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Daily Reaction: Should PS4 and Xbox 720 Games Cost More?

The next generation of consoles is looming, and that means a whole new era of video gaming goodness awaits on the PS4 – but will game prices go up again? Daily Reaction’s Seb and Dan answer Greg Etopio’s community question.

Seb: The PS3 and 360 saw retail video games go up in price by $10, so it’s natural to assume that a similar change will happen. Here’s why it could – over the past 6 years inflation has lowered the value of that $60 you pay for a game. $60 in 2013 money is only worth around $52.60 in 2006 money – that might not sound like that much, but even a small percentage adds up when we’re talking millions upon millions of games. Then there’s the problem about rising game development costs, which Epic recently complained about. Now, Activision’s Bobby Kotick has said:

This is my 22nd year doing this, and every single console transition we’ve seen an increase in development costs. Over long periods of time it gets smoothed out, but I would say this is not a transition where that’s going to be an exception.

We’re going to have to figure out how to take advantage of the unique abilities of new hardware and that requires new skills and investment in tools and technology and engines and so yes, that’s likely.

So the amount of actual value taken out of $60 is less, and the cost of developing a new game is more – a price raise makes sense, right? Unfortunately, no. $60 is already a tough sell for games, and the availability of other entertainment forms for way less, or of cheap iOS/Android games, means that trying to charge much more will put so many people off that it won’t be worth the added revenue from an individual.

What we’re seeing instead is the increase in other methods of making money, such as annual DLC subscriptions, online subscriptions, microtransactions and god knows what else. That way they can make up the missed money, simply by cutting content from the full game (awesome).

Then there’s digital downloads, where the saved costs from not having to create the physical product, or pay GameStop (they still have to pay Sony/Valve, but less) means they still bring in more revenue. As we move increasingly online, the ability for publishers to release games with various price points also becomes more acceptable – a title like Skyrim costs more to make and offers people more playtime (when it doesn’t break) than a much smaller game. This could potentially allow for greater developer flexibility – currently it’s either a $0.99 game, a $9.99-14.99 game or a $60 game, there’s not much outside of that. A great way to combat inflation and dev costs will be to allow publishers to price games more fairly, something that I’m sure consumers will appreciate too.

Dan: Yes, as much as developers will need the increased cash flow, given the rising cost of development, it will be unlikely that we will see costs recouped from raised retail game prices. The consumer market rarely understands the actual investment to develop most of the big budget titles that we see, given the flat pricing across the board, so it is difficult for many consumers to understand the difference between development titles. This is why I do think that we will instead see a raise in cost for PSN titles (non-retail), as the pricing has not been been flat, and so it will be an easier concept for consumers to understand. Many will still complain, but only when the fact is pointed out, as we still have a very loose understanding of the cost for digital titles.

Luckily, the cost for developing digital titles will still fall well below that of many big budget AAA titles, due to the nature of their development, therefore, digital titles will still be a great way for developers to obtain profit without as much risk. The only issue with relying on digital sales to push products is that the available audience will be segmented to only those with an online connection, and furthermore those who would be accustomed to using a service like the PSN Store. Which could actually lead to digital titles releasing first on marketplaces, but eventually seeing a retail launch later on in the same manner that The Walking Dead was released.

The only issue with this method of release is that digital content is normally priced below that of retail, and the titles would be considered old, a problem with multiple factors. The first being that a number of gamers try to attach on to the latest and greatest, meaning new titles launched within a very short window. The second problem is advertising costs, as all the investments made to push the digital launch would be lost, as the delay between a digital launch and retail launch could be too far apart to stay relevant. This would require publishers to do a second campaign to push the product a second, further lowering the amount of profit, or driving up the cost of the retail package.

As we see countless developers going under, and even major publishers, the need for retail prices will grow, but sadly the perception of perceived value from consumers will not follow suit. Until people realize the reason we are seeing titles being annually released is because they are guaranteed to profit in a tough economic climate, and the general gamer’s mindset will not allow for developers to match the increased cost to develop games with an increase in cost to them.

How much would you pay to see a realistic Nathan Drake on the PS4? Will inflation and increased dev costs cause problems for publishers? Is $60 already too much? Let us know in the comments below, or see what we’ll do for $60 on Twitter at Seb and Dan.

Be sure to email DR ideas, podcast comments and money to [email protected].