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Why Games Cost $60
eldavojohn writes "Crispy Gamer is running a very interesting article on why games cost $60. Many games start out at this retail price — but why? Did the makers of The Beatles Rock Band game just happen upon $59.99, as did the makers of Batman Arkham Asylum? After all, those two titles surely took different amounts of man hours to develop, and result in different averages of entertainment time enjoyed by the consumer. They interview a director at Electronic Entertainment Design and Research, who breaks down the pie as $12 to retailer, $5 to discounts/returns/retail marketing, $10 toward manufacturing costs and shipping. That leaves $30 to $35 in the hands of the publishers. Though lengthy, the article looks at three forces of economics on why game publishers continuously end up in lockstep for pricing: sensible greed, consumer stupidity or evil conspiracy. When asked about the next step up to $70 or $80, Hal Halpin (president and founder of the Entertainment Consumers Association) says, 'I'm not sure that we'll see a standard $70 price point at all. To my mind, emerging technologies, subscriptions and episodic and downloadable content should all enable price drops — increasing accessibility to a much wider audience.'"
Many games start out at this retail price â" but why? Did the makers of The Beatles Rock Band game just happen upon $59.99, as did the makers of Batman Arkham Asylum? After all, those two titles surely took different amounts of man hours to develop, and result in different averages of entertainment time enjoyed by the consumer.
It's the same thing with movies and music. There's a certain "standard" price everyone goes with, because if they didn't, it'll affect their sales. Going a bit over the standard decreases sales, going a bit less than the standard can increase them. You have to find the fine line.
And to be honest, they $60 price isn't that much if it's a great game. You pay atleast $15+ to go the movies, probably even more if you make a night out of it. You might spend the same amount in bars too. Both of those give only a few hours of entertainment value, and to be honest aren't all that fun all the time. Good games give a lot more entertainment and fun hours. My stats for Left4Dead show 947 hours and I've probably spend *a lot* in WoW too. And dont even get me started on the civilization and settlers series.
That being said, I would probably try more games if they were cheaper. But I still will get the games I want.
$10 go toward cost of goods sold, which includes manufacturing the game disc, shipping the games to the store, and anything else directly related to production and delivery of the game package.
I think digital delivery is something that can bring this price down a lot. Yes, bandwidth does cost, but its nothing like producing tons of dvd's, packaging them, sending them all over the world and delivering to stores. And the user experience is usually a lot nicer, you can easily buy it without walking to store.
And to be honest, game development is no cheap business and it's getting even more costly all the time. Yeah you could argue that theres great indie games that have been developed at cheaper budgets, and you're right; there are. But their budgets also are $10 000 - $100 000. It means you have to get lots of sales. And indie developers really cant produce the games like Call of Duty series (specially the modern warfare ones!) and Left4Dead and Half-Life 2. There is place for indie developers, but you need professional commercial game developers too.
There is no way that price drops are going to happen... The companies see it as having two options, they could drop the price, or keep it the same and make more profit. Which do you think they're going to choose???
I stopped going to Retailers for PC games, and started using a downloadable system (Steam).
And when I want a 360 game - I'll either Rent it, or one of us in our group of 5 friends will buy it and we'll rotate our games around, or on the odd Chance that it has great addictive multiplayer (Halo 3, Call of Duty, etc) We'll all buy it ourselves. But with episodic content (Like ODST) its cheap enough that we all can grab it, IF we really want it.
Try shopping for games in Europe. I can't speak for the other european countries, but at least here in Germany prices get converted from $US to â 1:1. We pay around 59â for most game titles, which is over $US80. It's the same for music, movies, and consumer electronics, by the way. Sucks to pay off your ass. :P
It is more fun to create a game than to play them, and a lot more fun than wincing about how much the commercial games cost...
Some place to start: Python games community
Games are $60 because enough people are willing to buy games at that price to justify it. Like many other products, if games don't sell at $60, the price drops. If they thought people would be willing to buy games for $50 but not $60, games would be $50.
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"That leaves $30 to $35 in the hands of the publishers."
So why can't we just download games for about half the street price?
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Because they have always cost $59.99
To my mind, emerging technologies, subscriptions and episodic and downloadable content should all enable price drops--increasing accessibility to a much wider audience.
Oh yeah. Just ask EA how well that's going. How much has their episodic content come down?
Why do games cost $60? Because that is what the market will pay.
...sometimes I wonder
Does this even need to be discussed? Are we really that retarded with our understanding of economics? Do we not understand the very simple concept of supply and demand?
"subscriptions and episodic and downloadable content" already drive the cost (to the consumer) of games to $70-$80. My kid gets an XBOX game for $60. Plays it. Finishes it. Pays $5 -$10 for points to download an add-on pack, or 2 or 3 or more, and next thing you know, he has invested $70 - $80 in the game. I already assume when he buys ODST, it will cost $80 before it's all said and done, and to me, that's the real cost of the game.
I think they have to keep the initial price at $60 for now because that's the point above which more consumers would say "screw it, I'll get something else". I'm pretty sure downloadable content will soon be (if it isn't already) about the only way game makers profit.
I prefer rogues to imbeciles because they sometimes take a rest.
Surprisingly enough, game software really isn't that much more expensive today than it was 20 years ago. Seems like I plunked down $40 or so for Zork I way back in the day. So $20 increase in 25 years... 50%--hell, I'd challenge you to find many industries that are even close to that number.
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Online multiplayer games are probably the best value in entertainment. Example: The Orange Box was $50, and contained four games. Just one of those games, TF2, has given me over 500 hours of entertainment in the past two years. Compare that $50/500hr expense to a $10 2hr movie, and you can see that almost any price could be "justified" for certain games. $60 is likely selected because it's about as much as many people can drop on an impulse purchase for a purely luxury item.
A slashdotter who didn't build his own computer is like a Jedi who didn't build his own lightsaber.
And many games for the iPhone are pretty darned cheap.
At some point, game producers will start cranking out cheap English mods of Bollywood dance games and Chinese puzzle and combat games and take over the US market with games that sell for $10 a pop total.
Barriers exist to crumble.
-- Tigger warning: This post may contain tiggers! --
The answer is incredibly simple, actually: Since developers are mainly working on HD games that end up on the PS360, bypassing half the market (the Wii), they've got a smaller pool to fish from. Add that to the fact that the cost of HD games have skyrocketed since the last generation, and can run away in spectacular fashion if not monitored carefully (example: Grand Theft Auto IV cost $100 million, while Halo 3 cost $30 million to develop and $10 million to advertise a year before that). The obvious result of being burned at both ends financially in this scenario is that the audience will have to pay more to make up the difference. Whether such a model is sustainable remains to be seen, though.
