Why Video Games Cost So Much To Make

Video game publishers are notoriously secretive about the budgets behind their games, but when a number does slip out, it can be shocking. Games like Call of Duty and Grand Theft Auto cost hundreds of millions of dollars to make, which is tough to fathom -- until you do the maths.

While reporting for my recently released book about how games are made, I asked a ton of developers how they calculate their budgets.

A few of the bigger companies wouldn't get into specific numbers -- like I said, notoriously secretive -- but all of the studios that did answer offered the same magical number: $US10 ($13),000 ($12,560). Specifically, $US10,000 ($12,560) per person per month.

"That's a good ballpark number," said Obsidian's Adam Brennecke, executive producer of Pillars of Eternity and its upcoming sequel.

"Based on the average salary for a developer plus overhead, it costs about $US10,000 ($12,560) per person at the studio. Some are more expensive. And that's how you usually do budgets with publishers too."

That number -- which might go even higher if you're in an expensive city like San Francisco -- accounts for salary, office rent, insurance, sick days, equipment, and any other costs that come up over the course of development.

It's widely considered to be a good estimate for how much a video game production will cost, no matter how big a team gets.

So let's do some maths.

Say you're an indie studio that just raised some money on Kickstarter. You think you can make your Earthbound-inspired, 16-bit-style RPG in a year and a half (18 months) and you think it will take five people: a designer, a programmer, a musician, and two artists. 5 * 18 * 10,000 = $US900,000 ($1,130,439). Hope you didn't have any stretch goals!

Say you're a mid-sized team like Obsidian or Double Fine. You're making a new console game that needs to look good, but nobody expects you to have the most polygons or the highest-end graphics.

You're putting a team of 40 on your psychedelic rhythm game, and you're planning a schedule of around two years (24 months). 40 * 24 * 10,000 = $US9,600,000 ($12,058,013).

Don't worry -- at least people on the internet will accuse you of stealing money!

Say you're a massive publisher that's trying to compete with the Red Dead Redemptions and Destinys of the world. You're making a military shooter, of course.

In order to hit the graphical fidelity that your fans expect, you need a staff of at least 400, and you need to give them three years (36 months). 400 * 36 * 10,000 = $US144 ($181),000,000 ($180,870,192). And that's before the inevitable delay, not to mention the marketing. Those CGI commercials aren't gonna pay for themselves.

I might be lowballing here. Many big games have development staffs across multiple studios, and if you go into the credits and count up everyone on a game like Destiny 2 or Assassin's Creed Origins, you might get into the thousands. Multiply that $US144 million ($181 million) budget accordingly.

This is why video games cost so much to make, why video game companies are so volatile, and why observers like me worry that the video game industry's current path is not sustainable.

WATCH MORE: Gaming News


Comments

    I'd comment that if the current industry path is not sustainable then it needs to change. All industries face external pressures (rising costs, competive pressures, changing consumer tastes, etc) that they can't control, but rather need to adapt to.

    Kickstarter is one response - fans will pay above market rates for niche products they like. That's great! I can think of many games where I easily got far more enjoyment out of it than the price I paid for it. And studios will fail when they don't hit the mark with their output. That's crushing, but the money and talent could be better used elsewhere.

    I'm not trying to make a "the market rules" argument here, but any industry needs to justify its existence, not cry out for help to sustain it.

      The movie industry is the same and to make it sustainable they auction their work off to studios to the lowest bidder forcing studios looking to work to just scrap by hoping that the work they do can land them a better deal next time. It's a vicious cycle which not only applies an inordinate amount of pressure on the publisher to make games as cheap as possible but for people to sell themselves even lower so that they can survive until that big break they so desire/need.

      Kickstarter has had a lot of high profile failures that are poisoning the well. People are much more suspicious of early access or Kickstarter titles as a result - and it illustrates why publishers still have a place in gaming (if only to keep developers on track). Kickstarter probably demonstrates how sometimes a game is bad because the developer fucked up, not because of the evil publisher.

    Well just imagine how much sales Activision is making just to make not only Crash Bandicoot N Sane Trilogy but other Activision games like Call of Duty Skylanders and Destiny 2 they're getting a huge increase in sales and so are the team at Vicarious Visions.

