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The Year Cycle Is a Myth -- Why it Can't Work Stuck
Posted on July 25, 2011 at 02:42 PM.

A couple of years ago, I wrote a deeply flawed take on whether a two year cycle for sports games would work -- it was so embarrassing I have stricken it from the official record. While I applied some rough math to the problem, my numbers were deeply flawed and thus my conclusions were way off.

So what I want to do today is to simply apply some 5th grade math to the problem to demonstrate whether a two year cycle is the answer.

A LOT of people on Operation Sports have the theory a two year cycle with a roster update in between games would work. So I understand I start this article by fighting a bunch of preconceived notions about the whole thing. Thus a note on the methodology here, we're going to apply a few different philosophies around the two year cycle and show the results. By all accounts, downloadable add-ons will never be downloaded by more than 50% of the people who own a game, this is a gaming business fact. (If you believe one study last year, half of gamers didn't even know about DLC). Secondly, the price will greatly impact how many people are willing to download an update -- this is just pure economics. Third, offering roster updates will do one thing -- it will disable community roster sharing.

There's no other way around that pink elephant in the room -- if you want a two year cycle you have to give up community roster creation and sharing. Ditto for any other sharing features. The two year model loses all chance of being profitable if you can bypass the $10 update for rosters which are current and free from community members. Also, constant updating rosters might have to go bye-bye as well, at least free ones. Thus, think about that one for each game (namely NCAA) before you decide you want a two year cycle. Otherwise, the economics simply don't work and the two year cycle is asking gaming companies to bankrupt themselves.

So let's dive into the math now. We're going to call our game -- Game A. We're also going to simplify things to pure sales and revenue. We'll discuss costs and whatnot later, but for now let's just get a base layer down.

Today's cycle calls for one game a year at $60. Let's assume sales are going to remain flat both years, which typically doesn't happen. But for the sake of this, we're going to skew our numbers towards the two year cycle:

Year One and Year Two - 1 million games sold each year (60 million x 2) = $120 million in revenue.

Ok, now let's do the every other year cycle. We'll do a roster update at $20 in year two, one at $10, and one at $5, with the amount of people willing to buy this update going from 15% for $20 to 40% for $5. Most studies have shown (as the Destructoid article above) that the number of gamers who even buy DLC is in the 15-20% range. Thus, these numbers are almost certainly highly inflated to the benefit of the two-year cycle. Also, some additional games would be sold in year two, but by all accounts -- a 16 month old game on a shelf at a reduced price would not sell all that well. But just to prove a point, we'll keep the game at $60 with the game still selling 25% of what it did in year one -- something which isn't very likely on either number just given sales patterns of the industry since the beginning of time.

Plan A
Year One: 1 Million Games Sold = $60 million
Year Two: 250,000 Games Sold + 150,000 $20 Download Packs = $18 million
Two Year Total: $88 million ($32 million shortfall)

Plan B
Year One: 1 million games sold = $60 million
Year Two: 250,000 games sold + 300,000 $10 Download Packs = $18 Million
Two Year Total: $88 Million ($32 million shortfall)

Plan C
Year One: 1 million games sold = $60 million
Year Two: 250,000 games sold + 400,000 $5 download packs = $17 million
Two Year Total: $87 Million ($33 million shortfall)

While simplistic, this basic math shows the two year cycle would, under the very best conditions given current market trends, result in a revenue shortfall of around the ~25% mark. Ask any business in America how well they'd operate with a 25% haircut in revenues and see what they'd say (read: Going out of Business sales everywhere).

You can do a lot to the above scenarios to try to balance the $33 million shortfall, including increasing overall sales both years in a two year cycle because the game would be better in quality -- but could game sales double under that circumstance? If you can double sales over your yearly cycle, you'd be able to instantly match the revenue in the year to year model. The sad fact is though, you likely will not see game sales double under any realistic model over the current release calendar.

Of course, doubling of sales of yearly titles would mean games like FIFA and Madden would have to sell approximately 12-14 million games per release -- which has never happened in the series history. In fact, even in the most ambitious model, you could say Madden and FIFA sales might see a 45% increase under various circumstances. Even in a model where you plug in such numbers you'd end up with a $10 million shortfall or more!

