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Default Fallout 3 - PC Zone UK Article @ NMA

March 31st, 2007, 13:00
Originally Posted by BillSeurer View Post
The investors think the other way: provide proof that your game is going to sell. So, what's the proof? The problem is, there isn't much, if any. Turn based games by major studios gradually died out. All the mega hits today are not turn based. Any investor is going to look at that and put their money where?
Both Final Fantasy and Dragon Warrior/Quest are huge franchises in North America and Japan, respectively. Even the latter is somewhat popular around NA. Both are certainly what can be called mega hits.

The Shining Force series, which combined turn-based strategy and role-playing, were incredibly successful in their time. The last turn-based title in the series to be released in the US, if I recall correctly, was Shining Force 3 for the Sega Saturn. By comparison, the most recent iterations of the series have used action and realtime components but failed to entice gamers and prove to be a success.

SquareEnix's Front Mission series have also been fairly well received in its original country of release as well as outside. It could possibly be well received in Europe if they bothered releasing more of the titles here.

Series like Lunar, Phantasy Star, Star Ocean and Suikoden have all met with good to great critical reception, if not outright commercial success. Pretty much all of them Pokewhatchamacallits are turn-based as well.

Even if the other series somehow don't provoke a shift in the general notion of turn-based being unsuccesful, one can't really claim Final Fantasy and Pokemensch aren't "mega hits".
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March 31st, 2007, 16:12
Originally Posted by aries100 View Post
that investors only look for the quickest way possible to get their bucks, dollars, yen and eruos, back. They don't seem to understand that a game that sell maybe 250,000 copies in the first month or so, or 500,000 copies in the first 6 month or so, can be slow hit, and that over time such a game might actually outsell a game that has sold maybe 1,5 million copies in its first 1-2 months. (if we look at it over a 10 year period).

And that's the way it is

And that's why investors won't invest in a turnbased game…
You forgot one not so tiny and actually quite important detail which is called the price tag . The number of copies sold means almost nothing. The number of copies sold at full price means everything. Just because a game like FO continues to sell and just because it has sold maybe a million copies during its entire 10 year lifetime, doesn't mean it is a financial success.
So I'm not quite sure what you mean when you say that investors don't understand something (what actually?) about the sales numbers.

If you are seriously accusing them of not investing money in such "great" slow-selling "hits", then that's like calling someone stupid who signs a one year bond with an 8% annual interest rate rather than the "great" five year 2% annual interest rate deal .

It's only natural that investors want a reasonably quick return on their investment. The write-off periods for loan redemption and interest only last that long (different from country to country obviously). A game that sells slow will lead to major direct losses and if you factor in the loss of profit/interest from the not returned capital then it's even worse.

The only reason that a game like FO has had such a long life at retail is that the distribution rights have been traded on and on and on from one company to another and yet to another. Those sellers probably make a small profit from every "new" incarnation of FO (like the current Ultimate Collection that is -at least here in Euro land- distributed by a company called GSP) but the folks from Interplay have apparently long had to wrap up their losses and call it quits (literally in their case ).
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March 31st, 2007, 16:36
Originally Posted by aries100 View Post
This is actually a much more deeper and complex problem (or challenge) than we think it is. On the bottown or basis of this lies the very core of how our society runs. Investors, banks, shareholders etc. want to see a quick return of their buck (aka dollars). For that very reason they focus alone on the first months or so shipments or selling of copies. And if a game doesn't sell (or ship) like a million copies in the first month or so, the investors are going to be grumpy. (it's like the movies where the first weekend often decided whether or not the film is hit or not).
Sure, true enough, *but* the problem is a lot more salient in the immature gaming industry. Generally speaking, the media industries (film, music, games) tend to be the worst cases of the short-term thinking you described. But both music and film, while sharing the same problems as games, have a special bit of room cleared out for the niche films or niche music that others won't cover. Considering the production costs sometimes involved, the level of professionality sometimes seen in niche films or music is impressive.

Games has this too (Spiderweb), but we can hardly call that filling out the niche properly, and the mainstream media and companies spend way too much time looking down their nose 'pon it.

