Cost of development

Mendel

I was reading another thread when I began to question myself.  A good number of posters believe that the costs of MMORPG development has skyrocketed to astronomical heights.  I too have shared that thought.

But how much do we really know about actual costs?  I thought I had a pretty good handle on costs that I faced when I attempted to set myself up as a developer in 2002-2003.  I had a rock bottom estimate of $5-7 million, with a final cost of $9-11 million US.

My 2003 model was as accurate as I could make it.  I build a full, complex COCOMO model to estimate the amount of work, researched local costs for office space and operation, surveyed costs of workstations, and planned for a salary model along a $40, $60 and $80 thousand per year scheme.  I had advice from professional HR personnel for overhead costs, and a real estate professional for facility rental costs.  I had a staffing plan intended to use local collegiate computer graduates and graphics arts students.  In 2003, if I could have secured the funding I sought, I would have been very comfortable with my numbers.

These days, that amount isn't even in the ballpark.  We've heard of $30 million investments that failed to deliver successful products.  I think if we were to form a collective guess about the actual cost of development costs, this community would come in around $100 million plus to even attempt anything, with a distinct possibility we might project the costs in the hundreds of millions.

But, I think I need to ask where that money is going?  The rate of increase in 'perceived' development costs outpaces inflation.   A gallon of milk may have been $2.50 in 2003, but it's no where near $25.00 today.  So, if not the cost of inflation, what is driving the community's perceived cost of development?

Games don't appear to be more complex, requiring extensive coding to develop new systems.  The artwork is similar.  Yes, there are more pixels and more graphic effects available, but the total amount of work for graphics artists remains about the same.  Network coding and security issues are easier to deal with.  IP costs have always been expensive, but developing a new IP for a game isn't difficult.  The content -- world and level design -- doesn't appear to be excessive, certainly that workload is highly dependent on the delivered product.  Personnel costs haven't increased by a factor of 10 over the past 15 years.

Why are MMORPG development costs so high?  Are the expenses really that high, or is the community, in our role as consumers, deluding ourselves about the cost to produce?  Ideas?  Thoughts?

Quizzical

You can make an MMORPG for $1 million or $10 million or $100 million or $1 billion or a lot of other price tags.  It depends tremendously on what you want to put into it.  For example, if you want to have hundreds of separate 3D, high resolution character models all smoothly animated with a lot of different moves, that costs a lot more than if you'll settle for a few dozen sprite models with perhaps a dozen frames of animation each.

In 2002, few thought that spending $100 million to develop an MMORPG would be profitable, as the market wasn't big enough.  WoW demonstrated that that wasn't the case, and if you build an MMORPG today, you're competing against some games that did spend $100 million on development.  Having a larger budget does give you advantages over a smaller budget, but it hardly makes you systematically better at everything.  There's still plenty of room for smaller budget games to fill niches that WoW and SWTOR and so forth didn't.

scorpex-x

Most AAA mmo titles cost around 50 million to create, Tera / ESO / Wildstar / GW2 etc.

There are some that bloat up, like SWTOR and FFXIV and they go well above 100 million but they are the exception.

CrazKanuk

Are they? It really boils down to what you're trying to accomplish. You can do an MMORPG quite inexpensively now. With engines like Unity and modules on top of that like Ativism (just for instance), the ability to create MMOs at a reduced cost is actually realistic. Your biggest issue is that labor costs in North America are crazy. If you want to do a AAA game, then it will cost you a ton of money in salaries alone. You need artists! Lots of them! 

But we've got Korea, right?!?!? Just outsource everything!!! In theory that's a great idea, but it's much more difficult in practice. It means having a very well-defined vision and expectations and being able to communicate that. 

We've got highly-anticipated games like Camelot Unchained which have, undoubtedly, been developed on a smaller budget. However, since their offices are in the US and they have like 50 or so employees, we're probably talking somewhere in the neighborhood of $5 million, minimum, in annual burn. On the other hand, we've got something like Pantheon with less than 20 people? Swing over to Star Citizen and we've got someone with 250+ people, burning $30 million annually. 

