The video game industry has lately had to face a difficult truth: hardware and software prices are going up.
In the last year, Ubisoft, Take-Two, Xbox, and Sony all formally announced a bump in game prices from $60 to $70, and other AAA publishers such as Activision Blizzard, EA, Square Enix, and Warner Bros. have quietly followed suit with games like Call of Duty: Modern Warfare 2, Star Wars Jedi: Survivor, Final Fantasy 16, and Gotham Knights. In hardware, the PlayStation 5 got a price bump earlier this year across a number of regions – though its cost remains steady in the US for now.
So what’s going on here? Why are prices going up? And will they continue to rise in 2023?
In short, yes – game price increases are likely here to stay. But the answer, as always, is a bit more complicated than that. There are a lot of conflicting factors at play, from game pricing history to inflation to the general games landscape where consumers have wildly different perceptions about the value of a $60 versus one priced at $20.
So if you’re concerned about price increases or just want to know a bit more about why you’re paying $70 to begin with for Redfall next year, it’s worth getting to know a bit more about the games pricing landscape, and what to expect in the year to come.
Wait, are game prices increasing?
One key to understanding why game prices seem to be increasing is that while the bump to $70 AAA games is ostensibly a price increase, it’s also not really an increase when you cast it in light historical inflation and pricing. GamesIndustry.biz recently published an excellent analysis of what’s going on here, which itself is based on another excellent analysis by TechRaptor from 2020 of how video game prices have changed since the 1970s. I highly recommend reading both these pieces for a good overview of this issue, but the short version is that, relative to inflation, games are actually much, much cheaper than they used to be. The Nintendo Entertainment System, for example, cost $179.99 at launch and an average game cost $45. But when you adjust for inflation in 2020 (as the TechRaptor piece did), the NES would cost $432.71 and games on average would be $108.18. And the NES isn’t an outlier – every single older console and its games followed this trend, with games and consoles getting gradually “cheaper” over time, even as the price tag itself appears more expensive. As Omdia principal analyst Liam Deane noted, if game prices had risen with inflation since 1990, games would now cost over $90 a pop. In fact, Deane even sent us this lovely graph illustrating how the inflation situation has impacted game prices - and is even already impacting existing $70 games:
This explains one reason why price increases like the ones we’re seeing now happen in the first place. But apart from that, video games have also become increasingly expensive to make. When I asked Kantan Games’ Dr. Serkan Toto why game prices were going from $60 to $70, he replied that companies “have no other choice.” He pointed me to comments last year from former PlayStation boss Shawn Layden saying that the PlayStation 4 games he had helped get out the door cost at least $100 million apiece, and predicted that PS5 games would cost $200 million or more.
And it makes sense that they would. Newzoo’s Rhys Elliott noted that the core development team of Assassin’s Creed 2 in 2009 consisted of (roughly) 450 people. Assassin’s Creed Valhalla in 2020 required over 1,000 people across 17 different studios. That’s a lot of salaries, benefits packages, equipment, and more to pay for. Per reporter Jason Schreier’s interviewee estimates back in 2017, making a AAA video game cost then, roughly, about $10,000 per person per month. Assuming that number hasn’t grown since then (it surely has), that ballparks at roughly $10 million per month for a game that takes much longer to make than games used to. And that doesn’t even include all the other game making expenses, like the increasingly pricey technology used to make them, the expenses of marketing and distribution over longer and longer marketing cycles, and all the other bits like paying for booth space at an E3, keeping the plumbing working at the office, company lunches and retreats, and on and on.
Given all this, it’s actually rather a bit surprising we haven’t seen games get even more expensive than this already. Why haven’t prices gone up more drastically before? Elliott offered a theory:
“The answer is that they’ve long offset these rising costs with DLC and microtransactions, bolstering premium game sales with smaller purchases (in-game boosters and cosmetics) as well as more robust content expansions,” he said. “Simply put: the industry has sustained itself with new monetization methods and live-service strategies alongside the classic premium launches. Content subscriptions, like Xbox Game Pass and PlayStation Plus are another factor in the mix.”
Another point worth mentioning is that many games are already much more expensive than $70, and people happily pay for them. As NPD analyst Mat Piscatella pointed out to me when I asked him about game price increases, we already have deluxe, silver, gold, collector’s, and other editions of games that sell for much more than $70 and are very successful, though there are usually extra pack-ins to incentivize those purchases.
Meanwhile, games increasingly get deep discounts within a year of launch. A quick glance at Steam as I’m drafting this piece reveals sales on recent releases like Sonic Frontiers, Call of Duty: Modern Warfare 2, Marvel’s Spider-Man Remastered, and Uncharted: Legacy of Thieves Collection. While two of those are technically re-releases of older games, you can look at Steam pretty much any week (and especially during large Steam sales) for example after example of this. The console triad isn’t quite as generous with its big sales as Steam tends to be, but you can still find significant discounts across Xbox and PlayStation first-party games multiple times per year. Nintendo is the one major exception – but notably, its games are still $60…for now.
All that said, it’s understandable to feel frustrated when game prices go up, because at least in the United States, wages have not kept pace for many people. So when an entertainment product that already felt expensive creeps up by an extra $10, it feels painful on an individual level even if the economics behind it make sense. And very recently, a number of complex economic factors have resulted in especially severe inflation that’s bumped the price of everything up seemingly all at once, making the $10 price increase feel like an added kick in the pants.
These on-paper price increases are unlikely to ever go away. In fact, we’re likely to see even more companies follow suit on these increases in the coming months and years.
Who’s raising prices next?
As the vast majority of large gaming companies have increased the prices on their biggest games, the handful of major companies that haven’t yet nonetheless haven’t closed the door on the idea. That applies to both software and hardware, too. While Microsoft said in August it had no plans to increase the current suggested retail price of its consoles, comments from Xbox head Phil Spencer since indicate that it’s not entirely off the table. Nintendo is in a similar boat with the Switch. Both Toto and Elliot told me they wouldn’t be surprised if Xbox raised its console prices in 2023, and Elliott pointed out that the Xbox Series S will likely continue to be pushed as a low-cost Game Pass box.
Deane disagreed, suggesting that he didn’t think Xbox necessarily needed to increase its console prices.