It’s a strange thing to consider that while the cost of most things has increased with economic inflation over time, the regular price of a video game has mostly stayed the same, despite AAA games becoming money-absorbing behemoths on par with blockbuster movie productions. Shawn Layden, the former President and CEO of Sony Interactive Entertainment, recently addressed the dilemma surrounding gamers’ resistance to upfront costs, stating that gaming studios attempted to increase the costs of games too late, a mistake that may endanger the industry now that it is changing.
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Earlier this year, Nintendo and Microsoft announced plans to increase the regular price of games to $80, sparking a firestorm of backlash online. The online pressure against the price increase has been so intense that Xbox was recently forced to cave, revising prices on upcoming titles like The Outer Worlds 2 back to $70, issuing refunds, and promising that its holiday releases will remain at $69.99.
“We’re focused on bringing players incredible worlds to explore, and will keep our full priced holiday releases, including The Outer Worlds 2, at $69.99 – in line with current market conditions,” an Xbox spokesperson told Windows Central in a statement.
Even as gamers break records on subscription service spending, they have also become accustomed to obtaining games at the lowest possible price, relying on sales and free availability through things like Xbox Game Pass at launch. This creates a dilemma for game developers, who have not raised the price of games in decades and are unable to rely as much on the sales of individual copies as they once did.
“I think it’s because everyone’s afraid,” Layden told Gamesindustry.biz, explaining why game prices have remained the same. “No one wants to be the first one to raise the price, because you’re afraid to lose traffic. So what you do is you just end up eating into your operating income, your profit margin.”
Layden observed the effects of this price stagnation as game development became increasingly sophisticated over the years.
“There were more sports cars in the parking lot in the PS1 era than there were in the PS4 era, because if you’re selling 20 million units at $60 for something that only cost you $10 million to make. That’s different than selling 20 million units at $60 for something that cost you $160 million to make.”
Layden believes that issues like the recent $80 pricing debacle were the result of developers waiting too long, stating that they should have prepared by gradually raising prices over the years to soften the impact of price increases.
The industry decided instead to maintain the same price expectation while focusing on increasing its customer base as much as possible, without a plan for what would happen when the growth potential stalled. Unfortunately, gaming budgets also ballooned during this same period to meet expectations of fully voiced, movie-level quality products. This forced developers to rely more on DLC, microtransactions, free-to-play monetization, and now subscription services to compensate for the shortfall. However, this strategy, too, may spell trouble for the gaming industry.
“That upfront price is such a barrier to get people even to try a game,” said Mat Piscatella of Circana. “Because why am I going to spend $80 for this game when Fortnite is here, and I can just log in, and everyone’s there, and all my stuff’s there?”
It’s unclear what the gaming industry can do to turn things around now that gamer attitudes have been entrenched for so long. Will big studios have to abandon riskier and more expensive projects in favor of sure hits? Will the games-as-a-service approach develop a stranglehold over the industry? Hopefully, there will be a way forward that industry players, developers, and the gaming public can all agree on to monetize their digital entertainment.
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