Just because a game like FO continues to sell and just because it has sold maybe a million copies during its entire 10 year lifetime, doesn't mean it is a financial success.
Yes it does. Your basic understanding of the concept of full price selling is correct, but you are reading it wrong. These games are still turning a profit, through edition and re-edition. There is nothing about this market that differentiates it from the DVD market. Sure, for the DVD market, initial sales matter. But do you honestly think Warner Bros. doesn't care anymore how many Matrix editions and re-editions they can sell? Why wouldn't this apply to games?
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March 31st, 2007, 17:01
Originally Posted by Kharn View Post
Yes it does. Your basic understanding of the concept of full price selling is correct, but you are reading it wrong. These games are still turning a profit, through edition and re-edition. There is nothing about this market that differentiates it from the DVD market. Sure, for the DVD market, initial sales matter. But do you honestly think Warner Bros. doesn't care anymore how many Matrix editions and re-editions they can sell? Why wouldn't this apply to games?
It might not apply to games in some cases because the company that originally invested the money (and we were talking return on investment here) might not benefit directly from the long term sales. Which might be especially true if a company like Interplay is involved that has (factually) gone out of business. One would have to know what exactly Interplay did with the distribution rights for the Fallouts but it could very well be that they sold them off for a flat fee and that they no longer participate in the earnings on a per copy basis.

But that doesn't even really matter in regards to the original investor because you have to consider that a game that does not turn in a profit gets written off as a loss by the company at some point. Then, after the write-off and a big, fat quarterly/annual loss, the calculation starts from scratch and -yes- it might be that a budget game becomes profitable then because all the previous negative factors (developing/publishing/distribution/marketing costs etc) have been written off. But that's after a lot of cash has gone up in smoke due to the write-off so you're only making a very theoretical profit on paper .
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March 31st, 2007, 18:39
Originally Posted by Moriendor View Post
One would have to know what exactly Interplay did with the distribution rights for the Fallouts but it could very well be that they sold them off for a flat fee and that they no longer participate in the earnings on a per copy basis.
Last time I checked they still get royalties for sales of Fallout 1/2.

Originally Posted by Moriendor View Post
But that doesn't even really matter in regards to the original investor because you have to consider that a game that does not turn in a profit gets written off as a loss by the company at some point. Then, after the write-off and a big, fat quarterly/annual loss, the calculation starts from scratch and -yes- it might be that a budget game becomes profitable then because all the previous negative factors (developing/publishing/distribution/marketing costs etc) have been written off. But that's after a lot of cash has gone up in smoke due to the write-off so you're only making a very theoretical profit on paper .
What does that have to do with anything? We're talking about a game being profitable from budget to 10 years later, which includes any and all costs and does not factor in your "write off". I'm sure that it'll seem even more profitable if you *do* do such a write off, but that's not what we're talking about here.
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March 31st, 2007, 19:12
Fallout was certainly highly profitable due to the large number of sold budget, low budget and ultra-low budget copies sold worldwide. Which, I assume, was one of the primary reasons for Beth to buy the license. They can build upon a huge installed base.

Successful long sellers are the exception though. Hundreds of games every year are discounted after 3 months, fail to gather traction with a huge fan base, sink down the budget line over the next year or so and then simply disappear.
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March 31st, 2007, 20:19
Originally Posted by Kharn View Post
What does that have to do with anything? We're talking about a game being profitable from budget to 10 years later, which includes any and all costs and does not factor in your "write off". I'm sure that it'll seem even more profitable if you *do* do such a write off, but that's not what we're talking about here.
You have to factor it in though. A company can only determine a profit of a certain product if it sets a price for the product (the manufacturing cost). It's what goes into the inventory, too. A company (a publisher) that has a certain number of games (boxes) in stock needs to attribute a value to that stock. So if you have a full price game, then your accounting department calculates a value of -say- EUR 22.97 per boxed copy (a totally made up number, of course ). A lot of other costs like stock-keeping etc depend on this value. Now if you can not sell your product at that price anymore due to a lack of demand, then you do a write-off to lower the value of the product. If you were in the red up to the time of the write-off then you're basically cutting your losses and starting from scratch. The cut losses go into the statistics and the product continues to be sold on the basis of a price of -say- EUR 7.92. That's how you go from making a loss to making a "profit" (sort of) if you are the original investor who funded the project from start to finish.

