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.'"

Comments

What about Wii?

[jZnat]

Then how can you explain why Wii games only cost $50 still? I blame the increased graphical power of the 360 and PS3 which increases the development costs due to the developers' (or publishers?) need to utilise all graphical power available.

Re:What about Wii?

[Vandilizer]

Simple you want to know why Wii games cost less!

They are the only ones who are not subsidizing the price of their consoled with the games that they are selling!

Sony takes about $150 hit they need to recap!

Pay for it now, pay for it later in the end you are still paying for it! I for one do not mind paying a bit more now to save later!

Re:What about Wii?

[MS-06FZ]

Then how can you explain why Wii games only cost $50 still? I blame the increased graphical power of the 360 and PS3 which increases the development costs due to the developers' (or publishers?) need to utilise all graphical power available. I disagree. More likely it's due to the Wii hardware's close kinship to the Gamecube. Developers familiar with the 'cube can take advantage of their existing skills - much like GBA developers could with the DS. The same applies to some extent to the PS3 and XBox 360, too, but those machines are much more distant from their predecessors in terms of capabilities.

But there's also this: in the end, they don't charge you what the game costs, they charge what you're willing to pay and then distribute the monetary yield. The Wii is an economy system, whereas the PS3 and XBox 360 are more high-end gear, (and with more "loss-leader" money to recover) so the game titles are priced to match.

Re:What about Wii?

[nagora]

You need more designers, more coders, more artists, better equipment, etc... That's just the way it works. That's the way it's been for the last 2 decades.

You're absolutely right, and that's a big part of why I didn't buy a console for 2 decades until the Wii arrived. I want enjoyable games, not tedious movie-wannabes or, even worse, pretentious dross by programmers who want to be "artists". That approach just means sinking the budget into visuals instead of game design.

Cheap and fun beats high-definition dullness every time.

TWW

Inflation

[UbuntuDupe]

Easier explanation:

-Why did next-gen titles five years ago cost $50?

-Now, take that answer and apply inflation for five years.

1.1^(1/5) = 1.9% per year inflation is all it takes, and it's been worse.

Because it's what the market will bare.

[hal2814]

As long as people are willing to pay $60 per title, that's what they will cost. You can break down the numbers all you want but if the market won't tolerate $60 games, there sure as heck won't be any. The least important links in the chain will either be paid less or eliminated entirely.

Re:Because it's what the market will bare.

[MeanderingMind]

If it's a waste, why are (hypothetically) you taking the game for free? That appears to be what you're implying is the proper response to the price.

I'm confused by a strange attitude I see in people today I'd label "entitlement". Somehow, we are entitled to anything we want, whether or not we can afford it. Instead of dealing with it and living without luxuries, we take what we want.

I don't know where this attitude comes from, I'm just noting what I've been seeing here in America.

Market forces

[tygerstripes]

It's interesting to see where that money goes & how it's divided, but to suggest that the ultimate destination of that revenue is the reason for the price of games is ignorant and foolish. Supply and demand, people. Any company who doesn't get all the revenue they can for a release won't last long.

It's mostly licensing...

[MaWeiTao]

I don't think the $60 price tag is anything new. I recall seeing PS2 and Xbox games in that price range.

The obvious reason why console games are expensive is because of console licensing costs. It's why the same game for PCs costs $10 to $15 less. PC games have been $45, at most $50, for years but console games seem to have been creeping up in price in that same time period. So the price difference clearly isn't due to increased development costs.

This is one of the reasons I never really got into console gaming. I don't like having to pay for these nonsense licenses nor do I like having to spend that much on games. Certainly consoles have some desirable games, but not desirable enough that I'm willing to spend that much more money on them. And if you think what we pay in the US is bad, you should see prices in Japan where your average game is at least $70, and I've seen some close to $80.

Why does anything cost what it does?

[ThousandStars]

Because people will pay the price. If they won't, the product sooner or later disappears.

Re:This is pure bullshit

[LordPhantom]

....and your post was grade "A" fertilizer. Look, real prices of games have actually gone down over time due to inflation. 60$ today is -not- the same as 60$ in 1995 or 1990, etc. When you were buying the high end games for your SNES, you were paying the equivalent of roughly 20$ more in terms of today's money. The reason for games being cheaper also probably has something to do with the fact that more of them are selling (volume).

In short, greed has nothing to do with it. It's a simple matter of money value over time, and mildly increased production costs.

And honestly, using a vague work history for the record industry isn't likely to increase your credibility for most people here, most of all in a post that tries to imply that -game- publishers are greedy.

Re: Cost =! price.

[trdrstv]

The reason Wii games cost less is development costs, plain and simple.

No. There is no direct correlation between development costs and consumer price.

If it did you would have non-standard prices that would vary wildly. Do you pay more to see a 'summer blockbuster' that cost 200 million dollars [to make] than an independent film that cost $5 million?

The developers have standard price points and they set their price and development budget to a level they feel they will make the most profit.

Welcome to capitalism 101.

Re: Cost =! price.

[trdrstv]

There is always a direct correlation between the cost to produce a good and the price of a good. The only reason games were generally set at $50 previously was because it was an agreed upon price by the developers, publishers, etc... If developers were not able to recoup their cost at that price then they would not have agreed to sell at that price, plain and simple.

If their is any coorelation between the cost to produce a good and the price of a good, it starts with what the customer is willing to pay. The cost of the final product to the consumer dictates the development costs and not the other way around (otherwise the market would not support it).

The Fact that Gears of War cost more to make than Dead Rising didn't mean it debuted at a different price. They were priced equally to maximize profit on each. Gears sold amazingly well, but would not have sold at a $99.95 price point simply because it cost more to produce. We as the consumer don't care how much it cost, we care about the value added to us, and what we are willing to pay for that.

Likewise, games that were easier to develop, like Katamari Damacy, often went for $40, $30, or even $20.

Lower development costs help a publisher's ability to do that, but it was priced lower to make it more attractive to the average buyer. If a Mario game, or Harry potter game cost the same to develop as Katamari it wouild still be priced higher than $40 since that is what the market will pay.

Furthermore, games were almost never sold at $50 for their lifetime. Once publishers have exhausted the amount of people who are willing to pay $50 they generally drop the price to attract customers who are more price conscious.

Exactly, and this works reguardless of initial development costs. Once the publisher has exausted the maximum profitability of the higher price point, they lower it to bring in more people. That's why you typically have a step down in pricing (from $50 to $40 to $30 to $20) rather than simply cut the price from $50 to $20, because you are optimizing profit and brining in new people at each level.

Bad math corrected: $28 per copy, not $1.

[ChaosDiscord]

Analysts predict that some other publishers will need to clear 1 million units to get in the black--and start making about $1 per game sold.

The remaining $59 per game goes into many hands. The biggest portion--nearly 45%--goes toward simply programming and designing the game itself.

Aaah, no. This is terrible, terrible math. The article is claiming that for copies 0 through 1,000,000, the publisher makes nothing. Then for copies 1,000,001 and beyond, the publisher is only making a dollar per copy. Utter nonsense.

Why would be publisher not be profiting for the first million? Obviously because they're recovering their initial investment. The investment into programming, design, art, and the like. So once that millionth copy is shipped, you don't get to count it as an expense any more.

The attached graphic indicates that art/design is running about $15 per copy, and programming is running about $12. From this we can conclude: For copies 1 through 1,000,000, the publisher is making zero profit. For copy 1,000,001 and beyond, the publisher has recovered the art, design, and programming costs. Add in their $1 pre-planned profit (also in the graphic), and now they're making $28 per copy. A significant difference from the articles insanely wrong claim of $1 per copy.