Manufacturing VS projected sales

[damn-I-Suck]

I have some questions for those for have knowledge/experience in the game marketing world:

What determines a companies decision to manufacture a certain number of copies?

What happens when say for example a game company produces 3 million copies of a game, and only 1 million are sold? What happens to all the unused copies? Do they still make a profit despite wasting so much?

What if the opposite happens: Say a company produces 2 million copies and it quickly sells out everywhere in a matter of a week? Do they RUSH RUSH RUSH and produce more copies like mad all of a sudden? And if so, who and what determines how many to produce?

And my final question: Wouldn't a DLC-only sales world for games eliminate this problem and drastically cheapen the cost of production? This way you would never over extend or under extend because the product would solely exist in the digital form?

This is just curiosity. I was thinking about it today and I had no idea how to research this kind of thing. Also, this applies to everything as well as the gaming world.

 

[Norik]

Companies have analysts and keep track of previous sales and trends. They have so much information at their disposal that generating sales models relative to the budget size and popular demand should be easy to do for a computer, and then I assume they just go for the average amount of predicted copies from all the possible models.

I would also assume that mass-producing something like copies of CD's becomes increasingly cheaper as the amount being produced grows. So they probably just order a little more than projected and keep about fourth of the copies as reserve in case the game sells very well. This way they have something to put in circulation while they get more copies made. And if these are not enough... well, there' just a shortage for a couple of weeks I guess.

As for the DLC... Well, there would definitely not be any shortages, although the downloads during the week of release would be very slow and choppy due to saturation of the servers. Generating physical copies of the game, however, tends to be the cheapest part of the production process, accounting for probably a seventh of what you're paying for, if not much less. Disks are very cheap to make and machines make it very easy to replicate their information in a matter of minutes (or maybe even seconds). What you're really paying for the the cost of production of the software, that's where the big money is.