Revealed!! Why Video Games are So Expensive

By on June 12, 2013

Video-Games

Why do we have to pay $60 for a new video game? It seems ridiculous. And don’t get started on downloadable content (DLC) and add-ons which can raise the total price of a game to $80 or $90.

Of course, this complaint isn’t exactly new. Video games, until the advent of digital downloads and mobile games, have always been (too) expensive. Go back to the mid ’90s when PlayStation and Nintendo 64 games were selling for around $50. If you go back 30 years, Atari 2600 games retailed for around $30, which is even more expensive when adjusted for today’s dollars.

Game publishers will tell you there are huge costs involved in the making of video games, especially today. And surely with next gen consoles like the PlayStation 4 and Xbox One on the horizon, those costs will rise as they did 7 to 8 years ago with the arrival of the current generation.

And of course, consumers continue to pay those prices, but for how much longer? In the last few years, mobile games and digital outlets like Steam have siphoned away the attention—and more importantly the revenue—of gamers.

Let’s take a look at some of the reasons given for the high price of video games.

From the David Fincher trailer for Halo 4

From the David Fincher trailer for Halo 4

Ballooning Budgets

In the movie industry, ticket prices for movies are the same regardless of budget, unless the movie is showing in a special format like 3D or IMAX. It’s the same for video games, except budgets are not cited as the reason for rising ticket prices nearly as frequently as they are for games. For movies, it’s exhibitors (theaters) on the defensive; for the games, it’s the publishers (video game makers)  that are forced to defend the high prices.

And there’s no doubt that budgets for modern video games can be staggeringly high. The 2011 MMORPG Star Wars: The Old Republic reportedly had an Avatar-like budget of $200 million, while last year’s Halo 4 cost $100 million. Still, they were priced the same as other games like 2011’s L.A. Noire which had a development budget of a mere $50 million.

Star Wars the Old Republic

In addition to the development team, there are other costs involved, not the least of which is the distribution channel. Retailers take a cut—as much as 20% or more, depending on the in-store marketing of the game. Still, video games are hardly alone in this respect.

Licensing fees and royalties are another factor. Console manufacturers Sony, Microsoft and Nintendo all receive a 10% to 20% fee per copy from third-party publishers. (However, you won’t see in-house games retailing for less.) Existing properties and movie tie-ins all demand licensing fees. Game engines developed by other companies require royalties.

Often the most expensive element of the budget is the marketing: the TV and internet ads, of course, but also social media, magazines and other outlets where the game is promoted. Games today have multi-million dollar marketing budgets like any big Hollywood movie.

Value Per Dollar

Game publishers will argue that consumers are getting more bang for their buck with video games. Top-flight titles like Skyrim and Halo may sell for $60, but they offer literally hundreds of hours of entertainment. A $20 IMAX movie entertains you for two hours and that doesn’t include the other expenses of multiple tickets, parking and refreshments.

skyrimThis is the most compelling argument from the gaming industry with regards to high game prices. I will even go so far as to say that the entertainment value of some of these popular single-player and/or multiplayer online games could fetch even higher price points than the standard $60. The problem is, we all know that if and when the price of games goes up, it won’t just be the good ones.

A middling game that’s dusted off in five hours should not be priced the same as one that offers 100 hours. The majority of games simply don’t measure up to that $60 price tag. Many gamers will say that the average title warrants a price somewhere in the $30 to $40 range.

That’s where used games enter the picture, and where a lot of controversy has swirled around the Xbox One’s confusing policy on reselling or trading games. (You can and you can’t.)

Used Games

GameStopGame publishers like to blame used game sales for the high prices of games. This is a frequent refrain in the video game industry, although it does crop up in other places, notably the music industry.

Naturally, the counter-argument is pretty simple: people would buy new if new weren’t so expensive! They’d also be less likely to resell if they felt their initial investment was worth it and the resale value was not.

Another counter-argument is the GameStop angle. Trade-ins are common and a lot of this money is going right back into the coffers of video game publishers. According to this 2012 Wired article, 16 million out of the 26 million sellers of used games, five years ago, turned back around and bought new games with that money. GameStop also encourages purchases of new games by giving trade-in bonuses.

The alternative to buying cheap used games is to simply wait it out.

Wait It Out

Patience is the key to beating these high prices. You’re gonna pay $60 a pop for console games unless you take advantage of pre-order coupons and other promotions at launch. So you just have to wait three to six months for a popular game’s price to go down. After six months, the price of a popular game is often 50% or more off the original price, i.e. into the $20 to $30 price range.

black-ops-2-xbox-360If you’re following Ben’s Bargains, you’ll rarely have to shell out $60 for the newest high-profile titles. Many games are discounted 15% to 25% on pre-order or at launch or include an equivalent credit.

