This article deals with the theme of distribution: how the product reaches consumers and how the publisher earns his money.

Distribution

1.) Revenue situation and pricing:


a) Traditional boxed-game publishers
The pricing of boxed games is relatively simple.  The following example (Bitkom study 2007: Game sales revenue) gives a rough sense of how the revenue situation looks:

  • 34%  Retailer margin
  • 7% Distribution (logistics, storage, etc.)
  • 5% Production of each copy (pressing the DVD, printing and production of boxes and manuals)
  • 7% Marketing
  • 20% Development costs
  • 4% License (Sony, Star Wars, etc.)
  • 7% Administration
  • 16% Profit

b) Browser Games:
Unfortunately I do not have any official figures for this case.  For games portals (browser game publishers), the developer is paid 20-50% of the revenues made, depending on the product and the tasks performed by the publisher.  The browser game publisher assumes such tasks as:

  • Sales
  • Payment from the player (international or domestic)
  • Marketing
  • Administration (foreign taxes, accounting, payment collection, etc.)
  • Translation into various languages
  • Community management and player support in various languages
  • Hosting in various countries

It is always difficult to find the correct price point for a new product.  For console products, the traditional publishers are dependent upon the hardware manufacturers, as they have to pay them royalties accordingly.  They also have many years of experience which makes the pricing process easier.  For the new browser games, the market is still developing and there are no third party companies to which royalties must be paid.  Thus companies are free to set prices as they wish.  Overseas business presents challenges for both.  For example, what would an Indian pay?  In India, it would not be wise to demand the same prices in Euros that we have here.  In this area, the browser game vendors have the advantage, because they can sell their product digitally and not on the shelves of local stores.  The price can then theoretically be adjusted at any time, and there are no returns.

2.) Sales

a) Traditional boxed-game publishers
Electronics stores (e.g. Mediamarkt)
  • Department stores (e.g. Kaufhof)
  • Online retailers (e.g. Amazon)
  • Supermarkets (Wal-Mart)
  • Specialty shops (Gamestop)
  • Toy retailers (idee+spiel)
In order to get your products into the retail market in Germany, the products must first be listed with the retailer.  And that is where the problem begins.  If you look at how many products are on the shelves in a Saturn mega-store, you can imagine that the central buyer has to conduct a pre-selection procedure when purchasing games.  This leads to all buyers only listing large companies with a suitable, high-quality product catalog.  Newcomers therefore have to try and get in with these distributors or publishers.  After getting successfully listed, some retailers require that you visit the individual outlets!  For some retail chains this is over 100 businesses which must be visited by a correspondingly large sales team.

 b) Browser game publishers

Recently some publishers of browser games have started to sell their games via store-based retailing, but this is still the exception.  The publisher’s own website is usually the sales platform, with publishers pursuing different strategies. Bigpoint bundled its games into one portal.  Travian markets its titles separately on separate websites. In each case you can still launch your product at any time and independently of third parties.

Marketing of browser games is done via partners who bring players to the site, or via international payment partners who offer international methods of payment. Pro Sieben, Gmx, or other large partners advertise the games on their websites or in other media (magazines, TV, etc.) and are paid according to various pricing models.

For many at the moment, international sales are primarily conducted via GoogleAds, which while still generating many players, generally has a poor conversion rate.  Publishers are now beginning to search for suitable international partners.

Cost-efficient international payment methods are especially difficult on the internet in developing countries.  Business is conducted with cash.  On the internet, however, payment is in most cases connected with a bank account in some way.  In Brazil, for example, the majority of people do not have a checking account (due to exorbitant fees!), so you need to have partners in these countries who can offer you alternative payment methods.