The question in regards to Fallout is: How much -if any- money did Interplay lose initially and were they able to make up for those losses from the long term sales.

However, even if they did make a profit in the long run, it still doesn't validate the investment. As I said above… if you -as an investor- have the option to buy a 1 year bond at an 8% interest rate or a 5 year bond at 2% interest rate (assuming that the level of interest rates is pretty much guaranteed to remain stable during that period and the risk is the same for both papers), then taking the latter of these two options would be mighty stupid. Sure, you're making money and a profit but why settle for less than you have to?

If I were an investor then I'd want a timely return on my investment as well. If I'd cough up $5 million then it had better pay off well because even if I did nothing with that money but leave it in the bank, I'd still get $200,000 (assuming a 4% interest rate) just for the money sitting there, doing nothing. Every year. So after three years (usual development cycle for a game) I could have $5.6 million from just picking my nose all day . Does it seriously surprise anyone that investors don't just happily throw $5 million bucks at a project that might (or might not) be a long term seller? Remember. If you still had the $5 million, you'd be making $200,000 every year from doing nada. You need one hell of a long time seller to make a profit of at least $200K year after year if you can only sell the game at a budget price.
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April 1st, 2007, 00:46
Sorry, Kharn, this long-term-profit argument isn't very strong at all. Mo is right. There's a very simple reason investors and company managers want a fast return: they have already invested the cost of production and need to recoup those monies and pay their current commitments now, plus they need a Return on Investment that meets a certain level or they may as well close down, put the money in the bank and just take the interest.

What good is a dribble of income years down the track if there isn't enough income now to pay the bills? The only exception is a company that is strong enough and diverse enough to pursue this strategy on a limited number of titles, while being propped up by other titles generating faster income. Even then, any good manager would have to ask if they were better off putting their personnel into something that would generate a better return.

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April 1st, 2007, 01:55
Sure, that's all true, but it keeps begging the question; why doesn't this apply to CDs or DVDs? Obviously, it does. And it *could* apply to games too. That's not a matter of economics, since the economic basis for these three industries are roughly the same, it's simply a matter of good economics.

And that's not just the exceptional movies or music that keeps selling high numbers (y'know, Godfather DVDs), there's a whole segment of the industry dedicated to it.

Any sane businessman would not answer Moriendor's question with "I'll just buy only 8% interest rate bonds" (unless he knows he can sail blindly 'pon them), any smart businessman would diversify over several bonds, both the long-term ones and the short-term ones. Hell, trying to go for the quick buck through Bubble-hypes may be the more visible side of the stock market, but it's not the only side of it, there's a good reason oil & food are quite popular on the markets, always and anywhere.

So, sure, you're technically right, *if* the argument was that producing mid-budget games aimed at the long-term to the exclusion of producing any other games is a viable business model. Of course it isn't.

But doesn't it strike you as odd that no matter how well your logic may work, the gaming industry is the exception in this undiversified portfolio, not the rule?
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April 1st, 2007, 05:38
Originally Posted by Kharn View Post
Sure, that's all true, but it keeps begging the question; why doesn't this apply to CDs or DVDs? Obviously, it does. And it *could* apply to games too. That's not a matter of economics, since the economic basis for these three industries are roughly the same, it's simply a matter of good economics.


