of the report, Marc de Gentile-Williams, stated: "At 30 years of age, the games industry still suffers from an endemic lack of professional management compared to less mature industries such as the mobile telephony and the internet industries. The high number of bankruptcies - despite favourable market conditions - is testament to this fact. Games companies must complement their formidable creative and technological achievements with strong business planning and analysis in order to reap the benefits of the next phase of console market growth".