Take Far Cry 3, for example. Released in December of last year, Ben’s Bargains had it on a pre-order sale for $48 last fall, then it was as low as $35 for Xbox 360 and PS3 at Amazon for one day in January, and it’s now down to $20 at Amazon this week.

You’ll see a similar pattern for other recent titles, like the holiday 2012 release Call of Duty: Black Ops 2 which now sells for around $30, or the early 2013 title Ni No Kuni: Wrath of the White Witch which is also now down to $30 on sale, or last year’s Mass Effect 3 which dropped to under $30 after about half a year.

Video games are too expensive and may get even more expensive with the next generation consoles, but if you have a little patience and deal savvy, you can keep playing games without breaking the bank.

About Joe Warner

I'm the senior editor of The CheckOut. I am an aficionado of shiny gadgets and classic Hollywood movies and can also tell you the names of the late '80s Swedish Davis Cup team members.

10 Comments

  1. Ndositwe Chizimbi

    June 12, 2013 at 7:53 pm

    GAMING is an expensive life.

    This generation is the first that I’ve had to own multiple platforms, which are PC, PlayStation 3, Xbox 360. My expenditure on games had to be disciplined; therefore, I play the waiting game since I have 3 children to feed. For the price of a new game at launch, the ‘wait it out’ approach allows me to get 2 to 3 games MONTHS later i.e. the launch price for ONE new game gets me THREE games, each for a platform. The interesting part is that I get them brand new, not used.

  2. Mike

    June 13, 2013 at 8:03 am

    I can’t remember the last time I bought a “New” video game. And the ridiculous prices are the main reason why.

  3. Geeked Chef

    June 13, 2013 at 12:36 pm

    I like to think of my purchases in terms of (hours / $) and compare it to other things that I would be doing; such as time at a bar, or the beach or something. Generally I am looking at about $10+ an hour to do something else with my time. So when I purchase a game I am looking to beat that $10 / hr amount. When you get a game like lets say Xenoblade with 100+ hours that makes something like this very easy for me to purchase. So video games can be much much much cheaper than other hobbies or activities. Even if You were to pay for only gas to get somewhere. Even that can amount to something much more than the cost of a game over time.

    • KAAAAAAHLLL

      June 17, 2013 at 2:03 pm

      Absolutely true. So many other things are way more expensive when you break it down by $ per hours invested in the activity.

      Steam is the real kicker though in terms of pushing that value over the top.

  4. Zaltor

    September 25, 2013 at 11:43 am

    I’m thinking about getting back into the console arena after being away for so long.

    I haven’t owned a console since the first PS1, then Xbox

    I know I can buy a PS3 right now for $200 and it comes with a couple games, yet I think spending $400 on a 7 year newer machine might be a smarter buy. The upswing will be better graphics etc., the downswing will be playing the waiting game until the price of PS4 games drops.

    Heck, maybe I should just wait 6 months until the price of games drop and the kinks are worked out of the first few batches of PS4s.

    Nicely done article by the way. I’ll be sure to bookmark this and come back to it, to look for up to date leads of good PS4 game deals :)

  5. sam

    November 21, 2013 at 9:50 pm

    buying video games new is such a waste of money. they always get way cheaper if you just wait. heck let everyone else buy it and then a 20$ game of the year edition is sure to follow.

  6. doc714

    November 24, 2013 at 2:06 pm

    Even waiting a few weeks to after a month from a game’s initial release can save you money. I bought Halo 4 (new, unopened) on ebay for about $35 a few weeks after the initial release. Same with Gears of War 3.
    It pays to wait, then shop around.

    • Joe Warner

      November 24, 2013 at 3:53 pm

      Yes, very good points — patience is key. Of course right now is also an excellent time to pick up some good deals, check out this preview of Amazon’s upcoming Black Friday Week video game sales!

  7. bruce

    February 13, 2014 at 3:18 am

    Games today are rip offs. It does not cost 100k to makea game either. You can buy all the software needed to make a blockbuster hit for 10k and designers get paid 80k a year and royalties from game sells as well. Cliffy B says designers are not making much money but yet this fool drives a Ferrari to work.

  8. Haruhi_Sailor_Mars

    June 6, 2014 at 6:48 am

    I honestly don’t believe blocking pre-owned games and controlling gamers will do anything to game prices. They will charge the same amount. Video games are expensive and I don’t think development costs are to blame for that. I just think video game corporations are far too greedy.

    I would counter the argument that movies can’t entertain you for as long as a game. Single player campaigns are becoming increasingly barren. I honestly don’t know which company thought up that excuse about hour entertainment as the only way that holds ground is if you see a movie once. I can look at any classic movie franchise, Back to the future, Jurassic park, Jaws, Indiana Jones, Star wars etc that I have spent hundreds of hours on. Interesting how I can watch all these over 100 times each and they still keep me entertained more than FFXIII did.

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