Any can succeed or fail and while money is an issue, it's more about experience and management of resources. I'll bet someone could create an MMORPG for $0 if they had the vision, charisma, and ability to manage their resources. 

iixviiiix

https://en.wikipedia.org/wiki/List_of_most_expensive_video_games_to_develop

Funny that in many cases development cost lost to marketing cost .

Sid_Vicious

Make the chinese prisons go to work on it.... entire families have been dishonored . ... maybe their imaginations have been enhanced from desperately wishing for a new life and can provide a better imaginary world than the chumps we have today?

CrazKanuk said:

But we've got Korea, right?!?!? Just outsource everything!!! In theory that's a great idea, but it's much more difficult in practice. It means having a very well-defined vision and expectations and being able to communicate that.

No just kidding!! Seriously don't do that!

Rusque

Without even bothering to get into huge AAA budgets, if we look at simple straight-forward business and labor costs, it should paint a clearer picture of why budgets seem out of whack when (let's be honest) crowd funded games "succeed" in getting funded, but are poised to fail or at the very least fall short of their target feature list.

You can't expect to have a small team, maybe 10 people, working on something for 1-2 years for zero dollars. Most of the development cost goes here. So if we assume they're working on slim budgets with $50k per employee covering wages, payroll fees, healthcare, you have employees being paid roughly $35k. That's pretty low for a programmer by any stretch, but let's just assume that they're willing to take such a low salary because they really really believe in what they're making and they're super passionate.

That's already $500,000 per year on labor costs for a team of 10. Two years of labor is covered. You now have to cover various other costs: Working space, Utilities, Marketing, Licenses & Assets, legal if needed, accountant if needed, etc.

Marketing will likely end up being your second biggest expense after labor, easily reaching in to the hundreds of thousands per year or more depending on what type of advertising and if you're contracting out the work or hiring another person to manage it in-house.

So can a small team function on $1 million /yr? Sure. They're all going to have small salaries though so they better all be really excited about the project otherwise you're going to end up raising everyone's wages as you try to recruit new devs to replace the old ones and have to pay more to get them, which results in those who stayed wanting fair pay just like the new person.

I feel it's safe to assume that this is directed at CoE, so we're looking at tight budgets and a very tight timelines. 1 year to release? They say they've been working on it, but I don't think I've seen a 1 yr turn around on anything close to the scale of an MMO, let alone what they're proposing. They have their work cut out for them.

I personally wouldn't back a crowd funded MMO that isn't asking for $3-$5 million minimum. Anything less tells me that they don't have a realistic business plan.

And this is all just ground level stuff, any project of this size needs amazing project management to stay on budget and on time while getting features in appropriately. Look at SC, huge budget, but the scope just ballooned and may have exceeded the huge budget.

CrazKanuk

Rusque said:

Without even bothering to get into huge AAA budgets, if we look at simple straight-forward business and labor costs, it should paint a clearer picture of why budgets seem out of whack when (let's be honest) crowd funded games "succeed" in getting funded, but are poised to fail or at the very least fall short of their target feature list.

You can't expect to have a small team, maybe 10 people, working on something for 1-2 years for zero dollars. Most of the development cost goes here. So if we assume they're working on slim budgets with $50k per employee covering wages, payroll fees, healthcare, you have employees being paid roughly $35k. That's pretty low for a programmer by any stretch, but let's just assume that they're willing to take such a low salary because they really really believe in what they're making and they're super passionate.

That's already $500,000 per year on labor costs for a team of 10. Two years of labor is covered. You now have to cover various other costs: Working space, Utilities, Marketing, Licenses & Assets, legal if needed, accountant if needed, etc.

Marketing will likely end up being your second biggest expense after labor, easily reaching in to the hundreds of thousands per year or more depending on what type of advertising and if you're contracting out the work or hiring another person to manage it in-house.

