GMAN-GAMES: Game Publishers that use licenses are Retards!

Game Publishers that use licenses are Retards!

June 20th, 2006

I've always wanted to try to analyse game sales data but unfortunately it's not generally publicly available. Until recently that is. I discovered that Wikipedia supposedly has data for all games that have sold over 1 million units. Assuming their data is correct or close to correct here is my analysis.

It makes NO FRIKKEN SENSE TO BUY A LICENSE!

Here's the short version of the market for Licensed Based vs Original IP Based video game software for titles that sold 1 million or more units.

Why would anyone purchase a license when clearly about 80% of the market belongs to non-licensed titles. Why do most people in upper management think it's best to buy a license? Well, here are my thoughts:

1) They confuse licenses with sequels. By my definition, a license is defined as something from outside the game industry. For example the Spiderman series (very successful) is a license. The Harry Potter and Lord or the Rings games are licenses. On the other hand Metal Gear Solid 3 is not a license, it is a sequel to an original IP title. Without the original IP there could be no sequel.

2) They mix in sports titles with software over all. The above numbers remove sports. My argument for removing sports from my computations is, that I'll grant you that if you are going to make a sports title the stats show you are pretty much required to buy a license. On the other hand, if you are not making a sports title then the fact that sports need a license should have absolutely no barring whatsoever on the decision to use licensed IP or not.

I posted those 3 charts as they are probably the most currently relevant but below is the data from most major platforms.

Platform	# Titles	Original Titles	Sequel To Original Titles	Licensed Titles	# Units	Original Units	Sequel To Original Units	Licensed Units	Original Based Units	Original Based Titles
PC	46	50.00%	45.65%	4.35%	128.21	61.63%	36.86%	1.51%	95.65%	98.49%
NES	38	50.00%	42.11%	7.89%	106.94	44.18%	52.11%	3.70%	92.11%	96.30%
SNES	39	28.21%	66.67%	5.13%	137.57	20.73%	77.12%	2.15%	94.87%	97.85%
N64	40	17.50%	62.50%	20.00%	125.19	13.87%	68.47%	17.65%	80.00%	82.35%
GameCube	34	8.82%	85.29%	5.88%	70.77	7.38%	88.33%	4.30%	94.12%	95.70%
GameBoy	46	10.87%	76.09%	13.04%	228.9	30.30%	65.47%	4.24%	86.96%	95.76%
GBA	50	4.00%	72.00%	24.00%	119.67	2.33%	81.50%	16.17%	76.00%	83.83%
DS	11	36.36%	63.64%	0.00%	30.93	38.67%	61.33%	0.00%	100.00%	100.00%
PS1	62	27.42%	61.29%	11.29%	184.59	26.14%	67.90%	5.96%	88.71%	94.04%
PS2	107	16.82%	58.88%	24.30%	294.08	13.91%	63.78%	22.31%	75.70%	77.69%
Xbox	30	33.33%	46.67%	20.00%	53.69	37.79%	46.84%	15.37%	80.00%	84.63%

key:

# titles is the number of non-sports titles on that platform that sold over 1 million units
Original Tiles, Sequel to Original Titles and Licensed Titles are the percent of total titles
# units is the total number of units in millions for all tiles that sold over 1 million units
Original Units, Sequel to Original Units and Licensed Units are the percent of total units.

What that means is lets say 4 titles sold over a million units for 3DO and that 2 of those were licensed titles. Therefore 50% of the titles were licensed based and 50% were original IP based. But, lets say the 2 original IP titles sold 4 million units each and the licensed titles only sold 1 million each. Then for all 4 titles 10 million units were sold 80% of which would original IP based units, 20% of which would be licensed units. Which number is more relevant I'm not entirely sure.
The last 2 columns are just Original + Sequels added up for both titles and units since together they show the total percent of the market represented by Original IP based titles.

As you can see, it's pretty damn foolish to buy a license. You're giving up more than 80% of the market and nearly all sequel potential.

Some trivia I noticed. There were no million selling sports titles for SNES or Gameboy Advance at all. ZERO! Probably no surprise but there are a ton of sequels for Gameboy Advance. There is pretty much nothing licensed for PC.

How else did I fudge the numbers? Well, for NES, not that that's relevant anymore but, I didn't include Super Mario or Duck Hunt as both were pack-ins. They would have helped my case though since they are both Original IP based titles.

Also, as far as sequels go I considered anything based on an existing game to be a sequel. In other words for the stats above, Mario Kart is considered a sequel to Mario Bros as is Yoshi's Island. Since they use the same characters they are clearly riding off the popularity of Mario and Yoshi and don't deserve to be considered wholly original for the purpose of these stats. Still, they are not licensed.

