Distributing the Game

A major difference in creating a video game for a console versus a normal PC is the approval and distribution process. Console manufacturers normally require strict licensing agreements between themselves and companies that wish to develop games for their system. We will outline the process that 3DO goes through with the game console makers they work with. Every company that develops games for a video game system manufacturer is considered a third party licensee. Here's how it breaks down:
• 3DO Develops the game idea Creates the game Tests the game Markets the game Distributes the game
• Console maker Approves the game idea Tests the game Reviews and approves the game Manufactures the game When 3DO submits the game to the console maker, the testing and review process can be very rigorous. The game may be sent back to 3DO with requests to change certain parts before resubmitting it. Once the game is approved, 3DO places an initial order with the console maker that must be paid up front. The console maker sends a master copy of the game to one of its manufacturing plants. The first run of a typical 3DO game is between 150,000 and 300,000 units. It normally takes a few weeks from the time an order is placed until the games are delivered to 3DO's warehouse distribution center in Atlanta, Ga. The games come packed at between 500 and 2,000 games per pallet. A tractor-trailer can carry about 40 pallets of 2,000 games each (about 80,000 games). That means it could take four trucks to deliver 320,000 copies of a single title! During this process, 3DO has been taking orders for the game from resellers. The resellers send their own trucks to the 3DO warehouse in Atlanta to pick up their copies of the game. Quite often, the games are pulled directly off the trucks bringing them in from the manufacturer, split up and reboxed, then put right back on the trucks for the resellers! Specialty retailers like Babbages and Electronics Boutique try to get the games from the distribution center to their store shelves as quickly as possible. Big box retailers like Wal-Mart, Kmart and Target are not as rushed, and typically ship the games to their stores along with other items. Many people mistakenly assume that the cost per game to the parent company is minimal and the profit huge. This is seldom the case. While the actual material costs for the CD duplication, box and manuals may only be a few dollars per unit, there are a lot of other costs incurred:
• Console licensing royalties (about $3 to $10 per unit for the console maker)
• Game development costs (typically several millions of dollars)
• Advertising (anywhere from $1 million to $4 million for most games)
• Salaries for the production team (a typical game might employ 40 people for a year or more)
• Other licensing fees (particularly in sports titles, where the professional sports organization and any featured athletes tend to receive royalties for each unit sold)
• Operational costs (the costs of running the company must be split between the various games sold) Game companies also have to take into account the short lifespan that most games enjoy. Since the technology that video games thrive on is continually improving, the games that are cutting edge today will seem slow and clunky in just a year or two. It's amazing that companies like 3DO continue to provide us with such incredible entertainment year after year!