Are video games becoming more expensive? Or not?


First of all there is an assertion that wants videogames today to be more expensive compared with the past something which is not actually the case. If we take into account a number of factors such as cost development & production, inflation and the DLC Hyperbole, I believe that it is obvious that the opposite is true.

Cost development & production

One factor that has changed significantly over the last 20 years in gaming, has to do with the cost of development and production of a title. This includes of course the money spent on its creation, the percentages attributed to the first-party companies as long as it comes to market in a console and continually rising costs for marketing and promotion. The videogames have evolved to productions of millions, often tens and sometimes hundreds of millions.
Four to five years ago an AAA title should have made at least 2 million sales to break even. Now this number has increased significantly and although there are not official data available supporting this, estimates are around four to five million. Tomb Raider which was realized in 2013, according to analyst Billy Pidgeon of Go’s Play Research, should reach five million in sales in order for Square Enix to break even. When we take into account productions such as Grand Theft Auto and Call of Duty these numbers increase dramatically.
The competition between companies is enormous: it takes only one unsuccessful title launch to lead a studio into bankruptcy and dissolution and a few more to put the future of an entire publishing and production industry into question, with a notable historical example of the 1983 video game crash (Oxford, 2015). Given this situation, it is perfectly natural for companies to push every means necessary to create and launch additional, content available with payment (known as DLC), to balance any future failures. For each AAA title out there, there is a giant mechanism in the background into operation long before its launch: the mass marketing of data, video, information and articles towards the consumers about the upcoming game is of major importance in the era of information overdose we receive daily. Note however that the cartridges used in the 80’s and the 90’s, are far more expensive than DVD’s and Blu-ray we use today, while the digital distribution of content, has almost zero marginal costs.

DLC Hyperbole

The DLC content that many of the videogames today use is an example of how video game companies choose to monetize the consumer. Erik Kain in his Forbes article (Kain, 2015) uses a photo of a burger that supposedly describes the whole situation. He tells the truth, but beware: not the whole truth.

Burgers
The concept of additional content remains fortunately or unfortunately extremely popular. Although no one can blame video game companies that they provide us with unfinished products, asking us extra money for the missing pieces (via DLC content). The exceptions are really minimal and prove that such decisions, hurt the companies that decided to implement them, making such companies distrustful in the eyes of their consumers. An example that this tactic should be avoided is Electronic Arts, which made extensive use of DLC content and was voted worst company of the year for 2012 and 2013 (Tassi, 2015).

Inflation

An important factor that video games today seem so expensive is inflation. Inflation is an economic reality. While many video games today cost 60 or more euros, you cannot compare them with the prices of video games in the past. For example the value of a video game in the 1990 may have costed 40€ but that is the equivalent of 70€ in 2015 terms. Colin Moriarty explains this extensively in his 2013 article where he compares prices for games and consoles between 1977 and today (Moriarty, 2015).
nintendoconsoles
Videogames in the year 2015 are not expensive, at least not in relation to the past.
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Athanasios Zias

Student number: 401028

References

Kain, E. (2015). Forbes Welcome. [online] Forbes.com. Available at: http://www.forbes.com/sites/erikkain/2015/04/24/video-games-should-be-more-expensive/ [Accessed 17 Oct. 2015].

Moriarty, C. (2015). The Real Cost of Gaming: Inflation, Time, and Purchasing Power – IGN. [online] IGN. Available at: http://www.ign.com/articles/2013/10/15/the-real-cost-of-gaming-inflation-time-and-purchasing-power [Accessed 17 Oct. 2015].

Oxford, N. (2015). Ten Facts about the Great Video Game Crash of ’83 – IGN. [online] IGN. Available at: http://www.ign.com/articles/2011/09/21/ten-facts-about-the-great-video-game-crash-of-83 [Accessed 17 Oct. 2015].

Tassi, P. (2015). Forbes Welcome. [online] Forbes.com. Available at: http://www.forbes.com/sites/insertcoin/2013/04/09/ea-voted-worst-company-in-america-again/ [Accessed 17 Oct. 2015].

The Economist, (2014). Why video games are so expensive to develop. [online] Available at: http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-15 [Accessed 17 Oct. 2015].

Warner, J. (2013). Revealed!! Why Video Games are So Expensive. [online] The Checkout presented by Ben\\\’s Bargains. Available at: http://bensbargains.com/thecheckout/bens-bytes/revealed-why-video-games-are-so-expensive/ [Accessed 17 Oct. 2015].

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One response to “Are video games becoming more expensive? Or not?”

  1. 365747fg says :

    I found your blog post very Interesting, the especially the part concerning the monetisation of customers using DLCs extensively to generate extra revenue. However I found that in your Post you are ignoring a large part of the gaming industry. The Free to Play models which is specially present in the the Phone Gaming industry. These models are similar to how Linkedin or Dropbox work (freemium model). They give the user free access to the game and require them to pay for extra features such as “extra lives”. Even though they might not be considered your traditional video game, they now constitute a major part of the industry. For Example The top 100 of grossing apps in across the major phone platforms are all free to play apps of which the majority are games. Even within the PC industry games such as League of Legend or Dota 2 created business models generating incredible monthly revenue based on the selling of extra features or character customisation options.

    http://qz.com/191931/the-phenomenal-growth-of-the-mobile-games-industry-in-charts/

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