Why does the CD soundtrack to a $150 million movie cost $17.50 and the DVD goes for $14? It's because those are the price points they got the public to swallow. VHS movies back in the day used to go for $75 or some ridiculous number and only the video stores bought them -- who would have thought private individuals would want to own movies? But eventually the price points dropped and there you are.
Back in the day, Sierra games came with order forms for other Sierra games. Those crappy little DOS games were selling for $79.99. The stores typically had the prices lower but not by much. The entire time I was growing up, the price points for AAA titles for the top systems would be anywhere from $40 to $60. Usually $50 was the sweet spot. I recall Street Fighter having some of the most insane markups. I think SFII topped out at $80 for the SNES. Then you could also pay another $100 a piece for the special controllers.
The two things that strike me now are 1) games were really goddamn expensive back in the day and 2) I'm surprised that they haven't been able to jack that price harder considering inflation and all.
I agree with the article about how crazy it seems for simpler games selling for the same price as ones you know have to be ridiculously expensive to produce.
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This Mahdi took Shaddam's Throne
Like any other retail product, the price is a function of what the market will bear.
There are some interesting social phenomena that affect the demand curve, that allow (or even *require*) a product to be priced arbitrarily higher than the marginal cost of production and distribution, because in some marketplaces, lower priced goods are regarded, probably unconsciously, by consumers as inferior.
It is also the case that when pricing a product with respect to a competitor's product, it is advantageous to price the product at the highest price possible while still being perceived as a better value than the target competition. I've seen reproducible studies that show the same product from the same supplier, if priced significantly lower, can be less popular.
Retail pricing is a bizarre non-linear non-deterministic function. It boils down to: If you aren't willing to pay the retail price of a product, and aren't able or willing to negotiate a lower price from a given supplier, then don't buy it.
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I think you missed the giant elephant in the room there.
What about computers and videogame consoles? My first PC, 8086 8MHz, 640KB RAM and 80MB hard drive cost me above 3000$CAD. My first console, Intellivision, was nearly 600$CAD if I remember correctly.
We've seen the price of the hardware go down by more than 50%, not up.
The fact that games have increased in price makes no sense since there's more gamers than ever before. It's just that companies like to waste their money on movie franchises and other such nonsense that make up a huge part of their so-called development costs.
I was thinking about this yesterday: When I started gaming on Nintendo almost 20 years ago the games cost $50. I am surprised the price has _remained_ at where it is currently.
I got turned off to downloading games after I downloaded Castle Crashers for the XBOX 360 and then got the red ring. Now the only person who can play the full version of the game is me. I bought the full game for my kids to play not for me to play, but they are locked out. I've tried unlocking it but nothing works.
Until the DRM is removed from downloaded games its not practical. Any of the kids can pick a game up off the shelf and play it, but if I'm not logged in my kids can't play the games I've bought for them. I don't want them to mess with my account and I don't want to pay to download the games again. I really don't want to spend hours on the phone with tech support to "reunlock" a game I already bought and paid for.
They cost $60 because that's what people are willing to pay. Supply and demand at work. However, I personally don't care what new games (and other forms of entertainment) cost. I refuse to pay more than $30, and that's only for items I really want to play. I usually won't even consider buying a game for more than $20. It's just not important to me to play a game on the first day it's out, or even the first year it's out. If the price never comes down into my range, I simply won't ever buy it.
He obviously isn't listening to what the boss at EA has been saying about pricing...
Do you understand the concept of supply? We're talking about data here. You can't apply supply and demand concepts when the supply is practically infinite.
If every instance of an ad in a game would cut 25 cents from the consumer cost of the game, I would say got for it!
It would be nice to see if Sargent Johnson drinks Coke or Pepsi and if Gordon Freeman likes McDonalds or Wendy's.
Tsukasa: All I really want, is to be left alone...
It's the same underlying reason why male dogs lick their balls.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
I think $59.99 may be a cap price for a while.
The left-digit effect: http://www.sciencedaily.com/releases/2009/02/090223221526.htm
Although arbitrary, I'd say it's common for consumers to think of "round" price points like $50 and $100 when it comes to entertainment (games, a night at the movies, dinner out, etc). The left-digit effect would make $59.99 the highest price to still "feel" like it belongs to $50, whereas the left-digit change of $60.00 would remind consumers they're "approaching" what they might consider an off-putting number.
Relative to the 1970's and 80's the prices now are a real bargain. I recall Pac-Man for the Atari 2600 being something like $50 at first.
Do really dense people warp space more than others?
Back in 1979 Atari was selling games at the $45+ price point. Same thing with Sega and Nintendo in the 80's, $49-59. In the 90's, $49-59. Today? $49-59.
What is killing console games is the inflexibility in pricing structures. Although AAA release game is okay at $60, a game like "Darkest of Days" is not. But since they are stuck in the same distribution channels they are forced into this pricing structure that doesn't make sense for the game.
This is why online stores like Steam have taken off. "Plants vs Zombies" is a hell of a lot of fun and would have died at the fixed $60 price. A developer may notice their game sales are slowing down so they do a price cut weekend which is impossible to do with the classic distribution chain. Even in the citation, half of the cost instead of being consumed in the distribution chain just putting disks on shelves can be put elsewhere. I don't have much illusions the big boys with the big games will pass the savings on to us but having the flexibility is at least a start.
$12 to retailer, $5 to discounts/returns/retail marketing, $10 toward manufacturing costs and shipping. That leaves $30 to $35 in the hands of the publishers
So why can I buy DVDs from $5 to $20? manufacturing and shipping costs for these two items should be the same. And I've never seen a game at discount, have you? Nor have I ever seen a game as heavily marketed as a DVD.
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Why do games cost $60? Because that is what the market will pay. Does this even need to be discussed?
I would think yes; yeah, we all know basic economics, but from someone not working in the industry how much do we know about how this price point was reached? Was this found by trial and error? Market research? Both/other? To what extent have there been deviations and what were the results? To what extent do Nintendo/Sony/MS play a role with "suggestions" about pricing? How does price set expectations about quality? What about the impact of historical prices on the perception of current prices? And whatever else I forgot...There's probably a lot of detail that can be explored about the topic that goes beyond just saying "that's what the market will pay". The article isn't great though it mentions a few points but could have been more detailed and researched.
It's the same reason every movie at a theater costs the same, regardless of the budget.
