Financial Issues in Games
Having a budget is an essential part of a business. It provides a game-plan for both long term and day to day operations. There are two main reasons for creating a budget:
1. To persuade potential investors that your company is good.
2. To plan the business finances.
There are three concepts which you must always remember when creating a budget:
- Variable costs - These are expenses which increase or decrease depending on sales.
- Fixed costs - These incur whether you have sales or not.
- Break-even points - These are the level of sales where you neither make money or lose money.
It is important that throughout you always monitor your budget. This will allow you to compare figures. If need be you may have to adjust expenditure and sales efforts depending if you are at a loss or making more than you intended.
Financial Issue Article - GAME & EA
On 2nd February 2012 an article was released expressing EA's concerns over the financial health of the major European retail partner GAME. At the time GAME were facing credit insurance problems which caused EA bosses to worry as there was a chance GAME would not be able to sell new releases. GAME's financial landscape had changed since the beginning of the year and they were hitting problems. However a GAME spokesperson claimed that the stories were untrue and that sales were due to start on Friday.
How is the money made?
70s-80s Aracde Games
Games in the 70s and 80s were developed by developers and publishers and distributed to arcades in several locations. Coins were used as the financial transaction.
Space Invaders
Space Invaders was an arcade game released in 1978 by Tomohiro Nishikado. It was manufactured and sold in Japan. The game was played by putting coins into the machine. The coins would then be collected and the takings would be distributed between both the arcade owners and the manufacturers.
Pac-Man
Pac-Man was an arcade game released in 1980 in Japan. It was developed and published by Namco and later distributed in the USA by the publishers Midway. Like Space Invaders this game was played with coins and the takings distributed between the manufacturer and arcade owner.
Consoles - First Party Publishers
Consoles were created as a closed community. If you didn't have the console then you couldn't play the most popular game. In the 80s games came in the form of a cartridge. The last games console to contain a cartridge was the Nintendo 64 in 1996. The disc was introduced when the TurboGrafx-16 Entertainment Super System was released in 1987.
TurboGrafx-16
The TurboGrafx-16 Entertainment SuperSystem was a home video game which was joint developed by Hudson Soft and NEC it was released in Japan on October 30th 1987. This console was played using a CD Rom. You would have to firstly pay for the console and then pay for each individual CD Rom. The money from these sales would be split between the shop and the manufacturers of the game.
Nintendo 64
The Nintendo 64 was released in June 1996 in Japan. This was the last console which used ROM cartridges to store games. You would have to buy the console and then buy each cartridge separately in order to play different games. The money from the sales of these games cartridges would be distributed between the manufacturers and store.
Destiny - Financial Issues
Destiny has been the most hyped game of the year however for some people it has been the most disappointing. The cost to make Destiny was 500 million dollars which means that 15-16 million copies will have to be sold just to break even. After poor reviews from the game this doesn't look very promising.
Apps
Apps have created a quicker and cheaper way for smaller companies to create new games. It is an easy way to get them to the market as so many people have smartphones and tablets these days. Apps can be free and often funded by advertising. The market of games has changed as it is now open to all different ages. Many apps now offer free gaming until a certain level and then you have to pay.
Candy Crush Saga - King
King Digital Entertainment Plc is a casual social games company and is the largest game developer on Facebook. King's most popular game is Candy Crush Saga which was first launched on their website in March 2011. It launched on Facebook in April 2012. After being so popular it was released as an app on mobile in November 2012. It was downloaded over 10 million times in the first month and to date has over 150 million monthly users. King have now created 9 mobile app games to buy including: Bubble witch saga, Bubble witch 2 saga, Candy crush saga, Candy crush soda saga, Diamond digger saga, Farm heroes saga, Papa ear saga, Pet rescue saga and Pyramid solitaire saga. In 2013 King spent approximately $100.5 million on research and development this is roughly 6% of sales.