Another argument which could be made is sports games are held back in overall sales by their annual release model and an every other year model would increase hype and sales to levels seen by behemoths in other genres. While this is pure speculation (most every discussion about this is) refuting that point can be made by simply looking at other genres which release every year if they can still put out quality offerings. Also, you can make just as compelling of an argument that by developing every other year, you open up the floor to a competing company to offer something which would have a very negative effect on sales. A well crafted Backbreaker 2 released in between editions of Madden 12 and 14 right as the NFL Season launches in 2012 would put a huge dent in follow on year two sales of Madden.

What is clear about the two-year-cycle business model is that some combination of games sales doubling + a sizable chunk of the fan base buying a roster update has to happen. Anything short of that ends up in gaming publishers seeing the year to year cycle being better for the companies bottom line.

The simple truth is: if the every other year model was deemed to be more profitable, then it would've been pursued by everyone in the industry already.

But let's get out of revenues and talk expenditures.

First off, sports games operate with yearly licenses. You'd have to pay a fee every year to publish a game every two years. If you think sports leagues are going to take a haircut on their license fees because a developer wants to develop every other year instead of the typical yearly release cycle you are kidding yourself. Simply put, your licensing costs will remain constant as they are now.

On the same token, your development costs -- for the every other year model to achieve the results of double the quality in double the time -- must remain the same. So basically, even in the best model possible, you will end up in a situation where you are paying the same people the same amount to produce one game in the same period they used to be producing two games.

One place where positive effects would seemingly be had is in advertised and game printing. You'd be printing and advertising for one game instead of two. However, in order to keep sales up -- especially as you get beyond month 8 or 9 of a game -- you'd have to keep advertising or sales will go through the floor. The exact amount is tough to figure, but ad budgets would have to be bigger initially to try to spur more sales and then there'd be a residual budget through the entire 24 month cycle in order to keep the project going.

Of course, this article is far from being the be all end all examination of the every-other-year release cycle but what it does show is a lot of things which have never happened in the gaming industry would have to happen in order for the model to be profitable in sports gaming. I've long been a proponent that quality sports games are increasingly tough to develop in a twelve month calendar year, but I also cannot be blinded by the simple fact that sports games can't operate under any other method.

We will never see an every other year model with any major sports game on the market in today's market.
Comments
# 1 Stick skills @ Jul 25
Good Article. It's a shame that we wont ever see an "every other year" cycle but i think extending the cycle by a few weeks might help them to get rid of some of the bugs before the games release without negatively impacting sales. Clearly Madden would benefit from a two year cylce but to be honest i dont expect a game to get insanely better from year to year but i absolutely expect a game to actually improve even if it is incrementaly. But the buissines of sports games dictates that games should have major changes and should feel drastically different so that it forces consumers to buy a game because it is different than the last one.
 
# 2 FBeaule04 @ Jul 25
The more I red your article, the more I was thinking about a soon-to-be free agent who is negociating with his actual team.

"Why would I accept an offer now since I'm going to get more offers in few months? On top of it, there's a chance I will have a longer deal and more money since there's a rarity for players like me? I like to play here, people would be happy, but it makes no sense moneywise."

It's the same thing here. Companies know we are going to buy it, companies know they could always drop the ball as long they don't drop it twice in a row, and companies know that people will scream, whine and cry a river about the game, but still buy it." On a strict business side, you're right, your model of two years is dead before birth, and I don't see any company CEO accepting that.

I think the problem with the year to year sale is the fact that the sports games have become too fat. There's too many modes, too many goodies, too many thing to attract people. Remember what was in Ice Hockey for the NES or Tecmo Bowl for the Genesis. These we're good games for the time, and the word simple came to my mind.

Now, sport games has to offer so many modes, online, offline, so much goodies, that it's becoming certain that the flaws, made possible with too much at hand and not enough time to complete, will make the game less attractive than what they could be if time was spent rightfully.

