EA exec estimates next-gen R&D at $100 million

EA CFO Blake Jorgensen recently spoke on the direction of the industry and what he expects to see from next-gen consoles and its own R&D costs.

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All eyes are turning toward Sony to set the tone for the next generation of console hardware next week. Like any generation, though, the real mettle will come down to developers and publishers. Electronic Arts CFO Blake Jorgensen recently spoke at the Goldman Sachs Technology and Internet Conference in San Francisco, and gave some insight to what the company expects from the next generation.

"Historical transitions have been bumpy for a few reasons," Jorgensen said, in statements reported by Gamasutra. "One reason has been that a lot of the companies had too many titles. We had way too many titles in the last transition, and the more titles you have, the more expensive it is to convert them from one generation to the next. We're much more focused now. We've got a core group of ten-to-fifteen titles. We'll stage those in terms of the transition and manage those costs through that. Our goal is to keep the cost increase for R&D under $100 million. And some of that will be in this year, some of that in '14, and some in our fiscal year '15."

Jorgensen also commented on how used games can actually help fuel the market, and stopped short of commenting on whether he had heard anything regarding the persistent rumors that one or both of the upcoming console generations would restrict used games by tying them to the user. He did, however, remark, that "the trend in the business is to have that always-on connectivity and connect with a customer, and to the extent that the software identifies a certain customer is going to create some issues going down the road in the used game market."

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  • reply
    February 12, 2013 2:30 PM

    Steve Watts posted a new article, EA exec estimates next-gen R&D at $100 million.

    EA CFO Blake Jorgensen recently spoke on the direction of the industry and what he expects to see from next-gen consoles and its own R&D costs.

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      February 12, 2013 2:43 PM

      Let me pull a number out of my ass that lets us justify charging even more for our games.

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        February 12, 2013 2:50 PM

        That's pretty much inline with Tim Sweeney's very rough estimates based off the Samaritan tech demo. The increase in fidelity, without a drastic improvement to the toolchain, will proportionally increase costs for AAA games, which is why Jorgensen is suggesting releasing fewer titles. I'm sure they'll try to nickel and dime their way into more money, but I don't think he's using this as a justification to increase prices.

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          February 12, 2013 3:43 PM

          Or maybe they could make fun games that don't require a hundred people just to make a single model.

          The console industry is their own worst enemy. No surprise people - both devs and players - are moving towards mobile experiences.

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            February 12, 2013 3:45 PM

            yep, clearly consumers do not want better graphics... wait

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              February 12, 2013 5:51 PM

              Everyone would say they do but look at the numbers. If getting that triangle count up one digit is all you can do with a new game, and then next year you have to do it again, you have a problem. You spend years and thousands of people, and too much money, creating super realistic games and then you have small outfits making vast amounts of money based on a very simple idea. They can brute force it as much as they want but it gets to a point where it stops making sense. AAA development is at a crossroads and just pushing for more graphics is not going to help. Everyone wants more more more but the writing is on the wall.

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                February 12, 2013 6:09 PM

                what numbers? have people not wanted more and more out of the graphics on their mobile games? Just because there are more people playing cheap mobile/web stuff which have worse graphics than consoles due to hardware constraints doesn't mean people don't want the same sorts of graphical improvements in their games of choice. It so happens that the market for Farmville is larger than the market for Doom, but it doesn't mean Mom doesn't want a prettier looking farm in next year's version if you want her to keep paying money. Every platform is pushing graphics, consoles are just the tip of the spear as far as how hard they're pushed and the associated costs.

                You spend years and thousands of people, and too much money, creating super realistic games and then you have small outfits making vast amounts of money based on a very simple idea

                And? It's always been that way. Zynga is not exactly a small outfit these days working on those simple ideas. The guy hitting the iOS lottery is literally just that, a lottery winner.

                I'm having trouble understanding what you think the endgame here is. A complete stagnation of graphical advancement because it costs too much and the 300 people on Assassin's Creed 4 could be making 150 indie games instead and if they're really lucky one will be even 1/10th the success of Minecraft?

