There lies a great gulf between the cost of premium games and what gamers are willing to pay.

With the launch of a new generation of consoles, gamers can now download games directly to their Xbox One or PlayStation 4 faster than running to the store and purchasing them.

Consumers have been told, overtly and implied, that this direct connection to games not only makes it easier for them, but would also make games cheaper. The latter has yet to happen. Launch games are still $60 a pop, but why? With tighter digital rights management (DRM) publishers can ensure less piracy, with no packaging there is nothing to produce, so why is a digital copy and physical copy of a game the same price?

To answer that question we'll delve into a couple of areas that have been in flux in the video game industry. An uneasy understanding has come over companies knowing that there lies a great gulf between the cost of premium games and what gamers are willing to pay. This comes at a time when better, cheaper, or free-to-play and mobile titles level the field.

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The Life of a Game: Game of the Year, Every Year

The lifespan of a game's sales have become incredibly predictable. In the olden days of 2010 only a few games had pre-order bonuses, now every release follows the same pattern.

First there are pre-orders that start selling anywhere from a year to six months before its projected release, which is usually delayed by a month at least once. Then there are special editions which range widely between $60 and $100 or more. After release, a title could have as many as three to five or more downloadable content (DLC) packs that range from anywhere between $5 and $30 each or perhaps $20 to $50 for all of them.

New maps, new weapons, the option to put pretty colors on your gun, or have Snoop Dog yell at you will cost you. Then within a year of release the game will be packaged up with all the DLC and sold as an “ultimate” or “game of the year” edition at around $50, until finally plummeting to $20 where it will sit in a GameStop until time untold.

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The Unsustainable Model of AAA Development

So, why are games so expensive? Like a prophet of the End-Times, someone invariably stands up yells “we can't sustain triple-A, it's too expensive, the sky is falling!”

So what does it mean? The so-called triple-A, an industry term meaning that a developer or publisher is creating something that's “cutting edge,” graphically intensive, but moreover expensive to make, includes games like Call of Duty: Ghosts, Watch Dogs, Grand Theft Auto V and the like which can cost a developer anywhere from $20 to $50 million dollars to develop although exact costs are kept very secret.

However, according to publisher Electronic Arts executive Rich Hilleman, companies “now typically spend two or three times as much on marketing and advertising as it does on developing a game.” So while the development costs may be at $50 million (pretty average) the actual cost to push the game out the door may exceed $150 million.

With such extravagant budgets to say, fly game journalist to Las Vegas, or hand out expensive swag in an attempt to get positive press coverage, publishers are spending huge amounts of cash to get the word out about their games.

Another example of what developers must contend with is the enormous cost of high-end graphics and bleeding-edge technology. EVE Online developer, CCP, recently reported an enormous shortfall. CCP was forced to cancel one of its upcoming projects in no short thanks to the over $50 million dollars in “research and development.” Much of that was tied to the upcoming virtual reality headset, the Oculus Rift.

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The Promise of Packaging

The game cost $3, but when the title was made into a crossover for the PlayStation Vita it jumped to a whooping $15.

Many gamers thought that through digital distribution game publishers could do away with one of the most obvious areas of cost.

Without the need to buy expensive packaging, DVDs, or all the other expenses that come with the handling of physical merchandise, those savings would be passed on to the consumer. What has actually happened is that those savings, and they are great, have been folded into marketing.

Publishers say that if there are no physical copies it's harder for them to get the word out about its games, so they must spend more.

A strange instance occurred back in 2012, as reported by Yahoo Games, which provides a good example of just how companies are trying to work around the packaging problem. The mobile game Plants vs. Zombies was a huge success across mobile devices. On iOS the game cost $3, but when the title was made into a crossover for the PlayStation Vita, it jumped to a whooping $15. Why? Because publishers believed that gamers who were accustomed to paying higher prices for individual titles could be milked for extra cash. And it worked.

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DRM Gonna Take Control

You may remember the huge stink that the Xbox One caused when Microsoft announced its always-on DRM policy for the soon-to-debut console.

At the heart of the controversy was the idea that gamers would have to “check in” a game online every time they wanted to play it. This was meant to ensure that publishers and distributors could verify the title was a licensed, non-pirated, version of the game. Microsoft responded by softening a few features of its policy, but be sure the policy still exists in many forms across all gaming platforms. These companies now have a tighter grip than ever on the kind of blatant piracy that has occurred in the console market. So, where are the savings? Again, any savings that might have been had under this new, tighter control are passed directly to marketing.

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Don't Call It Price-Fixing

This agreement, called minimum resale price maintenance, completely does away with competition.

Ultimately, the biggest factor in why gamers are still shelling out $60 for newly released titles has to do with a blatant, though wildly unknown, form of legal price-fixing. The reason almost every retailer in the US charges $59.99 when a game drops is that this is the price dictated by the publisher. Retailers that sell the game must agree not to drop the price below a certain point.

According to the Consumerist, retailers who drop the price below the agreed amount can fall out of favor with the publisher and not be offered the next big game. “So if Big Game Store wants to get players in the door for next year’s Call of Duty iteration, they won’t drop below the publisher’s guidance for this year’s.”

This agreement, called minimum resale price maintenance, completely does away with competition in a completely legal way. It allows publishers and retail stores to know exactly how much they're going to profit from each game sol, but leaves the consumer completely in the dark. As gamers well know, it's impossible to judge a game based on price.

A big reason this price maintenance scheme works is that big box stores, Walmart or Target for instance, make very little money from selling consoles. For that mater, neither do the manufacturers, but they do make a large margin from each game sold, allowing them to keep stock of the latest, greatest liquid-black boxes.


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Cost vs. Value

Games aren't going to move away from $60 a pop anytime soon. While there is no doubt that this sounds expense, many gamers find the trade justified. If a game is ten hours long that could be seen as a greater value than a $20 to $30 movie that lasts an hour. Ultimately it's up to the consumer to decide whether or not six hours of Call of Duty: Ghosts at $60 or an equal amount of time on Angry Birds for a dollar is gratifying.

In the end perhaps it was naive for gamers to believe that because companies were saving money that they would naturally pass the savings onto them. But without competition even the digitally delivered games from Xbox and PlayStation have become “walled gardens” where prices are tightly controlled in a vacuum of competition.