Why are Video Games So Expensive?

Why are Video Games So Expensive?

With the news of higher losses at every major publisher this year, many fans wondered if the cost of video games today is too prohibitive at a most often price of $60 for current gen systems. Playing a bit of devil’s advocate, here’s the breakdown.

First, there’s the most obvious, and that’s production cost. Many games are essentially small movies now. Some, like Metal Gear Solid 4 included enough cutscenes (non-played movie sequences) to fill multiple feature length films, and most story driven games have at least some cutscenes. In addition, many big names from Hollywood have gotten into the game voiceover business. Even a lesser profile game like The Legend of Spyro: Dawn of the Dragon featured a cast including Christina Ricci, Elija Wood, Gary Oldman, and voiceover artist extraordinaire Mark Hamill, amongst other known “names.”

Some games are still coming out with 5-7 hours of gameplay, but the average has been on the rise. With the raucous success of role playing games like Fallout 3 and Fable 2 this season alone, gamers are making it perfectly clear that they don’t mind putting 40, 50, or even 100 hours into a game, and that’s just in a single player campaign. The longer a game, the more variation it has, the higher the production cost goes. With major productions, the total number of developers, designers, concept artists, writers, producers, and project managers, often sits in the 80-90 range, if not higher, according to Red Fly Studio Programmer and Developer James Clarendon. In addition, there are the aforementioned voice actors, plus quality control testers and focus groups. In Santa Monica California, home to several development studios, a programmer makes between $51,000 and $65,000 a year, according to Salary.com.

All this adds up to a production cost that has considerably grown in the past generation, and more so the past two generations of game consoles. DVD printing, packaging, and manuals all go into the production cost, as well. The BBC predicted in 2005 that games’ production costs would start meeting and exceeding the $20 million dollar mark. According to Reuters, some games have hit as high as $50 million to make. Former Sony PlayStation Europe CEO Chris Deering claimed earlier this year that only 3 out of 10 games earn back their development costs, and that’s in a growing games market.

All this talk of production cost doesn’t even cover the entire cost of making a game. Activision was spending as much as $4 million dollars on marketing a single game as far back as 2001. Joystiq.com had Mike Griffith, Activision’s Publishing head, say they plan to release 70 SKUs next year (seemingly including multiple SKUs for single games, i.e. a PS3, Xbox 360, PC, Wii version, etc.), and even factoring some getting more marketing than others, that’s a lot of money. Retailers need a cut, as well, which is usually about 15-25% of the in store price. For the retailers to sell them, the games have to be distributed, and that adds to the price as well.

This is a very long-winded way of saying that prices of video games are not likely to fall any time soon. Many games are starting to use in-game advertising to recoup some costs. Proponents say these ads make the games more realistic, as they’re using real company and product names, while decriers say it is obtrusive to the gaming experience. Regardless, it does help to keep costs where they are, at least for the time being.

For some historical perspective, the average cost of games in 1982 was $35, and SNES and Sega Genesis games sold anywhere from $40-$60 in 1991. Adjusting for inflation, those costs are $74 and $60-$90, respectively. Cartridges did cost more than DVDs to produce, but overall, game prices have essentially been frozen, not even adjusting at inflation rate for nearly two decades, even with the rise in production cost and quality.

So, is $60 too much to pay for a video game? Well, the answer ultimately lies with each gamer and each game, entirely objectively. Are companies justified economically in that price point? The answer appears to be “yes.” Hopefully, companies don’t decide to meet inflation with the next generation of consoles.

What do YOU think? Knowing all this, is $60 still too much for a video game? Would you rather see lower production quality and lower prices? Sound off below!

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