For racing games, if they included licensed cars I consider them sports. If they didn't I considered them original IP. Example: Need for Speed is original IP. Gran Turismo is licensed sports. Tony Hawk is also a licensed sport. While you could add those titles in to support a licensing argument it would only change the numbers 1 or 2 percent.

Sequels of License Based titles (ie, Spiderman 2) were considered licensed based titles.

The other thing you can get from this is Sequels are everything. For most platforms they are 2/3s of the original IP based titles. Even DS is 2/3s sequels. For a few like GB, GameCube and GBA sequels are like 85-90%. Still, you can't publish a sequel unless you've made the original.

You could make the argument that licenses **might** be less risky than wholly original titles in some cases. If you look at GBA or PS2 you see that licenses sold more than wholly original titles. This was not true on Xbox or PS1 though and of course again, once you decide to go that route you've clearly given up any chance of getting any of that hot sequel action.

The conclusions:

#1: DON'T BUY A LICENSE!
(hit potential is about equal and there is no back end to licenses)

#2: DON'T MIX UP SEQUELS AND LICENSES.
They are not the same.

#3: DON'T MIX UP SPORTS AND NON-SPORTS.
They are not related.

Look at it this way. Based on the numbers above about 20% of the market is new Original IP, 20% is Licenses and 60% is Sequels to Original IP. So, here you are, publisher. Why would you choose a license? Your odds of success are about even so buying the license is not helping your odds in any way. On top of which, if you choose to license you've guarnteed you won't get any part of the sequel market. You've thrown it all away on the clearly wrong belief that the license was going to help.

ps: feel free to tell me where I figured wrong. I'm not a statistics major. I'm also missing data for titles under 1 million units. I'd be happy to add that in but I don't have access to that data. If someone would care to provide it to me I'll be happy to work with it.
The data I used is here in Excel format.

Pass it on

Comments:

Tony Hawk

Just for the sake of argument I moved Tony Hawk from sports to Licensed IP to see how the numbers changed. Here they are:

PS2:
Licensed Based: 27%
Original IP Based: 73%

XBox:
Licensed Based: 23%
Original IP Based: 77%

PS1:
Licensed Based: 15%
Original IP Based: 85%

As you can see the numbers changed but not enough to change my conclusions.

Also, one issue I have with Tony Hawk is that it's not clear the license mattered. For example a James Bond game is clearly about the license. It stars James Bond. A Lord of the Rings game is clearly about the Lord of the Rings characters and world. A Simpsons game stars the Simpsons. But Tony Hawk, as far as I know, features nothing about Tony Hawk except sticking his name in the title. The game was excellent and effectively has nothing whatsoever to do with Tony Hawk so it's not clear it needed a license and wouldn't have done just was well without one.

For example SSX is a million seller and it's not a license. Like Tony Hawk it's also an excellent game and like Tony Hawk it's more of a game, less of a sports simulation. For my purposes I marked it as sports and left it out of my computations but being original IP it would have only bolstered my point.

posted by greggmanJune 22, 2006 at 4:15 [ e ]

might just some additional data here..

http://www.everythingandnoth
ing.org.uk/vg/worldtotals.ph
p

posted by guyinAMERICAJune 22, 2006 at 21:08 [ e ]

You're a genius

Thanks for doing the homework to point out what we already know. Rock ON!

posted by bucketgirlJune 22, 2006 at 22:58 [ e ]

Licenses

Dear Gregg,

I really enjoy your website, and it helped me a lot when I moved to Japan. So thanks. I just wanted to comment on your analysis about licenses, because I don't see the same conclusions as you.

First, I don't know so much about specifics for the video game industry. But you seek to answer the question, should a game publisher buy a license?

Well, the answer depends on whether the publisher expects to produce a profit from the sales of the game. This requires both a consideration of game sales and costs to make the game. The game publisher doesn't need to worry about general trends in the industry (which types of games are more common), they just need to worry about producing games that will earn a profit so their company can grow and they can live happily, etc. Even though licensed games may be less common, your analysis doesn't consider whether they make profits for their company, because there isn't a comparison of sales and costs.

Second, I think it is possibly quite important to have the data on sales of all games, not just games with more than 1 million sales, in order to make any conclusions. Please consider this simple example to illustrate my point. You will know better than me if it is realistic:

-Suppose I need to sell 900,000 games to recover my costs and make some profit. This applies to both licensed and unlicensed games.

- suppose an unlicensed game is much more hit or miss. So if I make such a game, I have a 50% chance of selling 2.1 million units, and a 50% chance of selling 100,000 units.