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                  February 13, 2013 6:18 AM

                  There's no endgame. There's no complete stagnation either. I'm saying that the quest for the ultimate realism in all games is mostly futile and thinking that'll bring fortunes on its own is silly. Look at cg animation. They were trying for decades to get the most realistically looking human ever, thinking that'd make a great movie, and they believed that's what people wanted. They noticed in time that it's a pointless goal and now you have movies that are great on their own accord - cartoonish, stylized, or whatever - without trying to be a 100% super faithful realistic life-size rendering. One would still use super realistic cg in, say, special effects for an actual movie, but trying to make an entire movie out of it is pointless.

                  Look at Final Fantasy Spirits Within - a few scenes that are really impressive, wrapped by a completely bogus movie (and a bunch of scenes that were done without the same amount of dedication).

                  My point is that execs look at those AAA games that failed and they think "well, I guess we needed more triangles". I believe a lot of times that's not the case: it's that they're trying to invest in a market that requires too much and is, at the same time, over saturated with other games that also tried the highest triangle count, and forgetting that are other things that are also part of the equation in creating good, sellable games.

                  I love graphics. I want all games to have SSDO, subsurface scattering, global illumination, whatever. But I also know that after I'm done being amazed by the pixels, what I'll remember is whether I had fun with the game or not. And a few games have been proving that to me lately - not even blockbusters, but good games without a thousand people needed for adjusting the animation sequence of an arm. I'm not saying everything must be indie, not by a long shot. But that AAA titles are locking themselves into thinking graphics is all people want. And that's digging down their hole deeper.

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            February 12, 2013 8:33 PM

            What does that have to do with anything? The small game scene is flourishing right now and I love it, but that doesn't mean that there's no space at all for these immense high fidelity titles.

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              February 13, 2013 6:20 AM

              There is. But is it as big and justifiable as they think it is?

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          February 13, 2013 12:37 AM

          I can see the costs increasing a bit but not too drastically. The costs will mostly be from building or licensing the new engines. If you consider that most studios probably start with high resolution textures and models and downsample where needed. The artists will likely be doing the same work they have been doing.

          The size and scope of the game world is what is going to be the major factor that will balloon the budget. Add to that what ever marketing campaign they are going with. There is nothing to prevent "next-gen" games from being made on current budgets.

          Just food for thought. http://digitalbattle.com/2010/02/20/top-10-most-expensive-video-game-budgets-ever/

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            February 13, 2013 12:51 AM

            What are you basing the assumption that it'll be the same amount of work? Sweeney seems to think it'll be considerably more work.

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              February 13, 2013 2:38 AM

              The new consoles are likely going to be 5-10x the processing power and the PC is already that far head and more. You already see games on PC pushing higher polygon counts and higher textures. I realize that the costs will go up because of new technology and the learning process. That said they aren't going to drastically hire more modelers and animators in the next few years beyond what they have currently. That is really what I meant by it.

              Budget wise for instance Crysis 1 cost $22 Million to make in 2006. What really drives the costs up is the scope, marketing, and licensing of both technology and content .

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                February 13, 2013 2:58 AM

                Let me put it another way: Tim Sweeney, the Technical Director and founder of Epic Games, who was also the sole developer of the core Unreal Engine up until about 5 years ago stated that he was worried that next generation games will cost 3 - 5 times as today, but now expects their production to now only cost twice as much. He made that statement late last year.

                This is someone who not only founded the company, but also designed and wrote the engine on which the vast majority of all AAA games use. He's someone who not only has access to next generation hardware, but helps shape and design the very foundation that the so called next generation is composed of. He's telling me that the production cost will increase. You're telling me they aren't.

                Carmack, amongst others, have also alluded to games pushing the bounds of what next generation platforms can produce costing in the ballpark of $100+ million. Now EA CFO Blake Jorgensen is also claiming the same ballpark figure.

                Explain to me why I should believe you quite a few of the world's most prominent experts on the subject.

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                  February 13, 2013 5:54 AM

                  Because he said so, duh.

