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In order to answer this question, one needs to look from both the gamer and the retailer's point of view. First off, video games are actually priced similar to how ink is priced with printers. As with company's that make printers for computers, the gaming industry will sell a gaming console at basically their manufacturers cost or in some cases, even less than that cost therefore taking a financial hit on their sales. They then use the games as their only hope for any pure profits. As Steven Kent stated in "The History of Video Games", they take the "Give away the razor and sell the blades" form of marketing. For example, more recently when the Playstation 3 was released, the cost to make the system was actually around the $800 mark. This was mainly due to the Blue-Ray player in each unit. It cost Sony about $700-$800 to make one PS3 but they sold it at around $600 as to keep consumers from ignoring their product completely due to the high price. $100 lost per unit did actually put the company in the red but as of the date of this article, Sony's recent spike in high selling games for the PS3 along with strong PSP sales in Japan has brought Sony out of that estimated $1 Billion hole.

As a consumer we have honest reasons to wish the prices were lower. It doesn't cost the video game companies too much to create the games. Many consumers would think its just the cost of the box they come in and the penny it costs to make a CD, but there are other costs. First off, before a game could even be produced, the publisher has to pay royalties for the games. This account to about %10 of the cost. Then after the game is mass produced, outside of the cost to actually create 100,000+ CDs the game publisher sells the games at wholesale to the stores. This is where the money is made for the gaming industry. Being a store owner myself, I have found the markup from wholesale to retail very, very slim. Normally products at around the $50 mark give retailers about $15-$25 profit margins. Video game profits for the stores to the consumers, unless purchased at multi-million dollar bulk amounts per year, yield them only about $5-$10 profit. If a store sells many games in one day, they could still yield decent profits. This though explains why stores will do those highly marked up bundle deals during Christmas for the hottest games and consoles. As expected, consoles don't usually yield the seller much in profits; Nintendo Wii aside.

That is the retailer's point of view but as an avid gamer also, I would like less expensive games. I do though appreciate what was done to create the games so the $50-$60 mark doesn't upset me much. Like any consumer product we must look at the quality of the item we purchase. Of course we can eat from the dollar menu of McDonalds or Burger King every day and save lots of money compared to say having a healthy sandwich, sushi or restaurant style meals. Give that lifestyle a few years and you won't be feeling all too well. We could complain all we want about the price of games but if quality games publishers like Sony, Square, Nintendo and others have to cut their profits; don't expect to see any quality games to come out.

The best way for games to drop in price is for the industry to drop a bit of the profits from the games and start profiting a bit from the consoles. If they do that and maybe give the retailers a bit more profit margin; those excessive bundle deals can be honest discounts for the consumer instead of obvious price gauges.

Learn more about this author, Chuck Gaffney.
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