Why Traditional Retail and Niche Games Don’t Work

Defining Niche Games

The place to start with an article with the above title is to make sure everyone understands what a niche game is. Niche games can be broken down into three categories for the purpose of this essay.

The first category of niche games would be any product genre that a traditional publisher rarely publishes within due to the small fan base. This includes such genres as wargames, turn based strategy games, text based games, well… you get the idea.

The second category that would be considered niche games would be any genre of game that a traditional publisher would be interested in, but that the product in question has a production budget under $1.0 million.

And the third category would be a traditional product genre, where the developer has added influences from other genres. A 4x game for instance that had wargaming turn based elements to it, or an RTS that tried to depict in detail the elements of war. In other words, originality!

While I am on a defining kick, I might as well add an explanation of traditional retail. For Computer Games, this would be e-stores such as Electronics Boutique, CompuMart, etc., or mass merchandisers such as WalMart, Target, etc.


The Big Picture – 2004

Okay now for all those numbers… Last year, sales of Computer Games (and I am not including Video Games – the Console Game Market) was down $100 million dollars from the $1.2 billion mark in 2003. There were two, count ‘em, two games that had sales of 500,000 units and 18 games that had sales of 250,000 units or more. It is projected that less than 6% of all Computer Games made a profit. Based on the varying definitions of what is a new release, it is hard to know for sure how many products were released in 2004, but a number that I can live with is 1100 titles (in 1999 that figure was over 2200 titles). The average budget for development of a computer game is now over $2 million per title. And the average breakeven point in unit sales is around 110,000 units. The average retail price point is $24.45. And the average game at retail sales under 5,000 units!

And I got it all into one paragraph!

Now what do those figures really mean to the developer? It means that if you want to go into traditional retail with your new shiny niche market computer game because you will get rich, well, it just isn’t going to happen. The mainstream titles have a hard time turning a profit for the publisher and that means a hard time turning a profit for the developer. And these are products with development budgets in the millions, marketing budgets in the $1 million range and depth of distribution only attainable from the likes of EA, Ubisoft, and their peers. These corporate giants aren’t going to be interested in your game, and the smaller traditional publishers will have a hard time getting you market penetration, both from a marketing budget standpoint as well as from a distribution standpoint.

So You Don’t Believe Me?

Now you ask, what makes you an expert on all of this? Well, I’m not an expert, the experts aren’t even experts. What I do have to back this up is 3 titles with my name on them that were in retail with major publishers. And that equates to first hand knowledge of what type of sales to expect.
Look at the reality for a minute. If the average price point of a game is $24.45 at retail, then the average price the publisher makes is $15.89. Let’s say you negotiate a generous retail contract and get 50% of that. On an average offering selling 5,000 units that means you will make $39, 725.

Oh, but you say, my game isn’t average. Oh, that’s right your game is niche. I know AAA title games with $2 million plus budgets that did less than 1,000 units worldwide at retail. So how will your game really perform? Who’s to say, but it is a safe bet that it will come in under these numbers.

So What Does this Mean?

I don’t know what it means to you. I think each of us have to look inside ourselves and honestly decide what we are after from this business. If it’s to make money, well there are better avenues than traditional retail. If it is to see your game on the shelf of your local Electronics Boutique all I can say is hurry there once it enters distribution. Because as a niche game, it won’t be there for long. You may however find it in the bargain bins.