Games are $20. You just have to wait a few years. I'm just now enjoying Final Fantasy X, but still. The only way I'd pay $60 for a game is if the title starts with Starcraft.
If moderation could change anything, it would be illegal.
Haven't read TFA but this stood out at me from the summary:
"'I'm not sure that we'll see a standard $70 price point at all. To my mind, emerging technologies, subscriptions and episodic and downloadable content should all enable price drops -- increasing accessibility to a much wider audience.'"
Well if it worked for AT&T and Apple, I'm sure it'll work for the games industry. Decrease the initial investment cost, charge a regular subscription fee (DLC can serve this purpose too) and profit. No ???? needed.
Of course, it should be pointed out that PC and Wii games have stayed at $50. Just sayin'.
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It's more than just data that we're talking about here. Supply also includes the money and man-hours that go into developing the games. According to your statement, with a "practically infinite" supply, publishers should be able to make profits while selling their games for $1 a piece. Obviously, that is just not true.
Apparently wizard is not a legitimate career path, so I chose programmer instead.
The article's pricing justification seems like complete BS to me. Just looking at the claimed "retail + shipping" costs tell me that the values are completely inflated.
$10 to manufacture and ship? WTF?
It costs approximately $0.75* to manufacture the DVD, print it's label, print the wrap that goes in the amaray case and package it. The packaging is approximately $0.55-$1.50* more (depending on how much junk / crap they stuff inside plus the manual).
Then once packaged the product gets bulk shipped. Claiming $7.75 for shipping per product would mean that a case of 20 unites would cost $155 to ground ship. That's a pretty absurd number. $7.75 is the cost to me if I were to ground ship each package individually to a different location.
No, this article is nothing but BS justification for game prices. The real reason why games cost exactly $59.99 has nothing to do with costs or logistics and revolves entirely around price point.
$59.99 is exactly the price point that industry wants per game, regardless of actual cost/development.
*Note: I work for a company that replicates DVD's and print the packaging and assemble. Thus I know the real costs for the packaging.
One time many years ago, a bunch of us were hanging out at a friend's place watching movies, drinking beer, cracking jokes, shooting the shit, and just chilling out. This was back when most of us were still living with our parents, and the guy who's house we were at - I didn't really know anything about his family or anything.
So we'd been there for a couple hours when all of a sudden his younger brother - who I didn't even know existed until that very moment - comes tearing into the room and starts running around the furniture in circles. He's panting and making really strange guttural sounds and every now and then he'd blurt out random words. It was all just really mentally jarring after the relaxed, sociable time the bunch of us has just been having.
The guy who's house we were at stood up after probably 30 seconds, scooped up his little brother by the waist - not in a pissed off way but in more of a fun, playful way - and hauled him out of the room. I heard voices in another part of the house then a minute later the guy came back, sat back down and said "sorry about that guys, Kyle has downs syndrome."
I nodded and tried to turn my attention back to the movie, but part of my brain was still going "what the fuck was that?"
The above post left me with the exact same feeling.
If libertarians are so opposed to effective government, why don't they all move to Somalia?
I believe the giant elephant you are seeing is in fact just a sofa. Even with game costs the way they are now, most games will not actually show any profits, because commercial games cost a LOT more to develop than they did back then.
Apparently wizard is not a legitimate career path, so I chose programmer instead.
Trent Reznor feels the same way about many games these days: Joystiq interviews Trent Reznor
A timeless game is well worth $45 or more. I have been finding old GBA carts that are selling for more than $45 if they are in good condition. Many of the "hardcore" games on modern systems are not nearly worth that price point. Wait a year and you will see how much the game is *really* worth.
It is amusing that game companies want to shut down used game sales. Maybe they should work on making timeless games with good content.
Do you not understand that supply and demand is just one part of a larger formula?
You really need to get your head past Econ 101.
The Kruger Dunning explains most post on
The supply isn't the game, the supply is the people who can create a game.
The Kruger Dunning explains most post on
2. The truth is that supply side pricing is pretty consistent. He listed out the costs to deliver to a store. That is a solid $27. You need to throw in at least $5 for development and another $5 profit. OK, so the minimum price is $37 for a new game. But $5 profit out of $37 is a low margin on. Clothing is about as high as it gets at x20 cost for high end. Food goes for about profit margin about 5% at a grocery store (less than x2). But the truth is people LIKE making games. We do it for free. So they can't really raise the profit up to that high x20. They can't even get it above x2 for $74.
3. If you can wait a year, you can get the game for $20. Pretty much all games.
4. Games are priced at $60 not because of an evil conspiracy but because that is how much we budget for NEW games. It is the demand that is setting the price, not the supply. When supply sets prices, it varies more.
5. The real problem is that of difficulty in accurately measuring the pleasure provided by the new game. There is no simple way we can get an accurate worth on the product to us, in the short time that the game comes out. The best we can do is read articles, which by the time they come out, the item is already priced.
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That's when we'll see $70 games.
i think that tacokill gets it but Yvan doesn't.
supply and demand can still be applied when supply is "practically infinite" and demand is finite. demand dominates the governing equation.
10 dollars to manufacture a disk, manual, and case? No. Never.
"They confiscated everything, even the stuff we didn't steal!"
http://xkcd.com/606/
The Kruger Dunning explains most post on
Because they can. Don't pay more than 59.99, or the prices will go up. Simple economics.
The latest stock info for ERTS (aka EA) seems to show that they are losing plenty of money.
The situation goes like this:
The publishers have wet dreams about making customers pay again and again for the same content when the customer's CD/DVD wears out. As a result, several parasite companies have sprung up to sell the publishers "protection software". As you can imagine, this malware costs money to develop and license. This is where they screw the buying public over twice. First, you have to indirectly pay some parasite corporation to hide software in your own machine. Second, the publisher and the malware vendor are in cahoots to turn your purchases into rentals. We are seeing this with games like GTA4, which have to be activated.
But, that's what the economists say. They're also saying the economy is getting better and we should be happy.
It's NOT me! It's the meds! I'm on 1000mg of Fukitol.
Answer - Economics 101
But, just to add something interesting (at least to me), have a gander at this:
http://en.wikipedia.org/wiki/North_American_video_game_crash_of_1983
Down with the career politician! SUPPORT TERM LIMITS
The article asked why games cost $60. It did not ask "what considerations do publishers go through to arrive at the $60 price point?". At the end of the day, when you cut through all the marketing BS, ALL pricing is established by the market. There are no exceptions, even for monopolies, because people always have the right NOT to buy a product. So even monopolies have to be responsive to the market when they set their prices.
