Are Video Games Too Expensive? [VIDEO]
Hey future Caleb, in your year of 2078 are you still paying $60 for a video game? I hope not. And I don’t think you should be paying less. In fact, I think you should be paying more. I, present Caleb, should be paying way more. If future game publishers have been able to maintain profitability at a $60 price point–a price point that hasn’t changed in over 20 years–then I have to assume one of two things. Either loot boxes, other microtransactions, DLC, day one patches, and ports from previous console generations aren’t just the norm, but are in fact themselves rife with loot box loot boxes, nano transactions, day zero patches, and nostalgia motivated DLC ports not of games but of the installation progress bar.
Or maybe you aren’t paying $60 for a video game because video games no longer exist. Who needs video games when your corneas have been puckered by an atmosphere dense with never-ending nuclear fallout. I shouldn’t scare you present viewer. I’m sorry. Video games aren’t going anywhere. We’ll have the technology by 2078 to beam video games directly into our brains without the need for eyeballs.
Recently, Nintendo introduced Nintendo Labo, which many derided for relying so much on cardboard. Simple, cheap, cardboard. I personally love the idea, perhaps encouraged in part by the assumption that a cardboard toy would have a cardboard price, that being inexpensive. So, when I learned of the actual price, between $70-$80 dollars, I was shocked.
But I, present Caleb, pride myself in trying to understanding things before vocalizing an opinion. So, I stepped back from that ledge my friend and cut ties with the possible lies that I’ve been living in. The reality that all games, not just cardboard toys, aren’t $70-$80 or more means that we’ve been living a semi-charmed life. Game prices in the future…I wonder how’s it going to be…. So I’ve done some research because I didn’t want my uninformed opinion to render me 3rd eye blind.
I hope to enlighten similarly shocked gamers today on a couple fronts: 1) how much do games cost to make? And 2) how much should we consumers pay for games?
How much do games cost to make?
First, what goes into making a game?
Let’s talk about the finances associated with a business. In most businesses, the #1 expense is people. From personal experience, I can tell you that this number accounts for about 90% of expenses. And this isn’t just payroll. This is taxes, the company’s portion of healthcare (here in the US at least), and the company’s contribution to retirement plans like a 401k plan. The other 10% are, depending on the type of business, operating costs like rent and electricity, and other costs like marketing.
For the sake of this conversation, let’s focus on the 90% cost, the people.
In order to make a game, you need game designers, artists, and developers. Jason Schreier in his book “Blood, Sweat, and Pixels: The Triumphant, Turbulent Stories Behind How Video Games are Made” references a formula that some game developers use to estimate the cost of producing a video game. $10,000 per person per month. Per Obsidian’s Adam Brennecke, in a Kotaku article by Schreier, “Based on the average salary for a developer plus overhead, it costs about $10,000 per person at the studio. Some are more expensive. And that’s how you usually do budgets with publishers too.”
This means a small indie studio of five people working on a game for 18 months should budget $900,000 dollars. A major studio trying to compete with the Red Dead Redemptions and Destinys of the world spending 3 years and 400 people on a game means you’d need to budget $144,000,000 dollars. Game making is expensive.
Generally speaking, the longer a project goes, the more it will cost (the studio has to keep paying its people). So, a developer wants to make a game as quickly as possible in order to control expenses. This fact alone is worth unpacking because it should help you, as a gamer, understand how hard it can be for a developer to push back the release date of a game. In most cases, gamers should celebrate a developer that takes more time on the game. A pushed deadline can mean many things, but one of those things is that the developer wants to make the game better, despite the additional costs they are taking on. Gamers, at this time, expect a $60 price point, so it’s not like the publisher can simply increase the cost of the game to recoup those additional costs.
To control expenses and to keep games at $60 game companies can do three things: decrease staff, decrease timelines, decrease operating costs. Or, to increase revenue they can diversify the revenue channels (meaning putting out more games, more ports, more DLC, use microtransactions, sell non-game merchandise, use pre-order gimmicks, etc).
“What about technology,” I hear you saying. “Hasn’t technology gotten cheaper?” Yes. A game that used to take hundreds of thousands of dollars to make in the 1990s can cost much less today. Tools like Unity3D and GameMaker Studio make game making much more accessible. But the game studios that are making big budget AAA games aren’t pumping out pixelated sidescrolling platformers from the 1990s They are making incredibly complex games that cost millions and millions of dollars. It simply costs a lot of money to develop the kind of games that impress gamers enough to open their wallets. There are those of us who love a simpler game, ones that don’t take an expensive staff or costly overhead to make. And those games, generally speaking, are priced quite a bit lower than $60, keep in mind.
How much should we expect to pay for games?
So, we know games are expensive to make. So, how much should gamers expect to pay? Well, the short answer is, enough to cover the development expenses and to provide enough profit to fund other games. Arriving at this cost is difficult. No amount of market research can predict with 100% accuracy how many copies a game will sell at launch (and the launch sales are incredibly important; check out my video “Why Are Video Games Announced So Early?” for more information why). Perhaps this complexity is why it seems game publishers and retail chains haven’t come together to discuss pricing changes since the mid-90s. I wouldn’t want to be part of that conversation either.
Loot boxes, other microtransactions, DLC, the increase of previous generation ports, day one patches, all of these financially lead initiatives give the perception that game publishers are simply greedy. And some of them might be; I’m not here to unilaterally defend everyone. Those of us that have been gaming for a long time can smell a simple cash grab a mile away.
But I’d argue that game developers and publishers are generally working quite hard to keep game prices low. Adjusted for inflation, we should be paying over $90 for a video game. But we’re not. Even the biggest AAA titles release at $50-$60 brand new. How? Distribution costs are lower (think digital distribution and the fact that there simply are many more distribution channels). The market is larger than it’s ever been, meaning there’s plenty of demand. Re-boots and ports are generally cheaper than brand new games. I argue that publishers and developers have done right by gamers for a long time, but we, as passionate, emotionally and financially invested gamers, shouldn’t expect $60 video games forever.
The old pick-two-of-three adage applies with video game production as it does with any consumer product: a game developer can make a game quick, they can make a game cheap, they can make a game of high quality. The publisher, and the gamer, can pick two of those three things. They can’t have all three.
One final note, this isn’t a ‘woah is the game industry’ kind of video. I’m not encouraging everyone to feel sorry for game companies. If game companies don’t make good products that people want and don’t control their expenses, then they will go out of business, as they should. Game companies shouldn’t receive charity from customers.
I’ll bring it back to you, future Caleb. I hope in the year 2078 you’re spending at least $90 on a new video game. And I hope that leaves you with enough cash to wash your brain of every single 3rd Eye Blind lyric that burrowed itself into your teenage brain all those years ago. Baby. Baby.
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Research/Sources/Credits/Inspirations (this is not a comprehensive list, as that would be impossible, especially the “inspirations” items)
- Inflation calculator: http://www.usinflationcalculator.com/
- Why Video Games Cost So Much To Make https://kotaku.com/why-video-games-cost-so-much-to-make-1818508211
- Why Are Video Games Announced So Early? https://youtu.be/cj1SSGdPrKg?t=3m34s
- Why retail console games have never been cheaper, historically https://arstechnica.com/gaming/2013/06/why-retail-console-games-have-never-been-cheaper-historically/
Music Credits
8bit Dungeon Level Kevin MacLeod (incompetech.com), Licensed under Creative Commons: By Attribution 3.0 License, http://creativecommons.org/licenses/by/3.0/
