To me, one of the greatest mysteries in gaming is: Why do we pay so much for digital games on our home consoles? Sometimes, I’ll even go into a GameStop or another video game retailer and see a physical copy of a game selling cheaper than a digital copy. How?!
Nowadays, there’s a 3-6 year development cycle for big titles, and even 2-3 years on indie titles, so I’m not opposed to the full price tag of videos games because the development team should make the money that they deserve. Let’s take a look at where the money goes on each physical game that is sold.
For a $60 physical copy of a game, the money is distributed as such:
- $12 Retailer
- $12 Console Manufacturer
- $36 Game Publisher
That $36 to the publisher is distributed like this:
- Distribution costs (shipping, insurance)
- Manufacturing costs (packaging, manual)
- Marketing costs (advertising, sales)
- Development costs
- Overhead costs
- Returns (Copies that don’t sell)
- Amount allocated for damaged goods
- Profit (if any)
Looking at these numbers makes you think that the $60 price tag for a video game might even be too low, but if prices were raised to $70-$80 the retailer risks the chance of not selling as many copies due to our consumer expectation of a $60 game.
That’s where digital comes in. When you take away the production of creating the physical copy, distribution costs, returns, and cutting out the retailer all together then it seems like digital copies would net a lot more revenue for the Publisher, So why do we still pay the same price for a $60 digital game?
I will say that cutting out the middle man seems to allow for more promotions on games through the online platforms, and allows for great services such as Gamepass.
What do you think? Are we spending too much money on digital games? Or do you think it’s fair to allow them to be sold at the same price as a physical copy? Let us know in the comments section or on our Discord!
Source: Onlive, David Mullich, Bloomberg
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