And that's not just the exceptional movies or music that keeps selling high numbers (y'know, Godfather DVDs), there's a whole segment of the industry dedicated to it.
The highlighted part is your mistake. The business model isn´t similar. Games are ageing quickly, they are not part of the mass market and there are just a few sales channels. Only few games can avoid the sad fate of being more or less worthless after only 2 years.
Take a mainstream movie for comparison. A random list of income streams: cinema, pay per view, pay tv, pay tv (classic), tv, tv (classic), DVD, DVD back katalog (repeat endlessly), DVD CE, DVD Dir. Cut, Blue Ray / HDDVD, IP-TV, video store, video store online / mail, travel licenses (plane, ship), merchandizing, product placement, etc.
After a certain time movies stop ageing. The Godfather will always be one of the best movies ever, an all-time classic, Coppolla´s masterpiece, Brando´s comeback movie, Pacino´s way to the top, whatever. (-> target audience for back katalog!) Zork however is just worthless. Hardly anybody would spend a few cents on a copy of Zork in a new DVD box.
Film studios can afford to invest in long-sellers in addition to blockbusters because (a) they´ve learned over the last 80 years how to assess risks and sales potential. (Example: a 50M$ Clint Eastwood movie is always a safe investment.) (b) They minimize their risk by pre-selling the movie and using external investors for funding. (Lord of the Rings was funded with stupid German money, based on an immediate tax write-off.). Collecting advances on some of the channels listed above makes them sleep much better.
Furthermore investing in a bunch of promising low or mid budget movies can be a worthwhile strategy because they can make big bucks if only one of them becomes a surprise hit. The guy who spent 2M EUR on this year´s foreign language Oscar winner The Lives of Others will probably be more than happy. It´s currently at 40M$ worldwide, only counting cinema.

Games lack most of these income sources. The business is growing up, now we have Steam, etc. , but it will take a long time until the gap to other entertainment industries is closed.
Last edited by Gorath; April 1st, 2007 at 05:46.
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April 1st, 2007, 06:12
Publishers are interested in games that are long sellers like Fallout, it's just they have no way of knowing what is going to be a long seller and it is far easier for them and safer to publish a game with the latest and greatest graphics that is going to sell 300,000 in the first 3 months and give them a quick profit even though it may slide into obscurity once reviews start becoming widely available and games with even better graphics are available.

I would say the Godfather DVD is a good example to compare with fallout, however I think a better example would be the Godfather VHS tape, maybe if fallout got a small overhaul like support for higher resolutions (I dunno this may be already possible) and a re-release then you could say it is comparable to the Godfather DVD. As it is, the Godfather VHS still sells copies.

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April 1st, 2007, 07:37
Which again, leads me to wonder why no company makes regular upgrades to their games. The hard work has been done; all that's usually needed is more up-to-date graphics, and sometimes a better interface. That should be much cheaper than a new game!! How many would buy updated classics? I would!!

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April 1st, 2007, 08:23
But that's not the hard work, Corwin. The production of the art assets is the hard work.

I'm not an artist in any way and I've forgotten the exact details but I've seen stuff like a good artist can produce one high-ploy model in two days (or one day or one week or whatever)…the point is, across the thousands of art assets needed for a game, it takes thousands + of man-days production.

That doesn't mean it could never work in some cases but it isn't a simple thing. Are you better off spending 2/3 the budget of a new Fallout on re-writing the old one or creating a totally new one?

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April 1st, 2007, 09:59
What about using an existing system, like Laz did with DS? Yes, there was additional work involved, but imagine a large, full-time studio doing it and I'd think the risk/cost factors would be quite reasonable. I could be totally wrong, of course, guess I'd just like to see a lot of re-made classics!!

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April 1st, 2007, 14:02
Originally Posted by Gorath View Post
Games lack most of these income sources. The business is growing up, now we have Steam, etc. , but it will take a long time until the gap to other entertainment industries is closed.
Conceded, but that's a difference in scale, not in absolutes (hence the economic basis is roughly the same, just not identical). That doesn't explain why the gaming industry doesn't recognise that a long seller is an asset *at all*. Nobody in the industry took Troika seriously, no publisher would back them up long enough. That has nothing to do with a healthy entrepenurial attitude, like I said, a spread portfolio is a good thing, and there are surely publishers out there big enough to be able to afford backing up a company that cranks out slow, but steady bucks.

