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IDG: Other publishers are considering raising game prices for PS5 and Xbox Series X

Cost of development has increased between 200% and 300% while game prices have remained flat

Other game publishers are considering raising the price of games for PS5 and Xbox Series X, says games research firm IDG Consulting.

It follows the news that NBA 2K21 will be priced at $69.99 on the next consoles, $10 more expensive than it is on the current devices.

Speaking with GamesIndustry.biz, IDG President and CEO Yoshio Osaki says that game pricing has remained flat since 2005, whereas TV and movie pricing has increased significantly.

"The last time that next-gen launch software pricing went up was in 2005 and 2006, when it went from $49.99 to $59.99 at the start of the Xbox 360 and PS3 generation," he says.

"During that time, the costs and prices in other affiliated verticals have gone up."

Osaki says that next-gen console game production costs have increased by 200% to 300%, depending on the IP, studio and genre, but the prices have remained at $59.99. Meanwhile, cinema ticket prices have risen 39%, Netflix subscription costs have gone up 100%, and Cable TV packages have risen by 105%.

"Even with the increase to $69.99 for next-gen, that price increase from 2005 to 2020 next-gen is only up 17%, far lower than the other comparisons. While the cost of development and publishing have gone up, and pricing in other entertainment verticals has also gone up substantially, next-gen software pricing has not reflected these increases. $59.99 to $69.99 does not even cover these other cost increases completely, but does move it more in the proper direction."

He continues: "IDG works with all major game publishers, and our channel checks indicate that other publishers are also exploring moving their next-gen pricing up on certain franchises, for the same reasons outlined above.

"Not every game should garner the $69.99 price point on next-gen, but flagship AAAs such as NBA 2K merit this pricing more than others."

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Latest comments (9)

James Prendergast Process Specialist 2 months ago
I'm no expert statistician, but isn't comparing orthogonal percentage increases in industries with completely different production, licensing and consumption models irrelevant?

A 100% increase in Netflix prices is most likely caused by increased licensing and costs associated with distribution (datacenters) and network peering (dis)agreements... as well as increased expenditure in their own productions.
It also doesn't take into account the absolute increase. What was it? $7 to $14?

A 17% increase for games is proportionally less but it's a larger absolute increase in comparison. Or, is this an argument that a 20% discount on a $300,000 car is equivalent to a 20% discount on a $15,000 car? It's a false equivalence when taken in the context of the real world.

Is 17% justified? Without publishers publicly releasing information, it's hard to say.... but I'd wager that publishers are getting proportionally more money from the same number of box sales than they were in 2006, off-setting the increased production costs.

Arguments about being able to address a larger market seem to fall on deaf ears so let's stick to more tangible aspects - what were the latest stats regarding the digital/ physical split? 30-40% digital? That's a big increase in revenue when you take into account reduction in the used game market. DLC, MTX?

Sorry, but i don't see the 17% being justified when you look at the market as a whole. I don't think average disposable income has increased 17% in the last 15 years either...
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Axel Cushing Freelance Writer 2 months ago
I can remember when "flagship" used to be a bad thing in this industry.

All kidding aside, I think if the industry is serious about cutting costs, I can think of two areas right off the top of my head: online servers and executive salaries. Unless you are running an actual honest-to-God MMO, requiring servers for essentially single player experiences is utterly ridiculous. You could let players run their own servers for multiplayer, or you could try to figure out how to get consoles to basically create a private cloud server if people want multiplayer. But that's going to be unacceptable to most publishers because "muh control!" If you want to control the environment, you're going to have to accept that as the cost of doing business. Passing that cost on to the players by jacking up prices, and trying to appeal to the idea that certain game franchises are more valuable than others to justify the hike, is going to backfire one way or another.

As for executive salaries, I've got two words for you: Bobby Kotick. So far, gaming has not had a moment similar to Lee Iaccoca cutting his own salary down to $1. You could argue that Iaccoca could afford to do that because he wasn't exactly hurting for money before, but that's the point. No executive getting paid the stupid amounts of money they make should be hurting for it. If they're making six and seven figures and they're still broke, they probably should not be in an executive position. With all the money Kotick has made over his insanely long career at Activision, it should be a no-brainer to say, "OK, this year, I will draw a salary of $1 as part of a measure to cut costs." And it's probably never going to happen.
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Christopher Dring Publisher, GamesIndustry.biz2 months ago
@Axel Cushing: https://www.gamesindustry.biz/articles/2011-07-29-iwata-takes-50-percent-pay-as-he-takes-responsibility-for-3ds

Of course Alex, this isn't about an exec cutting his salary due to bad performance. It's about growing a business to satisfy shareholders, so that investment can increase, and the business can keep growing... which is hard to do when costs are also rising.

