Licenses vs Original IP revisited


A while ago I posted that I thought it was ridiculous for game publishers to publish games based on licenses.

At the time I did some analysis of the NPD sales data for games in the USA. The results were interesting. First of all I removed sports. Pretty much universally sports require a license. There are so few exceptions as to not be worth mentioning. At the same time, if you are not making a sports game then the fact that sports games require licenses (cars, teams, logos) has nothing to do with a non−sports game so it's not useful to include those in the same analysis IMO.

Anyway, the results of the remaining title were (rounding). 25% of the market (sales) is for licensed titles and sequels to licensed titles. The other 75% of the market is all Original IP and sequels to Original IP. Of that 75% of the market 1/3rd was original IP and 2/3rds were sequels to Original IP.

By that argument, if you want a piece of that 75% pie you should make Original IP. Note that you can't make a sequel to original IP unless you own the Original IP.

After that though based on some comments about why licenses might still be better I did some more analysis checking for the odds of making a profit which is different from the percent of hits that are license based vs original IP based.

It turns out that the odds of making a profit appear to be 2 to 1 in favor of licenses. Another way to state that is although original IP and original IP sequels make the majority of money, there also are lots and lots of them that lose money. For any amount of sales or units, the ratio of titles that made below that amount or above that amount is twice as good for licenses vs originals.

For me, that still means I'd perfer to go for original IP and hope to be one of the hits that grab the majority of the market. Bigger risk, bigger rewards, etc. Still, I can see why others might choose differently.

There is an assumption in my data that projects generally cost the same amount on average for any given category.

In other words, if we pick $2 million sales as a test point we might find for example

out of 20 licensed based titles 5 made more than $1 million out of 80 original IP based titles 10 made more than $1 million

In otherwords, 25% of the licensed titles made over $1 million and only 12.5% of the original titles made over $1 million.

Note, those are not real numbers I'm just using them as examples.

The assumption is that *on average* each of those titles cost the same amount to make. Sure, some titles were cheap and others expensive but averaged out I assumed there were similar costs in both categories.

BUT, That's not 100% for sure. It could be the average for original titles cost more because they had more R&D. If that's the case then that would be an argument for licensed.

Or, it could be that average for licensed titles cost more because they had to pay for their licenses. I know for a title like Spiderman the licensing fee has to be several million dollars so subtracting that fee out might change the numbers more in favor of original IP.

It could be that licensed titles spend less on R&D because they spend it on a license balancing it out with original IP titles. In other words an average original title might spend $3 million on R&D where as an average license title might spend $2 million on R&D + 1 million for license.

The point is according to those stats, assuming they cost the same, if I had $xxxxxxx dollars to risk I'd be twice as likely to get my investment back if I choose a license. Of course personally I'd rather accept the bigger risk on original IP an go for the bigger rewards

Some people wanted to see a correlation of advertising budgets added in. Unforunately I don't have access to advertising budget data.

I think I would find that *more* advertising = more sales. I don't know which side wins on that though. For example a Spiderman title gets lots of free advertising because of all the ads for the movie (and other promotions) so while they might have spent 2−3 million or more on the license they might not have had to spend as much on advertising (or maybe they spend even more?). Where as a title like Zelda: Twilight Princess or Lost Planet might need a much larger advertising budget to get the word out making it just as expensive as buying a license. I have no idea though. It sure would be nice to get that data.

Also, I don't have complete data. I had a copy of last summer's TRST data and then I asked friends to mark titles licensed based (including licensed sequels) and original based (including original based sequels). I only got I think 50% of the titles marked, maybe less. But it was still several hundred titles out of about 1350 so I figured in the end it would be close the right numbers. If anyone wants to volunteer to mark more titles I'm happy to let you mark up the list. I also only did PS2.

That data is here

You can match it up to your own TRST data if you want to try to do some analysis.

There's also this one which is the data from a Next Generation web article where I typed in the data

By that data licenses apparently caught up a little. 42% of all hit money went to licenses based (plus license based sequels) 58% of all hit money went to original based (plus original based sequels)

I want to believe that's a self fulfilling prophecy meaning it's because more licensed title were released, not because licenses do better. But I don't know how I would prove that.

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