With teams often starting at 100 people and budgets soaring to multiple hundreds of millions of dollars, developing a AAA game is rapidly becoming one of the most expensive enterprises humans can undertake, outside of building battleships, launching space vehicles or making movies. The expense of developing a AAA game is old news. So, those are the numbers, and by themselves they tell a pretty compelling story, but why is the industry in such peril? Why is only one of the major AAA studios earning a double-digit profit margin, and why are everyone's profits coming off lucky gambles or marginal models like virtual purchases and Wii games? Why aren't AAA games making money? Its massive 30% profit margin has to be some consolation, however. Not only is that revenue number down 19% from last year, but it represents a $200 million shortfall against Ubisoft's yearly revenues, putting Activision into second place, revenue-wise. Which means Acti has another year, maybe three of guaranteed crazy-insane profitability before it needs Plan B to start paying off.Īlso worth worrying about, Activision's $384 million in profit comes off of $1.2 billion in total revenues. Even WoW fans are beginning to question the wisdom of paying a monthly subscription. Call of Duty continues to dominate AAA multiplayer gaming, but dominating that market will not yield WoW numbers any time soon unless Activision finds a way to make subscriptions palatable to console gamers. But hey, $384 million is still over $300 million more than anyone else, so what's to worry about? Plenty.įor one thing, that profit is driven largely by World of Warcraft, which posted flat subscriptions last year for the first time since it launched 8 years ago. Activision posted a profit of $384 million in the first quarter of this fiscal year, down from $503 million last year. Now let's take a look at the 800 pound gorilla in the room: Activision. EA's $76 million in profits came in over $977 million in revenues, which is close enough to a round billion that it'd be exciting if it represented more than a 7% profit margin. That, my friends, is why people in the know are starting to panic. EA spent $40 million to make $56 million, and they had to ship more than 3 million copies to make a profit at all. That game's budget has been estimated at around $40 million, and it has sold over 3.5 million copies to date. But before we get all happy weepy over the turnaround, let's consider that $56 million of that profit came in the fourth quarter, and that EA's money-maker for that period was Mass Effect 3. Which is not great.ĮA did slightly better for the year, posting total fiscal year profits of $76 million, versus a $276 million loss last year. That's a 3% profit margin, for those keeping score at home. Virtually all of that growth, however, came from its virtual game sales, which rose 111%, and games for the Wii, which comprise a third of their total revenue.Īlso worth noting is that $48 million is the profit off of total revenues of $1.4 billion.
Ubisoft is the winner of the door prize, posting $48 million in profits versus a $67 million loss the previous year. Although in each case the gains were posted largely in the fourth quarter, bolstered by online sales and non-AAA revenue. Industry sales data posted last month by Variety points to modest gains in the last fiscal year by all three of the major third-party publishers, Activision, EA and Ubisoft. Now let's look at the truth behind the rumor.
Nobody is hitting those marks with any predictability, which means nobody is winning, or so they say.
Costs are too high and the number of units that have to be sold in order to break even is in the mid-millions. That no one is making money in AAA games. The state of AAA is chaos, bordering on impending doom.ĪAA development is a high-risk, narrow margins game with only a very few winners, and too many players. And we listen, even when we can't quote them. At private functions or over dinner with well-connected friends in the industry.
#State of war game series#
The entire series will be re-published in total next Monday. Parts two through five will be published separately each day this week. This is the first part of a five-part series on the state of games, written by the editors of Polygon.