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Why Are Video Games So Expensive, Anyway?

In short? People, marketing, and closed viewpoints.

Entertainment is a big business.  People want to have fun, and video games are one of the more popular ways for them to do so.  While other entertainment industries have struggled, video games have continued to sell in steadily increasing numbers.  Despite this, we still hear all the time from developers and publishers how video games are increasingly less profitable despite the increased sales.

Less?

It does not take a terribly in-depth analysis to realize something is fundamentally wrong with the monetary expectations of game publishers nowadays.  When the recent Tomb Raider came out, it sold 3.4 million games in its first month, most people thought it was a hit.  Square Enix called it a disappointment.


Can't make a game with these

Just considering the implications of that declaration is horrifying.  3.4 milllion video games sold, even if everyone only paid $40 (which seems to be a very conservative estimate) is still over $130 million dollars just in the first month.  What sort of cost was behind creating the game when so much money in such a short period of time fell far enough below what was desired to be called a disappointment?

How and Why?

The question of exactly how much money these big-budget games cost is complicated by a few factors.  The most obvious is that very few games ever give a development cost.  We can safely assume Tomb Raider cost significantly more than $130 million, but we have no way of knowing exactly how much more it cost.  Most games we learn even less about how much they cost to make.

A little math can help clear up some of the question.  While licensing fees on characters and development/graphic engines might vary wildly based on the character/engine in question, we can calculate the costs of the people involved in making a game with a bit of leeway given for higher or lower pay grades.

As an example, if we take a game with 20 arbitrary people working on it between the software engineers, artists, and various other roles and say they make an average of $60,000 a year each, we can calculate how much is spent paying the people to make this particular game.  In this for-instance, we get $1.2 million per year just to pay the people involved.  It's easy to see where such costs can get astronomical very quickly when publishers put together teams with over a hundred developers all working on the same project.

But... that's still not all of it!

Even if we take a game with 200 people working at double the average wage in the example above, that still doesn't even break $25 million a year.  The twitter post shown from Cliff Bleszinski hints at a game with a potential budget of $600 million or more.  The number of people involved in making the game seems fairly unimportant with a budget like that.  200 people working for five years would need to be earning over $120K each to account for even 1/6 of that budget.

So what actually costs so much?

Bleszinski himself has given us part of the answer.  In previous tweets he has mentioned before how some games actually spend as much on marketing as they spend on making the game itself.  When you get games with budgets approaching or surpassing $100 million dollars, that represents a huge investment.

The irony is if those marketing costs really are what makes games so expensive, the high cost of making AAA games might actually more be a matter of mindset than actual cost.  It is an easy to understand mindset, however.

You run a game publisher.  You have a game in the works right now that is going to cost almost $200 million by the time it is finished.  With an investment that huge, you want to make certain the game will sell, so the logical idea is to get commercials out so people know to buy it.

This really cannot be the only option.

With game after game getting funded through entities like Kickstarter and Steam Greenlight, it is becoming clear video games do not have to be as expensive as the big-name publishers seem to believe.  While some developers/publishers feel higher prices or more restrictive policies regarding used game sales might solve the problem of cost (Cliff Bleszinski among them) others argue that lowering the cost might actually have the same effect (Valve) by vastly increasing sales.

In the end, we can only hope someone finds a solution for these absurd development costs.  As much as certain developers might bother us with their practices from time to time, ultimately it is everyone, including us gamers, who stand to lose if they fail entirely.

Published Aug. 12th 2013
  • Pierre Fouquet
    Associate Editor
    You need to find a sweet spot, for the price to be low, but not so low you are simply just not going to make the money back. Companies still need to make money, as they have costs of their own to spend. And some of those costs are not recoverable (bills ect ect) through the game sales, as they are not to do with the game, if a game breaks even, the company has still lost money, as the other costs are not in the games budget. So, where am I going with this? I agree, selling games cheaper, may make more people buy it. It has been proven with so many games, through Sales, just look at Fez in the Steam Sale, it sold a hella lot, and it made Phil a LOT of money. It alone would have covered his costs of everything and given him enough to live off for a bit. So yes, it's an indie game, so the amount of money put into it is not as much as with a AAA. But maybe AAA need to focus on getting a few core elements amazing, not trying to get everything. So maybe sacrifice graphics, for gameplay and story, or if you get a new Engine, sacrifice length for the fidelity. But always make the gameplay good, and the story reasonable, unlike some games I will not name.
    But yes, lowering the dev costs, and lowering the expectations of the publishers, could drive more sales. In fact, publishers who interact, and listen to their customers make more sales, Ubisoft for one, they have now said, AC will end. They are making more sales than EA (well in terms of revenue for every game overall) because Ubi appear to be more interested in their customers than EA do.
  • Wokendreamer
    Featured Columnist
    I don't even necessarily think AAA games need to be sold for less, I just think they need to find a way of reducing the expense of making them. Possibly taking a bit longer to make them by having fewer people on the team (because I'm sure we would all cry if we didn't get a new Assassin's Creed literally annually) or spending less on Marketing and just focusing on making an awesome game and letting it sell itself.
  • Eli "The Mad Man" Shayotovich
    Featured Correspondent
    Interesting article! Sounds like the marketing department needs to get a damn grip. Spending that much on pimping out a game just seems like a bad, bad model/idea. But as you mentioned, they've been doing it that way for so long its just become part of the DNA of making a game. It's the only way they know how to do things.

    Me thinks it's time for a paradigm shift...
  • Mithrandir GW
    Contributor
    Great article. I've gotta say I'm inclined to agree with the Valve approach. I'm in the demographic that doesn't have $40-$60 to shell out for new releases; I watch Steam, GOG, Get Games, etc. religiously for amazing sales. When the Steam Summer Sale and Christmas Sale hit, I'm throwing what little money I do have at them so I can fill out my library.

    Downside? I don't have Bioshock: Infinite with a season pass for DLC.

    But do I care? No--I just got 20 games at massively discounted prices for the same amount I'd pay for 1 or 2 brand-new AAA titles. It gives me the ability to help do my part to fund the devs who deserve my support, and I can take my time scoping out which flagship titles I really want to play when it's their turn to be offered for pennies on the dollar.

    Keep up the good work, mate! I'm digging the classy Kakuna, too.
  • Wokendreamer
    Featured Columnist
    Valve actually recently showed a bunch of statistics about how putting games on temporary sale actually very measurably increase their income, by as much as 1700% during the sale and over 200% even after the sale itself was over. By itself it doesn't completely solve the problem, because the games still cost a bunch to make, but it's a step in the right direction in terms of mindset.

    And Gentleman Kakuna appreciates others with an appreciation for elegance in pocket monsters.

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