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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.'"
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.
'Yes, firefox is indeed greater than women. Can women block pops up for you? No. Can Firefox show you naked women? Yes.'
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.
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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.
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.
Meta will eat itself
When I am browsing through something like Steam, I don't think twice about buying a game for $20 or $30. For $60, it definitely becomes a calculated purchase, and I really start questioning how badly I want the game.
$60 seems to be pushing the extreme limits of how much I'd even pay for a video game under ANY circumstances. I wonder if this line will ever be crossed?
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 $80.
Because people will pay the price. If they won't, the product sooner or later disappears.
....and your post was grade "A" fertilizer. Look, real prices of games have actually gone down over time due to inflation. 60$ 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.
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.
I'm sorry, but I always buy games for current-gen systems. What would be the point of buying a game for a system not out yet?
An order of magnitude difference is a factor of approximately ten. For instance, Mega Man X for Super NES was 1,280 KiB, which is an order of magnitude larger than Mega Man for NES, which was 128 KiB.
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.
For independant game designers who make shareware games, price probably depends directly on development cost.
For the heavy hitters, development cost is a function of price, which is a function of demand. A game designer comes up with some idea, and passes it onto marketing. Marketing does some research, and finds that x gamers would be interested in a certain type of game. Then, with some simple calculus, find that y games will sell at a price of z for maximal gross sales of yz. Subtract out the price to manufacture, franchise fees and the whatlike, and you have a budget. If the budget is too small, tell the designer to shove off, or tweak the idea until it appeals to a more profitable market.
Consider the game Duke Nukem Forever. Marketing discovered that as time passes, market interest has decreased at a linear rate, such that a negative number of gamers are interested in the game. Also, as time increases, the development costs have increased at a linear rate. So, at this point, any reasonable price tag will result in a loss -- that's a negative sum of money. Here comes the stroke of brilliance: by selling the game at a loss, to a negative number of gamers, this is a product of negative numbers, so positive! Thus, 3D Realms' marketing department has determined that by delaying the game, since both market interest and profits are decreasing at a linear rate, the profit function increases quadratically! I figure, they're waiting until this profit will result in every employee earning a cool hundred million -- then they can release the game, and retire!
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.
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Well, as you're implying, Forbes aren't surprised. It's all economics. Forbes must think they can sell more issues by writing about high game prices than by writing about the price of trout in Belgium.
Was it because it cost roughly twice of any game that's ever been developed? Or maybe cartridges cost $40 more than CDs? No, it's because whoever sold it thought this is the right place to maximize profit. They may be right or wrong, and history seems to indicate $100 is probably the wrong price to sell a popular game. But really it's not our problem whether games are priced right or wrong. If they're priced wrong the publisher eventually pays for that mistake. If $30 gets you more profit than $60, eventually someone will notice this and start selling them at $30. The fact it's not happening suggests selling at $60 might be a good idea after all.