In other words, execs cutting their salaries is not a long-term solution. If gamers want these high quality experience, the revenue from them needs to grow along with (or even ahead of) the cost of making them. Now, that increased revenue could come from more people buying it every year (which isn't happening for some of the bigger games), it could come from microtransactions or other revenue streams, it could come from raising the price... alternatively, if revenue isn't going to grow, it becomes about increasing the profit by cutting the cost of development.

Some games will be able to reduce their development costs (like Resident Evil has done), some games will push further down the microtransaction route, some games will raise their price, some games are still in their growth phase and is enjoying more players with each new release....

We live in a capitalist world. It's not enough for Activision to just make profit.

Edited 2 times. Last edit by Christopher Dring on 3rd July 2020 4:58pm

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James Prendergast Process Specialist 2 months ago
@Christopher Dring: if we live in a capitalist world, why aren't games able to be made to a realistic budget? The number one rule when making something is that you make it to a budget with which you can make a profit. That's a complicated calculation which depends on total addressable market, price point and other factors. The conversation here seems to be taken from the point of view that it's inevitable that costs increase and profits do not.

If the costs are increasing and the market cannot support those costs, don't make the product to that budget.

Very often in these conversations people like to blame the consumer - "the consumer wants such and such". That's ridiculous - the consumer will take what the producer makes based on a value judgement that each individual consumer makes.... they are not demanding anything.

[Edit] of course, i don't think that this is even the conversation that should be taking place. This isn't a conversation about justifying higher prices based on market needs, it's really a conversation about a publisher investing prices because they think they can in order to gain more profit. That's fine, in and of itself - if they believe the market will bear the increased price then that's a decision for them as a company to make.

However, don't dress it up as being necessary or being the fault of the consumer. Really, i know this is GI reporting on what someone else said but it's disappointing to not have those comments looked at critically.

Yes, costs have gone up 200% or more at Amazon too... but you don't hear them moaning and blaming their customers for those increased costs because spending that money was entirely a business decision that resulted in massively increased revenue and profit.

Edited 2 times. Last edit by James Prendergast on 4th July 2020 6:59am

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Klaus Preisinger Freelance Writing 2 months ago
I bet some of us have had this discussion since the Super Nintendo. Why do we still pretend as if the development costs were to blame? Of those 10€ extra, how many Euros do we believe will reach the developer? From the +10€ sticker price 1.5€ are gone instantly because there sure as hell is no VAT tax exemption. Steam or other retailers will certainly still demand 30% and not cover price minus 10€ and only then 30% of what is left. Same goes for console licensing deals and the publisher's cut.

What are we talking about? 35€ per 60€ game ending up in the hands of the publisher with a 60€ game and maybe 40€ on a 70€ game? Best case speaking. Another 5€ gone by the time you made a few boxes and factored in bank transfer fees. Let's say you are not owned wholesale by the publisher and get a generous 50:50 split for your development studio. I would be angry to be assigned the blame for a 10€ price hike, of which maybe 5€ will reach the publisher and a meager 2€ is likely to reach the actual developer and go towards addressing the problem.

It is no use complaining about the idea to use the release of a new console generation to raise prices. That idea is so trodden out, you cannot parody it as this point. At the same time, we should not turn into idiots parroting a ready made copy/paste explanations as to why this price hike was justified. It only makes sense, if you are too lazy to think on your own. Especially when the explanation is ignorant of anything everybody should know about what happens to your 60€ after they pass over the counter.

Crank out that calculator, also do a google search on those publicly traded companies and their quarterly reports. Soon you will see whether those 10 extra quid are due to necessity, or not.
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Christopher Dring Publisher, GamesIndustry.biz2 months ago
@James Prendergast: Nobody is blaming consumers James. Seems like a very sensitive reaction. Amazon, as with everyone else, broadly raises its prices in areas where costs have increased and hasn’t been offset by user growth. The games industry (strictly speaking, anyway) hasn’t raised its prices. That’s not the fault of consumers. Nobody said it was.

What’s going to happen, I suspect based on past experience and other industries, is that people are going to buy the game at the increased price. Which justifies the increased costs of development, which means the economics of the business makes sense. There’s no need to reduce the budget if the games make more money. Reducing budgets is pretty unambitious for an industry in growth, and cutting costs is what businesses usually do when you’re managing decline and trying to maximise return in the short term.

