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  1. #1

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    "Why Does Gears of War Cost $60?"

    For all of the people who think Microsoft and Sony have upped game prices just because...

    Forbes released an article and breakdown on the cost of Next Gen games. Here's an example:


    Quote Originally Posted by 1up.com
    ON A $60 GAME OF GEARS:
    • 25% (aka $15) goes to pay the art and design guys.
    • 20% ($12) goes to pay the programmers and the engineers.
    • 20% (also $12) goes to your friendly neighborhood retailer. EB / GameStop, whoever.
    • 11.5% ($7) goes to a "Console Owner Fee" - ie. whichever one of the Big Boys made your hardware (Sony, MS, Nintendo.)
    • 7% ($4) goes to marketing, and puts Mad World and Marcus Fenix on MTV.
    • 5% ($3) goes to "market development" -- paying for cardboard Standees of the Gears Crew and elbowing other games out of the way for shelf space at your local retailer.
    • 5% ($3) goes to actually manufacturing and packaging the disc.
    • 5% ($3) is spent paying the Man for IP licenses or maybe hiring some big name voice actors. If your game isn't an original IP, here's where you get dinged by Marvel, Disney, or Ray Liotta's agent.
    • 1.5% (just $1) goes into the publisher's pocket.
    • 1.5% (also $1) goes into the distributor's pocket.
    • 0.3% (about 20 cents) goes into corporate costs. Management, overhead, lawyers, etc.
    • 0.05% (less than 3 cents) go into the cost of paying for the Developer's Hardware. Who knew an SDKs can cost tens of thousands of dollars?
    So... no. They don't just charge more because they can.


    Forbes Article

  2. #2

    • Pilot EdForceOne
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    Re: "Why Does Gears of War Cost $60?"

    what that fails to embrace though is those numbers are that way because they chose to budget that much. They budget that much because they know they can get it.

    You don't spend more then you think you can recover. If they wanted to charge $40 they would simply cut back their budgets.

    I don't think anyone believes they are just jumping their profit margins. But they are upping their budgets because the environment demands it and they know the market will bear it - in part because people are paying $500+ for a system compared to paying $200 before.

  3. #3

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    Re: "Why Does Gears of War Cost $60?"

    So....

    We should be playing games that look like they're from the 70's? I guess that same approach should apply to movies too since they cost a lot more than they used to. Cars too for that matter... and food.

    If a bigger budget begats better product, I'm all for it. Same goes with EVERYTHING else in the business world.

  4. #4

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    Re: "Why Does Gears of War Cost $60?"

    They charge that because they can. It is what has been negitiated by everyone. They can they same percentage of the pie but make the pie as big ($60 per title) or as little ($19 per title) and make their money on volume (i.e. more discs sold) or recoup all their costs at one time and stick it to the comsumer all at once.

    It's what the record industry is suffering from right now. You can buy the DVD version of say Queen at Wembly for $9, which includes extras and 5.1 sound, but the Cd version of that same show is $20, which cost more to produce?

  5. #5

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    Re: "Why Does Gears of War Cost $60?"

    It's controversial for a reason. It's because it's border line true.

    The article suggests that $59 dollars is used towards selling the game and $1 is the actual profit. You have to be pretty credulous to completely believe that it just so happened to add up to a perfect $60. Even if the article were completely true for Gears, not every game shares the same production costs. Why should others MSRP at $60 as well?

    They rounded to a nice $60, not purely because they can, but because it's the cheapest cost for all games with an LCD of $10 and because they can.

    Let's just hope more companies break the norm, offering strategically priced $45-55 titles. Because, you know what? They can.

  6. #6

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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by sailerm View Post
    They charge that because they can. It is what has been negitiated by everyone. They can they same percentage of the pie but make the pie as big ($60 per title) or as little ($19 per title) and make their money on volume (i.e. more discs sold) or recoup all their costs at one time and stick it to the comsumer all at once.
    Ever notice that budget titles usually lack a lot of polish, never break new ground, and don't push the hardware to its limits? There's a reason for that.

