How did we end up paying $60 for new games? Is it because of good ‘ole inflation? How about good ‘old bureaucracy and a more competitive landscape. Forbes examines the 20% increase of next-gen game prices on PS3 and 360. Find out who takes a cut, according to interviews, research, and expert opinion.
Making a profit on new games — it seems — is a tough ball game, alleges the article. According to Namco Bandai president Takeo Takasu, his company needs to sell at least 500,000 copies of each PS3 game to turn a profit. Furthermore, some analysts predict that other publishers need to sell through 1 million copies before seeing black. And even then, publishers only make about $1 per game.
So where does the other $59 go? Here’s the break down:
Art/Design: 25% (about $15)
Programming and engineering: 20% (about $12)
Retail markup: 20% ($12)
Console license fee: 11.5% (about $7)
Marketing: 7% (about $4)
Advertising: 5% (about $3
Manufacturing costs, packaging: 5% (about $3)
Licensing: 5% (about $3)
Publisher profit: 1.5% (about $1)
Corporate costs (overhead): 0.3% (about 20 cents)
Hardware development costs: 0.05% (less than 3 cents)
But when the establishment isn’t putting the squeeze on profits, publishers are turning to in-game advertising, episodic content, subscription fee-based games, and micro transactions for added revenue, all of which are still in their infancy. And even though most new games hit store shelves at a $10 premium, many games already sport varying prices from $30 and up, like that of mixed DVD price points. Of course, the risk averse can always become indy developers or defray the 30% retail mark-up and manufacturing costs via digital distribution that is sure to become the standard in a few years.