    Hmmm, so Star Citizen must be in a bit of financial strife then, considering all its start-up costs like building studios from scratch. How long's it been in full development for, with 300-400 employees? About 2-3 years? Rapidly approaching the point where investors (who are different from the crowd-funders) must be wondering if they'll ever make their money back. Of course, the crowd-funders knew the risk they were taking by 'pledging', and will have to take whatever 'game' is currently available when development inevitably downsizes to skeleton staff. Investors, however, will be looking at sales to consumers who have not crowd-funded. How many that might be is anyone's guess, but you'd expect the sales to be somehow inversely proportional to the increase in crowd-funding, since everyone who crowd-funds for the minimum package is someone who will not need to buy the game when it releases commercially. I'd love to see CIG's financials, although they will fight tooth and nail to avoid releasing that information, for obvious reasons.

      The equation doesn't really apply at all scales, I'm not sure what Schreier used for sources (I know, 'a ton of developers', but that's not very specific) and I'm not interested in his book to find out. Cost per head is a bell curve that goes down as studio size goes up, hits a plateau and starts to go up again as size gets too large as it's lost in bureaucracy costs. Multiple studios, outsourcing or carefully designed flat structure are usually the ways to combat the upward part of the curve; CIG seems to have used the first option.

        Yeah, I agree with you about the equation, but I think that it would give you a ballpark idea for most mid-large operations. Using contractors will be both beneficial (you don't pay for overheads) and detrimental (higher short-term cost per head). I think CIG having built LA and Wilmslow studios from scratch (including mo-cap studio etc) will be somewhat counter-balanced by using existing or refitted facilities such as Frankfurt and Austin.

        Great blog post by Matt over at Gamasutra - https://www.gamasutra.com/blogs/GamesandData/20170901/304964/Star_Citizen_A_Close_Look_at_the_Cash.php

        He estimates that CIG could be spending as little as $90K per head per year instead of $120K industry standard but says that would be an extreme best-case scenario, and realistically would be somewhere in between.

    I believe much of the cost for those multimillion games is marketing costs. Ads are expensive.

    ...salary, office rent, insurance, sick days, equipment, and any other costs that come up over the course of development.

    I'm not sure the $10,000 rule applies to indie developers (at least in the early days). They don't tend to have actual offices (or if they do, it's a shared space and a minimal expense). They use personal equipment, and pay themselves a flat annual salary (no sick leave, holidays etc.). They're also not seeking career wages, which that number includes.

    I'd imagine in most cases indie developers looking for funding will likely take wages far below the industry norm, if at all. Successful indies (finishing their project) make sure they can actually live on their reduced salary. The unsuccessful ones underestimate their cost of living.

    Of course I'm generalising, but in my experience that's been the case. The number is certainly a good indication for studios that hire qualified employees.

    Yes, that's really what it comes down to the end. Developers are highly trained and expensive, and they only get more expensive as you try to create an environment that attracts the best.

    You can understand why publishers try to do as many re-releases and re-masters as they can. In many cases, you'd find that the lower development headcount will be offsetting the cost of their more ambitious games!

    Wish I was getting $10k / month :)

      It would likely include overheads in addition to wage costs. I also don't envy the hours developers work.

        You should, my job is super cruisy haha.
        Boss has this lovely work philosophy which involves no crunch, overtime, and 9-5 days with plenty of time off.

    all of the studios that did answer offered the same magical number: $US10 ($13),000 ($12,560).$US10 ($13),000 ($12,560) is a magical number all right. :/

    Nintendo has pushed this topic for a while, aiming rather to create fun experiences on a smaller scale, ala Switch for example.

    Video games are a luxury, like high end cars.
    One day, there just won't be ppl wealthy enough to afford Bugatti's n Ferrarri's all the time.

    Games will have to hit a production cap soon

    $10,000 for a person-month doesn't seem very high.

    I work for a decidedly non-game company (which does not have the multi-million dollar budgets of a AAA game studio) and the internal finance process for a project typically bills $80-100 / hour for one person.

    A work day is 7.5 hours (8 hours minus a lunch break).

    A week is 5 days.

    So, a 5 day work week yields 37.5 hours of billable time: 5 * 7.5

    Assume 1 month yields exactly 4 weeks - it's generally a bit longer, but this keeps the maths simple.

    $80 * 37.5 * 4 = $12,000

    So, $10,000 for game dev seems... not that remarkable.

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