Activision investing $500 million into Destiny, won't break even analysts say

Half a billion dollars. That's the investment you have to pour into a brand new IP, if you want it to be the next Call of Duty-style blockbuster series--even if analysts don't believe the first game will break even.

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Activision may be breaking records with the amount of money it intends on spending to develop and promote Bungie's upcoming Destiny. According to CEO Bobby Kotick, the price tag on the upcoming game sits at $500 million. But, that's the investment you have to pour into a brand new IP, if you want it to be the next Call of Duty-style blockbuster series--even if analysts don't believe the first game will break even.

"If you're making a $500 million bet you can't take that chance with someone else's IP," Activision CEO told the Milken conference (via Gamespot). "The stakes for us are getting bigger."

According to analysts, the price tag would mean Activision would have to sell at least 15 million copies to break even. "It's a head scratcher," Sterne Agee analyst Arvind Bhatia told Reuters. The game is projected to sell 8 million units--far short of the amount the company needs to make the venture profitable.

Still, Activision has a ten year deal with Bungie, making it a costly initial investment that could grow over time. The half-billion dollar amount includes marketing, packaging, infrastructure support, royalties, and other costs, as well. Finally, future games in the series will be much cheaper to make. "Over the long term, we expect the ultimate product costs to be roughly in line with other Triple-A titles," an Activision spokesperson said, noting "robust backend infrastructure are upfront expenditures that should reduce future product development costs."

From The Chatty

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    May 6, 2014 7:00 AM

    Andrew Yoon posted a new article, Activision investing $500 million into Destiny, won't break even analysts say.

    Half a billion dollars. That's the investment you have to pour into a brand new IP, if you want it to be the next Call of Duty-style blockbuster series--even if analysts don't believe the first game will break even.

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      May 6, 2014 7:00 AM

      videos look terribly bland

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        May 6, 2014 7:03 AM

        The videos make me appreciate Borderlands more. I just hope they do a better job with inventory management when it comes to picking up random guns. :/

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          May 6, 2014 7:33 AM

          this must have a proper versus multiplayer though right?

          God I hope you don't need to farm gear to play deathmatch

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            May 6, 2014 7:38 AM

            My biggest thing is splitscreen. After playing Borderlands with my kid, I'm not playing another game like it without it.

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            May 6, 2014 8:07 AM

            They already said you can't jump straight into multiplayer, because you need better gear and one ability. So you need to play the campaign a bit and then multiplayer opens for you.

            They are going to show this at E3, the beta should come not long after it.

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        May 6, 2014 6:53 PM

        I'm with you on this. The art design is cool but actual gameplay looks dead boring.

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      May 6, 2014 7:03 AM

      Looks nice and I want to like it but the fact that it's MMO puts me off. I want to wander my open worlds only by myself, not with company of random assholes from the internet.

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        May 6, 2014 7:05 AM

        Is it open world? I thought it was just a series of FPS dungeons, or 'levels' as they used to be called.

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          May 6, 2014 7:18 AM

          Based on the last video that was posted, it looks like they have an overworld map as a loading screen where each region on the map is it's own level.

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          May 6, 2014 8:09 AM

          There are supposedly huge areas you can explore, even using a vehicle similar to Star Wars speeder bikes.

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        May 6, 2014 7:29 AM

        It's not really an MMO. It's just that you can meet other people sometimes. You probably won't see more than 8-12 more people at a time. You can also probably play it offline if you want.

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        May 6, 2014 7:32 AM

        Rather than players being able to see and interact with all other players in the game or on a particular server—as is the case in many conventional MMO games—Destiny will include on-the-fly matchmaking that will allow players to see and interact only with other players with whom they are "matched" by the game.

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        May 6, 2014 8:13 AM

        You can play solo but the game always requires an internet connection always.

        Strikes for example (30 mins missions with 2 mini bosses and 1 boss) you can do them alone, but some will be harder I guess. Raids are going to be crazy and harder, I read about one being 45 mins just the beginning of it.

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      May 6, 2014 7:07 AM

      $20MM development, $480MM marketing?

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        May 6, 2014 7:15 AM

        that's what I was wondering

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          May 6, 2014 7:25 AM

          Bungie has a large team (like 100-200 people?) so that $20 m is more like 200m

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            May 6, 2014 8:03 AM

            So about $1 million to $2 million dollars per person in salary over the development cycle?

