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The true cost of AAA games?
Eidos announced today that they were lowering their full-year revenue expectations by £20m due to their latest Lara Croft game, Tomb Raider Underworld, selling less than expected (it has sold 1.5 million units to date globally). Apart from highlighting the inherent dangers in relying on one franchise too much, this illustrates one of the biggest dangers of publishing a triple-A, cutting edge game.
The cost of AAA game development has continued to rise over recent years, with the extra fidelity required on HD 360/PS3 titles demanding larger art teams in particular. Given the recent pre-Christmas cost slashing, it’s certainly possible that Eidos ended up receiving as little as £10-£12 per unit sold after cutting the sell-in price to retail in order to shift their stock in a tough period. It was noticable that a few games, such as the latest Call of Duty, were holding their price well at retail, whereas games like Tomb Raider Underworld were being sold much cheaper (in some cases as low as £19.99). This suggests to me that Eidos were taking some of the hit on this price drop, as no doubt many other publishers were also doing.
With big AAA games costing £10m-£30m to develop (more in the case of titles like GTA), and adding in the costs of global TV advertising campaigns, it’s getting harder to turn a profit on big-budget titles that don’t sell more than 2 or 3 million units. So in terms of 360 and PS3, I think we’re likely to see fewer ‘AAA’ games with this kind of development cost, and a wider gulf developing between the ‘epic titles’ and smaller, more inventive products that use different business models. Of course, the Wii has proved an important lifeline, not least because development is considerably cheaper, but IPs like Tomb Raider rely on cutting-edge visuals and the PS3 and 360 versions are particularly key for this kind of brand.
At the end of the day, green-lighting a project which requires 2 or 3 million units to break-even is a brave call. Welcome to the new world of games publishing…