The Cost of Doing Business: Video Games Cost Too Much

The Cost of Doing Business: Video Games Cost Too Much

  • By: CM Boots-Faubert
  • Posted 20th Oct 2012

Kingdoms of Amalur: Reckoning



One thing that is clear is that Schilling came to the world of video games and game creation first as a fan and gamer, and second as a personality. It has been snidely suggested that he never was a business man, and that he never had a firm notion of what it means to run a major video game studio (and never will), but whatever the case and however the facts eventually shape up, in the end we are left stunned by how a game with so promising a future brought down a studio when its initial sales figures -- had they been applied to practically ANY other game -- screamed success!

== How Video Games Got Their Price ==

Depending upon who you ask the justification for the current threshold price of $59.99 -- which is the standardized price for modern retail boxed video game titles for the three major gaming platforms (Nintendo uses a different price model for its games which is considerably less than the price used for Windows PC, Xbox 360, and PlayStation 3 games) includes a number of key issues, among which is the cost of creation, the costs associated with operating a game development studio, the costs of distribution and packaging, and the insidious impact that video game piracy has had on the industry, that latter being a cost that legitimate gamers who do not steal games have to pay it seems...

While there may very well be a massive overhead cost in creating a video game that hovers above such efforts like a giant and obscene hot air balloon, the fact that it encompasses big and small studios alike and yet the vast majority somehow manage to not simply survive but to thrive leaves us wondering just how that magic number was arrived at. The conspiracy theorists in the GU bullpen have suggested that far from being a value and number that was arrived at through the careful examination of the actual costs of doing business, or as it has been suggested in the past that the $59.99 retail box price is a product of examining the economy of costs in creating a game and in operating a game creation studio, it is more likely the dollar amount that the experts concluded most gamers could pay if they had to!



While GameStop embraced the concept of pre-owned game sales as a market focus and developed much of what is considered to be the industry standard, other retailers have been quick to adopt the sale of pre-owned games to their business model. In the UK gaming retailer GAME is joined by Walmart stores worldwide, and the number of small Mom & Pop game and comic book stores to venture into the pre-owned game market is too numerous to even attempt to list.



We don't pretend to fully understand the logic that was applied in the process of working out the best price point for games, or the significance of that amount -- we consulted a number of economists and business experts in the process of researching this article, and it probably will not surprise the reader to learn that the majority of them considered the big picture of the video game industry to be largely responsible for not just the decision to set the price point at $59.99 but the decision not to alter that price point when the games are offered via Digital Distribution Channels like Steam, Origin, and other platforms...

According to the experts at least part of the reason for the high price of video games has to do with the reality that everyone has to get a piece of the pie in the cycle that begins with an idea at a meeting in a game studio and ends with the clerk in a Best Buy ringing up the average gamers purchase of the game.

There is a pie chart in their minds that shows the relationships among the recipients of that $59.99 and just like any product, it includes the developer of the product, the store you bought the product from, the advertising and promotion costs, and a very large number of very small slices in that pie spread out over a surprising variety of industries, including the CD maker, the company that presses bulk orders in CD media, paper and printing costs, and one very tiny slice that was so small we mistook it for a line rather than a slice, that being the part that is paid to the writers who not only wrote the dialogue and story in the game, but also the information that appears on the back of the box and in the abbreviated manual that comes inside the box.



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