Path: utzoo!utgpu!jarvis.csri.toronto.edu!rutgers!apple!bbn!bbn.com!denbeste
From: denbeste@bbn.com (Steven Den Beste)
Newsgroups: comp.sys.amiga
Subject: Re: No more Cinemaware stuff for Amiga !!!????
Message-ID: <43756@bbn.COM>
Date: 3 Aug 89 17:16:30 GMT
References: <6712@warpdrive.UUCP> <1505@ndmath.UUCP>
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Reply-To: denbeste@BBN.COM (Steven Den Beste)
Organization: Bolt Beranek and Newman Inc., Cambridge MA
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In article <1505@ndmath.UUCP> milo@ndmath.UUCP (Greg Corson) writes:
>
>I think a lot of manufacturers have to get with it, pricing wise, computer
>prices have been coming down at a staggering rate, but game software costs
>have actually gone up.

The whole electronics industry has been wrestling with the contradictions of
changing hardware and software costs. As time has gone on, hardware has gotten
easier to design and cheaper to manufacturer, while software has stayed
remarkably level - that is, it costs about the same per K to develop (a lot)
and to manufacture (almost nil) as it did 15 years ago. Software development
procedures are barely beyond the cottage industry stage, even now.

The great triumph of the industrial revolution was the ability to manufacture
very large and complex consumer goods by the millions. This enormous
manufacturing run causes any fixed up-front costs to virtually vanish in the
selling price. We've all grown up with it so we're used to thinking this way
about things. I call this the "weight test" - the object we buy should LOOK
and FEEL like it cost to manufacture about what we are paying.

Before I go on, let's take a common example of a case where this doesn't apply.
Suppose you see a painting at an art show, and the price on it is $500 or
$1000. It doesn't pass the "weight" test - you can buy a print for $10 that
looks just as good. But the painting is one-of-a-kind, and as such the design
time (the time spent by the artist) massively outweighs the manufacturing cost
(in this case, the cost of paint and canvas, plus labor for the frame and
suchlike). Since the manufacturing run is exactly 1, the design cost makes up
virtually all of the selling price.

So it is for software. In a deleted section, Greg says he understands why a
compiler costs $500, but doesn't think that games should cost that much - $25
at the most. The cost of developing a really high-quality game at a big
software house is staggering, and can exceed the cost for a compiler.
Even when this is divided among all the copies
which are sold, it still represents a lot of money. Worse, in terms of
accounting you have to think of that money as being borrowed from a bank, with
interest to pay. A package costing $300,000 to develop (say, 4 person-years
of effort) may need to pay back twice that before it breaks even,
depending on the times involved.

>                        Today I can buy a major motion picture that cost
>$40 MILLION dolars to make...for $19.95

...Yes, but that motion picture is also making money at the box office, and
from TV broadcast on cable, on networks and by syndication.
If video-tape was the ONLY source of income to offset the production costs,
you'd see the price sky-rocket - and you'd see rampant piracy, too.

>                                       ...I can buy a 500 page novel that
>someone took a year to write...for $5.

(Only 1 person-year? Not very much by software standards.)

...Yes, but most large publishing houses use profits from an occasional
blockbuster to underwrite other books which actually lose money. Random
House or Doubleday can do this because they are really big, and because
when they do hit with a blockbuster, they hit for a LOT of money.
That 500 page novel cost a few cents to manufacture, and you probably pay $8 or
$9 for it instead of $5. A buck or a buck and a half of that goes to the store
and distributer. The rest comes back to the publisher to offset their expenses.
For software, on the other hand, about half the cover price stays with the
dealer and distributer.

By the way, have you checked out the price on K&R's "The C Programming
Language" recently? Last time I looked it was $25, and it's only 220 pages.
The difference is that it is aimed at a nitch market, so the price has to be
higher because the volume will be lower. (Also, Prentice Hall is milking it for
everything they can get, because to a great extent they have a captive market.)

ALL software (except maybe that intended for clones) is aimed for markets even
smaller than the one K&R is aimed at [all programmers of any computer which
offers C, and that's a LOT!] and as such must be priced higher to offset the
lower expected sales.

>                                       Games certainly cost less to develop
>than a major movie,

...Yes, but motion picture studios also use profits from successful films
to underwrite films which fail. A small software house just hasn't got the
resources to do this. One product failure may be enough to sink them.

>                    require about the same effort as a major paperback novel

...Yes, but the potential audience for the software package is minimal by
comparison, so the creation cost PER UNIT SOLD is much higher.

>and cost less to duplicate than the average video tape.

...Yes, but in this class of product the creation cost largely overshadows the
cost of manufacture. Even if videotapes or software could be manufactured for
free it wouldn't really affect the sales price by much.
>                                                         Granted, the market
>is smaller, but so are the development costs.

...Yes, but the market is a lot more small than the development cost, so the
cost PER UNIT SOLD is much higher.

>
>I wish that just ONCE a software company would TRY distributing a really good
>game for $10 a copy...just to see what happens.

It's been done. There were a couple of "magazine on a disk" that were selling
for about $8 for the Amiga, and I believe they both went belly-up. More
interesting is the fact that these were distributing documentation and software
from the public domain, so they didn't have to pay the programmers - and they
STILL went under.

>                                                If the sales of Dragon's 
>Lair are as bad as people have been saying (since piracy) maby the manufacturer
>could try it with that package as a test (what have they got to loose if
>sales are near 0 now).

Even if the per-unit manufacturing costs is low, the total amount invested to
try what you are saying would be large, and they don't really want to throw
$40,000 or $50,000 down a rat hole. You are welcome give it a try when YOU
have that much money you are willing to invest in an experiment...

>P.S.  Just so you know I'm not talking through my hat...I develop games
>      as part of my living...so I know the effort involved.

However, I'll bet that someone else does the marketing and distribution for
you.


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