Are Video Games Worth $60?

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There is no denying that video games have come a long way. Some of the first video games that I played are now being produced for handheld systems at a fraction of the cost that my parents spent in order for me to enjoy the 16 bit masterpieces. As time presses on, technology doubles and triples in its capabilities to astound and amaze us. This is called Moore’s Law, and this phenomena has caused many to wonder…how far can this go and still be affordable?

More and more games are being released every year and video games have become more and more expensive. Based on SELRES_7f48c354-23af-4816-8431-800322a9b648SELRES_b312e383-792c-4297-9795-3ecb2cc45713The EconomistSELRES_b312e383-792c-4297-9795-3ecb2cc45713SELRES_7f48c354-23af-4816-8431-800322a9b648, author T.C. showed just how expensive games have become. In his reporting, he found that it cost more then $265 million to produce Grand Theft Auto and over $500 million to make Destiny a reality. This is the reality of AAA games. To put this into perspective, the normal budget for a new video game can be anywhere between one to tens of millions of dollars.

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If you have played a AAA game recently, you may have noticed that they are not perfect. I can’t tell you how many times I have been excited for an Assassin’s Creed game and have eventually been disappointed with all the bugs and problems. I often see these issues and wonder/scream, “WHAT THE HELL ARE THEY DOING!?” Obviously, they didn’t use all the resources that were provided to them. I am pretty sure that you can do a lot with $50 to $100 million, so where is the money going?

Turns out that a lot of the money that is raised for a game actually goes to the advertisements and market testing. Publishers will often bring ideas to a group of random people in order to see if they are moving in the right direction. Whether it is a concept of a game, or a type of direction that the characters are going, they will spend the money and the time to make sure that the product they are making will be able to turn some heads. Obviously, testing and advertisements are not a bad thing and are often needed in order to make a profit. However, sometimes these publishers can go a bit far.

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During the launch party for Battlefield 3, people could actually drive a tank down London’s Oxford Street. As amazing as that does sound, I would have rather they spend the money on the game rather then on a stunt that would create a cool headline.

These type of stunts cause developers to give up on AAA titles, and actually make them want to strike out on their own. Though this leads to some great indie titles, this does feel pretty troublesome for some of the game series that we know and love. If more and more developers decide that they don’t want to jump through hoops to make the games they love, we may see beloved titles no longer existing.

Now, here is where it gets kind of interesting.

You may have already known everything that I wrote. Of course we know that games cost money. We all know that games are profitable and that you need to spend money in order to make money, but does the growing industry mean that video games also need to cost more money?

In order to make an informed decision on this, first we need to look at some math. Although Grand Theft Auto 5 cost $265 million to make, it has made over $800 million over its life time. Star Wars The Old Republic MMO cost between $150 million and $200 million to make, and it was reported that it made its money back within the first year.

Based on an article by The Wall Street Survivor, video games are dominating the market. Video games currently occupy 40% of the mobile app usage and 70% of tablet usage. The ESA reported that the gaming industry grew 4 times faster then the entire US economy from 2009 to 2012.

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Stock prices as of 11/30/2017 (Most are down due to the recent backlash of Micro transactions)

  • EA – down 3.64% (105.49)
  • Activision Blizzard – down 6% (62.01)
  • Ubisoft – down .60% (66.04)
  • Take-Two – down 4.08% (11.45)

Even though stock prices are a little low right now, most companies have already posted their end of the year reports, and all of them have reported record profits.

  • EA – gross profit of 74.9% (up from 73.2% last year)
  • Activision – revenue up to 1.90 Billion (1.74 billion last year)
  • Ubisoft – 66% surge (shattering their last year prediction)
  • Take-Two – stock prices have soured more then 140%

 

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Most people can look at these numbers and see that the gaming industry is not hurting. In fact, they are living pretty well. However, the idea has been floated around that games should probably cost more money. This idea has come out even more due to the latest issues with Micro-transactions and Season passes that have left a bad taste in the mouth of the gaming community. Part of this discussion comes from the idea that if games just cost $70, publishers would not need to rely on DLCs and Micro-transactions in order to continue to make profits even when inflation is a factor.

Author for Forbes, Erik Kain, wrote a piece for this very argument. He argues that because of inflation, improvements to multiplayer, technology improvements, rising cost of voice acting, and the fact that new blockbuster are required every year, this leads to the need for micro-transactions in order for the publishers to be able to make their projects seem necessary to share holders. That’s all well and good and unfortunately it has become just the way of the world.

The ugly truth is that most publishers are having to make good with the shareholders rather then the gaming community. Making them happy means they will allow games to be produced, and then hopefully they will have the money to make a game that we will like. In my opinion, these feel like excuses to make us feel as though we need to pay more for newer blockbuster games. With digital games now taking over the market, and discs being the cheaper form of physical copies, gaming publishers can now ship out games far cheaper then before.

With all of this information, I can say that raising the price of video games is the wrong answer. It sounds like publishers are just trying to make more money for the shareholders in order to make them feel better about investing more money into future products. At a certain point, it seems as though publishers stopped making games for the gamers. Let me be clear, I do not feel as though this is an issue with the developers. The men and women that put in the time in order to create the product for us to enjoy are the real victims in all of this. I am sure that they are wanting to give us the best product, but are constantly having to revamp their ideas because too many people are trying to appease people with the money.

It’s my hope that something will eventually give and publishers will start to back off. We have seen the recent news about loot boxes and the problems that these have on the community, but maybe money will speak louder then words. Only time will tell.

5 thoughts on “Are Video Games Worth $60?

  1. I’ve been seeing a lot of remarks recently about “games need dlc and microtransactions because they’re so expensive to make these days”. Here’s the thing though, if you can’t afford to make it with the budget you have, then you have to cut back. Basically: live within your means!

    Most of these games are making huge profits without the microtransactions anyway (as revealed in a number of articles) and are putting them in to make even more money. I agree, £40/$60 these days may seem a little cheap, but the full experience costs $60, another $30 for a season pass, and then there’s all those cosmetic items that aren’t included in the dlc. The full experience is easily over $100 in big name games. And some people are surprised that I don’t play that many AAA games these days.

    Liked by 1 person

    • Man I hear you. It’s crazy to think that they can continue to sell half a product, charge full price, and still feel like it’s a good thing.

      Before they try and upchargs, maybe they should try selling me a product worthy of $60 and not a broken game that needs to be patched for a year.

      Liked by 2 people

  2. If game prices go up, then I’ll want near perfect games at that price. Up here in Canada, we pay $80 for a brand new AAA game, and that’s before taxes. This is already a huge amount to pay for some of the games at this price, but if that’s jacked up, then there better be a huge increase in quality. I’ll tell you, things like a Mass Effect Andromeda purchase will not be a day 1 purchase for me at higher prices. And games can’t just have more content for the sake of it. It has to have meaningful content, not filler. Think Witcher 3 as a prime example of this.

    But if this dreaded day does come, for me it would mean all that money that is not going to AAA will be going into the indie scene. There is already huge bang for the buck there as it is.

    Liked by 1 person

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