Posted by: seanmalstrom | May 24, 2010

Email: Why hasn’t games kept up with inflation?

I frequent a gaming forum, which I will not name out of pity for the poor souls there, where a great number of opinions are beginning to coalesce around the idea that the recent moves by game companies to wring as much money out of gamers as possible is not only acceptable but expected. Apparently game developers have been able to convince gamers that they have the right to do whatever they want, legalities be damned.

I remembered one of your posts about how games haven’t been able to keep their value in recent years and so I did a quick search for an inflation calculator and what I found not only confirmed this statement but also showed me just how much the value of games has plummeted. Excuse my usage of the NES for my beginning calculations as I wasn’t around in order to know the original cost of Atari or even earlier system games. All years are from the US launch of the systems:

The average cost of an NES game in 1985 was $50.00.
The average cost of an SNES game in 1990 was $50.00.
The average cost of an N64 game in 1996 was $50.00.
The average cost of a GAMECUBE game in 2001 was $50.00.
The average cost of a Wii game in 2006 was $50.00

Let’s look at those numbers using inflation:

The average cost of an NES game in 1985 was $50.00.
The average cost of that same NES game in 1990 would have been $60.70.
The average cost of that same NES game in 1996 would have been $72.68.
The average cost of that same NES game in 2001 would have been $81.02.
The average cost of that same NES game in 2006 would have been $92.56.
Today that same NES game would cost somewhere around $100.00 (the inflation calculator I used only allowed dates up to 2009 at which time it would have cost $98.37.)

Apparently, as games have gotten exponentially more expensive to make their value has dropped by nearly %50, and yet no one is asking the question of why? No one is asking why the used market has grown to such proportions while even though games cost half of what they used to gamers still seem to think that they’re not getting their money’s worth. Not even Nintendo has been immune to this value loss even though they are more immune to resale than most developers.

Why is no one talking about these numbers? Why has no one looked this up and realized just what a bad position the video games industry is in? Sony and MS this generation have tried to counteract this drop with a modest increase (to where games should have been in 1990) and yet gamers protested. Is it because they were just used to games costing $50.00, or was it because the games themselves weren’t worth the cost increase?

Why haven’t developers simply raised the price of their games over the years? Why all this cloak and dagger stuff where they slip in extra costs under your nose like having to pay for online separately or DLC or the worst of the lot unlock codes for features already on the disk?

Something far more dangerous and sinister than simply lost revenue from resale and pirates is going on…

The cost for making video games hasn’t always ‘risen’ (only the cost of development). Discs made video games much cheaper to producer and much less risky from a financial standpoint. As a gamer, I love cartridges because they will always work. I love how there is new hardware inside some of them such as the chip to play those drums in Super Mario Brothers 3. As platform owners, companies like Nintendo and Sega also loved cartridges because all third parties had to buy their cartridges from them. People do not remember but the NES software sales were repressed during the height of the NES Era because of cartridge shortages. Nintendo could not create enough cartridges to fill the demand of third party companies. Nintendo couldn’t even make enough for their own games as Super Mario Brothers 2 and Zelda 2 kept selling out.

I don’t think the average price for N64 and SNES games were $50 for new titles. Many of them were $60 to $70. I remember Final Fantasy II being $80-$90 (and totally worth it I might add). This is why we rented games so much back then because they were so expensive! Though I do remember prices would drop. I bought Star Fox for $20 due to it being a type of ‘player’s choice release’ type of thing. I also picked up Super Metroid $20 and Mystic Quest $20 since retailers were trying to get rid of them as those games didn’t sell too well.

Game companies have been good at cutting costs on the production side. Going from cartridges to discs really lowered costs. Since then, many companies have merged and grown large (like EA or Actvision) which means they can leverage costs better than a smaller company could (e.g. more resources to pool).

Distribution costs have lowered to such an extent that all there is now is just the disc, a very thin plastic case (which may or may not have holes in it!), and the cost of the retailer. The big cost sticking out today is the retailer cost. So it is very tempting for these game companies to want to get rid of the retailers along with the plastic case and disc by going digital distribution. Of course, they could lower their development costs, but they won’t do that.

With the price increase from $50 to $60, I think it shows that game companies are between a rock and a hard place. They cannot cut distribution costs any more unless they somehow remove the retailer from the equation (which is a drastic change in how video games would be sold). HD gaming has forced costs to go up. I think all the movement toward DLC illustrates that they knew they cannot move to digital distribution (look at the PSP Go for example).

I don’t think the price remaining the same, despite inflation, is the indicator of a drop of value in games. This is because the Games Industry has been good at reducing costs in many areas. I think the indicator of the drop of value in games is the erosion of customers and, more importantly, the less and less frequency of phenomenons occurring. We have to keep things to a context of their times. Comparing today’s games to the past means we must remove additional territories games, today, sell at, and we must account for population growth (and gamers growing older who have more disposable income). This generation I believe we have seen only five entertainment phenomenons:

-World of Warcraft
-Call of Duty/ Modern Warfare
-Wii Sports
-2d Mario (both DS and Wii)
-Wii Fit

These games have moved well beyond ‘high sales’. They are something else entirely.

For the NES Generation, you could have as phenomenons….

-Super Mario Brothers
-Zelda (it’s a cereal too! Nin-ten-do…)
-Gradius (and other shmups)
-Mega Man
-Final Fantasy (Japan)
-Dragon Quest (Japan)
-Punch-out (one of the top selling NES games)
-NES Sports games (Nintendo remembered this phenomenon which is why Wii Sports exists and why Wii Sports Golf has tracks from the NES version)
-Classic Arcade Series (these sold ridiculously well)
-Capcom’s Disney games (these were ridiculously popular probably because they were so well made. Ducktales and Chip and Dale’s Rescue Rangers are ones everyone probably remembers.)

And that is just on one console. Not even going to try to do other consoles or computer games that were phenomenons at that time period.

Or to put it another way, think of all the really amazing 16-bit games. Now look at PC Gaming as it was creating phenomenons with the invention of FPS (e.g. Doom) or RTS (e.g. Warcraft and Command and Conquer) as games were exploring LAN play and even Internet play at that time. So much was going on in gaming. Since I can count all the phenomenons this generation on one hand, this is a big problem. Without phenomenons, new audiences will not be brought in and gaming will cease to be exciting. No one will say “Wow! This is new! This is amazing!”

As I understand it, how Nintendo looks at the gaming market is not how they can sell the most but what can they do to create an entertainment phenomenon. A successful phenomenon will, of course, sell very well but also create excitement that will rocket a console’s momentum.

The question is why are there less entertainment phenomenons in gaming today? Let us play doctor and put the thermometor into gaming. Let us place the stethescope to gaming’s heart and listen. The patient is not healthy.

What is the antidote? Or better yet, what is the virus?

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