By Olga Kharif and Takashi Mochizuki
Bloomberg News
The $60 video game dates back to at least the 1990s. Rarely has a game exceeded that price threshold in the three decades since, even as inflation drove the dollar’s value to nearly half of what it was in the days of the Super Nintendo.
This week, video game publishers will press ahead with an industry-wide effort to raise the standard price to $70. The move coincides with the debut of two new game consoles from Microsoft Corp. and Sony Corp., a generational change that comes every seven years or so. There’s one complicating factor: an economic crisis that had doubled unemployment in the U.S. from levels before the coronavirus pandemic.
Inside publishing houses, a price hike has been plotted and dissected by executives for years. They point to inflation, as well as the ballooning cost to develop triple-A games, as justification. At one point, Sony discussed going even higher before settling on $70. Many of the game executives requested anonymity, apparently because they recognize the move is unpopular. In many cases, companies won’t acknowledge the fee increase, saying only that prices will vary by title.
The fact is unavoidable, though, when browsing inventory on digital store shelves. The new Call of Duty, Demon’s Souls, Godfall, NBA 2K21: Each one will cost $70.
In the 90s, Nintendo Co. rode the popularity of its game machines to set the price of some cartridges at $60. It was Sony that helped drive costs down with the 1994 introduction of the PlayStation and its games printed on compact disc, which were less expensive to produce. That ushered in the era of the $50 game, which continued with Microsoft’s Xbox in 2001. They went back to $60 in the next console generation, a move that happened to coincide with an economic boom in the mid-2000s that continued for another three years. And that’s where prices have stood.
Dan Armstrong, 34, has been playing video games since he was 12. “When I started earning my own income, left my parents’ house, the standard so far was $50 when I was younger, then it went to $60, and I am hearing it’s going to go to $70,” he said. “It’s getting kind of ridiculous.”
Armstrong spent eight years in the U.S. Navy before he was honorably discharged a year ago to pursue a career in IT. He enrolled in college and got a job on campus as a career counselor in Norfolk, Virginia, working 15 to 20 hours a week. Once the pandemic hit, his hours were cut in half. The economic situation is forcing Americans to choose between groceries and car payments or keeping up with his favorite hobby, he said.
“We don’t know how long it’s going last. I would rather keep my money in a safe place rather than giving my money to Activision,” he said. “I do understand they need more programmers, graphic designers. But some of that just seems a bit greedy.”
Gamers’ reluctance to pay more led companies to experiment with business models catering to the most obsessive players. Premium editions sell for $70, $80 or in some cases, much more, offering limited-run artwork, figurines or special costumes for characters in the game. Many publishers sell additional weapons, gear or levels as downloadable content for a fee. Loot boxes are a newer and particularly divisive category that asks players to spend real money on a sort of digital equivalent of a pack of baseball cards.
None of those options are expected to go away with the new consoles. But Microsoft is heavily promoting an alternative to paying a flat fee for each game. Xbox Game Pass offers a Netflix Inc.-like subscription with more than 100 titles for $10 a month. Sony will offer a more limited collection as part of its subscription service.
Take-Two Interactive Software Inc. became one of the first publishers this summer to commit to $70 with NBA 2K1. It faced a prompt and swift backlash. Strauss Zelnick, the chief executive officer of Take-Two, defended the move in an interview, citing the high costs of development. “We don’t have a pricing strategy,” he said. “We charge much, much less than the value we deliver. That’s our pricing strategy, if we have one.”
Electronics Arts Inc. is offering owners of its two biggest sports games a free upgrade to versions for the new consoles. As for next year’s games, the company will outline pricing in six to nine months, said Blake Jorgensen, the chief finance and operating officer. “We are going through our key sports titles,” he said. “What we do know is that the cost of building games continues to go up.”
Sony executives have been deliberating over a price increase for some time, said people familiar with the discussions. A spokeswoman for Sony said the company is selling titles at launch for as little as $50 and the “biggest games” for $70. She said the higher price is “reflective of the growing development resources needed for these ambitious games.”
“We don’t have a pricing strategy”
Game companies argue prices haven’t kept pace with the cost of other media like a movie ticket, Netflix or cable television, said Yoshio Osaki, the head of IDG Consulting Inc., which works with most major publishers. Since 2005, the cost to develop a game has tripled or quadrupled, he said.
“Not all publishers will launch next-gen games at $70,” Osaki wrote in an email. “However, we do anticipate that a growing percentage of games will launch at $70, but not all at once and not uniformly across every publisher or every game franchise.”
Capcom Co., the Japanese publisher of Resident Evil and Street Fighter, won’t release software for the new systems until next year. But like other companies, Capcom said it’s taking a “title-by-title” approach. “We believe game software’s price should be determined by how much money consumers are willing to pay for the quality, not by how much money we spend to make that game,” said Kenkichi Nomura, the chief financial officer.
Games published by Microsoft or Sony are more likely to undercut the competition in order to drive hardware sales, said David Cole, an analyst at DFC Intelligence. They have already taken that approach with Halo Infinite and Spider-Man: Miles Morales, two of the most anticipated games for each system and priced at $60 apiece. In time, when more titles are competing for gamers’ wallets, prices could inch back down, Cole said, but the $70 game is here to stay: “Consumers will definitely pay in the short term.”