I do, however, find it hilarious that the marketing droids of the world have somehow convinced everyone that it is more complicated than supply and demand. I understand that companies want to try to affect the price point - and they can (through quality or other criteria) - but at the end of the day, the fair market value of their widget (ie: the price) is established when you have a willing buyer and a willing seller. Everything else is 100% superficial and nothing more than an emotional attempt to sway the price at which you are willing to buy.
Here, let me quickly run down your list:
market research -- yep, everyone does it. It is surely a factor.
Trial and error -- yes, a little bit of trial and error too. It is surely a factor.
Deviations? -- yes, there is a "grey" market and the publishers don't like it. They are surely a factor.
Sony/MSFT -- they play a large factor because they are large suppliers in this industry
Price/quality -- ok, this is legit. This would be a good study and worthy of further effort. Perhaps this is what the article should have been about
Historical pricing -- doesn't really matter. Past history is no indication, etc, etc
Again, the article asked, "Why are games priced at $60?". Answer: because that is all the market will pay for games. If the market was willing to pay more, then publishers would surely increase prices. And if there were more games at $70 than people wanted/needed...then the price would come back down to $60. Supply and demand.
i would think that if you wear out media than you're getting your money's worth out of it. either that or you're just careless with your stuff.
...for myself as to why $15 per month was not an unreasonable WoW fee. Then I stopped paying for monthly subscriptions and reunited my life with the real world. I learned something when I did that. WoW and video games in general, as much fun as they are, shield you from the joys of reality. Granted, the fees being paid are less than those you would pay for going to the movies or going to the bars, but you don't actually get to meet people face to face in WoW or Halo 3 online. Frankly, if I don't play WoW all day, I probably will get bored, get outside, and might just meet someone. Suppose I ask that someone to come hang out and watch a movie with me. Well now I just made a friend and watched a possibly decent movie for $15. I would say that having a pal to go run amock with rather than spending my afternoons and evenings in front of my computer was well worth that $15.
In fact, you can also find fun things to do in the real world that are cheaper than WoW AND movies. Imagine that. For instance, suppose again that I don't play video games all the time and instead walk down to the beach every so often instead. After awhile, walking alone might get boring so I start swimming, skimboarding, surfing, or playing volleyball there. Now not only have I saved myself the cost of the video game, but I have started learning a new skill, which in and of itself is a much more rewarding experience than epic loots. On top of it, I'm at the beach, even if I don't meet anyone I can gawk at all the cute girlies in bikinis. Priceless.
Don't live by the beach? Make for a mountain hike, or go explore a forest, or go buy a $15 bike off craigslist and start mountain biking...the possibilities are endless really.
I suppose what I am getting at is that this mindset of "Either video games or drinking or movies..." is really stifling. For some reason we think it makes sense to pay a crapton of money for eye-candy which really just paints a picture of what's already alive and well in our own imaginations when, in fact, we could be going out and living our own adventures.
Do yourself a favor...just say no to video games (mostly, I do admit that I still play Halo regularly and own both Mass Effect and Fallout 3).
Motorcycles, Robots, Space Gossip and More!
After all, those two titles surely took different amounts of man hours to develop...
...$12 to retailer, $5 to discounts/returns/retail marketing, $10 toward manufacturing costs and shipping.
That has nothing to do with determining the price. All that matters is how much consumers are willing to pay, and that is determined by supply and demand.
Costs do not determine price. It's the other way around: Since retailers know they will be able to sell a game for $60, they are willing to pay $48 to stock it on their shelves. And so on down the supply chain.
Suppose that consumers were suddenly willing to pay $70 for games. Because retailers know they can charge more, they will probably be willing to pay more to stock the game. In other words, costs will rise if consumers are willing to pay more.
But, on the other hand, rising costs do not necessarily lead to price increases. For example, if $15 was charged for manufacturing costs and shipping (instead of $10), games might still go for $60, because consumer demand has not changed. The price of games would only go up if the increase in costs caused the supply of games to decrease (or if the market anticipated a decrease in supply).
So, why do most games cost $60? It's all supply and demand. Gamers, in general, are not willing to pay more than $60, no matter how much time and money was put into a game. On the other hand, if a game costs less than $60, less games may be sold, because many consumers believe (rightly or wrongly) that a lower price indicates lower quality. In time, games will probably cost more than $60, because the federal reserve is increasing the supply of dollars at a much faster rate than the supply of games.
Yeah, except that there's been approximately zero effort put into price discovery on the part of the sellers. The market will pay $60 (apparently)... but when was the last time you saw a game priced at $70 to see if the market would pay that? What about $50 to see if it would increase sales? Are you getting the same quality play experience out of every game on the shelf? No? Then why does the market tolerate a fixed price for different-quality games?
It's not so much a question of "why is the price fixed" but "why is the price fixed at this particular point." That's the interesting part.
Freedom isn't free; its price is the well-being of others.
They spent all that money to make all the awesome graphics for a game that many people play once and sell it back to Gamestop. Then the publisher complains about used game sales.
If game companies made games that last as long as say, Pac-man or Super Mario Brothers, then people will not only willing pay $60, but they will hang on to the game forever.
Trent Reznor gets it: Joystiq interviews Trent Reznor
Why do PC games still cost $40 to $50? I've always heard the excuse that they're paying for licensing. While I accept that's true to some extent the reason console games are so expensive is because that's what the market will bear. From everything I've seen console gamers are less discriminating. Even when they feel they've been wronged by a developer or publisher they'll go right on buying those games. I suspect console gamers skew younger which means they're often not spending their own money and if they are, gaming is still a very important thing to them. Look at the lengths people are willing to go to in order to get a game the day of release. Like you're somehow getting a better game because you're first in line.
I'd say PC gamers tend to more cost-conscious and shop around for deals. However, probably more importantly, there are fewer people buying PC games which means publishers need to work harder to entice gamers to buy a new game. This is why I can walk into a retailer and find a brand new PC game on sale but with console games how quickly the price is dropped is dictated by the popularity of the game.
If the vast majority of gamers stopped buying games in protest of their pricing I guarantee you within a couple of weeks prices would drop dramatically. Unfortunately people value entertainment more highly than they do principles.
That's fine. I bought a PS2 and only purchase used games, or the 3-packs for $20 at wal-mart. If the rest of you would join me, we can have a big downward pressure on prices. I'm playing a $3 game this week.
