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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.
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?
"I bless every day that I continue to live, for every day is pure profit."
"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.
What TFA didn't mention is that the $60 price point goes all the way back to the NES days.
I specifically remember My family shelling out (thanks!) the sixty apiece for SMB 2 and later SMB 3 and Megaman 2 when they were new. I think that the less popular or complex games costed less, but there were some real turds like Legacy of the Wizard which also went for the full sixty.
Drop in at your local community college and take a course on statistics. Pay close attention to the "profit maximization" section. It'll explain the math behind the relationship between unit cost, units sold and total profit.
Fascinating stuff. If nothing else, it'll teach you to never spend more than $2 on lottery tickets, if you spend anything at all.
Learning HOW to think is more important than learning WHAT to think.
That's to cover the costs of editing out textures and censoring.
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.
Kwisatz Haderach
Sell the spice to CHOAM
This Mahdi took Shaddam's Throne
It's the same underlying reason why male dogs lick their balls.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
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.
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.
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.
I like Steam because I feel too ridiculous buying a game in a Best Buy in my late 30s :-) Really, Steam is like a brown paper wrapper for Half-Life and Crysis :-)
Damn, dude, I'm 57 but I'll get off your lawn anyway.
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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.
It doesn't need to be either that or this. You can enjoy both worlds, just as long as you don't take gaming too long. I enjoy traveling, going out and hanging out with my girlfriend. On the other hand I enjoy sitting on computer, coding, gaming, writing on slashdot. As long as you balance them both good, it's great. Or even mix them; I like watching while my gf plays gta or some other games and drink a beer while she does so. And I like it when I play Left4Dead till 4am at night and she wakes up and comes sitting behind me to watch me finish it and convinces me to get to sleep then.
You dont need to choose either one, you can do both as long as you balance it.
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.