Just take NHL 11. You have Battle for the cup, Tournament, Season, BaP, BaP NHL, BaGM, HUT, EASHL, OTP, Versus, Shoot-out (and I might miss some). What you see is the lack of depth for BaP and BaGM. Just imagine, if there was only two or three mode, what it could be.

I guess, on a business standpoint, what I say would mean less money, and in the end, it's not about how the gamer feel about the game, but how much sales did the game had!
 
# 3 chivs890 @ Jul 25
It's just simple. The amount of people wanting to play an up to date game every year will be the same, no matter what plan you have. So if you charge people less the second year, you're going to get less revenue. Simple.

And I think this whole 2 year cycle is ridiculous. It's only Madden/NCAA that is stale every year and barely make improvements. You've just been drawn in to their awful excuses, they control you like puppets.

Big developments can be under development alongside the smaller yearly upgrades. Take FIFA. They're bringing out a brand new physics engine for FIFA 12 that they have been working on for 3 years. And for the past 3 years, the games have been improving quite a lot and there is a huge difference between Fifa 08 and Fifa 11, huuuge difference.

The people behind the Madden/NCAA franchise are just money hungry and lazy. Plain and simple. No competition means they don't need to make any big improvements, as they won't lose sales no matter how little they've improved. Simple as that.

It is not sports games, it is this game. This development team, this league that refuses to allow more than one game. NOT all sports games.
 
# 4 molinafsu @ Jul 25
The two year cycle sounds awesome for people who buy the game in the beginning but what happens to those who don't buy it first year and want to buy it the second year(for whatever reason). They will have to purchase the game and update which would cost that individual more than the person who owns a copy from previous years. I am not against it, just playing devils advocate. Btw if you notice most games(Madden,Fifa, NCAA,Etc) are on a two year development anyways. Ncaa Dynasty looks very similar to last years. And everyone knows the gameplay is from the previous years Madden(which is smart). So its not like these games are fully developed every year. So it could work but that guy who never bought the game year 1 wants to buy it year two but because he didn't buy it year one, he has to pay an extra $20-$10-$5 to update it is now looking at roughly $80-$65. Chances are he thinks about it more and lose many people year two . Then your franchise suffers and loses future players. Just my two cents.
 
# 5 MMChrisS @ Jul 25
Quote:
So why is it that games like Call Of Duty and Modern Warfare are profitable? They have a game drop every other year and do quite well, while making leaps and bounds improving gameplay.
Two things, Call of Duty and Modern Warfare are the same game. And it's a yearly released title in case you haven't noticed.

But even still, you don't have licensing fees and whatnot to pay with games that aren't sports games -- and you can afford to wait. Shooters aren't seasonal so there's no pressure to wait a year or two regardless -- whereas sports games are based upon a very seasonal thing. Just a couple of the big differences between the two -- but the differences definitely don't end there.
 
# 6 statum71 @ Jul 25
Have to respectfully disagree. I'm totally against the two year cycle.

Because the bottom line is people just ASSUME that a game taking two years will be that much better and bug free. Truth is......it waould be about the same.

Look and Nascar The Game 11....They even pushed back the release date because they wanted to "make sure it was right."

Safe to say that didn't work at all. That game is full of bugs.
 
# 7 Layoneil @ Jul 25
they sell more each year. the sports gaming audience is a smaller market.
 
# 8 statum71 @ Jul 25
I mean (disagree with those FOR the two year cycle)
 
# 9 Ikki @ Jul 25
Are there figures about how many people buy a sports game every year, every other year, etc. ?
 
# 10 jwilphl @ Jul 25
I have no problem if they choose to keep yearly releases. As the consumer, I do not have to buy it every year. I find the game much more interesting when I do purchase less often, as prior to that plan I was suffering from burnout largely due to lack of innovation.

The reality is all about money. If there's no money in it, they won't do it. A yearly cycle for these major titles will remain. You will notice, however, that 2K does maintain a 2-year cycle for their Top Spin series. I imagine you don't qualify that as a "major" game.

As per the COD reference, and even Guitar Hero before it fizzled, these games had much bigger audiences. The target audience for sports games is generally much smaller, especially niche sports games like NCAA.