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              May 6, 2014 8:09 AM

              Not so much salary, more like incidentals.
              Keep in mind that most expenses for companies arn't directly tied to wages, but tied to workers and benefits. So they're paying a lot more than the wages for things like health care, employee entitlements, the building and infrastructure, etc.

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              May 6, 2014 10:29 AM

              A good developer can have a total cost of > 200k per year, once you factor in equipment, healthcare, amenities, etc.

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                May 6, 2014 7:09 PM

                I don't doubt it but would that many 200k developers be working on this one project?

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            May 6, 2014 8:09 AM

            Bungie has 500 people working on Destiny.

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        May 6, 2014 7:25 AM

        that'd be my guess. You reach a point where, outside of licensing assets, throwing more money at a game provides no real benefit and makes the project that much more difficult to coordinate to boot.

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        May 6, 2014 10:26 AM

        $100M for the people that do the work, $200M for the marketing, $200M for the people that fronted the money and did no work.

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          May 6, 2014 12:11 PM

          Who are those people who "fronted" the money if not Activision? Are you saying they borrowed development funds?

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          May 6, 2014 12:57 PM

          Would you borrow $200M to someone else without any gain? Pfft!

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          May 6, 2014 4:59 PM

          that would be breaking even + $200M

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      May 6, 2014 7:13 AM

      It looks a lot like a Halo mod to me.

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      May 6, 2014 7:17 AM

      I hope it was worth it. I for one will be picking this game up to play with friends for sure, on PS4.

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      May 6, 2014 7:27 AM

      I hate to be negative, but every time I see anything about this game I feel like it is going to fail. I don't understand why they thought they should go with an MMO as their next game. Many of the rats have fled the Bungie ship though, so I think the writing is on the wall.

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      May 6, 2014 7:32 AM

      The idea is great on paper, and even the last video looked okay. I hope it succeeds, and I hope it is different enough from the rest of the FPS genre to carve out its own niche.

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      May 6, 2014 7:33 AM

      Can't wait to try the beta.

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      May 6, 2014 7:38 AM

      It boggles the mind. That's so much fucking money.

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      May 6, 2014 8:00 AM

      So Bungie's last IP was about a donut, and their current IP is about a timbit.
      (All Canadians and some 'Muricans will get the reference)

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        May 6, 2014 8:11 AM

        I'm canadian and while I know what timbits are I have no idea what you're getting at

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        May 6, 2014 9:18 AM

        You do know that Donut Holes are not strictly a Canadian thing, right?

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          May 6, 2014 1:35 PM

          A hole is actually a hole :P The thing you cut out to make the hole is something else :) Our coffee shop of choice, Tim Hortons (better than Krispy Kreme) calls them Timbits.

          But yeah, I know it's not an exclusive thing. It's just that every place else sucks in comparison. Krispy Kreme opened a shop in London, Ontario and it shut down after six months because the novelty of paying 13 dollars for a dozen donuts wore off really quick for people.

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            May 6, 2014 7:04 PM

            is this some sort of fucking slight? you talk about krispy kreme and you don't even bring up dunkin fucking donuts

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      May 6, 2014 8:15 AM

      They recently said their data center people are starting already 24 hours shifts.

      And they have a program scheduled, that means (according to them) there will be a new thing to do in Destiny every day for the next 10 years.

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      May 6, 2014 8:46 AM

      A pricetag like that, makes me appreciate how much Star Citizen is doing with (so far) one tenth of those funds.
      half a billion for one game... absolutely ridiculous.

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        May 6, 2014 9:25 AM

        get back to us when they've actually done it

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          May 6, 2014 3:14 PM

          well, dogfight is this week. so I'll get back to you soon.

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            May 6, 2014 4:14 PM

            - someone from last December

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              May 7, 2014 8:53 AM

              That's back when they were going to use the Cryengine netcode. But decided that adapting it for the DFM would just be throw away work, they decided to finish up their own netcode that was going to be used for the Persistent Universe instead. That way, they save manhours instead of throwing them away, and they get to bughunt and optimize their own netcode for far longer than was originally planned.

              It was a delay yes, but in the long run it'll save time and money, and likely make a better game at release.

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        May 6, 2014 9:29 AM

        It's essentially the Assassin's Creed model. First game is a money sink to establish the IP and build the engine, then you release sequels on a tight schedule that each have a lower cost individually, to make a profit.

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        May 6, 2014 5:11 PM

        Well remember that 500 million is not at ALL what is required to make a decent AAA looking game. The Witcher 3 is being made on 30 million and that is looking like a HELL of a game.

