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Why Next-Gen Titles Cost $60
Heartless Gamer writes "Forbes.com has up an article detailing what goes into the $60 price tag for next generation games. Publishers get about a buck per copy sold. 'The remaining $59 per game goes into many hands. The biggest portion — nearly 45% — goes toward simply programming and designing the game itself. Then the console maker, retailer and marketers each get a cut. Add in manufacturing and management costs, and depending on the type of game, a license fee. Some gamemakers also have to pay a distributor to help get their titles in stores.'"
The publisher makes a hell of a lot more than $1 a title, and the money certainly doesn't go to the developer. The retailers take a huge chunk of it. Realistically speaking, the publisher takes the lionshare of the profit - and uses that to cover the advances made to the developer.
The reason games cost $60 is nothing to do with the cost of manufacturing anyway, the console manufacturers run a cartel and have agreed these prices.