Tuesday, 10 August 2010

TIGA Study: In-House Development 5X More Profitable Than Independent



A TIGA sponsored survey has some interesting statistics on the earnings of UK based development studios. According to the report, developers who are owned by their publishers average a profit of £15.5m, vs. £3.130,600 for self-owned publishers. Though the costs are higher for publisher-owned studios - about £3m for them vs. £897k for indies - the profit margins are higher as well; profits for publisher-owned studios earn about 500% provit vs. just over 300% for indies, on average.

Other interesting statistics: smaller independent studios have, on average, about 51 employees, while the bigger shops have 245. Also, despite being UK based, 72% of studios said that America was a vital market, with only 44% of them claiming the same for the UK.

None of these statistics are really surprising. Publisher owned studios can afford to take resources from the bigger houses, and in exchange, the publishers are going to put the marketing into those titles that they wouldn't really put into an independent studio, due to the potential for return to the publisher. Of course, there are negatives to this approach as well - just look at what's happening between Infinity Ward and Activision - but they rarely affect the bottom line, which is all publishers care about anyway.

As for the UK being less important than the US market, it's simple: money, or more specifically, VAT talks. As a Yank, the cost of games in the EU is staggering to me. When I was a Serviceman and visited Europe in 2000 and 2002 and marvel at games that would cost anywhere from €70 - €90, costs that were surely due to a combination of foreign development and the instantaneous tax added onto all goods. With so much money eaten up by taxes, there's only so much people can spend on video games, especially with the way companies like Activision gouge UK customers by charging £54.99 ($87.45 USD/€66.12) for AAA titles like Call of Duty: Modern Warfare 2 and Starcraft 2.

The Value Added Tax does good things for the EU and UK in providing essential services to the populace that the United States government does not provide. However, incomes are finite, and that tax has it's price.

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