Or you can rent new games instead of buying - then the price doesn't matter to you at all. In fact, given that some games have 20 hours or less of gameplay, it makes sense to rent it for a week and forget about owning it. Then you would buy only the games which have good reply value, or are intended for mostly online play.
Above all, everyone needs to realize that if they pay $60 for a game, they are allowing the games to stay that high. It would only take a few weeks for game places to see zero sales, shit themselves, and drop prices.
Yup, it's nice that you get games for 60 dollars, it's 100 dollars in Finland (about 70 euros per game). And yeah, 70 euros is a lot for a game.
We all know the supply and demand thing, but the question the author asks is, games don't inherently have a value, so how does the market determine its price to be $60 ? That is, why isn't the market clearing price not $30 or $90 ?
In addition to the points the author mentions, another explanation is in the phenomenon of anchoring. Humans inherently do not know the value of any good, so the first price they see for a product stays in their mind and they compare all prices for that product off that anchor. We have grown used to seeing $60 as price for games - it has become an anchor - so all new games are priced at that.
A brilliant example of anchoring is given in the book "Predictably Irrational" by Dan Ariely. He gives an example of Tahitian black pearls. When they were discovered all pearls used to be white, so black pearls had no market and no value. But a very clever marketing campaign was launched to *anchor* the black pearls with very expensive jewellery, and hence there value became very high.
Economics assumes that people are rational. However, people are often irrational. There is a subject called behavioural economics which studies irrational behaviour of people and the limits of normal economics.
Inflation from 1990 to 2009 : inflation. OK it is Maine, ok it is not an official nubmers, but from 130 to 215 it is a 65% increase of cost of living. So at least for Maine, game are actually LOWER in cost than they were 20 years ago. In my experience it is the same in Europe.
C. Sagan : A demon haunted world:
http://www.amazon.com/gp/product/0345409469/
visit randi.org
Do you understand the concept of supply? We're talking about data here. You can't apply supply and demand concepts when the supply is practically infinite.
Your statement would only be true if every single game for sale was identical. Supply refers to providing things that people want, it's not limited to just how many copies of a game you can sell.
Supply and demand still apply, here.
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
Because God loves the infantry! Now you STFU.
--Forest C. Adcock--
Games cost $60 because some of them are worth it to the consumer. What makes a game worth $60? It can be any number of things: Many hours of interesting gameplay; unique game design; impressive graphics; a chance to revisit a favorite movie universe or play a favorite comic book character; a social experience with friends; a perfect progression of challenge.
Of course, plenty of games aren't worth $60 (or at least aren't worth that much to very many people). They get introduced at that price point, because every developer hopes that their game will turn out to be worth 60 bucks to a lot of people, and experience has shown that that is about as much as a consumer is willing to pay for a really good game. The ones that aren't worth that much to many people don't stay at $60 for long, because before long the retailer starts cutting the price to get them off the shelves and make room for new games that might actually sell for $60.
How much games cost to make is pretty much irrelevant here. The publisher is going to scale a games budget to what he sees as its sales potential, and there may be some games that don't get made because the developer doesn't see how they could possibly make money. But a really popular game will more than pay back its development costs.
Tacit collusion. 'Nuff said.
well i think the point of interest here is industry collusion, price-fixing, etc. there is more to free-market theory than 'what the market will bear', namely 'real competition'.
Completely off-topic, but I paid nothing for my nonexistent jersey, because I'm not gonna pay into a company (yes, the NFL is a corporation, not a national institution) that actively hates it's fans, charging through the ass for seats and making it hard for people to even be fans of the game by trying to claim copyright of anything that once looked in their direction. Fuck them.
My blog. Good stuff (when I remember to update it). Read it.
The reason it cost $60 is because that is what we are willing to pay. To the person that posted the question spend the money to get a college economics class. You really are clueless.
Most modern game boxes could easily get into the Priority Mail flatrate envelope, which has a $4.80 postage charge anywhere in the US, which is reduced by a few percent further of you print the shippign label online.
I listen to both RIAA and non-RIAA stuff if I like the music, tangential business/politics nonwithstanding.
Unfortunately, the "feelies" (box, manual, media) are real world items and are finite. Cheap as the materials are, there's also the manufacturing process (printing box art/manuals, stamping CD images) which adds time and therefore money. For download-only distributions, the limiting factor is bandwidth and server upkeep.
I'm not saying that those costs justify such a high price because I have no idea what the figures are. However, it is not a simple matter of "data is infinite" in this case. In other arguments, maybe; but in this one, no.
its called 'second run theatres'
'kids meal' popcorn/drink - 5 dollars.
seeing artsy english movies in a packedd theatre of laughing old people - priceless
Most people could afford $30 or less for a game, but not $60. Which is why people pirate the games on P2P networks. They cannot afford it and the pirated version has the DRM removed. But the P2P version may cause lockups and might be malware infected, so people are taking a chance when they pirate a game from P2P networks.
But common sense says the #1 reason why people pirate the games is the cost of them. When the Atari 2600 came out games cost $15 to $30 each, but as the Atari 2600 got old they got sold at bargain bins for $5 to $1 each. Sometime in the 1980's the video game console market collapsed and then games got cheaper. Then in the 1990's they went to $30 again, then $40 or $45 by 2000. Then by 2005 they were almost $55, and now in 2009 they are $59.99. Yeah games did get bigger and more of a challenge to develop, but most of the work is offshored to the cheapest labor in third world nations and then the debuggers are in the USA. It is the same way with sneakers, they make them in third world nations but sell for $100 or more in the USA.
It is corporate greed and the companies conspire to all sell at the same retail price. Which is why sales are down, and companies cannot earn money. They keep raising the profit margin and that raises the retail price. If video games were reasonably priced, most people wouldn't pirate them, and video game companies will earn more money via the volume of sales. Back in the 1980's before they had DRM in games, after the crash, video game companies made millions and there wasn't as much piracy as there was now as games cost $20 or $30 each back then. Games like Bard's Tale made record sales and profits, but the Bard''s Tale remake for $60 wasn't anything like the original and was bloated and buggy and thus made record losses and couldn't sell very well.
Remember, Slashdot does not have a -1 disagree moderation, and no, troll, flamebait, and overrated are not substitutes.
While that one game you bought was half the price, PC games are normally $10 cheaper, not 50%. And the experience is not "usually equal or better". It is rarely better. Equal, sure. Worse? I see a lot of that. A lot of PC ports are often half assed and ignored.
Honestly, I think $60 is too much for a game.
PC games are usually at $40 new where I live (Seattle).
