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Making Money in Multimedia

May 4th, 2008 by Ted Bailey

My previous article discussed the paradigm shift promised by multimedia. It built a framework for making money in multimedia development. We continue the discussion focusing on CD-ROM, although the concepts work for all new media design. Multimedia titles/projects tend to first fall into two primary categories which can be further broken down. While overlaps occur, the tiers look something like this:

  • Consumer
    • Games/Entertainment
    • Education
    • Edutainment (combination of above)
  • Developer/User
    • Graphics
    • A/V (audio/video)
    • Utilities

Consumer titles are generally complete and immediately useable like a game, a reference work like an encyclopedia or a child’s storybook. Developer titles usually contain information or material which is used to create something else such as clip art is used for desktop publishing, utilities for programming, or audio/video clips for other multimedia programs or projects. Often the more mass appeal that a title has, the lower its retail price will be. $34.95 – $39.95 seems to be the magic retail price point right now.

“All aboard, Train leaving on platform 3…”

Now, what hardware platforms will you support? More platforms mean a larger market potential and more income. Not everyone has a Macintosh (Heaven forbid! – whose biased?) and not everyone has a MPC (multimedia PC). There are other CD-ROM multimedia platforms to consider as well, such as; SEGA, NINTENDO, SONY, TANDY (VIS), PHILLIPS (CD-I), COMMODORE (CD-TV), KODAK (P-CD), etc. Earlier this year, the company Icom Simulations, had sold over 150,000 copies of the CD-ROM title, Sherlock HolmesŠ At an average of $40 each, that’s a few bucks ($5 million, to be exact)! However, to get there, this title is allegedly availble in 42 different formats. That’s also a lot of development, production and support headaches. Today, we also must contend with DVD technology and web as well as a variety of browsers technologies (Netscape, MS Explorer, Mosaic, AOL, Lynx, etc.). Many platforms aren’t convertable or compatible, so consider this question well.

“…this little piggy went to the market…”

The more that you handle, then it stands to reason that the more money you would get to keep. However, the multimedia biz is similar to book publishing. After all, how many authors personally produce and sell their books mail-order or door-to-door? Most multimedia authors seek out a publisher, who will handle getting the copies produced, the promotions, the tradeshows, the “getting-it-reviewed”, etc. The producer doesn’t generally provide the mass distribution. That task falls to companies like, Electronic Arts, Compton’s and Time Warner, to name a few. These people get your title into the mall retailers, software shops and mail-order catalogs. All of this comes at a cost and your remuneration will usually come in the form of a royalty (a percentage of sales), which are most often paid quarterly. Publishers use different methods to figure royalties, so watch out AND READ THE FINE PRINT OF THE CONTRACT!

“…who’s on first; what’s on second…”

The distribution house is the first group to take their cut, usually around 60-70% to cover marketing and getting it to the retail shelves. Next is the publisher, who pays you the royalty after covering their marketing and packaging costs – and packaging is VERY IMPORTANT! What this all boils down to is this: although you did all the development work, you might see only $2.50-$5 of that $40 CD-ROM title. How many are likely to be sold? Well let’s look once again at the Sherlock Holmes title; 42 platforms gazinta 150,000 units sold about 3,500 times per platform, which is reasonable to expect over a couple-year period. How does that translate into real dollars? Thirty-five hundred units times an average royalty would yield between $9,000 and $18,000 (per platform) for your efforts.

Ok, so maybe you won’t make a million on that first title. With carefull planning, attention to detail, and proper design the right material can generate a nice long-term income. Consider designing a series of related titles that maybe shares character design or subject matter. This will help generate repeat sales from those individuals that purchased your first title.

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