X-Box 360 Game Prices.

[Eric]

All this shit's $59.99 wtf.

[Zeus]

All due to high development costs.....or so they say. Gotta be at least $2mil per game.

But the real reason is because games have not appreciated in value in 20 years since people aren't willing to pay more than $50 US (to maximize profits). Back in the day, NES games were about $80 Cdn. So, each new generation, they increase the price at the beginning (except for the last gen) since they can get away with it. An early adoptor will be $60 US instead of $50 US (regular price, even now), so they can get a little more this way. It'll only stay that high if they feel that they can get away with it, otherwise, it'll be back down to $50

[SineSwiper]

Nintendo tried this. It didn't work. Inflation isn't that high people.

[Don]

Raising your prices counting on early adaptors want your game really bad seems contradictory to the goal of having a diverse library. You can only pull it off if you're like Nintendo where there's nothing worth buying on your system besides the 5 first party games.

[Nev]

Nintendo tried this. It didn't work. Inflation isn't that high people.

It's not inflation, wingnut. Zeus is right. Increases in model, animation, and gameplay quality all cost more money. I'm almost sure the next-gen titles cost more to develop than PS2 titles for that reason alone, to say nothing of the difficulties on the programming end in learning the new hardware.

[Don]

So why hasn't cost of games gone to say $100 if every new generation the development cost goes up? Why do companies still sell games at $50 if it's always getting more expensive to develop stuff?

Technology is supposed to pay for itself because it is better technology. Otherwise why bother developing new technology? So no I don't buy this increasing costs thing. I'm sure it is expensive but the companies are supposed to deal with it, not consumers.

[Nev]

As companies develop more and more for the new technology, they become more familiar with it, and better tools and infrastructure decrease costs. Given the PS3 development library set, which I posted a topic on earlier, my guess is development costs for the PS3 may actually decrease over the long haul. However, nearly all new technologies have some sort of learning curve, so the initial development efforts are going to take longer, and cost more. As far as "companies are supposed to deal with it", does this mean they should lose money or produce an unprofitable project in order to get something out for the next-gen systems? Please let me know if you agree or disagree with this before we continue the debate.

[Zeus]

So why hasn't cost of games gone to say $100 if every new generation the development cost goes up? Why do companies still sell games at $50 if it's always getting more expensive to develop stuff?

Technology is supposed to pay for itself because it is better technology. Otherwise why bother developing new technology? So no I don't buy this increasing costs thing. I'm sure it is expensive but the companies are supposed to deal with it, not consumers.

That's sort of it. Increased costs actually don't affect the price. That's like saying that the payroll of a sports team affects what it sells its tickets for (it doesn't, regardless of what the hockey owners try and tell you).

It's actually quite simple: a company will sell it's product at a price it thinks will net it the greatest gross revenue (price x quantity sold). Costs of producing only come into play as to whether or not to actually make the product, not what to price it. Early on in a system's life, the price is higher than later because people are willing to play more; later on, they're willing to play less. So, for the launch, the price will be higher and later on, we see the average price drop (you see a lot more under $40 US games now for the PS2 than you did when it first came out).

Do you honestly think that if Nintendo, Sony, Microshaft, EA, or any of the game companies COULD sell the games for higher that they wouldn't? They just can't, otherwise their gross revenues overall would decrease. The increased costs simply means that we're seeing less and less "experimental" games and more and more sequels and licenced games.

This is what I meant by "or so they say" in my original post.

[Nev]

Good point, Z. I didn't think of that.

Me and my macro supply-demand curves - those don't really work at the individual firm level, do they?

[Zeus]

Good point, Z. I didn't think of that.

Me and my macro supply-demand curves - those don't really work at the individual firm level, do they?

Demand is demand, man. Whatever the public demands the price at for maximizing revenue is what the game will be sold at. If it's not profitable, the company will simply not produce.

Basic MICROeconomics theory, which is always at the individual firm level :-)

[SineSwiper]

I agree with the guy with a BS in Economics.

[Nev]

Yes, I do too.

[Julius Seeker]

There's also the factor that royalty prices and production prices of videogame units are actually much lower than they were before; even if program development costs are much higher. Essentially it's what Zeus has said. Analysts project a number which will yield the largest income. They likely determined that at that point in time selling a game for 59.99 likely wouldn't yield 17% or greater fewer sales than if they had released it for 49.99; that way they will be making more money by releasing the game at 59.99, factoring in royalties and printing costs of manuals may drive that % up to 20%, 25%, I don't know for sure. Anyways, if the number sold was expected to be lower than 17% (theory assuming that royalties and printing costs are dirt cheap) then they would release the game for 49.99.

[Zeus]

I agree with the guy with a BS in Economics.

There is some management accounting (mainly target pricing, the whole "produce or not to produce at the price you can sell it for" thing) and general business admin (the other filler stuff) mixed in there as well. Basically, it's a collection of all I've learned in university. It had to come useful at some point in my life :-)

Seek basically gave a numerical example of that theory