I can usually get them at $30 bucks if I wait a few months after release.
I have a Xbox 360 and those games are like $60 new.
Most games that I can play on both my PC and 360, the 360 looks worse.
And on top of it, I'd have to pay for the Gold live to play online.
Not to mention all the little crap MS wants to nickle and dime you on their live service.
I only have a few 360 games, bought used. I don't pay for live, and even though I have a 3 month pass for Gold, I doubt I will use it.
It's just designed to line MS's pocket, and I think thats the wrong approach to take with consoles and video games.
I don't have a PS3, but I do know their online system is free. Games are about the same price.
Not sure actually why consoles games have to be $60 while PC games aren't. If a game is being developed for all 3 systems, like most of them are, then I guess maybe it's cheaper for the PC as a way of apologizing for the crappy 360 port?
I don't know, but here's some advice to anyone that wants to read this far:
Drop your price. $40 is a magic number. And quit, for the love of (insert your diety here), quit making these stupid behind the charcters shoulder 3rd person view already! While it works with Batman, it doesn't with shooters. Ya, I know, some peeps think you need to use a gamepad to play shooters. And then trying to force it with a off center viewing angle. And do not ever spend more money on advertising then you do on producing the game. oh, and quit making crappy ports. Seriously, spend a little extra time making it special for each system.
anyways, sorry for the rant.
Be seeing you...
The real answer to games cost $60 is "because people will pay that much". That said, I think there are signs that the price point is more than the market will bear. Look at the meteoric rise of the trade-in market and digital distribution. I'd argue that the lower pricepoint are a big factor.
Furthermore, look at Left 4 Dead. When they lowered the price to $30 Valve sold more copies that weekend than they did at launch!
We know why most audio CDs cost $17.99. Illegal price fixing.
We know why video games cost $60. Illegal price fixing.
The FTC and the Justice Department's antitrust unit were out to lunch during the Bush administration, but that seems to be changing. Stay tuned for enforcement.
One point that it seems a lot of people are missing is the retailer's end in this.
Let's say a publisher creates 5a game with an MSRP of $25. The retailer isn't ever going to get more than 30%. So that means they can make $7.50 on the game - so little that they probably aren't going to bother with taking the shelf space for it when they can get $12-$18 for some other game that occupies the same place on the shelf.
Therefore, no game for $25 is ever going to appear on retail store shelves. Or Amazon. Or anywhere else, except direct from the publisher. Which means it isn't going to sell well and won't make much money for the publisher. Therefore no $25 games ever get made.
Remember, the publishers are competing against one another for shelf space and this market is controlled by the retailer. And if you aren't in retail in one form or another, you aren't in the marketplace at all.
It's so simple: both cost 60 bucks because that is what people are prepared to pay TODAY... I remember when I started gaming on a PC in 1996, in germany a top game cost DM 70 (which was about $45-$50 back then) - over the time they increased the price for a top game slowly but steadily and today we pay EUR 60 (which is about $90).
...
given, games today look much better (more work), but on the other hand: back then there were no programming frameworks, no unified level-editors, no armature, tougher hardware boundaries and they had a much smaller target group (because not so many people had PCs), so all in all I guess that little of the increased prices is actually justified...
some day the price will go to $70 and people will say "well, that's just 10 bucks more than what I'm used to - I'm prepared to pay such a little extra for a TOP title like $TopTitle"
some day the price will go to $80 and people will say "well, that's just 10 bucks more than what I'm used to - I'm prepared to pay such a little extra for a TOP title like $TopTitle"
some day the price will go to $90 and people will say "well, that's just 10 bucks more than what I'm used to - I'm prepared to pay such a little extra for a TOP title like $TopTitle"
The MAFIAA is a bunch of mindless jerks who will be the first up against the wall when the revolution comes
New conesole games costs around 100$ where I live. So I never buy new games anymore. 60$ is what preowned games costs. So I only buy preowned but mostly I borrow them.
That's an intriguing point. My first thought was "oh noes, another data wants to be free jerk". But then I thought about what you wrote, and it's very true. Supply and demand doesn't apply here (at least for downloadables); but at the same time "whatever the market will bear" does. Clearly the price is $60 because people will pay 60 -- the "demand" side is certainly covered. But when the supply is infinite at negligible cost. , how does that fit in an economic sense?
We must be talking about console games here. Big name PC releases generally go for $50. The only thing I can find on Steam right now that retails for more than $50 is a collectors edition of Aion. The standard edition is still available for $50. So the question is, why do PC games sell for less?
Sure, $60 isn't so bad compared to $15 for a movie when comparing the time spent. But that isn't the half of it. Two hours entertainment from a good movie isn't the same as two hours of a good DVD movie, cinema, music CD, gig, the game, golf, hookers or whatever you do for fun. Two hours from different games isn't even the same, nor often is any two hours from the same game. If you're going to use hours as your criteria then how does gaming value stack up against a good novel, a good website, or a walk in the park?
Sure, I think gaming is good value when you pick with care, but breaking it down into $ per-hour is folly.
I'm suddenly reminded of how much the "real worth" of a new car is the moment you drive it off the dealer's lot.
Libertarians somehow believe that private businesses should be stronger than governments but weaker than individuals.
Do we not understand the very simple concept of supply and demand?
I already made this point above, so I'll cut it short. Freely- or practically freely-explicable commodities break supply and demand because, once initial development is paid for, supply becomes unlimited. If "because that is what the market will pay" is the entire story then it, in fact, has nothing to do with supply and demand.
Property is theft.
Damn me for not proof-reading. That should be "freely-replicable".
Property is theft.
It's important to not overlook the overhead required for successful product distribution. You need an entire branch/ sector to make sure the product arrives everywhere it needs to on time, gets placed on the right shelves. The company needs to pay salaries and benefits for a group of employees who manage this. Although the physical product and packaging might be cheap to produce, making sure it is properly distributed and keeping store inventories stocked is more difficult than one might think. While it might only cost $10 to ship a case of games, maintaining the relationship with retailers and knowing where to ship the games costs a lot. Digital distribution will help cut these costs and should hopefully reduce prices (although publishers are evil and probably won't pass the savings on to consumers).
Nobody said things are created for free, just that the logic of supply and demand doesn't work. If a brand new game was developed for every person who bought one, then it would work.
Property is theft.
AU$150 for Street Fighter II Turbo on the SNES. That was back in '93-'94. So anything less than that is a bargain!
Electronic Arts pre-tax profit margin -25.2%
Either they are selling games at too high a price to sell enough, or they are not charging enough for the games they are selling, because they aren't making a profit!
