[Tim Brooks]

I think that on average the developing studio will get, at best, 10 to 15% of the selling price

Yea, but that's the publishers selling price - NOT retail price. A $45.00 game at retail grosses the publisher between $18.00 to $24.00, depending on how they determine costs. Now, they do not pay you until costs are recovered, using your 12% (industry average) to offset that. Plus they don't pay you for "promotional" copies. They use promotional copies to offset advertising, shelf space buy-ins, and catalog buy-ins (all needed to be in retail). So the mass merchant wants $20,000 for a month on the New Releases shelf. The publisher covers half the cost with free games to the mass merchant, these get sold but you don't get paid for them.

Now after 3-6 weeks (it was a really good game) the price to retail is cut in half. So the publisher is now making under $10 per game with virtually no lessening of expenses.

Okay, now put in the average sales of a new release at retail - somewhere under 5,000 units.

Do you see where this is going...?