So can a small team function on $1 million /yr? Sure. They're all going to have small salaries though so they better all be really excited about the project otherwise you're going to end up raising everyone's wages as you try to recruit new devs to replace the old ones and have to pay more to get them, which results in those who stayed wanting fair pay just like the new person.

I feel it's safe to assume that this is directed at CoE, so we're looking at tight budgets and a very tight timelines. 1 year to release? They say they've been working on it, but I don't think I've seen a 1 yr turn around on anything close to the scale of an MMO, let alone what they're proposing. They have their work cut out for them.

I personally wouldn't back a crowd funded MMO that isn't asking for $3-$5 million minimum. Anything less tells me that they don't have a realistic business plan.

And this is all just ground level stuff, any project of this size needs amazing project management to stay on budget and on time while getting features in appropriately. Look at SC, huge budget, but the scope just ballooned and may have exceeded the huge budget.

Yeah, I would usually take a salary and double it to calculate in the salary + labor burden, but even at 1.5 times it's pretty expensive. 

That being said, I think that the assumption is that these games only take on the crowdfunding campaign money. We all know that additional fundraising goes on following that. Also, that's all off the books, so who really knows. Other times, games go public (like Frontier Developments did with Elite: Dangerous). Then there's the matter of private investors. So I don't really think that the campaign ask is indicative of how much money is actually being spent on the game. City State Entertainment is a great example. The amount they raised on their KS campaign is far less than what they would need to sustain their company today. In fact, their annual bur right now is like double their KS campaign ask, but they're still developing. So money is coming from somewhere. 

SC is just very overt with their number, which is a double-edged sword. Had they not been telling everyone all this time, would we have thought differently of the game? Like WOW!!! Look at what they did with 2 million! Lol. 

cameltosis

From my (albeit limited) knowledge of running a company and currently working in IT, generally take an employees salary and double it, that tends to roughly cover all the other costs such as buildings, hardware, employer contributions to pensions, sick leave, holidays etc. 

Taking UK standards:

Top tier dev - £70k-£80k pa
Mid tier dev - £40k-50k pa
Low tier dev - £25k-£35k pa

Artists and modellers are more common so cheaper. 

You're going to want, as a minimum:

2 top tier devs -£320k pa
4 mid tier devs - £400k pa
2 low tier devs - £120k pa
10 artists / modellers - £700kpa
5 full time qa - £240k pa
15 part time qa - £300k pa
1 finance - £120k pa
1 md - £100k pa
1 creative lead - £100k pa
2 assorted managers/producers - £120k pa

Total: £2,520,000 pa rough costs for complete barebones staff

Its going to take 3+ years to develop their MMO, so you're up to £7.5m for a real barebones MMO by indie team. But, 8 programmers and 10 artists is really a small team. They may be exceptionally talented but it still just takes a long time to develop all the art assets, systems, server infrastructure etc. For example, when I worked for a AAA studio in the UK, it took the average modeller 2 months to make all the assets for a single car (racing game). They needed 5 levels of detail per car, plus all the various different types of damage to each part of the car so bloody time consuming. 

Compare this to a company like Rockstar. They end up employing something like 500 people per game, with the games taking years to develop....its no wonder it costs so much!



As to why its so much more now than 15 years ago - scope and new tech. Yes, you can buy off-the-shelf engines and assets but in the MMO space that is usually a bad idea. Most off-the-shelf engines aren't designed for MMOs and so really start to fall over when you get the massively part of MMO working. Just look at sw:tor - they took an off-the-shelf engine and tried to modify it for the mmo world and it just plain sucked. Terrible stability and no scalability resulting in some MMO features being dropped from the game. 

So, not only do studios need to employ some incredibly talented developers (who are rare) to build the engines etc, the level of detail of graphics means the artists take way longer to produce their models than they used to (assuming bespoke models). Then there is scope. Players expect EVERYTHING in their MMOs, and most studios try to deliver. This means more features than mmos used to have 15 years ago, so more time and more money needed. 

