Ubisioft: Retail game margins are 55% (vs 70% digital), Sony/MS/Nintendo take $12 in COGS per game

Nirolak · Feb 12, 2018

25% is the retailer's margin ($15 at $60, $5 at $20).
20% is the licensing fee + cost of goods from Microsoft/Sony/Nintendo for making a retail game ($12, and from previous conversations with industry figures, this is static regardless what you're charging).

By comparison, it's a flat 30% with digital.

Edit: Since people are asking, COGS = Cost of Goods Sold.

Edit 2:

It's also worth noting this:

devSin said:
Unless it's changed, it should be noted that the licensing fee is a manufacturing charge, not a sales charge.

You have to pay them to even make the game (per unit), regardless of whether anybody ends up buying it or not.

Source: https://ubistatic19-a.akamaihd.net/comsite_common/en-US/images/34ubisoft q3fy18 1202_tcm99-318978_tcm99-196733-32.pdf

KHlover · Feb 12, 2018

Finally we got a precise number for that open secret of the retail margin.

TheDutchSlayer · Feb 12, 2018

KHlover said:
Finally we got a precise number for that open secret of the retail margin.

Yeah I love that we have this now.

UnluckyKate · Feb 12, 2018

I thought it was barely anything, hence the rush to Digital Distribution, that the retail store was taking the biggest part of the pie on physical games

TheMoon · Feb 12, 2018

Now I just need to know what COGS stands for an I will have learned something.

edit:

mugurumakensei said:
Cost of goods sold. It's a cost they take on every item sold. In this case, it's a combination of royalties, fees, etc that goes to the platform holder.

Thanks!

mugurumakensei · Feb 12, 2018

TheMoon said:
Now I just need to know what COGS stands for an I will have learned something.

Cost of goods sold. It's a cost they take on every item sold. In this case, it's a combination of royalties, fees, etc that goes to the platform holder.

ianpm31 · Feb 12, 2018

I always say the rise of digital is a good thing for AA and smaller games because the margins are bigger. They can sell less to break even as oppose to a market that's 100% physical.

magash · Feb 12, 2018

TheMoon said:
Now I just need to know what COGS stands for an I will have learned something.

Cost of goods sold.

Bhonar · Feb 12, 2018

And yet people complain that Steam takes too much of a cut??

Digital is better in all aspects, it's awesome. Do not care whatsoever about re-selling or trading, because I'm well past that stage in my life.

viral · Feb 12, 2018

TheMoon said:
Now I just need to know what COGS stands for an I will have learned something.

Not to be rude, but the whole first page of Google is about it when you search COGS. Cost of Goods Sold.

darkside · Feb 12, 2018

Bhonar said:
And yet people complain that Steam takes too much of a cut??

Digital is better in all aspects, it's awesome. Do not care whatsoever about re-selling or trading, because I'm well past that stage in my life.

Doesn't Steam take the same cut?

Durante · Feb 12, 2018

I guess those percentages are for full price games, and retail fares even worse at lower price tiers.

darkside said:
Doesn't Steam take the same cut?

Steam takes the same cut as console digital distribution, but doesn't have players pay a recurring fee.

Deleted member 10726 · Feb 12, 2018

Interesting, but I guess it also makes sense that Digital would have bigger margins without an additional party involved.

Also, you got one i too many in that "Ubisoft", OP.

TheMoon · Feb 12, 2018

mugurumakensei said:
Cost of goods sold. It's a cost they take on every item sold. In this case, it's a combination of royalties, fees, etc that goes to the platform holder.

Thanks!

ethomaz · Feb 12, 2018

Why there is no Sony, MS or Nintendo royalties for digital?

Glio · Feb 12, 2018

Bhonar said:
And yet people complain that Steam takes too much of a cut??

Digital is better in all aspects, it's awesome. Do not care whatsoever about re-selling or trading, because I'm well past that stage in my life.

It also implies far fewer jobs

Transport, shops, factories ...

Wandu · Feb 12, 2018

Wow, that is interesting to see indeed. I didn't realize it was just a straight 30% to the storefront (MS/Sony/Nintendo) on digital. I can definitely see the push for digital by publishers. Also, if digital consumption is on the rise, where does that leave retailers in the future? I am sure physical will never go away, but I'm curious to know about future software distribution piplines.

MrLuchador · Feb 12, 2018

What I find interesting is that this hardly changed in 15 years or so, from what I saw during my time running a games department in a Virgin Megastore. Cost Per Unit to buy in was £30 - £44 on console games (this was before Sony was sued for price fixing).

