In 1994, it cost around $2.49 to buy a 20-ounce box of Oreo cookies. In 2014, it cost around $4.49 to buy a 14 ounce box of Oreo cookies. Manufacturing one box of Oreo cookies hasn’t necessarily gone up, but the rate of inflation has, making a smaller box cost nearly twice as much as a larger box did twenty years prior.
But video games are a different story. Though the cost of developing them has risen considerably over that same period, the retail price has not, and in some cases, it’s even dropped. Why is that? That’s the mystery we intend to solve, in this episode of The Infographics Show: Why hasn’t the price of video games changed?
The first example of a game machine was unveiled by Dr. Edward Uhler Condon, at the New York World’s Fair, in 1940. The mathematical game was played by roughly 50,000 people, with the computer reportedly winning more than 90 percent of the games. The first game system designed for commercial home use was in the late 1960’s, when Ralph Baer and his team released his prototype, the Brown Box, a vacuum tube-circuit that could be connected to a television set allowing two users to control cubes that chased each other on the screen. But it wasn’t until the 1970’s that games became mainstream, when the first commercial arcade video game, Computer Space by Nutting Associates, was introduced.
And in the same decade, Atari introduced Pong to the arcades. A game that many who were born in Generation X will remember fondly, Pong is a table tennis sports game, with simple two-dimensional graphics. And it quickly grew in popularity. It was the first commercially successful video game, and it helped to establish the video game industry along with the first home console, the Magnavox Odyssey. Soon after its release, several companies began producing games that copied the layout of Pong’s gameplay, and went on to release new types of games.
But back in 1976, of course, things were quite different and gaming was simple. Pong was the height of at-home multiplayer gaming, with only two dials, one button, and a switch. And new, it cost nearly $100, which is enough to buy an Xbox 360 and a Nintendo Wii by today’s dollars!
So what about the modern gaming era and the prices people pay to play? The 1990’s were a decade of innovation in video gaming. A transition from sprite-based graphics to full-fledged 3D graphics. It gave rise to several genres of video games including the first person shooter, real-time strategy, survival horror, and massively multiplayer online, or MMO.
Consoles went from 4th to 5th to 6th generation, CD-ROM technology was born, with the Nintendo 64 being the last major home video game console to use ROM cartridges, and game controllers took on a new look with the Super NES controller introducing a more rounded dog-bone like design and adding two more face buttons, “X” and “Y”, arranged in a diamond formation. Games such as Street Fighter 2, Mortal Kombat, Sonic the Hedgehog, Super Mario 64, Doom, Resident Evil, Starcraft, and dozens more were released. And how much did the 90’s games cost? Well, Super Mario 3 cost $94.40, Mortal Kombat for Super Nintendo, was priced at $119.55, Street Fighter 2 was a cool $123.13, a big chunk of cash for a 90’s gamer.
Those prices should have continued to rise, but that’s not what happened. The price eventually dropped to $60. We couldn’t work out exactly when this was but the online opinion of gamers says that it was sometime in the 90’s, and $60 is where it has stayed. And with rising development costs and inflation, how and why has the price not shifted? Kate Cox from The Consumerist, a non-profit consumer affairs website, detailed some of the practices that have become standard with video games sales, in recent years.
She explained that the reason most retailers in the US charge $59.99 for a new video game on release week, is because it’s a price point that comes from the publisher, and all the retailers that sell the new product agree to abide by it. Stores that choose not to abide by this price quickly find themselves out of favor with the publisher, risking future shipments. So if Big Game Store is keen on getting players in the door, they won’t drop below the publisher’s guidance.
And gaming media website Gamerant concluded that all the AAA publishers set their game price at $60 as it’s a guaranteed method of leveling the playing field. Publishers set the minimum price of $60 because it guarantees their cut will be substantial enough to support them, with more being made from extras such as collector’s editions, DLC, and microtransactions. Unfortunately the model may not be as lucrative for retail, and stores often take a hit on stocking new games, which is part of the reason used game stores don’t offer much cash for used games, yet still on-sell them at a much higher price.
So where exactly does this $60 go to? According to Alex Pham in an article for the Los Angeles Times in 2010, that sixty dollar price is broken down as follows: $27 goes to the publisher; $15 to the retailer; $7 to returns, which are games that don’t sell and are sent back; $7 is a platform royalty which is paid to Sony, Microsoft, or Nintendo; and $4 to production and distribution.
You might have noticed that there’s no mention of the developer…well, that’s because in most cases the developer has already been paid. And to talk about developing video games for a minute, you would think that a game that is more expensive to make, should be more expensive to buy. Well, that’s just not the case. Call of Duty: Modern Warfare 2, cost two hundred million dollars to make, whereas Gears of War, only cost ten million to make. Surprise, surprise, they’ll sell for $60 and generate $27 of profit per sale.
Will video games stay $60 and below forever? No one knows for sure, and we found there is a lot of debate from gamers on Reddit and Quora as to when things might change. Maybe you have your own opinion on why this $60 price tag has lasted so long. Let us know your thoughts in the comments! Also, be sure to check out our other video called Minecraft vs Roblox – How Do They Compare?! Thanks for watching, and, as always, don’t forget to like, share, and subscribe. See you next time!