Wii Development Costs Highlight Spiralling Crisis News

An article from The New York Times highlights the potential perils facing the video games industry, citing the typical risks of rising development costs and increased competition; publishers selling more titles but unable to turn a profit.

Nestled within the piece is the suggestion from Nintendo's Reggie Fils-Aime that Wii titles need to shift over a million copies to turn a profit for the publisher.  The New York Times cites NPD figures that suggest only 16 out of 468 Wii titles have achieved this landmark, though TVG points to the fact that Fils-Aime is likely to have been referring to worldwide sales and that substantially more Wii titles would have passed this figure when taking this into account.

Wii titles, depending on their status, typically bring publishers between £13 and £27 per unit, so a million units would equate to anything between £13 million and £27 million in generated revenue.  The New York Times suggests that the cost of games development is typically around $25 million (£17.52million), but it's unclear whether this takes into account the associated marketing and distribution costs that are also incurred. So a figure of a million units seems accurate.

The figure, however, is perhaps more interesting by the numbers it suggests that PS3 and Xbox 360 titles need to surpass to turn a profit with significantly higher development costs than Wii.

Responding to the obvious need for Xbox 360 and PS3 audiences to grow larger and thus increase sales, analysts cited in the piece instead point towards the diversification of games formats within the industry as the true dilemma with the rising popularity of online games and platforms such as the iPhone. 

"Video games used to be the type of entertainment that sucked dollars from TV, music and the box office," said Evan Wilson, an analyst with Pacific Crest Securities. "Now, inside the video game industry, it's having its own internal distraction issues. There are lots of options."

Such a concept of consumers not having enough time to play the vast multitude of games available, however, comes at odds with Nintendo's policy of expanding the video games audience.  Hardcore gamers ultimately didn't switch allegiances with the release of Wii and rise of social gaming; instead perhaps it's an indicator of the diminishing hardcore audience that Microsoft and Sony rely upon. 

All TVG can add is: Watch out hardcore gamers we're facing extinction.