                  I also find it amusing that people think next-gen games will just look like today's pc games, i.e current gen games with better textures and fancier shaders. Sure the initial launch titles, like every new generation, wont really stretch the new systems. But several years into development things are going to look very different.

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        February 12, 2013 5:14 PM

        You are paying less for for video games when adjusted for inflation than you were 15 years ago. Meanwhile development costs have increased close to two orders of magnitude. You do the math.

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          February 12, 2013 6:00 PM

          I remember SNES games costing 70-80$...and that was in the early 90s....

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            February 12, 2013 6:03 PM

            So yeah I don't get why people complain about video game prices. Relative video game prices are honestly cheaper than they've ever been, while creation costs have skyrocketed.

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              February 13, 2013 1:27 AM

              Sales are also orders of magnitude larger.

              Someone was saying last night that Diablo 3 has sold 13 million copies. That shit did not happen 20 years ago.

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            February 12, 2013 6:39 PM

            Even Atari games cost that much and more... in the 80's!! I have an original Asteroids cartridge in front of me now, still with an original price sticker on it for $59.87 (AU) from 1979!!

            Back then, gaming was for rich people... now it's for everyone really! Great times.... oh wait. (I liked being part of a niche group).

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            February 12, 2013 7:23 PM

            Hell, I remember Phantasy Star 1 costing $69 back in 1988.

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            February 12, 2013 8:08 PM

            so they should cost $140 now, adjusting for inflation 8D

            http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=80.00&year1=1990&year2=2012

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            February 12, 2013 9:15 PM

            Dude. The first NES Batman games and Super Marios Bros. 3 were $80 each

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              February 12, 2013 9:29 PM

              Precisely. I never, ever understand it when one uses prices as some sort of justification of game piracy; games are better and cheaper now than they ever have been in the past.

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            February 12, 2013 9:42 PM

            i definitely remember shelling out around $70 for secret of mana and FFIII. Still have them, too.

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          February 13, 2013 1:07 AM

          15 years ago titles didn't have much chance of hitting 1 million copies being sold unless your name was among Nintendo, EA, SquareSoft and Capcom. They needed to be that much.

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            February 13, 2013 5:57 AM

            Well as we've see this generation, mid-tear developers barely exist anymore, and even the ones that still do a dropping like flies.

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              February 13, 2013 6:03 AM

              Yup, it's unfortunate.

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              February 13, 2013 8:12 AM

              I think we'll see a resurgence next gen some time in the mid-tier from studios that have done pretty well in the indie scene going bigger and better, obviously not all of them will but I'm sure that's the goal of many (the house that Minecraft built being the most obvious candidate but I'm sure other devs will start dipping their toes into higher fidelity gaming).

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          February 13, 2013 2:49 AM

          They are selling 8x the copies they were 15 years ago, you do the math.

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        February 12, 2013 6:14 PM

        Full game experiences now are about $100 per game
        59.99+ 49.99. Worth of DLC

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          February 12, 2013 6:34 PM

          We are still getting full game experiences for $60 IMO

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          February 12, 2013 7:02 PM

          By this logic the same was true in 1999 when any big game got an expansion pack

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            February 12, 2013 7:12 PM

            pc games were always cheeper then console games thou

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              February 12, 2013 7:33 PM

              my Blizzard games were $90 for the "full experience"

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          February 12, 2013 7:41 PM

          DLC is optional. While there are a plethora of games with DLC, I haven't found games such as COD, Assassins Creed 3, Dead space 2/3, etc, etc to be incomplete without the DLC.

          I still had a good , complete game experience.

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          February 13, 2013 5:58 AM

          I can't think of many games that i've played that have felt incomplete thanks to DLC.

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      February 12, 2013 2:51 PM

      Why did you shove a bunch of numbers up your ass?

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      February 12, 2013 5:57 PM

      More focused? The Warfighter article suggests that they have too many titles now... sooo, sounds like they will have this "too many titles" problem again. Meh. They talk a lot of shit. Ho hum.

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      February 12, 2013 6:36 PM

      Can someone explain how or why these games cost so much to make? because they have a higher number polygons and textures are bigger it costs more?

