How much can an XBLA game make?

In a post on his blog this week, GarageGames cofounder Jeff Tunnell talked about the early success of Xbox Live Arcade and asked just how profitable games on the service could be. Tunnell has some knowledge of the subject, as GarageGames' launched Marble Blast Ultra on the service in January.

Tunnell broke down the numbers to come up with a working estimate of how much money a game like Marble Blast Ultra 3D brings in versus how much it costs to make. Tunnell used estimated figures for the exercise, rather than releasing exact numbers on Marble Blast Ultra. The first thing he noted is that the cost of XBLA development is rapidly escalating.

"Creating an XBLA game is taking most studios 6 to 12 months," Tunnell wrote. "Costs are currently ranging from $100,000 to $300,000...The industry-standard arms race will quickly make the top-end $300,000 budget a cheap product. Right now, I wouldn't consider attempting to make an XBLA game with a $100,000 budget. Development kits and Certification (QA testing) would eat up half of that, not leaving much for the actual game development. While these budgets may seem high to Indies, these budgets wouldn't buy coffee on an AAA console title for the retail box channel."

Tunnell wouldn't give an exact figure for the budget of Marble Blast Ultra, but suggested it was at the higher end of that range. He then figured out roughly how many people had paid the $10 worth of Marketplace Points for it by checking the game's leaderboards, which listed about 120,000 gamer tags.

So for the purposes of Tunnell's example, Marble Blast Ultra grossed about $1.2 million--but how much went to GarageGames? "The publicly available information on this is that the distribution fees for bringing a game to XBLA is 35 to 70 percent, depending upon participation by [Microsoft]," Tunnell wrote.

So if GarageGames funded its own development of the game and Microsoft only took 35 percent, the company would be left with $780,000. "Again, if you are a starving indie developer, this sounds like an infinite amount of money. But, in the world of publishers, this is not considered a big hit," Tunnell wrote.

Tunnell said when he headed up a studio for a publicly traded company, the benchmark of success was whether or not a game returned five times the amount invested into it. "But, I no longer have public shareholders to please," Tunnell pointed out. "As the cofounder of a small independent game technology provider that makes a few games, I am extremely happy with our returns from XBLA360, and I also know that we are not done yet."

Tunnell suggested that going forward, the big challenge for XBLA developers will simply be getting carried by the service. Microsoft has stressed that it will carefully manage the portfolio of games available on Xbox Live Arcade, and the increase in traditional publishers creating games for the service could make it more difficult for independents to get a spot at the table.