Video Game Development Costs

Video Game Prices can often be difficult to justify when we make that all important purchase, so here is a brief insight of what it costs to develop a video game. Who makes what from a sale of a video game?

Let’s start by looking who the players that bring us our beloved video games that keep up us up at all hours of the night. The major players, the ones who get a cut of our hard earned money are, the Publisher, Developer, Manufacturer, Retailer and for console gaming there are associated Console Royalties to be paid to Sony, Microsoft and Nintendo. What you might find interesting is how the cost of a $60 USD game has its costs distributed amongst these major players.

The most interesting thing I find about the distribution of the following is how small of a cut the developer receives, and how much the retailer gets! This is my primary consideration when deciding to search out the best Video Game Prices.

Video Game Development Costs Breakdown

Data Source: Video Game Industry Trends

Video Game Development Costs are different for every game. What is the cause of one game costing much more than another? It comes down to the ability to appeal to the masses and initial pitch of an idea to determine there is a market out there for the game, and on a grand scale! I can guarantee you that the first Call of Duty did not cost over $50 million dollars which is what the current iteration of Call of duty Modern Warfare 3 had a budget for. Not to mention Skyrim had a total budget of in excess of $50m. Note that I have mentioned two games that now have a long history of bringing out sequel after sequel. No different to what Hollywood does by bringing out movies in Trilogies, with the budget for each subsequent movie typically receiving more on the back of the success of the prior movies.

Here’s a bit of a glimpse of what major release games can cost to develop; these figures don’t even count the hundreds of millions of dollars of marketing money that is poured into games such as Call of Duty and Battlefield 3.

Video Game Development Costs for Major Releases

This table alone beings to give me an appreciation of how many sales a game needs to reach just to cover its costs. So when you do feel like you've paid a little extra for a new game you can take it with a grain of salt knowing how much money is poured into a final product. Not to mention the blood, sweat and tears!

Video Game Prices in Australia are unacceptable

Why are Australians paying such a premium on Video Game Prices? A few years ago it might have been understandable especially at the lows of the 2008 GFC when the Aussie dollar traded at 60 cents to the US dollar and not that great against other currencies either. It wasn’t particularly affordable to import games.

The Australian dollar is now trading over parity to the USD and yet Australians are still paying up to twice as much as what Americans pay.

It makes you wonder that the reason that we might be paying these prices is due to the physical walk-in stores that sell video games for PC and the consoles PS3, Wii and Xbox 360 have no ‘apparent’ competition. What I mean by this is that there is no perceived threat, yet.

Lack of awareness of cheaper alternatives appears to be an important factor with this gaming market problem. The average consumer can save a lot of money if they are prepared to shop around where they purchase their games, just as long as the average gaming consumer can exercise a little patience when they are purchasing a game. By patience I mean they don’t always have the burning desire to play brand new games in the very first hour or day that the game is released. They can get the same product for up to 50% off if they
shop around and wait for delivery a week later.

I’ve been a big advocate of solving all or a lot of my issues online. Only in the last year I had wisened up to the idea of importing from the UK. I have started buying from ozgameshop.com when I realised that I didn’t want to be spending 100 dollars every time I wanted to play a brand new ps3 game. For a laugh here’s a price comparison using for 4 games I pre-ordered in September 2011 against the prices JB Hi-Fi Online (who you could argue are cheaper than it’s physical stores!) are charging TODAY (23/01/2012)!

The math really speaks for itself. That’s a saving of $104.04 AUD. I'm so glad I got the Skyrim price offered at OzGameShop!

Just to be thorough and support local I did a bit of extra shopping around to see if I could buy cheap games within Australia itself and it turns out you can. Over at http://www.game-lane.com.au/ I spotted Video Game Prices for the above for games to sit between OzGameShop and JB Hi-Fi Online. You could easily find savings of 20% or more by purchasing from non chain stores online.

I read an interesting article over at Kotaku where the economics of the high Video Game Costs in Australia are discussed. Basically, in Australia we have gotten used to paying these premium prices, and there has yet to be a sufficient threat to the physical store gaming market or as I have interpreted, no major shift to the online stores to warrant the physical stores reducing prices to acceptable or competitive levels.

Please share what you do to find cheaper prices for your Video Gaming needs.