-meanwhile, a licensed game is more of a sure thing. Because I can rely on the popularity of the license, I can confidently predict to sell 1.1 million units. I won't have a blockbuster, but I also won't have a dud. Just a consistent performer.

By only including data on games selling more than 1 million units, you miss out on seeing that there are many unlicensed duds. The licensed games are more consisent and not duds. (i'm assuming this is true, but neither of us can say without more data) They recover their costs, and they are less risky than making the unlicensed games.

I think this provides valid reasons for producing licensed games, or at least you need more data about the costs of production and the variability of sales before you can make the conclusions you do.

posted by WadeJune 28, 2006 at 4:33 [ e ]

You might be correct Wade.

My rebuttle to your arguement would be as follows.

To the idea that you are more likely to have a hit with license than without. Well, there is no reason to believe the numbers change for under 1 million sellers. I agree with you it would be good to have all the data but I suspect the numbers wouldn't change. It would still be 20% licenesed games, 20% original games, 60% sequels to orignals. That still suggests your chance of making any amount of money with a license is equal to making an original and again, with the added loss that you won't be getting in on any sequel action.

As to your profit arguement, we'll never have that data. The only data we could possibly get is sales. But, we do know licenses cost money. So a game that is going to require 1000 man hours of work (low number) is going to cost more if the budget has to also include the licensing fees on top of paying for the game to be made. That means the budget for any licensed game is higher than the same game without a license meaning with the licensed game you have to be hit to make your money back raising your risk even more.

I could even go further. You can read all over the net that 360/PS3 games are projected to cost 10-20 million dollars to create. After costs, marketing, wholesale, returns, etc are all calcutated a 10 million dollar budget game plus all that other stuff has to sell, just a rough guess, about 750k copies to break even. So, in other words, lowering the limit to games that sold over 750k copies isn't probably going to change the percentages.

I guess I see your point that maybe 1000 unlicensed games were made and only 10 licensed games but all 10 of those licensed games made it on the 1 million+ chart so the actual odds might be higher for a licensed game. I have a personal feeling that it's more likely that some percent of games are hits like say 3% and that's 3% of licensed games and 3% of original IP games so even in there are less licensed games the odds of making a hit are the same. Of course I need more data to figure that out.

posted by greggmanJune 28, 2006 at 16:52 [ e ]

While I agree with Wade on the idea of hedging your bets with a license, I wonder whether that many companies really expect there is even a chance that their unlicensed game will explode in sales.

I believe (without the research to prove it) that the vast majority of games aren't expected to sell millions. They are expected to sell hundreds of thousands. Sometimes they don't even make *that* mark.

In that regard, licenses might not be seen as so bad an option. You likely boost your minimum sales (unless you've already killed the license through prior games,) and maybe you bump the higher end a bit or maybe you don't. Licenses kind of offer the safety net of a sequel by have at least some in-built audience from the start.

A popular fan belief has also been that licenses were often put on games that just weren't *that* good to begin with. Sometimes you could trace problems back to fitting in the license (such as compromises to fit in a certain story or scene, or being rushed to a certain release date.) Other times it was questionable whether the publisher/dev teams could even produce a decent game to begin with.

In a few cases, licenses just happen to offer some new variety (Capcom's Marvel-based fighting games) to keep interest. Or just happen to be the best fit for ideas that you have (and I'd argue the Spider-man movie games fit here.)

posted by BainesJuly 2, 2006 at 16:57 [ e ]

I think the magic number is around 200,000 - around which a small budget license title (think SpongeBob or Dora) starts making money. Publishers pick a license because they think they can hit that mark with a crappy licensed - i.e CSI or Who Wants to be a Millionaire?

I want licensed titles to die, but I think the reality is if you included ALL professional sports titles as licenses then the shift is fairly extreme. You aren't required to buy a sports license to make a game - think Pro Evolution Soccer or Burnout. For the sake of "original vs. licensed" comparison - removing sports titles is probably fair.

posted by NelsonDecember 31, 2006 at 10:31 [ e ]

missing data

by only looking at million sellers you are indeed only analyzing a fraction of the released games. i have the sales data for nintendo DS titles open right now and of the top 100 titles only a handful are original IP, and of those the only ones that sold well are first-party titles (from nintendo directly.) there are a lot of factors concerning risk aversion and other stuff (such as, for ANY game there is only a 25% chance it will break even). companies aren't only looking to have million sellers, they also want games that sell well enough to break even and often licensed IP has a much smaller risk.

here's an article that goes more in depth on the topic..

http://www.igda.org/articles
/dellarocca_ipsnatchers.php

posted by andycJanuary 12, 2007 at 17:02 [ e ]

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