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.'"

What about Wii?

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?

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: Cost =! price.

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.

Re:What about Wii?

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?

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

Re:What about Wii?

I don't think that the designers of the console should be entitle to anything.

They're not "entitled" ... the companies have simply established a mutually beneficial business arrangement that you're willing to pay for when you buy a game. Nintendo sinks money into developing a console, in the interests of making money. The software company sinks money into developing a game title, in the interests of making money. The software company pays Nintendo to license the Wii name and logos for marketing and sales purposes (you know, so they can say the game is for the Wii), and to get Nintendo's technical assistance and expertise. That serves the software house's interest, as it allows them to sell more games, and hence make more money. It also serves Nintendo's interests, as they also make more money. You're free to go ahead on your own and develop and market a console game without the help of the console manufacturer ... but you aren't going to make a whole lot of money without their assistance and logos. Really, how many people are going to spend money to buy a game for a console when the box doesn't say it's for that console? Bloody few....

I don't see Dell getting a cut when PC games are sold.

In this instance, there's no mutually beneficial business arrangement that would dictate that. The correct comparison would to Microsoft getting a cut for each PC game sold. And they DO get a cut (of a kind ... I don't know if they get an actual slice of money per box), in that they license their Windows logos and tools to developers in another kind of mutually beneficial business arrangement.

Inflation

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.

Cute

I click on a link to an article of why game prices have gone up and I get a full-page ad asking me to compare various sports cars.

Beats the music industry

If the programmers and actual developers get 45% of the remaining $59, it beats the music industry content creators by a magnitude or more.

Because it's what the market will bare.

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.

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

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.

Way past my impulse buy point

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?

This breakdown doesn't work

Or rather it's the price that changes the breakdown. Lets assume that a game has a staff of 30 programmers and designers at $100 000 pa and takes a year to write. That means that it cost 3 million to write the code. Now then, if they sell 100 000 copies of that at $60 a time, then that's $30 per programmer for each copy sold, or 50% of the cover price. If they only sell 50 000 copies, that means that 100% of the sale of each game goes to the programmers. If they sell 500 000 then it means $6, or 10% of each game goes to the programmers. So, do they reduce the price of games if they know they'll sell more? Doesn't seem to be the case.

Okay, next - the retailer gets $12 for each game sold. Would he still demand $12 if the games cost $20 each? What if they cost $12? Of course not. The retailer knows that the lower price would yield higher sales and would be happy with a similar percentage cut. Teh same applies to the console feee. The console companies charge a smaller amount per unit for budget games.

Manufacturing costs - Now this is something that actually affects the end unit costs. However they exaggerated severely. Small (1000 disc) runs cost less than half that.

Marketing? Well, that's not even in the picture. If this was considered an expense, they might as well get rid of the marketting department and make a whopping $4 extra per unit. Every dollar spent on marketting sees more than a dollar return either in allowing them to increase the sale price or increasing the number of sales.

This is pure bullshit

This article is a work of fiction on a hilarious level. "Next-Gen" titles cost $60 because the greed of publishers demands it. Publishers get the majority of the profits, developers only get the amount it actually takes to develop the game and pay their employees. I can't believe the writers of this have the gall to say otherwise.
For the record I've worked in the industry for 15 years. There doesn't seem to be a hair of truth in this article.

Re:This is pure bullshit

....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.

It's mostly licensing...

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?

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

hmmmmm

This was my biggest worry about gettting a 360, but to be honest ive got about 8 games now and i havent paid more than £25 for any of them (and they were new). The irony is that so far this gen has been much cheaper for me.

Its probably just luck, seeing the deals at the right time and such but i swear if u stay the hell away from brick and motar stores you'll be fine.

Doesn't add up

The article says that they need to sell 1 million units before they get into the black and start making $1 per sale. It also says that many games cost $20M+ to produce. Assuming the $20M mark, and assuming that production costs don't increase with sales (do programmers get royalties?), that means they are paying off their investment at $20/sale. If this is so, why do they not start making $20/sale after selling 1M units?

Total Horseshit!