    Of course, every game that costs $60 doesn't "deserve" to cost that much either...

    The point is, these games cost this much because of development and not because of profit.

    It's what the record industry is suffering from right now. You can buy the DVD version of say Queen at Wembly for $9, which includes extras and 5.1 sound, but the Cd version of that same show is $20, which cost more to produce?
    How does that model relate to gaming?

    Quote Originally Posted by pizzamousechips View Post
    It's controversial for a reason. It's because it's border line true.

    The article suggests that $59 dollars is used towards selling the game and $1 is the actual profit. You have to be pretty credulous to completely believe that it just so happened to add up to a perfect $60. Even if the article were completely true for Gears, not every game shares the same production costs. Why should others MSRP at $60 as well?
    Forbes is a highly credible source. Rather than steep myself in conspiracy or whatnot, I'll believe them over nothing.

    Let's just hope more companies break the norm, offering strategically priced $45-55 titles. Because, you know what? They can.
    Nintendo can... and there's a good reason for that.

  7. #7

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    Re: "Why Does Gears of War Cost $60?"

    It's what the record industry is suffering from right now. You can buy the DVD version of say Queen at Wembly for $9, which includes extras and 5.1 sound, but the Cd version of that same show is $20, which cost more to produce?
    My point is that both of these releases have the same content, recorded at the same time, by the same people, with the same artists, and yet the video division feels that $9 is a suffient price point, where as the record label charges $10 more (and your getting less)

    My point is that the video game (DVD, CD, Book) pricing is arbitrary. It's what the market will bear. It's no differant that a pair of Nike Shoes selling at $150 even though it costs them pennies to make.

    I know that better games, may, cost more to produce than crappier games, but when I go to the cinema to see a low budget independant film, or a $250 million dollar epic, the theater owner charges the same ticket price either way.

    New titles drive the video game industry, so the get the preium price, but if a title does not sell at $60, trust me they will reissue the disc "At a NEW Lower Price!"

    Again, They charge $60, because some people will buy it at that price.

  8. #8

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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Soulquarian View Post
    Forbes is a highly credible source. Rather than steep myself in conspiracy or whatnot, I'll believe them over nothing.
    The veracity of the story's claims isn't my point. In fact, if they're right, it further contributes to my side of the argument. Not all 360 games cost the same to produce/market/etc. The fact that they all retail for $60 easily demonstrates that some charge more than necessary just because they can.

    This isn't any amazing news or anything, it's just the truth.

  9. #9

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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Soulquarian View Post
    So....

    We should be playing games that look like they're from the 70's?
    That's overstating it quite a bit.

    From what I can tell, the price jumped with the new generation. So all of a sudden, production costs jumped up $10, multiplied out over several hundred thousand copies (or more) just because of the new generation. I'm not buying it. It's too convenient. The jump from the last generation to this current generation is the smallest technical leap since the 8 bit to the 16 bit. Game costs stayed steady during the jump from SNES to N64, so this sudden jump in price during one of the smallest technical leaps in consoles seems fishy.

    True Gears of Wars is an obvious contender for utilizing a bigger budget, but Microsoft might have decided to sell that game with minimal profit to themselves to give themselves the necessary killer app to draw in gamers. It would be poor logic to extrapolate all games currently priced at $60 based on the estimated budget breakdown of a single game.

    I also believe that budget titles lack a sheen not because they are made on a cheaper budget, but because the studios making these games are less experienced. But without any actual information, both of our opinions on this topic are exactly that: opinions.

    Another interesting point from this article is the comment that many game developers need to sell between 500k and 1 million copies of a game to see a profit on the PS3. That would mean that many games would need to sell more than one copy per system out there to see a profit. I see some of the smaller production houses jumping ship if these prices continue to soar.
    Last edited by Mr Ness; 12-22-2006 at 01:05 AM.

