But even if it did, this still falls well within their plans
Although the video game industry at large has had a rough go this year with layoffs, game cancelations and studio closures, Capcom is continuing its stride of financial success though that doesn’t mean every big new release is instantly generating them a billion dollars out the gate.
Instead, it can apparently take Capcom well over a year to make their money back on current games, but that’s okay in their book.
The company recently held its financial presentation for the first half of the fiscal year where Capcom representatives held a Q&A session for their investors with some interesting subjects to even the general public.
This is the same place where they revealed the Marvel vs. Capcom Fighting Collection was selling exactly as planned while Kunitsu-Gami: Path of the Goddess fell short of their expectations.
Following that up, they were posed a question if the developer plans to adjust their marketing strategies moving forward from Kunitsu-Gami and Dragon’s Dogma 2, and the response was fairly fascinating.
“Recently, there has been a trend in the industry of spending large amounts on advertising and promotions just before and after release to kickstart initial sales, but we have not traditionally used such methods,” reads Capcom’s official response. “We calculate the costs for promotions based on expected performance and take a long-term approach to sales.
“On average, we can recover development costs within about one to one and a half years after release, so even if we lower the selling price afterward, once costs are recouped we expect profit margins of 80-90%. Our marketing approach remains unchanged.”
Although Street Fighter 6 is not clearly mentioned specifically, this means the flagship fighting game could have only just recently turned profitable for the company if it was considered among their “average” releases since it came out in June 2023.
Unfortunately, we don’t know the development budget of SF6 or other modern Capcom games, but the price in general around the industry has been ballooning for years now.
Longtime Tekken Director Katsuhiro Harada discussed on social media earlier this year that development costs are 10 times higher than the ’90s, and even more recently, Tekken 8 cost more than double that of Tekken 7.
Development costs are now 10 times more expensive than in the 90’s and more than double or nearly triple the cost of Tekken 7. Even the Fight Lounge servers are costly to maintain. In the past there weren’t so many specs and there wasn’t online. Plus they didn’t have such high…
— Katsuhiro Harada (@Harada_TEKKEN) February 21, 2024
He cites not only the need for higher fidelity and resolution but also the cost of updating and maintaining a game’s online servers along with other expenses that didn’t really used to exist as much.
This of course all goes beyond just fighting games too with Remedy revealing they still haven’t recouped all of their $75 million+ development and marketing budget for Alan Wake 2 yet after more than a year — but that doesn’t mean these games aren’t still considered successes.
Capcom noted that once they have made their money back, profit margins are upwards of 90%, which seems pretty darn good / high.
To try and dissect the numbers a bit more, let’s say SF6 or another game cost a nice even number of $100 million to develop, and we’ll average out the amount of money spent on a copy between full price and sales buyers to $50.
Platforms like Steam take 30% of revenue from game sales, so that would leave the company theoretically with $35 per copy.
At that macro level, the game would have to sell 3 million copies or so to break even, but it’s obviously a lot more complicated than that with other hands in the pie and revenue also being generated through DLC.
According to Harada back in 2021, investing $10 million into a game means it has to sell 1 million to reach its target, so that would actually put a $100 million game at 10 million copies needed by that metric.
All we truly know is Street Fighter 6 reached over 4 million copies sold now, and Capcom seems to be happy with its performance from launch until now.
This does point overall to Capcom at least being decent now with their planning and forecasting so that they can sit on a game for an extended investment instead of expecting a massive return immediately, which is not something we’d be saying a decade ago.
They do have the bigger money makers of course like Monster Hunter and Resident Evil, but even the latter probably isn’t turning profits at launch anymore with the rising prices.
It seems like a delicate balancing act, but Capcom has been doing it well for quite some time now with a string of profitable years higher than they’ve basically ever been before.
And they’re apparently happy with how things have been going if they don’t plan on making any notable changes to try and boost their revenue.
Capcom did set a lifetime goal for Street Fighter 6 to reach 10 million copies sold, which would put it ahead of any single fighting game release from the company.
Ryu and the gang have already crossed over 40% of that hope after just a year and a half, however, so things are looking pretty good for how long the developers are likely going to support it for multiple more seasons.
Image by Csaba Nagy from Pixabay.