How the model works

The model shows how much money a game needs before it pays for itself and when that money comes back. It covers 36 months: wishlists → sales → events → DLC → developer revenue → expenses → cash flow.

The model reproduces the Excel model "Steam Game Financial Model v2" to the cent, including its simplifications (listed at the end). Rates are entered as percentages. Nothing is rounded inside the calculation; only the numbers on screen are rounded.

Time

• The model runs month by month, 1…36. Month 1 is the "Model start", then months follow in order.
• Dates only change labels. Moving the "Model start" does not change any number.
• Release month is the month the game goes on sale. There are no sales before it.

Expenses

Expenses come first, because marketing drives sales.

• Marketing is spent every month, from month 1.
• Live ops starts in the release month.
• Other expenses are spent every month, from month 1.
• Indexation ("… growth per year"). Each of the three can grow once a year at its own rate. Years count from the model start: months 1–12 have no indexation, 13–24 once, 25–36 twice (compounded: at 10% that is ×1.10, then ×1.21).
• DLC: a one-off cost in the launch month and monthly support from the launch month. These costs are not indexed.
• "Spent before the model" is subtracted once, in the first month of cumulative cash flow.

marketing(m) = marketing per month × (1 + marketing growth per year) ^ full years
live ops(m)  = 0 before release, then live ops per month × (1 + live ops growth per year) ^ full years
other(m)     = other expenses per month × (1 + other expenses growth per year) ^ full years

Wishlists

Every month new people join the wishlist "pool":

available(m) = what is left from last month
             + new wishlists per month
             + extra wishlists from the event of the month
             + wishlists from ads (before release only: marketing ÷ cost per wishlist)

Part of the pool buys the game:

• before release, nobody;
• in the release month, "Wishlist conversion at launch";
• after release, "Wishlist conversion after launch" every month.

Buyers leave the pool; the rest carry over to the next month.

Organic sales

Organic sales are purchases that come neither from wishlists nor from ads.

• In the release month, "Organic sales at launch".
• After that, each month is lower by the "Monthly sales decay", but never below the "Long-tail floor".
• An event multiplies organic sales of its month by the "Organic sales multiplier". The multiplier does not carry over to the next month.

Ads after release

After release, marketing buys copies directly: copies from ads = marketing ÷ cost per buyer (CAC). Before release the same budget buys wishlists.

Copies and refunds

copies sold          = copies from wishlists + organic copies + copies from ads
refunded copies      = copies sold × refund rate
copies after refunds = copies sold − refunded copies
player base          = copies after refunds summed from month 1

Fractional copies are not rounded: this is a forecast, not bookkeeping.

Events

An event changes three things in its month: the game discount, the organic sales multiplier and extra wishlists. A month without an event has no discount, a multiplier of 1 and no extra wishlists.

• Release and DLC launch events are placed automatically in the months set in the parameters. Their month is changed only in the parameters and they cannot be deleted, but their effect can be edited.
• The discount in the release month comes from the "Launch discount" parameter.
• Sales and updates are added by hand in the calendar. Choosing a type fills in typical values, which you can change.
• One event per month at most. An event lasts one month.

DLC

For each DLC:

• in its release month, the "Buy at launch" share of the player base at the start of the month buys it;
• after that, every month, the "New buyers who add it" share of new game copies after refunds buys it;
• DLC sales = DLC copies × DLC price.

Price and revenue

discount(m)         = launch discount in the release month, otherwise the event discount
price after discount = price × (1 − discount)
sales to buyers     = copies after refunds × price after discount

Deductions are taken from sales to buyers (for the game and, separately, for DLC) one after another:

sales tax        = sales × "Taxes in price"
chargebacks      = (sales − tax) × "Chargebacks"
before Steam     = sales − tax − chargebacks
Steam share      = before Steam × "Store fee"
withholding tax  = (before Steam − Steam share) × "Withholding tax"
developer revenue = before Steam − Steam share − withholding tax

"Taxes in price" is the share of sales that goes to taxes, not a VAT rate.

Cash flow

operating cash flow(m)  = developer revenue − marketing − live ops
                          − DLC launch − DLC support − other expenses
cumulative cash flow(1) = operating cash flow(1) − spent before the model
cumulative cash flow(m) = cumulative cash flow(m − 1) + operating cash flow(m)

Money arrives in the month of the sale: Steam payout delays are not modelled.

Key numbers

• Funding need is the lowest point of cumulative cash flow, if it goes below zero, and the month it happens. This is how much money the project needs before it pays for itself.
• Break-even month is the first month when cumulative cash flow is zero or above. If cash flow dips below zero later, the break-even month stays the same.
• Cash at the end is cumulative cash flow in the last month.
• Developer revenue over 36 months, copies after refunds, operating cash flow, peak player base and DLC sales before deductions are totals or the maximum over all months.

Verdict

The verdict is cash at the end divided by the funding need, named after Steam review scores:

If no funding is needed at all, the verdict is Overwhelmingly Positive.

Achievements

If an achievement is not reached, the progress towards it is shown as a percentage.

Simplifications in this version

The model calculates exactly like Excel v2, so it keeps its simplifications. We will revisit them in the next version of the model.

• No monthly development costs before release: everything spent before the start is one amount.
• A sale does not raise wishlist conversion; it only affects organic sales.
• DLC has no discounts, sales or refunds.
• Game buyers in a DLC's release month are not part of that DLC's launch base.
• One Steam fee rate (no reduction after $10M and $50M), no payout delay, no income tax and no publisher share.
• The horizon is 36 months.

Glossary