  10. #10

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    Re: "Why Does Gears of War Cost $60?"

    My problem with the $59+ pricing: Great games selling more copies at lower prices will be equal or great than the lesser amount that might be sold at a higher price.

    Therefore, what needs to happen is cheap game=greatness, expensive game=crap. Make sense, don't it? I mean, if you're making a crap game, you want to maximize that per-copy breakdown. But if you have a truly great game, you don't need to maximize the per-copy breakdown because you're selling more copies of the game to cover the cost.

    Ok, so we're not living in that fantasy world...
    -Tim

  11. #11

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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Soulquarian View Post
    So....

    We should be playing games that look like they're from the 70's?
    What, the games you've been playing for the last 5 years don't count? The point is they knew this was an opportunity where the market was ripe to bear a new average selling price based on the price people are paying for the console. If they raise their production budget or raise their profit margin.. up to them. The real story would be comparing the per title license fee of the previous generation vs this generation.

    I guess that same approach should apply to movies too since they cost a lot more than they used to. Cars too for that matter... and food.
    Not sure what you are trying to say.. because the costs of all those things continually go up in part due to rising costs.

    If a bigger budget begats better product, I'm all for it. Same goes with EVERYTHING else in the business world.
    Again.. another over simplified statement without any experience. By your logic..

    1) more expensive = better
    2) to make it better, just throw more money at it

    There is a reason you budget! You can't endlessly charge more money. Price is inversly proportional to volume. You can't price yourself out of the market by simply spending more and more money.

  12. #12

    • Pilot EdForceOne
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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Soulquarian View Post
    Ever notice that budget titles usually lack a lot of polish, never break new ground, and don't push the hardware to its limits? There's a reason for that.

    Of course, every game that costs $60 doesn't "deserve" to cost that much either...

    The point is, these games cost this much because of development and not because of profit.
    What then you think everyone of these games magically costs the same amount to make?

    And your comment on budget games is wrong and echo's your belief on technology's importance over and over. Creativity doesn't cost and dollars do not replace creativity.

    How does that model relate to gaming?
    Because they have a fixed ASP that is based on what they believe the market will bear, not costs necessarily. Why is the CD from a new no-name band the same cost as the CD from an established band that was recording for over a year to make? The no name production was cheap to produce and the big name was many times more expensive to produce. The end product is not priced on cost, but on market expectations. The publisher has the volume to try to recoup their costs either by volume or through success of other product.

    Larger game publishers mitigate risk a bit in the same regard. Smaller publishers don't have such benefits and must fix their costs much more to what they can recover on a title by title basis.

  13. #13

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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Mr Ness View Post
    That's overstating it quite a bit.

    From what I can tell, the price jumped with the new generation. So all of a sudden, production costs jumped up $10, multiplied out over several hundred thousand copies (or more) just because of the new generation. I'm not buying it. It's too convenient. The jump from the last generation to this current generation is the smallest technical leap since the 8 bit to the 16 bit. Game costs stayed steady during the jump from SNES to N64, so this sudden jump in price during one of the smallest technical leaps in consoles seems fishy.
    I don't think that's true at all. If we're talking GRAPHICAL leaps, that can be applied, but we're looing at all sorts of possibilities with consoles now. Downloadable content, Huge numbers of people playing a FPS online in one match (40+ in Resistance), vastly intelligent A.I., interactive enviornments and dynamic lighting, better physics models...

    The leaps are huge in a variety of different areas, but people keep focusing on graphics alone.

    True Gears of Wars is an obvious contender for utilizing a bigger budget, but Microsoft might have decided to sell that game with minimal profit to themselves to give themselves the necessary killer app to draw in gamers. It would be poor logic to extrapolate all games currently priced at $60 based on the estimated budget breakdown of a single game.
    I agree. But I still do not believe these companies are in it for the sole purpose of squeezing every penny out of the consumer. Why is it that third party games on Nintendo cost the same as Zelda? The same rule applies.