Deleted member 643 · Feb 12, 2018

Makes sense why they want to open up PC storefronts. Why give 30% to Valve when you can keep it for yourself?

ethomaz · Feb 12, 2018

Wandu said:
Wow, that is interesting to see indeed. I didn't realize it was just a straight 30% to the storefront (MS/Sony/Nintendo) on digital. I can definitely see the push for digital by publishers. Also, if digital consumption is on the rise, where does that leave retailers in the future? I am sure physical will never go away, but I'm curious to know about future software distribution piplines.

It was know before the stores get 30%... Apple and Steam to the same.

Glio · Feb 12, 2018

MrLuchador said:
What I find interesting is that this hardly changed in 15 years or so, from what I saw during my time running a games department in a Virgin Megastore. Cost Per Unit to buy in was £30 - £44 on console games (this was before Sony was sued for price fixing).

The prices of the games neither the public have grown either whereas the budgets yes.

That's why we have GaaS and DLC and those things

iag · Feb 12, 2018

ethomaz said:
Why there is no Sony, MS or Nintendo royalties for digital?

They earn 30% of the price as the distributor.

Joeyro · Feb 12, 2018

That's why i don't understand when people want retail editions of indie or AA games, support them more digitally!

4859 · Feb 12, 2018

ethomaz said:
Why there is no Sony, MS or Nintendo royalties for digital?

Because its included in the online store cost instead of a double charge, to incentivise using their digital store, where they as platform holders also get more money than selling to retail stores.

So by going digital and going with nintendo instead of a store retailer, they get an extra 15-20% for themselves.

Meaning that digital sales are literally worth more than physical sales, to the tune of about an entire extra sale in revenue made, for every 5-7 digital units moved. Which is fucking massive.

Looks like I nailed the shit out of this.

Bhonar · Feb 12, 2018

Glio said:
It also implies far fewer jobs

Transport, shops, factories ...

I don't care about that. There's been plenty of other fields that have been digitized the past 5 to 10 years.

The world changes with time.

Kyougar · Feb 12, 2018

mdubs said:
Makes sense why they want to open up PC storefronts. Why give 30% to Valve when you can keep it for yourself?

you know, they can just sell the keys themselves? The Valve cut is only paid for games that are bought through Steam. Greenmangaming and all the other storefronts don't pay Valve anything, that's why they can give 20% discount on new games.

ethomaz · Feb 12, 2018

iag said:
They earn 30% of the price as the distributor.

So royalties are already included in these 30%?

Deleted member 10629 · Feb 12, 2018

I wonder if big publishers put pressure on console manufacturers to make digital more attractive than physical.

TuMekeNZ · Feb 12, 2018

TheMoon said:
Now I just need to know what COGS stands for an I will have learned something.

edit:

Thanks!

Come on man
Coalition of Ordered Governments... geez

Deleted member 7051 · Feb 12, 2018

While that graphic makes it look like a bad deal for a publisher to use retail at all, it's probably worth remembering retailers buy millions of copies before the game even ships. If it weren't for those bulk purchases, a lot of big games probably wouldn't be made since I doubt big publishers like EA or Ubisoft would sink hundreds of millions of dollars into a game's development unless they can practically guarantee a launch shipment of, say, five million copies.

...and if that graphic is right, those retailers pay $45 per copy and make a profit of $15 per copy bought by consumers? Typically speaking, I mean. So if retailers buy a total of five million copies to sell to the public, that's $225m right there.

Man, having these figures really helps you understand why so many big games are considered flops.

Prine · Feb 12, 2018

Yep, great argument for digital, good to see devs/pubs rewarded better.

Bhonar · Feb 12, 2018

Kyougar said:
you know, they can just sell the keys themselves? The Valve cut is only paid for games that are bought through Steam. Greenmangaming and all the other storefronts don't pay Valve anything, that's why they can give 20% discount on new games.

I'm not quite sure that's exactly how it works.

Who allows the key generation algorithim database to begin with?

Are you saying Valve makes literally ZERO money? While allowing everyone to still download and use their Steam servers constantly?

PeskyToaster · Feb 12, 2018

ethomaz said:
Why there is no Sony, MS or Nintendo royalties for digital?

That part is now rolled into the Distributor margin as, on consoles, those parties are the storefronts. Other aspects of COGS go away because your product is digital.