Flappy Bird - Pulled from the App Store
Flappy Bird was the new indie mobile sensation of 2014. It was making roughly $50,000 per day. However it was suddenly pulled from the game app store. Its creator made this decision as he felt it was too addictive. There was roughly 2 million hits on the post when the game was removed which was able to show how much people lied and depended on the game.
Social Networking
Social networks attract players to certain games as there are 1.19 billion regular users of Facebook every month, 874 million mobile users and 728 daily users. These high numbers of users are drawn to social games where they can be played and paid for by microtransactions. Due to the high number of people who use Social Networking sites it is easy for the game companies to draw people in. This usually results in people paying for their games.
Farmville - Zynga
Zynga is a provider of social networking games and was founded in 2007 in San Francisco. Their mission is to connect the world through games. The company develops social games that work on both mobile phones and social networking sites. Zynga launched their best known game Farmville in 2009.
Farmville is a farming simulation social networking game. The game involves different aspects of farm management. You carry out jobs such as harvesting crops, raising livestock, ploughing land, growing and planting. Farmville requires Adobe flash player. The game is free to play however if you would like to progress quickly players are encouraged to buy farm cash. The player will input their bank details and save them so that each time they require cash they just have to click on the farm cash icon.
Financial Issues with Zynga
Zynga recently experienced financial issues when their second-quarter financial results were weak. They also had bad expectations for the rest of the year. Their stock was down due to late trading by more than a third to $3.18 a share. This was a bad situation as their partners Facebook the social networking sites shares fell 8 percent which affected the money they made from that site. Shares were affected when Facebook changed the gaming platform which lost a lot of players. The social networking games are slowly getting replaced with apps which is losing lots of money for the gaming companies.
Homebrew - Peer Funded Communities
Homebrew are channels which are specific to consoles. They were created so that anyone can create their own gaming work if they have the right skillset and upload them onto the homebrew channel to show potential developers. Homebrew is like opening the doors to the engine of a console and using the manufacturers own software development kits to produce work.
Steam
Steam is a homebrew channel which enables people to create and share their own content. It also allows instant access to games and has community which you can join to talk to other gamers. It allows you to buy games which are available to play on PC and also has some games to download for free. It has different game genres and platforms. You can also watch game demos before you purchase the game and read up to date news about new releases. The homebrew channel Steam make their money through player purchases. A gamer will log on to their website and purchase games from the store.
Internet Browser (Casual) Gaming
Internet browser gaming is usually free through the use of environmental advertising which is posting adverts on the screen during gameplay. It also uses in-game advertising however this way of funding the production of games is unpredictable as the economy downfall can results in a drop in proceeds.
Miniclip
Miniclip is a mobile and online games website which was launched in 2001. It is best known for its wide variety of games. It is the second largest privately owned gaming website and was valued at over £900 million in 2008. It is popular for games such as Clone Wars Adventures, Club Penguin, RuneScape and 8 ball pool 5. Miniclip is funded by advertising and using microtransactions where you have to buy coins.
Subscription
Games are now opting for a subscription model which means games are delivered through computers and are platform free. By getting a player to subscribe they have to pay a regular fee which means the company have a steady regular income coming from that player. The player can also buy additional features such as expansion packs (which give you more to do on a game). This is a good method of making money as it is a steady income however the downfall is that the game usually starts off with a free trial. So some players may not necessarily purchase the game if they do not like the free demo.
World of Warcraft
World of Warcraft is a multiplayer online role playing game. It has over 10 million subscribers and is currently the worlds most subscribed MMORPG. it has grossed over 10 million dollars as of July 2012 and it is the highest grossing game of all time. in January 2014 it was announced that more than 100 million accounts has been created over the games lifetime. The player has to firstly pay for the game and then there is monthly subscription fee.
On-Demand
OnLive.co.uk is a gaming website where you can access games On Demand. It makes its money from advertising (adverts on the screen) and through subscriptions. The site offers lots of different games to play. The games are available to play on a range of different devices including Android, Smartphone and Tablets.
Sources
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