This is also a news story. We don’t put opinions in stories due to the experienced nature of our readership. Our opinions are published separately as columns and within our podcast
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Christopher Dring Publisher, GamesIndustry.biz2 months ago
@Klaus Preisinger: Retail costs haven’t increased. In fact, with digital, they’ve gone down. Distribution and replication costs are also largely the same.

Development costs have risen a lot. But this isn’t a ‘blame’ situation. It’s a situation where companies want to keep making bigger, more advanced games, and want to do so while maintaining the commercial growth that they’ve enjoyed over the past decade.

Let’s be clear. This is absolutely about the big publishers making more money than the year before. And if a game enables a big publisher to do that, then they’ll invest more in the product going forward.

This isn’t anyone’s ‘fault’.

Of course, there are numerous other ways to generate more revenue from IP - microtransactions (which may come under regulatory pressure), licensing (which isn’t typically that lucrative), emerging markets (hence the push into streaming), esports (oh boy), subscriptions... and we are seeing lots of companies investing a lot more in those areas, too.

Price rising is just one way of doing this. As is, indeed, reducing costs
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Klaus Preisinger Freelance Writing 2 months ago
@Christoph

If we were to look at the problem the way it is presented by T2, then the problem is an increase in development costs and the solution is a 10€ price hike.

However, this simple narrative includes a high amount of insincerity. Because once you factor in the reality of how the money is split up, T2 either lied about the problem, or the solution.

Because if the developer really needs an extra 10€ per game, then the solution we see is inadequate to provide that. As I pointed out, taxes, retail, etc, they all want their share, so the 10€ are never going to reach the developer. Hence the problem of the developer being short 10€ per game, is not solved by raising the price 10€.

If the developer only needs the actual 2€ he is likely to get from this price hike, then increasing the price by 10€ is also highly insincere, because there are now 8€ to be distributed among anybody but the developer. I bet if you ask publishers, distributors and console manufacturers for soundbites, they will all say raising the price by 10€ is the right thing to help developers. Knowing full well that they profit as well and they are happy to see you are acting as if you were blind to that fact.

This is why the story reeks. On the one side you have a list of persons affected by the price hike, albeit a list of one, i.e. the customer. On the other side, you do not have a list of beneficiaries, you are not given a list at all. Instead there is just an example of who will get more money. And wouldn't you know it, the example is the one entity with which the affected persons (customers) are likely to empathize the most when parting with their 10€. This empathy is then used to cover up the fact that 10€ given are 2€ received while 8€ end up with people you wouldn't give extra money. Maybe 6€, if you feel taxes in your country actually achieve something, which I do, but your local mileage may vary. The cycle of clickbait Youtube outrage videos starts here and sadly it also ends here as presenting a solution is not a Youtuber's job.

Up until this point, all we get is insincerity and we know that, once we will take the initial statement, which is developers need more money, and try to solve it with sincerity for once. More commonly deferred to as asking somebody to put their money where their mouth is.

The following is a practical test to see who is willing to put the money where the mouth is. Any big publisher, could cooperate with the digital distributors (Steam, Expic, etc.) and create a "Developer's Edition" to be bought online. It offers nothing extra, but costs 5€ extra. However, neither the digital distributor, nor the publisher will touch this money, it will be paid to the developer in full on top of his regular share. If making games is truly too expensive, then here you go, more money to the people who make the games and whose products keep the light on at publishers and distributors. Star Citizens tells you all you need to know about the good will existing between developers and people who buy video games. Publishers and distributors want to pay more than lipservice showing their good will? This is how.

I dare anybody
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Christopher Dring Publisher, GamesIndustry.biz2 months ago
@Klaus Preisinger: Distributors and retailers don't take a cut in the physical space. They pay a cost price. So that doesn't quite follow.

You keep talking about things as if the publisher and developer are seperate entities. The games that are likely to see these rises -- FIFA, COD, NBA etc... that's not the case. And these developesr have had their budgets increased every year. So that developer is getting more money.

But it's not about who benefits... it's not about consumers vs publishers vs developers... nobodty is talking about that. It's simply about the desire for a strong industry to keep growing in the face of rising costs, whether area of the business you work in. There are many ways those costs can be offset, this is one of them. Although as IDG says, $10 isn't going to offset it alone.

There is a threat to these big companies in the form of microtransactions facing regulatory action. It means they need to explore other avenues to increase revenue, or instead lower the budgets to improve profitability. The latter option should be the last resort, really.

Edited 2 times. Last edit by Christopher Dring on 6th July 2020 9:44am

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