Memento · Feb 12, 2018

The platform holders take 30% of every game sold on their digital stores??? That is insane, wow.

Imagine Sony with 70 million active users buying stuff on PSN. Jesus.

Rainrir · Feb 12, 2018

So the cost escalation means everyone wants to cut out the physical retailers.

RIP physical retailers.

fspm · Feb 12, 2018

Buy ubi games in retail.

Hero · Feb 12, 2018

ianpm31 said:
I always say the rise of digital is a good thing for AA and smaller games because the margins are bigger. They can sell less to break even as oppose to a market that's 100% physical.

There is a downside though, with digital you only get paid on what you sell, with physical the publisher gets retailers to buy X thousands/millions of copies up front and get paid.

OnanieBomb · Feb 12, 2018

Interesting.

If digital prices were equivalent to Best Buy's GCU, I'd go all digital in a heartbeat.

Nirolak · Feb 12, 2018

Memento said:
The platform holders take 30% of every game sold on their digital stores??? That is insane, wow.

That's pretty standard across everything, even films/music on iTunes.

4859 · Feb 12, 2018

Guys, 55% and SEVEN-FUCKING-TY percent margins do not create poor barely able to keep the doors open publishers who have to resort to lootboxes to get buy.

Bhonar · Feb 12, 2018

Memento said:
The platform holders take 30% of every game sold on their digital stores??? That is insane, wow.

Imagine Sony with 70 million active users buying stuff on PSN. Jesus.

Do you not know what Steam is? It's been publically known they've been taking 30% for the past 13+ years when they started.

Soony Xbone Uhh · Feb 12, 2018

Microsoft and Sony make 50% more on digital sales.
Publisher make more on digital sales.

Everyone wins

DriftingSpirit · Feb 12, 2018

wild wild rice said:
Interesting.

If digital prices were equivalent to Best Buy's GCU, I'd go all digital in a heartbeat.

Yep, that is why I stick with physical for bigger releases. I rely on digital for sales.

Bhonar · Feb 12, 2018

Soony Xbone Uhh said:
Microsoft and Sony make 50% more on digital sales.
Publisher make more on digital sales.

Everyone wins

And it's waaaay more convenient for myself as the Buyer.

I fucking hate physical, I don't think I'd even take a physical game for free nowdays.

rAndom · Feb 12, 2018

And that's the reason why being a first party is important. The amount of revenues lost to royalties and digital storefronts are pretty significant.

Memento · Feb 12, 2018

Bhonar said:
Do you not know what Steam is? It's been publically known they've been taking 30% for the past 13+ years when they started.

Crazy stuff.

CommodoreKong · Feb 12, 2018

Bhonar said:
I'm not quite sure that's exactly how it works.

Who allows the key generation algorithim database to begin with?

Are you saying Valve makes literally ZERO money? While allowing everyone to still download and use their Steam servers constantly?

Yeah a publisher can generate Steam keys to sell on other stores for free. If you buy a Steam key on Greenmagaming Valve gets 0% of that sale.

Proteus · Feb 12, 2018

4859 said:
Guys, 55% and SEVEN-FUCKING-TY percent margins do not create poor barely able to keep the doors open publishers who have to resort to lootboxes to get buy.

Does this include the cost to actually make the game?

TeenageFBI · Feb 12, 2018

Bhonar said:
I'm not quite sure that's exactly how it works.

Who allows the key generation algorithim database to begin with?

Are you saying Valve makes literally ZERO money? While allowing everyone to still download and use their Steam servers constantly?

Yes. If the Steam key is purchased elsewhere, Valve makes 0% from the sale. I assume Valve thinks this is worth getting more people in their ecosystem.

Kyougar · Feb 12, 2018

Bhonar said:
I'm not quite sure that's exactly how it works.

Who allows the key generation algorithim database to begin with?

Are you saying Valve makes literally ZERO money? While allowing everyone to still download and use their Steam servers constantly?

Correct.

Valve doesn't get a cent on every retail game that activates on steam.
Valve doesn't get a cent on every digital key sold through thirdparty stores
Valve doesn't get a cent on every key that gets thrown at the user through promotions (graphic card pack-in or free keys from developers)

Why?
- every new steam user is a win for Valve
- third party sales are minuscule in the grand scheme of things
- Valve good-guy
- apology for not counting to 3

Ubisioft: Retail game margins are 55% (vs 70% digital), Sony/MS/Nintendo take $12 in COGS per game

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