Why Are Video Games So Expensive, Anyway?

Entertainment is a big business.  People want to have fun, and video games are one of the more popular ways for them to do so.  While other entertainment industries have struggled, video games have continued to sell in steadily increasing numbers.  Despite this, we still hear all the time from developers and publishers how video games are increasingly less profitable despite the increased sales.

Less?

It does not take a terribly in-depth analysis to realize something is fundamentally wrong with the monetary expectations of game publishers nowadays.  When the recent Tomb Raider came out, it sold 3.4 million games in its first month, most people thought it was a hit.  Square Enix called it a disappointment.

Can’t make a game with these

Just considering the implications of that declaration is horrifying.  3.4 milllion video games sold, even if everyone only paid $40 (which seems to be a very conservative estimate) is still over $130 million dollars just in the first month.  What sort of cost was behind creating the game when so much money in such a short period of time fell far enough below what was desired to be called a disappointment?

How and Why?

The question of exactly how much money these big-budget games cost is complicated by a few factors.  The most obvious is that very few games ever give a development cost.  We can safely assume Tomb Raider cost significantly more than $130 million, but we have no way of knowing exactly how much more it cost.  Most games we learn even less about how much they cost to make.

A little math can help clear up some of the question.  While licensing fees on characters and development/graphic engines might vary wildly based on the character/engine in question, we can calculate the costs of the people involved in making a game with a bit of leeway given for higher or lower pay grades.

As an example, if we take a game with 20 arbitrary people working on it between the software engineers, artists, and various other roles and say they make an average of $60,000 a year each, we can calculate how much is spent paying the people to make this particular game.  In this for-instance, we get $1.2 million per year just to pay the people involved.  It’s easy to see where such costs can get astronomical very quickly when publishers put together teams with over a hundred developers all working on the same project.

But… that’s still not all of it!

Even if we take a game with 200 people working at double the average wage in the example above, that still doesn’t even break $25 million a year.  The twitter post shown from Cliff Bleszinski hints at a game with a potential budget of $600 million or more.  The number of people involved in making the game seems fairly unimportant with a budget like that.  200 people working for five years would need to be earning over $120K each to account for even 1/6 of that budget.

So what actually costs so much?

Bleszinski himself has given us part of the answer.  In previous tweets he has mentioned before how some games actually spend as much on marketing as they spend on making the game itself.  When you get games with budgets approaching or surpassing $100 million dollars, that represents a huge investment.

The irony is if those marketing costs really are what makes games so expensive, the high cost of making AAA games might actually more be a matter of mindset than actual cost.  It is an easy to understand mindset, however.

You run a game publisher.  You have a game in the works right now that is going to cost almost $200 million by the time it is finished.  With an investment that huge, you want to make certain the game will sell, so the logical idea is to get commercials out so people know to buy it.

This really cannot be the only option.

With game after game getting funded through entities like Kickstarter and Steam Greenlight, it is becoming clear video games do not have to be as expensive as the big-name publishers seem to believe.  While some developers/publishers feel higher prices or more restrictive policies regarding used game sales might solve the problem of cost (Cliff Bleszinski among them) others argue that lowering the cost might actually have the same effect (Valve) by vastly increasing sales.

In the end, we can only hope someone finds a solution for these absurd development costs.  As much as certain developers might bother us with their practices from time to time, ultimately it is everyone, including us gamers, who stand to lose if they fail entirely.