I have toyed with the idea of running a mailbag feature here on my website. I never opened it up for that, but this recent question, posed to me on X (formerly Twitter), made sense as a mailbag topic. Thus, I am sharing it here. If you’d like to see me open this up as a regular feature, drop me a direct message on X (Twitter), or email me at: joethreezero (at) gameoverthirty DOT com.
Question: Is there a reason that video game companies don’t share budgets like film productions? I do wonder why there is a ton of secrecy around this topic.
There are a couple reasons why I like this question:
1) Movie budgets are typically communicated more often than video game budgets (ex: Mad Max Furiosa cost AU $333M).
2) If movie studios are usually OK with sharing budgets, then why isn’t that applicable to video games?
It is true that we hear about confirmed movie budgets more often than video game budgets. That said, movie production budgets are often a mix of official numbers and word of mouth. You shouldn’t take reported movie budgets as 100% factual truth, but instead something that might be close to the true number. Regardless, the idea of a publicly reported movie budget is relatively commonplace today. If video games and movies are both entertainment products, why is it so much harder to get information on a video game budget (particularly large scale “Triple-A” productions)?
Different products are different…
I’ll cut right to the chase on this one: Despite movies and video game both being creative endeavors, their production processes are significantly different. When a production company decides that they are going to commit to a movie, it becomes a significant ramp-up in cost that didn’t previous exist. When a movie is made, the production team takes on dozens, if not hundreds of individual, temporary line items. Think about how a movie is made: Actors need to be hired, sets need to be built, special effects are created, marketing, etc. Except for the permanent staff of the production company, a movie budget is a one-time packaged expense. While some of this might sound similar to video game production, the key difference is the labor (people developing / creating the game).
In most video game projects, the majority of the core development staff is already employed by the publisher / developer. They were already an expense line on the company’s statement of operations prior to the commitment to start the project. Even in the situations where the studio needs to pay for motion-capture, voice acting, and additional services, game production consists mostly of labor expense. How about we make it even more complicated? Depending on how a company tracks those labor expenses, they may choose to never book those costs to a particular project (internally maybe, but not publicly). EA, and Microsoft for example, book the majority of the development time straight to expense (check their SEC documents if you don’t believe me), making it even harder to (publicly) understand what a game might have actually cost in labor time. Those companies (EA & MSFT) do track time on projects, but they don’t place all that cost into a special capitalized bucket. (I don’t have time to go over capitalized expenses in this article.)
How does any of this work?
Video game projects do have budgets. If it’s a large project, there is usually a point in time when the budget is approved for $X millions, and that includes how they will track that cost (read more about it). New games, especially AAA products, need marketing, special services, one-time expenses, etc. Those special services are all part of that approved budget. To make things easier to monitor, developers often need to specifically book their time against each project they work on. Remember, the budget isn’t just a blank check, but the line between “game budget” and “not game budget” isn’t entirely clear. In fact, the only time a game budget can really be tracked line for line is when 100% of the project is on contract. In those special cases, where the publisher contracts all (or the majority) of the work out to external partners, those contracts usually have exact value that could theoretically be added up to encompass most of the budget (plus publisher expenses, marketing, services).
Here’s a secret for you (don’t tell anyone): You can already see what most publicly traded AAA publishers are spending on game development by looking at their financial statements:
Remember, most of the developers already employed by the publisher / developer are already paid to be there. The idea of what a game actually costs to make isn’t an exact number, and the actual development process makes number even harder to pin down. Even in the case where a video game company takes a write-down due to a cancelled project, that is typically a non-cash expense (think of it as a value statement for tracking purposes).
Conclusion
There are a handful of other considerations to keep in mind. Movie budgets are often leaked, or discussed with the press because of what is considered “normal” in Hollywood. Budgets in movies are often seen as a sign of prestige, but these customs don’t really translate well to software development, or more directly, game development. Additionally, a publisher / developer may not want to closely advertise the costs of individual games because, quite frankly, it doesn’t make a difference if they are a publicly traded entity. As I mentioned, you can already see their expenses, and talking about the budgets of individual games could cause confusion among investors. In the case of a private entity (such as Epic or Valve), why would they advertise their development costs to the general public? There is absolutely no reason to do so that benefits the company.
That’s all I have time for today. Hopefully this article makes it a bit easier to understand why game companies don’t share game budgets as willingly as Hollywood.