Ubisoft net profit margin 6.5%
Not much profit...
Nintendo net profit margin 15%.
Of course, they actually make physical things as well (Wii).
Does this even need to be discussed? Are we really that retarded with our understanding of economics? Do we not understand the very simple concept of supply and demand?
Try explaining that to the RIAA.
An SQL query goes to a bar, walks up to a table and asks, "Mind if I join you?"
But..... SOOOOOOOO many people have been asking me to flash their drives as part of the repair, or telling me they need the console repairing coz the drive has been flashed and they don't want to buy a new unit and all they have are copies. It's been quite an eye opener....everybody's at it, and the answer is always the same : Games are too expensive, DL DVD's are much cheaper....
I have to admit, I NEVER buy new games, because I feel that they're simply not worth the money they are charging for them. I always buy second hand games for less than half price. Oh, and no, I don't have any copied games....
People. Catch a wake up. You are selling your games for far, far, far more than people (That's your market) think they are worth. DROP YOUR PRICES. You'll:
a) Sell more games.
b) Make more money due to increased volume.
c) Reduce the piracy that you are so concerned about.
Quit being a part of the problem, and start being a part of the solution.
The music and film industry need to come to the same conclusions....the products they sell are worth a *lot* less than they think they are.
-- Fuck Beta
They raised the cost of games to $60 today, we have always paid $60 for games. I've heard they will lower the price to $50, which is a $10 savings and a real deal. Games have never cost $50.
...the cost of getting your yard mowed in my neighborhood jumped from $50 to $60 the day the X-Box 360 was released. I guess teenage boys are too single-minded to know about sales tax.
<oldfart>In my day, we had to mow 10 lawns to get an Atari cartidge.</oldfart>
Price is determined by what the consumer is willing to pay.
Price is determined by what the consumer is willing to pay.
It's not that hard and it does not apply solely to video games.
You can call it a "rental licensing" fee, but everyone had to pay it. In fact, during the beta vs vhs period, they charged hundreds of dollars for tapes (more than a thousand for some). I know because I wanted to buy some, but as a kid I could not even remotely afford it.
Remember, Hollywood didn't like "evil" video tapes and tried to sue various companies out of business for it. Just like they tried to get rid of the "evil" internet, though their strategy there was more to replace it with their controlled version of the internet.
It's important to take inflation into account when looking at price increases over a 10-20 year time span. According to MeasuringWorth, $60 today was ~$55 in 2005, ~$45-48 in 2000, ~$38-42 in 1995, and ~$35 in 1990. So prices might have gone up, but not that much.
Ignoring inflation is a very common error in stories about spending, probably because it's an error that makes the story more exciting.
Visit the
so windows 7 OS is a fair price compare to these game prices....
just dont buy anything
Games cost 60$ (70€) because had they remained at 50$ (60€) the publishers would not have been able to show any growth to their shareholders. They keep making roughly the same games, appealing to the same audience and thus don't have any customer growth. In the past that was not an issue as the population was growing and despite appealing only to the same percentage of people (30% of households had a console, that number remained the same from the NES to the PS2) they got automatic growth. Now the population growth is slowing or even reversing in many countries so the number of customers is no longer increasing. In order to maintain revenue growth the publisher must wring more money out of the existing customers so they come up with higher prices, DLC and such while talking about the evils of piracy and used sales in a desperate attempt to explain to their shareholders that there are still growth opportunities that don't require changing the games themselves to appeal to new people.
Meanwhile Wii games stayed at 50$ (dropped to 50€) because the Wii can afford to do that, it's increasing the customer numbers drastically and selling to many households that were not interested in the games available before (at least the last few generations, they may actually have had 8 bit systems) so they don't have to wring more money out of each individual customer.
Justice is the sheep getting arrested while an impartial judge declares the vote void.
The point that most people miss with lotteries is the potential they have to change your life. A standard risk of $2 on a lottery may for that insignificant amount of money, permanently change your life. While the odds are stacked massively against you, the small risk for the massive reward and the potential for lifelong effects can overwhelm the actual % chance of return.
Supply of a game, not supply of games.
Here is an informal pricing of common geek entertainment choices converted into dollars per hour at prices that I typically encounter in California. Important note: not all options are equal value. This is just a pricing guide, not a direct comparison.
Disneyland for 6 hours = $11 per hour
Museum, 3 hours = $6.66 per hour
Movie Theatre = $5 per hour
Computer game for 10 hours = $5 per hour
Premium Cable TV @ 2 hr/day = $1.66 per hour
Netflix, 5 movies per month = $0.90 per hour
Cable TV @ 2 hr/day = $0.83 per hour
Sci-Fi book read twice @ 1 min/page = $0.80 per hour
Good computer game for 100 hours = $0.50 per hour
World of Warcraft @ 2 hr/day = $0.25 per hour
5 minute song played 50 times = $0.24 per hour
Good Sci-Fi book read 20 times @ 1 min/page = $0.08 per hour
Good 5 minute song played 500 times = $0.02 per hour
It actually started around the time Halo 2 came out. Developers came up with the idea of the "Limited Edition" that came with some extra junk for $10 more than the standard $50 price at the time. So in the year or so between Halo 2 and the Xbox 360, a few of the bigger titles (At the moment I can't remember any others, but they were there) also released "Limited Edtion" versions. And for some reason people bought those. So the publishers realized that people would spend more than $50 on a game, and jacked up the price to $60 starting. EGM ran an article about this in late 2005, or early 2006. Not sure which.
Visit New Zealand.... New Release game titles tend to come in at $129.99 nowadays, especially on consoles. A second-hand game might cost $60 at a store like EB.... if you're lucky.
Thus, we are thankful for Steam.
The bit people want to pay for are not in infinite supply.
Yep. I only buy greatest hits/platinum hits games, because I'm not willing to shell out $60 for a game.
The last two I bought were Crackdown (found online for $10 including free shipping) and Assassin's Creed ($30). They weren't the best games I've ever played, but they were worth what I paid for them. :)
Now I can't wait for AC2, except I know I'll have to wait a year after they release it for the price to come down. :(
Even basic economics should have taught you that things become more complex when dealing with luxury goods...
I think video games cost more generation due to high production cost to develop the games, but game prices should drop soon for the holiday season.
Well, for the sake of simplicity let's exclude recurring cost games like WoW and Madden, and limit our discussion to one-time purchases.