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        February 12, 2013 7:03 PM

        higher quality models/textures/maps/etc take longer to produce and we're putting more and more (higher quality) stuff in games which then requires more people to put out a larger game on the same x year schedule

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        February 12, 2013 8:37 PM

        a modern first-tier game is a massive undertaking. massive. probably nearly as many people involved as some smaller movies.

        i had a friend who worked for microsoft for some years. i was talking to him at a reunion and he said, "have you tried windows 7?"

        i told him i had. he asked if i noticed the installer progress bar. i had.

        that's what he worked on for like a year. that screen. the progress bar and screen.

        so, games require large numbers of talented people and years of testing.

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        February 12, 2013 8:42 PM

        The amount of content that a modern AAA game consists of takes hundreds of people years to make. Salaries for those people range anywhere from $45,000 to $150,000 dollars in the United States (http://www.gamecareerguide.com/features/1108/game_developer_salary_survey_2012.php).

        Let's say for example that you are in full production on a game for two years with 150 people and that the salary per person averages out to around $80,000. Salary is only one part of a compensation package and so the cost to employ someone full time is considerably higher than her base salary. For the sake of this example, let's say the cost to employee each of our employees totals to $120,000.

        For the two year production run, you have already spent 36 million dollars just to make payroll, pay benefits and associated taxes. You haven't factored in publisher/developer staff overhead (everyone else in legal, hr, IT, etc who aren't involved with development but who are vital to keeping the process moving), fixed costs (office lease, utilities, internet bill, server space/hosting, computer upkeep, etc), middleware licensing costs (Havok, Unreal, Scaleform, Bink, etc), contractors/outsourced work, and marketing (for a high profile release, take your total production budget and multiply by 2).

        Making a modern AAA game is expensive and will only get more so as the fidelity of the experiences on offer increases. Tooling can only help so much to mitigate this, and at certain point you still need (lots of) people to generate (enormous amounts of) assets; designers to put those assets in interesting places and think of ways for the player to interact with them; and programmers to tie everything together and ultimately make those gigabytes of assets look and sound fantastic.

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          February 12, 2013 9:24 PM

          thanks, this is really what i was looking for. super thorough :)

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          February 12, 2013 9:41 PM

          This. A million times this. There isn't some dark magic behind game development that requires ever increasing costs; it's literally just basic math of the costs involved.

          As a hardware platform increases in capability, the necessary work to take advantage of the hardware increases, which in turn is necessary to meet the raised expectations of the audience due to the newer hardware (vicious feedback loop). If your production times need to stay fixed, then you need larger teams. The asset requirements of a modern AAA game are staggering - just look at the hissy fit people threw when DA2 reused dungeon layouts and assets; and it's not because DA2 was the first game to do it, but because people's expectations of AAA game quality has increased dramatically with each new hardware generation to the point where they expect their content to always feel fresh and unique.

          And as Professer12 noted, this is just the costs involved the actual development of the product. Factor in all the additional support costs, especially marketing, and the final bill can easily be double the base development cost.

          As someone that works in AAA game development, it bothers me to no end how entitled some people can be. It's fine if you want to get the most value for your money - that's just being a smart consumer. It's another thing entirely when you feel like it's some <insert deity>-given right that games should have everything you expect and only cost $25. That said, I honestly don't think the current AAA game development environment is sustainable. Production costs have been steadily increasing, but game prices have remained flat, and thanks to Steam sales, digital consumers are developing the mentality that AAA games aren't worth their cost. Something in this delicate balance will have to give, and I just hope it doesn't bring down the AAA market with it.