This is a vicious cycle, y'know, one of the reasons the gaming industry isn't maturing is because it refuses to face the simple economic fact that the high-profile high-risk-only game they're playing is pure economic insanity, and one of the reasons they have to play that game is because they're not mature. It's not going to be changed if people just keep saying "meh, that's just the way it is."

Of course, it'll inevitably change, but that's another topic.

Originally Posted by bjon045 View Post
Publishers are interested in games that are long sellers like Fallout, it's just they have no way of knowing what is going to be a long seller and it is far easier for them and safer to publish a game with the latest and greatest graphics that is going to sell 300,000 in the first 3 months and give them a quick profit even though it may slide into obscurity once reviews start becoming widely available and games with even better graphics are available.
Uhm, not to nit-pick, but while, as Gorath effectively argues, the long-term selling market is hardly risk-free, it's not like the short-term selling market *is*. Remember, the compete in the short-term selling market at all, you have to go high-budget. If you flop in the low or mid-budget range, you can survive. If you flop in the high-budget range, you generally go belly-up.

As an investor, if looking at risks, I'd probably prefer Troika to Bethesda. Troika had mid-range games that sold enough to pay for themselves and then some, and each game so far was a long-term hit. Bethesda has a *lot* more, but also invests so much that one flop is all that is needed to topple the entire structure.
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April 3rd, 2007, 17:35
Longselling: There is also this technical barrier. Fallout was designed for Windows 9x and it's DOS background. Today we're using a NT-based OS like XP or Vista. Yes, there is normally a possibility to make old games run on XP or Vista, but it's always another solution. For LucasArts-Adventures a simple solution is ScummVM, but for Daggerfall you need another programm. When you're good enough, you have heard of VDMSound and can grab it somewhere (because the original project website is down), that's the easy way. Or you're simply not informed enough and so you choose DOSBox as your favorite virtual machine. Good luck, it's not that easy as it seems. For Warcraft II i.e. I didn't find a solution for my graphical issues. The Riddle of Master Lu doesn't work and so on.

Film and music industry can rely on longselling without further work to be done. CD is the same since almost 20 years, the only change in production since then is introduction of copy protection (and its problems for replay). In film market, of course, DVD is not as long available as CD and is changing now to BR / HD, but compared to games it's very easy to shift between these media. And normally there are standard definitions for all formats and players. If something doesn't work, there are two solutions: Medium or player are defect. If the media is defect you can bring it back and get another copy. If the player is defect you can try to repair it (guarentee) or simply by another one for a few bucks. A DVD-Player costs 50 €.

For PC there are standards also, but different combinations of hardware, the problem for a game not running on your PC could be everything. To get over this problems first you have to locate the problem. Copy protection or your dvd drive? Is it your video card? Or only chipset drivers? Maybe even an old BIOS version? When I take a look to NWN2, its various problems and lots of solutions, I could start crying . And these changes that M$ implements to force people to buy a new OS isn't helpful, too. To get these games back to retail market, you need programmers to look over your code or find another solution to make these games run on XP or Vista. And of course, you have to support it, with all its consequences. There are only two examples coming to my mind there this had been done: EAs Command & Conquer - The First Decade (I was quite perplex that EA was doing this ) and Ubisofts Settler 2 (but only in combination with a Collector's edition with it's Remake Settlers - The Next Generation).

That old games can sell as well, I will not deny. Best examples are mobile games, many of them are based on old DOS or C64 games. But that's only small source code. The only solution for todays games I could think off, would be a online plattform with a virtual machine running in the background to guarantee a failure-free game experience. Or something like XBox Arcade, since all Xbox 360s have the same hardware.

Also I agree, that there is a market for middle class games. That's proven, just remember that there are still many adventures and dtp / Anaconda has earned enough money with selling adventures that they now can finance more mainstream games. Or Frogster, a publisher mainly selling mediocre titles, now looking for mass market titles. But I don't think that's the market, Bethsoft has in mind with Fallout. Nearly all studios and publishers are looking for the big success. Developing games with small earnings does not impress your shareholders, that only works for privately financed companies.

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