Though trade-in's is different than digital distribution, I think from the consumer's perspective they are trying to achieve a lower price. The vast majority of trade-in money goes towards the purchase of another title, thus offsetting the cost; and digitally distributed games come in (typically) at a lower price in the first place. Either way, it's a lower price (perhaps not a better value per se, but mentally it's a lower number in the consumer's head).
You bring up good points, but I still think that game prices are due for a "market adjustment". The market has a good way of establishing "true value". When the wii first came out, the "official" price was $250 but you could easily sell it for $350-400 on ebay. Similarly I think that you have a segment of consumers who will only buy a game once it comes into the neighborhood of $20-$40 USD.
In my opinion, some games that I have played such as Metal Gear Solid 4, Call Of Duty, Grand Theft Auto and etc, are well worth the $60+ price tag. I feel if its a really good game that actually took a considerable amount of hard work and time to create than there is no problem with $60, considering the price of other things we pay for today like $10 for movie tickets, $20 for DVDs, $15 CDs...
Console manufacturer's have a significant impact on the pricepoint, and the article fails to really explore this. Developers are bound by the contract they make with the console maker, it's there platform, they control it.
In general the console maker takes up to 25 - 35% off the SKU, generally a minimum of $10. One reason PC titles are cheaper. I vaguely remember this from several sources including a discussion I had with staff from Rockstar. Contrary to what someone else noted here, I've never heard of the console maker taking 50%.
This is how console makers earn their profit even after taking severe losses on system purchases. And don't forget all those reports that asseses the manufacturing & component costs and show the manufacturer making a loss, neglect to cover corporate overhead, R&D, marketing, shipping, packaging, returns, etc. Nonetheless, the fees they earn per game sold can allow for substantial profit in the long run. During PS2's peak, 80% of Sony's worldwide profit came from the PS2 division. As PS2 usage delclined, Sony's earnings plummeted.
Similarly in film, you don't have just the production costs which have now risen to approximately $200 million for tentpole event films, but P&A (Prints & Advertising). Those costs are usually $50 to $100 million extra in North America alone. Plus those weekly box office takes don't account for the theater share (which is usually tiered, so the studio earns more at opening weekend, as much as 90%, a reason why concession prices are so high, that's where theaters really make their profit). This is why DVD's were so important to studios. At the peak of DVD sales, Hollywood was making 4 times more money on DVD sales/rentals (24 billion one year) than they were on North American box office, $100 million plus for a tentpole film's first week on DVD. This was mostly profit as Hollywood unions took less on DVD's, hence the guild strikes. Also why the comparison of the games industry earning more money than Hollywood was absolutely ludicrous. Hollywood is much more than just the North American Box Office.
With GTA 4's production budget apparently running up to $100 million, the development/publisher costs plus the console makers fee could prove problematic for the next generation of games...
So why can I buy DVDs from $5 to $20?
ShadowRangerRIT listed a few reasons. I'll add another: The "manufacturing costs" include a royalty to the patent holders and console certificate authorities. The royalty to MPEG-LA and other interested parties for a DVD-Video disc is much less than the royalty to, say, Nintendo for a Wii disc.
The only way I'd pay $60 for a game is if the title starts with Starcraft.
Even if it were a camping simulator? Or what about four copies of a $15 game for your LAN?
Don't rely entirely on the bargain bin if you enjoy online multiplayer. The publisher is likely to have already shut off the matchmaking server before you open the shrinkwrap. Sony has been known to do this; I buy a game from the bargain bin, start it up, and get "DNAS Error -103: This software title is not in service."
The cost of things comes from how much consumers are willing to pay, not how much it costs to make. An illustration of this is that man go to much effort to find pearls because they are valuable. They are not valuable because of the effort. In terms of how much profits are justified, any profit is justified. If they were not justified (usually by risk and uncertainty), then more people would shift to this field and compete (thus lowering profits).
I think if more games go to downloadable versions online, the price should drop. This basically eliminates the middle man and the profits go basically straight to the game company. It's been going more this way with PC games because well it's a lot easier to download and install it right to your computer than for instance a PS3 game where you would probably have to burn a DVD and then use that disk to play the game. With most consoles using the internet for online interaction you could probably download the games off the console itself. I'm not sure if they already do this but it'd be a great way to keep prices lower, maybe in the 40 dollar range. When it comes down to it though, paying $60 for a game isn't that extreme, people just need to make sure they're buying the games they really want. People need to do more research on the games they're looking at and maybe even go rent it before actually purchasing it. That's just my 2 cents.
I'd have to say that I agree with Hal Halpin (president and founder of the Entertainment Consumers Association). Because of the developing technology, such as subscriptions to GameFly©, or downloadable games through XBOX Lives© new dashboard. I believe that we will most likely see a stand still of $59.99 for games, if not a slight price drop because of competition between publishers/developers and these subscription services that allow you to download or simply rent games for a cheaper price. In addition, one thing that publishers need to take into consideration when determining a price, is piracy. If prices continue to rise too greatly, then you could see an incline in people copy or pirating games. This could lead to revenue drops for these game companies and thus, they'd be loosing more money then they hoped to gain.
It's clear now that Nintendo isn't trying to be powerful as price effective. This being the case, we know they won't be selling for $60 a game until we see what they're trying to do with whatever their new system is. Sony and Microsoft are selling games for $60 because it's a next gen system, so that means they won't raise up until at least the next gen, which I don't think it'll go up much more.
Why are games at $60? Skimming strategy. Every game is gonna come out at $60 because there are gamers that are hard core about playing THEIR game the moment it comes out, no matter the cost. Developers know this and the fact that demand in the gaming industry is inelastic, so common marketing theory points to making the most profit they can at first. And for those of us who are somewhat more patient, we get sucked in at the $50 or $40 range when the price gets dropped to achieve more penetration pricing, getting to the common gamer. And it also comes down to determining value in the mind of the gamer. If gaming developers and retailers make me believe that I receive more "value" from being able to play Modern Warfare 2 the day it comes out (11/10/09!!!) than the price I pay for it, then I will justify it as a good buy.
Source: http://www.netmba.com/marketing/pricing/
CDs were $15 - 20 for two decades. It came out that they cost $1 to produce. The music industry pushed the limit on this price for years. Then the bottom fell out and they can't give away CDs now. They were forced to go back to singles (iTunes) for a buck and MP3 albums for $5 online. Go into a music store now, CDs are $8-10 max. And that's new releases. You guys are fools for paying $60 for a game.
Dunno if it's been posted before, but here in Europe, the pricetag is rarely less than 70â for new current-gen games. Which is 101$ at the current exchange rate.