I call shenanigans on this piece of FUD. Sure the poor lil' ol' publisher only makes $1 and the evil programmers make $27... based on how many games sold? After you paid the expenses of producing a game, you don't pay more. There are no royalties provided to the creative minds behind what actual did something... like make the game. It all becomes pure liquid profit for the publishers. Why do you think the asshats can afford to charge only $20 for older games? Did they all of a sudden become cheaper to make, market, or distrubute? Nope, it's because they already raked enough cash to buy that private island in the Caribbean, but still need to hire Jose to wax the yacht. One buck a game? My ass. Leave it to Forbes.

Wrong, It's all about what people will pay.

If you'll notice, a lot of next gen titles are existing previous generation titles in higher resolution with a few more effects enabled. Obviously the development costs there weren't anywhere near what the inintial development was, especially with cross platform titles that have to have a portable enough code base to be deployed on disparate architectures.

The $59.99 is completely artificial, because that's what people will pay. There's no other reason for it. Of course, some games do cost quite a bit more to develop than others, so it makes sense their publishers would price them higher. That's not what happens though. Some games and publishers will price lower, because they can (or other marketing reasons,) but most will price the same at release to make the most profit possible. Good for them.

Just like last generation you'll notice games will come out at "max" price. A month or so they'll be down $5-10 everywhere, then they'll keep dropping, eventually they'll hit a "bottom" price where they'll be republished as a "greatest hit," if they can still sell. They're still making profit off the greatest hit games. Whether it's because they've completely recouped development costs at that point, or if it's just what the market will bear for that game, who knows. Probably a bit of both.

Supply meet Demand

Why do they cost $60, People will pay it. Period.

Next-gen?

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?

Because They Can

Just wait a year and buy the game in the bargain bin for $15. If you've got to have the title NOW, you obviously don't mind paying the premium that much.

GoW production cost: $10m not $20m

Now explain why other games that were twice as expensive to be made also have the $60 pricetag.

It's getting to be too much at times...

Frankly, Final Fantasy XII was worth the $60. (Yeah, I know the non-collectors one was $50, but it was out of stock at the time.)

Many of the franchise games, with recurring themes, are no longer worth the $60. Many of these simply look better, or have some nifty feature and that's it. Hmmm... reminds me of Microsoft software actually. --no thanks! This title was big (really fricking big), expanded on the story line and overall theme nicely and had fantastic art direction. Beautiful and engaging game, with a lot of depth. Casual players could blow through it and enjoy the title. Those wanting to really explore the game are rewarded with lots of things to do. Playtime on this title ranges from 20-30 hours, to nearly 200! That's worth the $60.

If the game is actually something new, and provides that escape factor, the $60 is no biggie, particularly if it's got some playtime to it. If it's a rehash, I'm more inclined to snag it used, or just skip it period.

All of the licensing that goes on, makes sure the existing games remain expensive for new versions. I've no problem with that, but I think as time goes on, more people will start doing what I am; namely, skipping or buying used or trading. That pie will shrink somewhat. New gamers will counter that somewhat. Don't know where those curves intersect!

A new Madden game, for example, is generally not worth the $60, IMHO. The core elements that make that kind of game fun are present in the titles I already own. Getting new players and such is cool, but not $60 worth of cool.

Retro gaming is getting pretty fun these days. Being able to self-publish creative and fun games for older consoles is a kick and more people are doing it now than ever. I like this scene. The games are fun, you can get to know the developers and even participate in the process too boot! Interestingly, some of these titles hit $40.00 each! Many sell into the hundreds and a few into the thousands. $40.00 for a game written for the Atari 2600, suggests there could be a very strong market for smaller scale development efforts, given the right expectations are set. It also suggests that smaller houses could make plenty to make the whole affair worth it.

The current crop of consoles is powerful enough to allow for some level of abstraction to make developing new games easier. The price will be perhaps somewhat smaller games, or maybe less potent graphics, but the creativity is likely worth it in the longer run. We need new genres, or perhaps we just need to really explore some of the ones forgotten.

For now, I'm not getting a new console. The trusty PS2, retro machines and my computer all provide a lot of gaming fun. I'll spring for a new title, and I'll pay the higher price too, but I just don't do it as often. For so many games, it's the same overall ideas with different skins, essentially. No thanks!

