On Average, Only $10 of Every $70 Game Sold Goes To The Developers

With $70 becoming the standard cost of new AAA videogames in 2021, curious minds may wonder where that $70 actually goes. It would be really interesting to know things like how much of that $70 is actually used to develop the game and how much of it is profit for the studio.

To answer these questions and more, Mark Darrah, an ex-employee of BioWare for 23 years, made an extremely compelling video breaking down the cost of videogames, showing where the money actually goes.

Mark separated the $70 cost of the videogames into 5 divisions. Before he started elaborating on these divisions, he made a note that once you factor in price reductions, sales and back catalogue, the average price of a AAA game ends up being $50.

In the first division, Mark goes over the retailer costs, which he explains to be around $15. This includes manufacturing costs, shipping and the retailers’ cut. The retailer cut is bound to fluctuate as it changes over the lifetime of a game.

Marketing costs are apparently only $5, meaning 10% of the game’s costs, but this number also fluctuate as each studio spends a different amount on their marketing. The Overhead costs, which includes the HR department and central groups that support the teams, are also 10% ($5).

Before he finally talks about how much the developers themselves get from the $50, he explains that the shareholders expect a large margin of profit of these games, so it has to be around $15 for it to be acceptable.

This leaves $10 in the bank, which finally goes to the developers to make the game, which is absolutely mind-boggling. With this $10, not only do you have to pay for the developers’ salaries, but you also have to pay for their perks, office space, health care, computers and desks etc.

Since all these costs are not fixed, instead they’re percentages, you can also calculate them for $60 games as well. If you do that, you’ll find out that for a $60 game, the budget for the developers ends up being an astounding $8.57

Considering the fact that this $10 (or $8.57) includes office space, desks and computers etc, it means that not even this entirety of this small amount goes to the developers.

With these figures in mind, it seems like a service like GamePass could become the more efficient model for outputting games. With something like GamePass, the $15-20/sale for manufacturing and marketing isn’t required and because of the lower upfront risk, the $15/sale margin is probably much lower as well.