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            February 12, 2013 11:49 PM

            It's not that a really well made AAA title isn't worth the $50-$60, it's that there are oh so, so few AAA titles that are actually well made, have single player elements that will last longer than ~ 5-6 hours, and aren't standard, run of the mill, corridor shooters or clones of some dude-bro game I've played a dozen times. In short, they're hardly risky, challenging, fun, engaging, or pretty much any other adjective aside from movie-like. The industry costs are so enormous now that if a AAA title doesn't sell shitloads the studio is probably tanking. And what's the best way to sell shitloads? Make it a near copy of Game X which broke all sorts of sales records. Too bad for the customers that Game X wasn't really all the much fun either and was more of an update to the MP side so everyone can be playing the same game again this iteration. There's a reason I'm on my 4th play through of Baldur's Gate 2. Sure the graphics by today's standards are shit, and the combat is excruciating. The game is fun for me, expansive, and complex. A few adjectives I haven't laid on another game since DA: Origins. Then again, the market got to them as well. The simple fact is that I learned a while ago that, while I certainly used to be, I am *not* the primary audience for AAA games any longer. Even though I earn plenty of disposable income that I would absolutely LOVE to spend on quality games (a helluva lot more than I did when I *was* among the primary audience), the games that I'm interested in spending that money on simply won't be made in this current climate. It's too risky, for everyone I guess, to simply scale back the teams, production values, and effects, and simply go back to emphasizing fun and innovation. Sad but true.

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            February 13, 2013 2:27 AM

            Do you actually have hard data that would support your claim that people are cheaping out and are too frugal to pay the full price for a AAA title, or is this just speculation on your part? Anecdotes from people saying they won't buy full price games don't count.

            You're sounding like EA with your stance on digital sales. IMO (based on sales data revealed by Valve), Steam sales lead to more overall revenue than if they didn't exist. Instead of a traditional downhill curve, you get huge spikes. You still see old games topping the charts when they're discounted, even if they're multi-million sellers like Portal or L4D2. And it's not like Valve is holding a gun to publisher's heads and forcing them to slash prices and "devalue" their IP. Really, if there was data to suggest that these sales lead to less revenue overall they wouldn't happen. More money for Valve = more money for publisher. More money for publisher = more money for Valve.

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              February 13, 2013 4:49 AM

              If steam was bad for business no one else would be doing it.

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              February 13, 2013 11:07 AM

              You're right, the last statement should have been phrased in the context I was intending: a prediction. I do not have any hard data to back up the prediction other than pure anecdotal, but at the same time, what kind of data would you accept? Poll of age 18-35 gamers? Trend of average price per unit sold during the first year of sales for the past 10 years?

              I don't claim that Steam sales aren't revenue boosters during the long tail of a product's lifespan (and hell, any sale will have this affect, irrespective of Valve's involvement). But at the same time, that sort of sales data can lead to multiple different conclusions. These are the two that jump out to me:

              1. Publisher's should discount their games on Steam to drive additional revenue. As you said, "More money for Valve = more money for publisher. More money for publisher = more money for Valve." Everyone wins!
              2. Sales spike when products receive discounts because their pricing has reached the point at which the target market values it.

              Valve would obviously prefer everyone to reach conclusion 1 because in that scenario, the true winner is Valve. Digital distribution costs amortize very rapidly once the initial cost outlay is done, which in turn means that selling additional games involves little additional cost for Valve. However, each new title they add increases the value of their storefront. In addition, sales, aside from driving additional revenue for Valve as they take their distributor cut, help attract more customers to the storefront and uniquely for digital distribution, causes further platform lock-in for existing customers because they want their games in a single library. In effect, Steam sales help cement Valve even more as the largest digital storefront.

              EA clearly reached conclusion 2. Whether or not it's the correct one is a matter for debate, but from a financial standpoint, it's not hard to see how they reached that.

              My prediction has little to do with either of those conclusions; I'm simply afraid that aggressive sales and pricing will eventually shift consumer purchasing habits significantly enough that AAA development is no longer feasible. Or even worse, publishers start treating base games as loss-leaders or break-even investments in capturing an audience to which they can deliver future DLC to generate a profit.

              These times, they are a'changin'

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                February 13, 2013 6:07 PM

                What I would really want to know is how newer games are taking in profit versus older similar games. Straight revenue would also be interesting. Since the argument is about whether consumers are shying away from full price games, something like 3-6 month sales + revenue, then some longer term data to see how the title fared overall. At least an anecdote from someone who has this data would be nice.

                We hear about Activision breaking records with CoD, D3 continuing to sell like hotcakes despite the negative fan reception, etc. It seems to me that at least for true blockbusters, the demand is greater than ever, even at $60 a pop.