    Quote Originally Posted by FrumiousBoojum View Post
    Therefore, what needs to happen is cheap game=greatness, expensive game=crap. Make sense, don't it? I mean, if you're making a crap game, you want to maximize that per-copy breakdown. But if you have a truly great game, you don't need to maximize the per-copy breakdown because you're selling more copies of the game to cover the cost.
    The question is... why do people buy crappy games anyway.

    Quote Originally Posted by flynnibus View Post
    What, the games you've been playing for the last 5 years don't count? The point is they knew this was an opportunity where the market was ripe to bear a new average selling price based on the price people are paying for the console. If they raise their production budget or raise their profit margin.. up to them. The real story would be comparing the per title license fee of the previous generation vs this generation.
    So you're saying that it costs developers the same to create a game for the PS2 or a PS3? I really don't believe that.

    1) more expensive = better
    2) to make it better, just throw more money at it
    I guess the more you say that, the more you think that's what my opinion is...

    A game is better based on the game itself. Lower price does not denote a better gaming experience and neither does a higher price. Obviously, a game has a better chance at being better if more money is spent developing, but that largely depends on who's developing and where that money is being spent.

    Quote Originally Posted by flynnibus View Post
    And your comment on budget games is wrong and echo's your belief on technology's importance over and over. Creativity doesn't cost and dollars do not replace creativity.
    Why do you insist that more money equals bad product? Burger King is selling games for 3.99. Obviously those games are going to lack in quality as opposed to other titles.

  14. #14

    • Pilot EdForceOne
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    Re: "Why Does Gears of War Cost $60?"

    Quote Originally Posted by Soulquarian View Post
    So you're saying that it costs developers the same to create a game for the PS2 or a PS3? I really don't believe that.
    No, I'm saying your comparison to 70s games is exagerated and pointless. The game format available right now for PS3 is evolutionary to the existing platform, not a general jump. The capabilities offered of the PS3 right now is simply removing barriers of what could be shown or done in paralell. It has not shifted or added new aspects to the development. Do you believe their costs have jumped 20% to develop the titles we have now compared to what was done on PS2?

    I guess the more you say that, the more you think that's what my opinion is...
    When you illustrate it with your discussion.. its hard to ignore.

    A game is better based on the game itself. Lower price does not denote a better gaming experience and neither does a higher price.
    Ok, then why do you automatically chastize the BK games based on their price point? Rather then the content of the game? Or why make statements like

    "If a bigger budget begats better product, I'm all for it."

    That mentality means just keep spending. What you skip over is, spending more with the INTENT of a better product doesn't always equate to a better result. Guess what though, you've already spent the money, so the price goes up regardless. You can't apply the 'spend more to get more' across the board. Otherwise you simply have cost inflation that is irreversible.

    Why do you insist that more money equals bad product? Burger King is selling games for 3.99. Obviously those games are going to lack in quality as opposed to other titles.
    See again.. short-sighted. Why bother comparing the $3.99 price vs a stand-alone product's price? Do you honestly think the $3.99 relates to their cost? The product is funded with marketing dollars, not income from sales. The TV spots they've ran alone probably cost more then most game's total budgets. Stop using the consumer's price tag as a measure of value or quality.

  15. #15

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    Re: "Why Does Gears of War Cost $60?"

    There'd be a lot less of retailer/marketing garbage if we could only change the distribution model to purchasing from a server instead of physical copies sold through retail channels.

    Valve is doing it with Steam on the PC already. They charge a fee, but not as much as the retailers do.

    GameSpot/EB and others milk the heck out of publishers for "shelf space", and publishers are obsessed with covering the earth with advertising. Gears of War was a great game, it could have easily become just as popular through word of mouth without an MTV countdown or life-sized cardboard Marcus.

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