How Is the Budget for Producing Video Games Set?

Video Games
via Pexels

Video games have come a very long way over the last few decades. Back when the first major gaming consoles were being released by Nintendo, Sony and Microsoft, the games were nowhere near as technically advanced or developed as the ones that are coming out today. There was a lot less content, the graphics and sound effects weren’t as immersive, and the general gameplay was more basic. Modern games, by contrast, typically offer a huge amount of content, look and sound like a cinema film and have gameplay that’s creative and intuitive.

These days, video games can cost a huge amount of money to develop. There are some that have cost upwards of $100 million (in 2020 money) to create, and many more whose development cost is in the millions. Most games can take several years to go from concept to finished product, and there are typically dozens, if not hundreds, or people working on it, all of whom need to be paid. Then there are additional costs such as:

  • Licensing
    • Hardware
    • Voice acting
    • Office facilities
    • Marketing

Most of the time, the amount of money spent on marketing a video game takes up a significant portion of its budget. After all, companies have to invest in promotions if they’re going to stand a chance of seeing any returns. From social media campaigns and print advertisements to launch parties and TV spots, there are loads of different ways games are promoted these days.

So how exactly is the budget for a video game set? How is it decided whether a game’s going to have a budget that’s in the hundreds of millions or a much lower one? There are several factors that determine this.

Sequels

A video game is more likely to receive larger development budgets if it meets at least one of the following criteria: it’s part of a series, or it’s part of a franchise. What happens a lot is that if a game is successful, there’s a sequel. If that does well, sooner or later there’s another instalment and so on. Some video game franchises can end up having over a dozen instalments released across multiple consoles and platforms. The Final Fantasy series, for example, consists of fifteen games with a sixteenth in production.

If a sequel or even a spin-off or prequel – any kind of continuation of the series – is given the green light, it’s likely to have a bigger budget if previous instalments have been particularly successful. Developers want to satisfy the fans, but they also want to keep the momentum going. By investing more in the game, they can hopefully keep the series relevant and make sure it continues to perform well both critically and commercially. In other words, developers strike while the iron’s hot. It makes sense to spend more on game development while a series is attracting sales and good reviews. On the other hand, if a series isn’t doing too well, the budget for future instalments will most likely be on the lower side. Of course, a series may sell poorly and new titles may end up getting shelved.

Franchises

Many video game franchises start off as video games – Tomb Raider, Crash Bandicoot and Fortnite are some examples. But, there are a number of video games belonging to a franchise that didn’t originate in video games. One of the most expensive video games ever produced is Star Wars: The Old Republic. Released in 2011 by BioWare, it’s a massively multiplayer online role-playing game based on the hugely popular Star Wars franchise. Star Wars didn’t start off as a series of video games: it was all about the films first of all. The films are the key component of the franchise and other Star Wars-branded products such as video games, toys, collectibles and even theme park rides, all of them are continuations of the franchise.

When you’ve got a franchise as big as Star Wars, any video game themed to it is undoubtedly going to have a big budget. The more established and well known a franchise is, the more developers are willing to spend creating a video game because there’s more of a chance of profits being made. Case in point, Star Wars: The Old Republic reportedly cost around $227 million to make, though its lifetime profits have passed the $1 billion mark. When a video game themed to a recognizable brand such as Star Wars or Marvel is released, it stands a pretty good chance of doing well because of the popularity of the franchise it’s themed to.

Market Demand

Pokemon GO
via Pixabay

We’ve looked at two factors that can determine a video game’s budget: whether it’s part of a successful series or whether it’s part of an established franchise. Another key factor is market demand. It goes without saying that if a game’s part of a series or franchise, there’s already going to be some demand for it. However, some games are deliberately designed to fill a gap in the market, to offer something new. Developers of these games spot something that the market is demanding, but other developers aren’t responding to just yet.

Pokemon GO is a prime example. Released in 2016, the mobile game has been a phenomenal success, grossing over $3 billion in revenue and maintaining a high level of popularity in many countries around the world. Before it came out, Pokemon was already a very well established and successful franchise. The video games were the key part of it, but there are movies, an anime series, board games, trading cards – you name it.

Part of why Pokemon GO has been such a hit is because it satisfies market demand. Pokemon games have you catch, raise and battle Pokemon in fictional worlds. People have grown up playing these games, wondering what it would be like if they could catch Pokemon in the real world. Pokemon GO lets you do just that, thanks to augmented reality. The game’s success can be put down to the fact that it lets people do what they’ve wanted to do for years.

Pokemon GO was always going to do well and as a mobile game with micro-transactions, it was designed to keep bringing in money. Its budget has been rumoured to be around the half-million mark, which is practically nothing compared with console games. However, it’s actually quite a hefty budget for a mobile app. Developers decided to give the game a significant budget because they saw the demand for it and knew it had the potential to generate lots of income over many years.

Other Factors

There are several other factors that can affect how much money is set aside for producing a video game. There are lots of different companies and studios developing games, and some have huge amounts of money to spend, while others don’t have as much. A smaller, more independent company might have to be frugal and cut back on things, whereas a bigger company won’t necessarily have to cut corners. The amount of money a company has to spend on a game can, of course, be impacted by how much money its previous games have generated, regardless of whether they’re part of the same series or franchise.

Other things that can determine the budget include hardware and languages. As games and consoles become more advanced and technically powerful, the cost to produce these games goes up. A company may well decide to spend less on a game and make it less advanced than others so that some of its budgets can be freed up. The more languages a video game’s available in, the more voice acting and translation there is to be paid for; there’s also the matter of releasing and promoting the game in a growing number of countries. A company might stagger a game’s release and roll it out slowly or release it to all markets at once.

Summary

Whether you’re playing a blockbuster video game like Call of Duty: Modern Warfare 2 or a casino game such as the China Shores slot machine, there are likely all sorts of factors that determined the final budget. The cost of video games is generally going up, though there are plenty of indie studios making games ‘on the cheap’ that still manage to find their fans and sell enough copies to keep the studio going. It’s not uncommon for budgets to change once the development process is underway. Most of the time, budgets go up as it’s realized that more is needed to get the video game finished to the standard that’s expected.

There are lots of different factors that affect how much money is spent producing a video game. The great news for fans is that the industry as a whole is very successful indeed. There’s plenty of money available to put into developing everything from highly sophisticated games featuring popular characters to creative indie titles introducing new concepts.