Finally, we have to consider actual content. The MMO paradigm has shifted from social / exploration / mob grinding to developer-controlled scripted content. So, not only do we need the systems and the artwork, we also now need new teams of writers to create content then new teams of devs to implement the quests. 

SEANMCAD

1. most published costs included marketing which from my understanding is often more than 50% of the project.

2. I know Wurm isnt a AAA game but keep in mind that game was built by 1-3 people most of the time just 1.

anemo

SEANMCAD said:

1. most published costs included marketing which from my understanding is often more than 50% of the project.

2. I know Wurm isnt a AAA game but keep in mind that game was built by 1-3 people most of the time just 1.

Marketing is much like nuclear weapons in the cold war and "countries trying to prove themselves"...   You can't prove they do any good, but you're screwed if you don't invest the must in it/them.

Kabulozo

Wildstar was the most expensive funeral ever: 100 million bucks burned.

LynxJSA

Mendel said:

Why are MMORPG development costs so high?  Are the expenses really that high, or is the community, in our role as consumers, deluding ourselves about the cost to produce?  Ideas?  Thoughts?

A few areas off the top of my head: 

The number of animations (not frames... whole animations) per character has increased, especially in MMOs like LOTRO with what seems like an endless number of moods and emotes. Yes, you can get away with just a basic, reusable combat set, but you'd be setting the bar extremely low. No MMO necessarily needs taunts, fatalities, or blowing frigate-shaped smoke rings, but they add more to the MMO they are in. 

The amount and complexity of layers for a 3D model has increased. I'll let others chime in on this because there are quite a few rabbit holes one can go down here. Graphics are an ongiong process. The more realistic your graphics are, the faster they look dated, and the more frequent graphics - or even engine - updates need to be. Stylized graphics aren't necessarily easier. Just because they are 'cartoony' doesn't mean that they are easier to make or that your art team is easily replaceable. 

The more people you want playing, the higher the advertising/marketing budget has to be, not just to bring them in initially but to keep them coming in over time. This also means having a marketing team that knows what they are doing. The less you know about reaching the press, dealing with publishers, bidding on ad space, and other factors involve, the higher your various costs (ex: cost per acquisition) are going to be. 

There's also the Billing and Customer Support teams, which you can definitely outsource, but it's still money that you're shelling out, and with credit fraud and hacking much more prolific now than in 2002-2003, you're gong to at least need a few people internally to handle that. Want to do well in other coutries? Then it would be good to support their currency. Again, the cost of that solution is related to the expertise and connections of the peopel you have navigating those waters. 

You could basically run down a list of each department in the studio and there's one or more areas where the team or outlay is a bit leap ahead of what was needed in 2002-2003.

ceratop001

Sid_Vicious said:

Make the chinese prisons go to work on it.... entire families have been dishonored . ... maybe their imaginations have been enhanced from desperately wishing for a new life and can provide a better imaginary world than the chumps we have today?

CrazKanuk said:

But we've got Korea, right?!?!? Just outsource everything!!! In theory that's a great idea, but it's much more difficult in practice. It means having a very well-defined vision and expectations and being able to communicate that.

No just kidding!! Seriously don't do that!

Wow where did that come from?

I did laugh however because I knew you weren't serious.

Heronn

Its the  urge to not accept mediocrity   in both scale and possibly scope that kills a studios budget. If team members are not A- list as a unit then they should not be assigned roles they cant handle.       

Story and graphics are both huge sinks lol. 

nariusseldon

SEANMCAD said:

2. I know Wurm isnt a AAA game but keep in mind that game was built by 1-3 people most of the time just 1.

I can make a mmo with 2D sticky figure without animation, with zip content, all by myself too. What is your point?

There are always cheap way of doing things, and that does not mean it will result in games that people will want to play. There are plenty of "indie" games that one look and they goes into the "don't waste my time" pile.