Grand Theft Auto IV (GTA 4) was released in 2008 and cost its developer Rockstar $100+ million to create. Its retail price? $60 per copy. GTA 5, the next installment in the series, came out in 2013 and set Rockstar back a record $265 million in development and marketing costs. Its retail price? Still exactly $60! Mainstream, blockbuster video games (a.k.a. AAA games) are one of the few information goods that has not changed in price in the last 20 years, despite the increased development costs or any effects of inflation. Several reasons account for this phenomenon.
At first glance it does not seem logical that the price has not changed at all in recent years. Video games are now more complex, have better graphics, offer a lot more content to players than they used to in the 90s, yet prices remain exactly the same. According to Ben Gilbert, senior tech correspondent for Business Insider, ‘The $60 price is mostly due to consumer expectation, so if you’re Nintendo or you’re Sony or Microsoft or any of the other game publishers out there, if you released your game the base level price being $70, $80, more than that, it’s a strong possibility people just won’t buy it.’
Consumers have developed a certain expectation of how much a AAA game should cost and they are in general not willing to pay more for it. This does not mean that $60 is the ideal price for consumers but it does help them plan their next purchase better. Gilbert argues that the standard price also benefits game developers since the fix price helps plan revenue and set sales targets.
Despite that, it is hard to deny that the ever-increasing competition in the video game market and growing development costs affect the bottom line of game companies. This is why companies have developed different pricing strategies in order to increase their profits.
For most AAA games $60 only gets you the ‘standard’ edition of the game. Deluxe or Collectors editions can run anywhere between $70 and $120 and will get you additional game content or physical goodies like art books or figurines. Such bundles are now very common and target hardcore fans who are willing to spend more in order to get extra value.
Another strategy is the periodic release of extra downloadable content for the game, or DLC. Extra content generates more revenue for an already existing game buy usually charging players an extra $10 – $20. DLCs actually also serve a dual purpose of reinvigorates the player base, keeping them interested and playing the already-released game.
Lastly, the most popular pricing strategy in recent years is including microtransactions to the game. Asking a small amount of cash from players for a new skin for a character or other cosmetic changes adds up quickly. In fact, microtransactions is how most mobile games, which are free to download in the first place, make all their revenue. This strategy is so profitable that it is now commonly included in $60 games.
So why do AAA video games only cost $60? In reality they don’t. Game developers use different pricing strategies to get extra value from costumers. However, from the player’s perspective things don’t seem that grim. A $60 still gets you the game you want to play – the other extras are optional. Additionally, the video game market is so saturated that discounts of the retail price pop up very frequently, essentially providing the most patient of gamers with the best value.
References:
Here’s the reason most new console video games cost $60, Michelle Yan and Ben Gilbert, 2018, https://www.businessinsider.com/why-video-games-always-cost-60-dollars-2018-10?international=true&r=US&IR=T
List of most expensive video games to develop, 2019, https://en.wikipedia.org/wiki/List_of_most_expensive_video_games_to_develop
Pricing Strategies for Video Games, Emin Oguz Akgoz, 2019, http://thecircular.org/pricing-strategies-for-video-games/
Image used: Why Do Games Cost $60? Why Hasn’t The Price of Video Games Changed?, The Infographics Show, 2018, https://www.youtube.com/watch?v=P6B6t_hUnpQ
Although GTA5 might have been a cheaper game than it should’ve been, if inflation is taken into account. I agree it’s not very surprising. Rockstar has proven that the initial price of the game is not where they make their money. The fact that GTA5 is said to be the most profitable entertainment product in history (MarketWatch, 2019), proves that it even works to make it available for free. I for one would not be surprised if this is the case for GTA6.
I imagine the game that could overtake (or maybe has already) GTA5 for the most profitable entertainment product is a free game: Fortnite.
Source: https://www.marketwatch.com/story/this-violent-videogame-has-made-more-money-than-any-movie-ever-2018-04-06