COD also has two separate teams working in unison so that, truthfully, those games receive a two-year development cycle despite yearly releases (Treyarch and Infinity Ward). Activision floods the market with their games while the interest remains extremely high, and once the well runs dry, they find a new trend to bulldoze. Despite what some may consider "oversaturation," I have a pretty good inkling that Activision makes money hand-over-fist.
 
# 11 Pete1210 @ Jul 26
Only sports game I buy every year is NBA 2K. Football I now alternate between NCAA and Madden (this year is Madden).
 
# 12 TheTodd84 @ Jul 26
Chris... awesome article by the way. Completely refuted my idea of a two-year release cycle. Guess I will have to move on to my next gripe. lol, in all seriousness, I do have one question.

I think what I want is not necessarily a game to release every two years. What I want is a game like NCAA, whose engine is completely broken in a lot of ways to take one year off, ala NBA Elite, and come back the following year completely revamped with real-time physics, and a much more polished experience. From then on, they can really build off of that platform. Right now, I feel like there is not enough time to truly polish the game with their clearly inferior engine on this generation of platforms.

Do you think that is viable? I think it would really help the NCAA series reach its peak. Then, once they get an engine that is based off of physics and doesn't need to be patched 5 times to play properly, they can build off of that for the following one-year release cycle.
 
# 13 MMChrisS @ Jul 26
Quote:
Chris... awesome article by the way. Completely refuted my idea of a two-year release cycle. Guess I will have to move on to my next gripe. lol, in all seriousness, I do have one question.

I think what I want is not necessarily a game to release every two years. What I want is a game like NCAA, whose engine is completely broken in a lot of ways to take one year off, ala NBA Elite, and come back the following year completely revamped with real-time physics, and a much more polished experience. From then on, they can really build off of that platform. Right now, I feel like there is not enough time to truly polish the game with their clearly inferior engine on this generation of platforms.

Do you think that is viable? I think it would really help the NCAA series reach its peak. Then, once they get an engine that is based off of physics and doesn't need to be patched 5 times to play properly, they can build off of that for the following one-year release cycle.
It's not like EA hasn't done this before (NBA Live/Elite/NewNameYetToBeReleased), but I don't know if they'd do it for a franchise that's doing so well. In the case of the NBA game, sales were falling while 2K's sales were climbing extremely fast -- so I think EA hit the panic button. In EA's case here, NCAA's sales rise every year without fail, there's not much incentive to reinvent the wheel when business fundamentals are so good for the company in regards to the title.
 
# 14 RUFFNREADY @ Jul 26
Wonderful write up, and great showing of the Business plans.
My plan/opinion on EA's Fall FOOTBALL Frenzy; is to as follows:

Year 1
NCAA Football; throw everything into it, for this year, making it the only football title out for the year, and best ever!
Give Madden a roster update and a few more tweaks/ patches.
(part of a two year cycle)
Year 2
Make Madden the greatest football game on the planet, and don't forget anything. Giving NCAA a recruit class, and roster updates, with some patches and tweaks for that year.
(part of two year cycle)

Year 3
-look at Year 1, and bring it up to "industry' standards. by ie. 3D, if it's the in thing, incorporate it into the game.

Year 4
-Look at Year 2, and tweak what needs to be tweaked

YEARS - "In order to MAke MONEY, you may have to spend/lose money"

I am just trying to state; do we really need 2 football games in the same year, about a couple months part, every year?
EA puts out an EASports basesd football game (NCAA and Madden)ever year; so why don't they try and clean it up and make it play better given the chance for new stuff tobe implemented on the two year cycle; if they need the time.
I know Money speaks louder than words, and this is the ship that EA runs on. In the end, it's the gamers that have to make the decision on whether to buy or not to buy; Or EA needs to find a new business model.

cheers
 
# 15 dkomarek @ Jul 26
you're numbers are assuming that everyone buys a new Madden game every year... I can't speak for everyone, but I would be more likely to say that most people buy a game one year and then wait a year or two before they buy a new one. Atleast that's how everyone I know opporates.
 

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