Rather than get into a price discussion, I would prefer that be off the table and instead see more efforts to encourage smaller scale game development. Heck, if the console makers are worried about managing expectations (graphics, for example), brand the effort with a logo so those titles are differentiated from the blockbuster ones filling the shelves now.

More diversity and creativity in gaming will expand both the pool of potential gamers as well as generate a new set of core platforms from which second and third gen games can be built. This is where the value is. Always has been, always will be.

I fear the established players have a solid interest in not seeing this go any farther than the current retro scene. If people got into games as art, and played them for playability and all the other classic things that make games fun, suddenly the need for totally new console hardware drops doesn't it? Efforts, like the ones I described above, could span several consoles and even generations of them, given some engines to work with. This would be a much better scene than the one we have now.

BTW, of the

OK... but what's changed?

None of the conditions that were mentioned in this article are new to the "NEXT-GEN" consoles. The percentages were the same on the PS2, XBOX, and GameCube.

So what's changed that is making these games cost 20% more?

I read someone's comment about inflation, but that did not take into account the fact that many of the costs associated with developing a video game have decreased significantly as well. And the market for publishers is more competitive than it ever has been in the past. Also, video games, like music, have never really followed closely to inflation trends.

I understand that some games have production costs in the $20million range, and I would probably not mind paying more for a game like that. But PLEASE don't try and convince me that every game (Sonic the Hedgehog for PS3/360 for example) costs that much to produce. Why not chage less for games that cost less to make? At least then the old "you get what you pay for" addage would be as true for video games as it is for everything else in the world.

I think though that the numbers speak for themselves. The Nintendo Wii is selling it's games at $50. Every month when the figures come out, the Nintendo Wii is the number one selling console (see past slashdot posts) even though they are still almost impossible to find in stores. And it owes that to more than just a fancy magic wand for a controller. For the price of a PS3 with NO GAMES you can buy a Wii and FIVE GAMES. I have both, guess which one I have bought more titles for?

And here's a question... When the PS2 games sold a million copies (or so) they would release the game as a platinum release for $19.99. Is the PS3 version going to cost $29.99 (a 33% increase)?

$40 in the 80s

We can argue the percentages of profit in this business model but I would like to remind everyone of how much we aren't paying. My brother and I saved up and shelled out $40 (that's what I remember, can anyone confirm this?) in the 80s when Pac Man came out for the Atari 2600. Was the game worth that? Hell no, it was terrible. Are games now worth $60? I'm not sure. Some games I might pay $100 for, others I won't play until I see a 3 year old used copy for $9.99. Basically we're lucky they haven't tried to milk us for more.

better question...

is why does the same game on Xbox360 cost AU120 while the Xbox game cost AU90 at release?

The games in question have already been out for a fair while on XBox, yet the 360 version costs even more and the game is old. (OK, maybe not a better question, but I find it damn irritating /rant)

The Publishers 1.6%

Honestly, please guide me to a publisher that would only take a dollar on each sale. I would say this article is misleading at best. Publishers MAY only make a dollar but that's if they are picking up 100% of the marketing, advertising, localization, QA, etc costs. This is not always the case (I wouldn't even say that this is frequently the case). Trust me, there wouldn't be a ton of publishers out there if they are only making a dollar a pop per game with the costs of overhead to also keep in mind.

It's all about the market

Game publishers think enough people will buy at $60. So long as people buy games at $60, games will remain $60.

If publishers think they could charge $70, $80, $100 and still get the sales, don't you think they would? Of course.

I fail to see why this is such a big revelation to someone like Forbes...

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

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.

Nothing new

$60 is nothing new for games, I remember NES and SNES games costing this much, and after inflation, that price was probably closer to 80 or 90 of today's dollars. I've probably only bought about five total $60 dollar games, and most of those were for the N64. I buy most of my games used or at the $40 price range, just requires a little patience...

Correct me if I'm wrong, but...

I really think I remember seeing Mario Kart for the SNES being something like $55-60 (and offtopic, but it was some weird random number like $57.42)...back in the early 90s. Yes, I know that cartridges cost more than CDs/DVDs to manufacture, but Sega CD games were in the same price range at about the same time.

The laws of inflation don't seem to apply in the video game realm. We get off kind of easy now as compared to before. I don't remember relatively new "greatest hits" being sold for $20 a pop back then either...yet we see that today, even with Sony, which isn't exactly known for its philanthropy.

