Raising the price of AAA games – a cartel or economic necessity

What motivates the rise in price

Shortly before the release of the next generation of consoles, major publishers began to prepare gamers for the fact that prices for games will rise by at least $ 10. The explanation for this step, it would seem, is extremely logical. The fact is that the standard of $ 60 for an AAA title was formed in the mid-2000s, when everyone was waiting for the release of the PlayStation 3 and Xbox 360 consoles. 15 years have passed, and prices have remained at the same level. At the same time, in terms of technology, games have made a significant leap forward, which means that their development has become more expensive.

Another factor in price increases is inflation. For 15 years, the dollar, in which the budgets of many global projects are mainly formed, lost in value from 25 to 35%. At the same time, the prices for software, for example, in the USA, in the period from 1997 to 2017 almost halved… Games are software in many ways, but publishers prefer to classify them as entertainment. This is partly true – good programmers and UI / UX designers are not enough for a quality product. A good title requires a quality script, music and sound design, and so on. Therefore, publishers are more likely to draw parallels with the film industry. The average global price tag for cinema tickets (they form the main income of a picture, not digital copies) has increased by about 40% since 2005. In total, filmmakers have covered inflation, but game makers have not.

Other arguments of the developers in favor of the rise in price are not related to the economy. For example, Sony Interactive Entertainment CEO Jim Ryan statedthat games provide much more time for entertainment than other products in the industry. As an example, he cited Demon’s Souls, which requires a minimum of 16 hours to complete. At the same time, the film is 1.5-2.5 hours long. In the US, the average price for a movie ticket is $ 20, in Germany it reaches € 20, in Japan – $ 18. According to this logic, publishers simply give their creations to the players for free.

In the main role – marketing

Unlike the film industry, where movie budgets are always publicly disclosed, game publishers often hide the actual cost of producing a product. But sometimes such data become known to the public. For example, the budget of Call of Duty: Modern Warfare 2, which was released in 2009, was $ 250 million. The amount is impressive, but $ 200 million of it went to marketing. The situation is similar in the case of other AAA projects, although the margin in the direction of marketing is not always so great. In particular, about the same amount was spent on advertising GTA V as on the development itself – $ 130 million. It turns out that the authors of AAA titles spend more on selling the game than to develop it. And ordinary gamers should cover the costs.

No one argues that development is actually increasing in price. But at the same time, both the audience and the market volume increase. Even if you consider that Newzoo predicts a 3% decline in sales of digital and physical copies of games in 2023, it is worth noting that this is expressed in relative terms. If translated into absolute values, then the total revenue will increase by $ 41 billion – from $ 160 billion to $ 200 billion. And this is without taking into account the fact that many modern AAA-titles have microtransactions, which also bring profit to publishers.

Next, we will analyze the three main theses that publishers use to motivate the need for price increases.

Other types of entertainment are more expensive

When comparing games to movies, as Jim Ryan does, there is one important point to consider – regional ticket prices. In the United States, they pay $ 20 for going to the cinema, but at the same time in Russia it will cost on average ₽250 – about $ 3.

Let’s take another example from the entertainment industry for comparison – the top-tier UFC mixed martial arts promotion. Most of the events in the US are available for viewing through a subscription to the ESPN + service for $ 5 per month, while the most significant tournaments can only be purchased through the pay-per-view system for $ 65. In the CIS, absolutely all events can be watched on the UFC TV channel, which is available for almost any Internet provider with IPTV in a standard package. And a $ 8 UFC Fight Pass subscription gives you the opportunity to watch early prelims (2-4 fights out of 10-15, in which either third-tier fighters or newcomers participate), as well as provides access to broadcast recordings and other post-production UFC content.

That is, the vast majority of entertainment products that game publishers cite as examples use regional pricing policies. In the gaming industry, this is partially only for PC products. Moreover, this almost never applies to AAA titles. Most of them in any region will still cost $ 60, and soon $ 70.

Games provide more time for fun

Let’s say a typical Demon’s Souls playthrough will take 25-30 hours. At the same time, the game costs ₽5.5 thousand. The Last of Us Part II will take about the same number of hours, but this title costs a thousand rubles less. For the same ₽4.3 thousand you can buy Spider-Man: Miles Morales, only you can pass it at least two, or even three to four times faster than TLOU 2. I wonder if the same Sony will take into account the passage time in the pricing of future games after the announcement of Jim Ryan, or regardless of the duration of the passage, all AAA titles of the company will cost the designated $ 70? And how proportional will this estimate be?

“High” salaries for game designers and developers

In the fall of 2023, journalist Jason Schreier spoke about the working conditions of the Blizzard head office employees. According to him, only a few receive more than $ 100 thousand per year, and testers and junior developers receive close to the minimum in California $ 12 per hour. And we are talking about the IT sector, about specialists with skills and education, and not the workers of some Taco Bell.

That’s just the head of Activision Blizzard Bobby Kotick in 2019 earned $ 40 million in salary and bonuses, and the company’s CFO Dennis Darkin received bonuses for $ 15 million. And in general, the ratio of the average salary of Activision Blizzard and Kitten employees is 1: 306. And it was in a less financially successful year for the gaming industry – in 2023, the coronavirus pandemic helped publishers earn even more.

Business is business

The conclusion is clear: the most common arguments from publishers are groundless. The absence of regional prices levels out the difference in the cost of consuming video games and, for example, movies. Game length is a fickle variable, and high salaries in the industry are more of a myth, fueled by inflated executive budgets. The bottom line is that the increase in the cost of production of games is associated only with higher marketing costs – for example, CD Projekt RED recently spent $ 2.5 million on a billboard in Times Square. Such advertising costs will be used in part to cover the $ 10 added to the market value of the games.

At the same time, now is the right moment for publishers to introduce new pricing standards, because the industry is changing generations of consoles. This means that consumers are subconsciously ready for the fact that in gaming now a lot will change – including the pricing policy.

Publishers have every right to make their games as they want, make money on them as they want and sell them for whatever they want. At the dawn of the gaming industry, everyone evaluated the title at what they considered necessary and chose how to motivate this decision. It was only later that they came up with standards like AAA and began to tie prices to them.

However, when all the major publishers in the market follow the same policy, this does not seem like a forced measure – the cost of producing games even from the AAA category still varies greatly. Therefore, theories about cartel collusion cannot be called unfounded. The audience of gamblers was long and persistently processed and prepared for higher prices – by the joint efforts of all publishers at once. After all, it would be strange to make a decision to increase the price without the participation of other market players – who will need Far Cry 6 for $ 80, if there is Call of Duty for $ 60, and vice versa.

Many theses that the rise in development costs makes it harder for publishers to survive are not supported by real statistics. Publishers continue to make millions, and gaming company revenues have grown even more amid the pandemic. And just at that moment they decided to raise prices.

Large publishers think less and less about how to make a quality game that will be appreciated by even the most sophisticated user. Marketers and financiers come to the fore, who may not be interested in games at all. Everyone thinks about how to earn more by spending as little as possible, because this is the main rule of business. And with such a policy, advertising costs often exceed the costs of creating in-game content. But do users have to pay for it?