Thursday, February 27, 2014

Why do video games cost $60?

This has been a huge question in the video game industry since the dawn of the "Next-gen consoles" which included the 360, the PS3 and the Wii. Trying to figure out why exactly the cost has gone up because i mean what is really so special about video games now that weren't so special back in 2006/2007 when the gaming industry took that big step forward? well a lot of the information i've found is pretty universal and here it is in a nutshell:

With the increasing graphical quality that newer video games required and the more intricate coding and higher licensing costs the need to raise the cost of video games grows and is justified by giving us this demographic of where every dollar in the 60-dollar schema goes to:

  1. Developer Costs - $20
  2. Retailer Cut - $12
  3. Console Licensing - $12
  4. Publisher Overhead - $9
  5. Marketing - $7
So we can take a quick look at this and go okay, that makes sense. Especially of you're a console gamer. It costs a lot because there's a lot of leg work involved in the transaction of video games and everyone needs their pound of flesh. But what about PC gamers? Why are we stuck paying the exact same cost as console gamers? Let me illustrate why we shouldn't have to. There is no console licensing cost. Most AAA companies make their own engines in the first place whether it's console based or not so that SHOULD be bundled into developer costs. With the dawn of Digital Distrbution platforms like steam and Origin, the retailer cut has significantly decreased since there are no CD's to make, no CD's to ship, no storefront employees to pay on an hourly basis, etc. AAA companies generally have their own in-house publishing service so that could also now be bundled into developer costs and decreased significantly. Marketing stays the same. So where does that put us? probably somewhere in the ballpark of the following:

  1. Developer Costs - $23-25
  2. Marketing - $7
  3. Retailer Cut - $3 - $4
so reasonably, computer games should ONLY cost about $33-36 now for PC games instead of the exact same 60 that everyone else pays. Keep in mind for companies like EA who develop, publish, and sell their own products and have their own digital distribution platform, and don't have to pay any royalties to put their ads up. all of that 36 dollars a game would translate raw profit no distributing money to other people it all just goes straight to their pockets.

Now i know what you're thinking? is it really fair that PC gamers should get to pay less than console gamers for their games? Well i think so. The initial investment of a decent gaming machine (not even a ship of the line) is much larger than the initial investment of a console. If even if you build it yourself. And by doing this you have an individual platform with which you can do with whatever you please. Is it the fault of PC gamers that they have chosen a system that does not have licensing fees and has improved access to video games? Not in the slightest. So why exactly should they be slighted for exactly that?

Console gamers walk into console systems knowing that they are purchasing the video game equivalent of an MRE and with that comes more loyalties because companies need to do more on the back end to make your experience as close to a PC's experience as possible. Convenience pays, so i think it's entirely justified. However with the introduction of the XBM and the playstation store could the prices go down a little on microsoft games and sony games? absolutely because it goes back to the most basic argument that i was making that companies like that, who own all the pieces to make games from start to finish independently really don't have the $40 dollars of third party expenses that a third party developer of lesser wealth and status would have.

Take it as you will this is just my belief that game companies are getting away with a lot of things they probably shouldn't be getting away with these days in terms of their pricing structure. in 2006 and 2007 a pricing structure like this was necessary but it has no longer become necessary in a lot of situations in the last 2 years. And the reason they cling to it is we're used to it. 7-8 years used to it and it works for them.

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