                Regarding conclusion 2, it depends on whether the company sees that as a positive or detrimental. Valve once said that during (the first ever, I think) sale on L4D1 that they sold more copies during that sale than they did when the game launched.

                The question that is important is "are consumer purchasing habits changing, and is this really leading to less revenue overall for me in the long run?" Sure, some people may not pay full price for a game anymore. But is this a large number? Console games don't have Steam sales, but invariably always drop in price after a few months. I don't actually know a single person who wants a PC game but doesn't buy it at launch if they can afford it. Even during the holiday sales I see full price games on the best seller list.

                If anything, I agree with your prediction, but not for your reasons. Games are tied to economies of scale since price hasn't really budged. Eventually, the market will tap out despite budgets continuing to soar. Crytek seems to be banking on F2P generating way more revenue than classic retail. I'm sure they're not alone.

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                  February 13, 2013 10:15 PM

                  It's nice to see there are still people willing to engage in civil discussions on a topic. I was sure my original semi-rant would have seen me flamed into oblivion. I tip my hat off to you good sir :P

                  We're definitely at a crossroads in the industry, and in the end, only time will tell. What I think will eventually happen is that publishers will maintain 1 or 2 marquee titles that are developed as full AAA experiences, with the remainder of their portfolios as some mixture of mobile, social, and medium scale F2P titles. Indies will continue what they're doing and crowdsourcing will allowing the development of medium scale games that will likely try to fill the gap left by true AAA games. It's not the most desirable of futures, but at the same time, it would be as if the industry hit the reset button on itself, which could have interesting outcomes.

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            February 13, 2013 8:31 AM

            From what I understand, the pricing of video games in general is actually fairly elastic (at least on the PC, as we're getting plenty of evidence for with steam sales and the explosion of profitable F2P games). And given that actual publication costs are extremely low after launch, there's basically no limit to the amount of demand that can be fulfilled. it's a matter of meeting that demand at a price that makes sense.

            On that matter, while I do think F2P games will over saturate at some point, the traditional AAA market outside of MMO's is vacant of this pricing model and has only up to go for the foreseeable future. The first of either EA, Activision, or Ubisoft to succeed with a F2P AAA game from the traditional game space will have a drastic change in the market as a whole.

            This being said, I believe the stigma attached to the pay model and the way in which it is implemented still has a lot of refinement and number crunching required before this happens, and with Crytek headed there very quickly and publicly the big three are still in a wait and see approach on consoles and even the PC. I believe there is plenty of room for games in the <$30 market from larger devs and in fact it would be a great way for them to hedge bets on new IP's in the AAA space but they have to be willing to experiment with pricing and I don't think any of them are brave (or desperate) enough to go there yet.

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          February 13, 2013 1:16 AM

          What this guy said. $10,000 per person per month is a good estimate for a standard burn rate. That's what it costs to run a company in a normal month. That doesn't include "one time" costs such as marketing.

          Super block busters - Halo, Battlefield, Call of Duty - are easily $100 million dev costs plus another $100 million, or more, in marketing costs. Battlefield 3 was supposedly 150 million marketing and Halo 4 was in the same ballpark.

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            February 13, 2013 8:44 AM

            I think AAA marketing costs are way out of whack, it seems absurdly expensive, higher than most blockbuster movies.

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        February 13, 2013 6:02 AM

        Games have increased massively in scope from generation to generation.

        Level design is way more complex.
        Scripting is way more detailed and unique than ever before.
        The level and quality of animation has gone through the roof.
        Sound production is like that of a feature film now.
        Scores for big budget titles are often recorded with full orchestras.
        Full voice cast.
        Marketing has exploded. It used to be the occasional magazine piece or tv add. Now marketing is everywhere from social to billboards.

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          February 13, 2013 8:36 AM

          Well, level design aesthetically is way more complex. It's considerably less complex in many scripted FPS titles since your pathing is so regimented.

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      February 13, 2013 5:53 AM

      Somewhere, Notch is laughing unto tears.