Blog Post

The Harsh Economics For Indie Game Developers

imageTired of being forced into one-sided deals with big publishers, indie game developers are flocking to platforms like Xbox Live Arcade and Nintendo’s Wii Ware to reach consumers directly. But as developer Mommy’s Best Games notes, these direct-distribution channels come with their own middle-man: the console-maker, who sometimes takes an even bigger cut of the revenues than a publisher might.

In the case of Xbox Live Community Games, a platform Microsoft (NSDQ: MSFT) launched for tiny studios and individual developers, the company takes 30 percent of sales off the bat. Add in a 10 – 30 percent “promotional fee” for games that get “featured” status in the Xbox Live Arcade, and that means Microsoft can wind up keeping 60 percent of revenues overall. (Microsoft has reportedly waived this additional fee for the first four months a game is on sale). Since these games all cost under $10, once you factor in royalties, taxes, licensing fees and other costs, developers may need to sell well into the tens of thousands of units to break even — let alone make a profit. And that’s not what happened to Mommy’s Best with its award-winning title, Weapon of Choice. More after the jump.

The side-scrolling action title sold for $5, and was dubbed the “Best XBL Community Game” by IGN, but it still managed to move less than 10,000 units, well short of the 30,000 that the studio was banking on. “Obviously, with a $5 game and these projections, we