$60 is fine.. If there are no strings.

Unfortunately Microsoft requires you to pay for the game and pay for broadband Internet access too. I went out and spent $400 on an Xbox360 and another $60 on a game. I got home and it didn't work because the console needed an update from the Internet.

Microsoft just expects that everybody has broadband Internet at home. If it's not available in your area you're screwed. Their old system worked fine, the updates were included on Xbox game discs and installed automatically. Now, anybody who can't get broadband can't play their Xbox360.

Yes, I called Xbox360 support. They said update discs aren't available. I was instructed that I could buy broadband or lug my huge-ass console to a friend's house to use their broadband. Not just once, but every time a new game comes out that requires an update. I asked why it was designed to be so difficult and the phone rep, completely unaware that rural areas exist or that some people can't afford broadband, explained that I was mistaken in being annoyed and it was infact very easy to do.

I've always been aware that Microsoft uses some unfriendly tactics to force users into using their products, but this is really an ass move.

Legit

I think that the people who are calling this BS aren't reading carefully, or are otherwise not paying attention. This is not percentage of PROFITS. This is percentage of gross. Yes, the biggest bulk of the cost goes into development. For a next-gen title like a Gears of War, you have several dozen personnel working for multiple years on the project. For a typical game, that 45% chunk goes back to the publisher, who fronted it to the developer during the years of development. It's not like the game sells and suddenly the devs are rolling in money. They've already SPENT that 45%.

Chrono Trigger was $100 in speciality stores

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.

Video Game Economics 101: Dev costs are irrelevant

There's one thing people seems to forget. Physical goods have two prices associated with them. If my product is oranges, I can sell each for $1, knowing that I have to buy additional trees for each orange sold and pay some migrant^H^H^H^H farmer to pick them.

For software, I just pay the cost of development. For each additional CD that I print, the cost is negligible. Let's say I'm releasing Mario's DS Funhouse. It's well-liked by a lot of people, but not the kind of people who pay $60 for a game. For $60, let's say I have 10K sales (so $600k net). But, once I lower it down to $50 I sell 20k copies, since your older sister now wants a copy (now I make $1m!)

Let's take the case of Wolfenstein 4D. It costs as much to make as Mario's DS Funhouse, but the players are mainly hardcore and would buy the game for almost anything. Selling it for $50, 12k people will it (600k net). At $60, 11k people still will buy it ($660k).

10 years ago, the audience for gaming was generally smaller (e.g. sales were up 26% last month) so even if development costs went up, assuming more people buy/play games, prices could actually be the same. As the above model suggests, regardless of development costs, the optimal profit for a game is entirely dependent on demand. Games aiming for a large audience ought to lower their price, but "hard-core" games ought to have a high price, since offering the game at a lower price is less likely to increase sales.

Lost Data

Someone must have lost a $38bil file [slashdot.org] in the process of making the game.

Simple

Because we'll pay it. And bitch, and moan, and pay $70 for the "collectors edition".

The 360 launch line up says otherwise..

This argument might hold true, if it wasn't for the fact that some of the titles available for the 360 have been ports of current gen games, with only minor graphical tweaks. Yes, I'm look at you, Gun, American Wasteland and Battlefield 2. Yet they still cost the same as other titles which were developed for the 360. It just doesn't add up.

econ 101

they cost $60 because people will pay $60, end of story.

I call BS

Games have costed relatively the same since the NES. To say this generation is more of a jump than any other, frankly, is bullshit.

The companies are simply using this Next Gen hype bullshit to try and make more money. Now inflation I MAY understand a little, but even that is bullshit when being applied to intellectual properties.

Re:Bull

The publisher makes a hell of a lot more than $1 a title

Yeah, especially when they doctor their books so that the $1mil they were supposed to spend on marketing and PR went straight into their own pockets, and when they massage sales figures so they don't have to pay the developers what's fair. Publishers are a dirty dirty breed. Their entire business model pretty much falls apart if you remove the corruption.

Re:Bull

OK, show your research proving this. You have research, don't you?

Re:Bull

The extensive supporting documentation and sourcing you have included with your argument makes it all the more compelling. Perhaps you have a newsletter to the likes of which I may wish to subscribe?