by Jeff Gates
Why Are Games So Damn Expensive?
In an effort to decipher why video games are so expensive Hooked Gamers fought through trenches, double-crossed some high-ranking officials and even lost a comrade or two to Jason Bourne wannabes.
It all paid off though because we have compiled data that clearly states why video games cost us $60 a pop, and it's all in a pretty pie chart.
What you see above is a pie chart, or a 'disc chart' if you will. On this 'disc chart' are the different fields where that $60 you spend on a video game go.
Art & Design - 25% - $15
Video games take a lot of man hours and some serious firepower to get so dog gone sexy. Publishers are willing to spend that money to make their games look spectacular because often times a game that looks like crap sells like crap, and I dont know about you but I'm not lining up to buy any of that. Also, if you have ever wondered why Wii games are only 50 dollars its because they take less art development. Seems obvious now, huh?
Programming - 20% - $12
A large chunk of why this is such a massive margin is because we have factored the engine costs into this field. Those beautiful graphics and physics have to come from an engine, and unless its developed in-house the publisher has to pay for it. AI development and multiplayer structure also make up big parts of this field.
Retail - 20% - $12
This might come as a shock to some but stores like Gamestop and Walmart make a pretty nice chunk of dough off the games they sell. Typically they purchase the games for around $50 and sell them to us at $60. How does that make $12? Its math, that's how. Ah, but wait, typically only a dollar or two of that reveals itself in net income. Crazy how this math thing works.
Console Developers Cut - 11.5% - $7
If you have ever wondered why Sony, Microsoft and Nintendo open up their wallets to get exclusive games and exclusive advertising deals with 3rd party titles its because they get a slice of every copy sold for their console. Interestingly, Sony's cut is a bit higher because of the Blu-Ray format. Also, this fee can be waived if a game becomes an exclusive in certain instances.
Marketing - 11.5% - $7
This is where things start to get confusing, because from here on out a number of factors play into where exactly the money is going. For instance, if a game is part of a well-known franchise it does not necessarily need a huge marketing bump. Conversely, a new game is a very expensive venture because a large marketing push is needed to get it into the public's minds. This field also includes things like: good placement in stores and spots in retailers advertising.
Packaging - 5% - $4
This figure is a little iffy. Mainly because Blu-Ray is more expensive than DVD to print on. Blu-Ray runs about 5 dollars each (thats with case) and DVD is only around $3 or $4. So 4 dollars is a good bet, of course we are not averaging in special editions. Interesting fact though, next time you are struggling to open a games shrink wrap you can thank the publishers for wasting that penny.
Other - 5% - $4
Okay now I need you to stick with me because we are covering a lot of things here, mainly licensing. You remember earlier how I said a lot of variables would soon change where exactly the money is going? Well licensing is probably that key variable. Publishers, despite the additional marketing costs, are often quite willing to back a good idea for a new game because of the massive expenses that licensing can entail. Whether its EA paying the NFL Players Association for Madden games or Activison paying Marvel to use Spider-Man licensing is pricey so publishers get a better profit when none is required. Since we bundled voice acting into this category we'll go ahead and let you in on a little secret: go into the business. Big name voice-actors get a paycheck and a percentage of each copy sold. Our question is: Do the guys who make the grunt and "WHOOHOO!" noises for Mario get a percentage? If so, they'll never has to worry about money for the rest of their life.
Other things included in "Other" are distributor costs, legal fees, and hardware development. Distributors help small-time publishers reach larger audiences and without hardware like computers how would developers make their games?
Publisher Profit - 1.5% - $1
This one is probably the most surprising. All sources are pointing towards the fact that after all is said and done the publisher typically adds just one dollar to the net income, just like the retailers. What that means is Bobby Kotick needs 5 copies of Black Ops to be sold before he can get his Big Mac.
If you have ever got in an argument with your friends over 'will gaming ever drop retail and go fully digital' we have your answer. Yes, yes it will. Go jump on Steam, look at the latest games, what are they 50 dollars? Think about how much of that the publishers make without packaging, the console developers cut or retail getting in the way. Even though Steam obviously gets a bit of the top we guarantee its not as much as Gamestop. So its obvious that discs are soon to be a thing of the past.
You might have noticed the numbers don't add up, don't worry you aren't going insane. We realize this too. Basically its because all of this is an average. In fact we did a bit of our own math to make it a bit more palpable.
We hope you enjoyed our breakdown of why video games cost so much. Our information was gathered from numerous sources. Including interviews, articles, and industry analysis from this console generation.