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          May 6, 2014 5:12 PM

          er, make that 40 million, 15 mil of that for development.

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          May 6, 2014 7:08 PM

          it's also being made in poland where cost of living is still much cheaper and they can probably afford to pay extremely talented programmers 30k/year without impoverishing them.

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          May 6, 2014 7:32 PM

          Most of the reason The Witcher 3 can be made on such a small budget is because they pay their staff significantly less because the average salary and cost of living in Poland is far lower than in the USA or the UK. Projects in more expensive nations cost more.

          Consider that CCP spent more than Star Citizen raised in total last year in R&D alone.

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          May 6, 2014 7:47 PM

          But it's being made in Poland not the US.

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      May 6, 2014 9:44 AM

      I hope the music will be good.

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        May 6, 2014 5:47 PM

        Shouldn't have fired Martin O'Donnell then.

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      May 6, 2014 9:53 AM

      If they would have made it available for PC they would easily hit their 15Mil.

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        May 6, 2014 10:45 AM

        GTA V sold 32 million so far without PC…

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          May 6, 2014 5:15 PM

          GTA is a well established IP

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            May 6, 2014 7:14 PM

            GTA is also both a gametype and a brand that isn't traditionally associated with PC. Open-world third-person sandbox-style "murder simulators" (love that term) were basically born on consoles, and the modern GTA series itself cut its teeth on the PS2 and original XBox. While PC ports existed, they were never really the focus of the games.

            Compare that to FPSes, which traditionally have been PC, or at least "some console plus PC". FPSes which only release on console have been the rarity, not the norm. Not only that, most of the time the PC sales of those games are a not-insignificant amount of total sales.

            Bungie and/or Activision skipping the PC release for Destiny is just an odd choice for an FPS, and even moreso for an MMO. Maybe they figure with the wide swath of consoles they are covering they'll have enough sales to make a tidy profit. Somehow though I can't figure that whatever money they put towards a PC port wouldn't return vastly more in terms of sales.

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              May 6, 2014 7:41 PM

              No, pretty much every modern cross platform shooter moves far more units on consoles than on PC. Call of Duty regularly posts numbers like 20 to 1, or even a larger margin, in favour of consoles over the PC. NPD numbers and other metrics support this.

              Bungie is fielding four separate platforms simultaneously and that's requiring a massive budget. All four of those platforms will sell more than PC. Why is there any confusion over this at all?

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                May 7, 2014 1:03 AM

                Another factor is that Bungie is used to developing just for one platform. Going for 4 platforms now is surely enough for them, adding PC to the mix does not make much sense.

                It's interesting also that times changed enough now for developers to go console only with MMOs. Back in the day most of the consoles were not connected to the network, now almost all are.

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                  May 7, 2014 4:48 AM

                  Yeah, they are doing 360/XBO/PS3/PS4 all in-house. Coming from doing just one console to doing 4, it's a lot on their plate.

                  Supporting PC would add lots of trouble to that equation.

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      May 6, 2014 2:29 PM

      COD: Crysis-Lite

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      May 6, 2014 4:56 PM

      This is only surprising because of the lack of transparency of development/marketing budgets in the video game industry, particularly at the top end. When you staff up to hundreds, in the case of something like Assassin's Creed thousands, of developers, you only need to do some back of the envelope math of cost per employee x fulltime staff x full production cycle duration to know that modern AAA games are hundred million dollar affairs without accounting for marketing. Then you add in other fixed development costs - licensing middleware, leasing office space, administrative staff, outsourcing art/audio/ports - and a marketing budget that often dwarfs the already steep development cost, and it is no wonder that AAA development is consolidating around conservative bets. When you factor in that a 3rd party publisher/developer will only see something like $20 from a $60 console game sold at retail, it is a wonder that any AAA game makes money at all.

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        May 7, 2014 6:00 AM

        Factor in a new copy being slapped out of the customers hands and a $55 used copy put into it.

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      May 6, 2014 5:01 PM

      An ad for it came on yesterday and I asked my fiancée "what game does this look like?" and she immediately said "it looks like a Halo ripoff."

      lol. Is that what they're going for?

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      May 6, 2014 7:28 PM

      A franchise tailor-made for dude-bros, purely for the purpose of making lots of money over the next decade. Sounds like a real winner. Hope the dudebros enjoy it, and the investment fatcats get rich.

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        May 7, 2014 6:01 AM

        Doesn't it look like star wars though? How it's that a dude bro style?