Pay More to Play: Why Video Game Prices Could Rise in 2023

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.

“Microsoft has been running a pretty aggressive pricing strategy recently, especially with the Series S, which they’ve been offering at steep discounts in a lot of markets,” Deane said. “Market share is the name of the game for Microsoft and they’re not going to risk a golden opportunity to make up ground on Sony for the sake of a bit of extra short-term hardware revenue.”

Microsoft has been running a pretty aggressive pricing strategy recently, especially with the Series S.

None of the three thought Nintendo would increase prices on the Switch so far into its life cycle, though both Deane and Toto pointed out that new models down the line would likely have higher price tags.

Meanwhile, in terms of software pricing, just a handful of AAA publishers are still holding out on the $60 cap, and incidentally, the ones of note are all Japanese companies: Nintendo, Bandai Namco, Sega, Capcom.

Nintendo has previously lagged behind Xbox and Sony in raising prices on its games – the latter two brought their first-party games to $59.99 in 2005, and Nintendo didn’t match them until the release of the Wii U in 2012. Nintendo has kept its Switch games at that price ever since, but has also been the most notorious of all three companies for rarely putting its biggest first-party titles on deep discounts even years after release. With this history, it’s pretty likely we’ll see Nintendo maintain $59.99 for first-party games through the rest of the Switch’s life cycle. And promisingly, The Legend of Zelda: Tears of the Kingdom already has pre-orders up at $59.99, meaning Nintendo will very likely stick to this specific gun for a while longer. But given the trajectory of its competitors, we should be braced for Nintendo to match Xbox and Sony soon – perhaps tied together with whatever its next console launch ends up being.

As for the rest of the major publishers, it’s likely their inevitable price increases will take place with little fanfare. EA, Square Enix, and Warner Bros. did their price lifts over the last year almost in the shadows, simply dropping upcoming pre-orders at the new $70 price without issuing any big statements or explanations. Of course, if companies like Bandai Namco, Sega, and Capcom want to do the same, they’ll need to time it with a release big enough to warrant it. For Capcom, the natural fit would be Street Fighter 6, but given that it’s currently up for preorder at $60, Capcom might be willing to cling to the old price point a bit longer than most. Bandai Namco, meanwhile, has Armored Core 6 coming up in 2023, which seems like a likely candidate for a $70 price tag. And as for Sega, Like a Dragon: Ishin! is firmly at $60 for preorders, but the upcoming Like a Dragon 8 in 2024 might push the publisher into $70 territory with the rest.

The Japanese giants have most probably been discussing price hikes for their software in the West for some time now.

“The Japanese giants have most probably been discussing price hikes for their software in the West for some time now,” Toto said when I asked him about the developers above. “Square Enix already made heads turn last year when they said they want $70 for the Steam version of Forspoken. I don't think every Japan-made video game will cost $70 in the future, but players should get used to the idea for sure.”

Deane noted that while it was hard to make predictions on individual publishers, he did think there were other ways to sneak price increases to consumers without the fanfare of increasing overall AAA game cost.

“A big question is: to what extent have they shifted their business models from full-game sales to DLC and microtransactions?” Deane posited. “It’s much easier to raise prices for those quietly because there’s no psychologically important $60 mark that consumers are anchored on. So some publishers might decide to stick with $60 and instead quietly increase other prices. The strength of the dollar and weakness of the yen also makes things easier for Japanese publishers—their US revenues are rising in yen terms purely thanks to the exchange rate, so they’re more likely to stick to $60 than their American competitors.”

The good news in all this is that not every game is going to be $70, in the same way that not every game now is $60. All major publishers release a number of their non-blockbuster games each year for lower price points, or using alternative business models like free-to-play, subscription services, and the like. But while $20, $30, $40, $50, and yes even $60 games will still exist, if the top line goes up, we’re likely to see the average prices under that slowly creep higher over time as well.

That situation may soon start to bear out in the indie scene. Video game marketing consultant Chris Zukowski published a fascinating analysis earlier this year of the average price of every game released on Steam going all the way back to 2006, and broke down the averages by AAA games and indie games. Prior to 2012 or so, AAA and indie games on Steam were roughly priced the same. But from then on, AAA pricing has climbed, while indie has remained stagnant. Both Zukowski and the folks at VGInsights have come to similar conclusions, urging indie developers to price their games higher, as all the data seems to indicate that bumping a $5 up to $10 or a $10 up to $20 doesn’t really hurt total sales numbers much. While the data doesn’t indicate that indie games are overall getting more expensive, anecdotally Zukowski pointed out on Twitter that a number of indie games toward the end of 2022 launched at $20 or more – Choo-choo Charles and Dwarf Fortress being just two examples.

Especially given the economic situation, the rising prices of AAA games, and a growing awareness of game pricing data, it’s possible indie developers might begin a well-earned push toward pricier games themselves.

Subscription Service Saviors

So where does that leave those of us who are still apprehensive about paying $70, multiple times a year, to stay up on the latest games? It leaves us, mercifully, blessed with a few other options. Amidst the rising game prices we’ve also seen the rise of subscription services such as Xbox Game Pass, Ubisoft+, EA Play, PlayStation Plus, and others that offer free or discounted games for a low monthly price. Individual mileage varies on these, of course - it’s not much help to folks who are huge fans of Nintendo games, for instance. But subscription services can certainly help ease the burden of having to pay for every game you want to try.

Unfortunately, at least one of those subscription services (and arguably the most robust one) might also be on its way toward a price hike. During the same conversation in which he suggested Xbox games would get more costly, Phil Spencer also hinted that Xbox Game pass could follow suit. Rumors have been swirling for some time that Xbox is considering ditching its base tier subscription and nudging its audience to a more expensive higher tier of some kind. The rumors haven’t yet come to pass, but combined with Spencer’s comments it seems likelier than ever we see a shift of some kind in the new year.

Toto and Elliott feel the same way. When I asked Toto about Game Pass, he called it a “prime candidate” for a price increase, especially if more Bethesda blockbusters arrive in the new year. And Elliott noted that Xbox has been priming customers for this for some time now by emphasizing Game Pass features like cloud, PC and (via the potential Activision Blizzard acquisition) eventual mobile gaming.

We could see Xbox taking a leaf out of Netflix’s book and utilizing advertising to make entry-level tiers more affordable.

Deane again had a slightly different take. While he, too, expected price increases on subscription services, he didn’t think they’d be as straightforward as I suggested- especially after Microsoft’s “disastrous” attempt at increasing the Xbox Live Gold price in 2021.

“Companies like Netflix have introduced new tiers to justify price increases, or introduced lower tiers to give consumers more options,” Deane said. “With Game Pass, Microsoft has so far focused on aggressively acquiring users. Game Pass and Game Pass Ultimate are still at their original launch prices, but inevitably when Microsoft shifts focus to profitability, prices will have to go up. We think that this will most likely come in the form of a new, higher tier Game Pass subscription. On the other end of that spectrum, we expect that in 2023 Microsoft will start testing a cheaper, cloud-only Game Pass tier. Further down the line, we could also see Xbox taking a leaf out of Netflix’s book and utilizing advertising to make entry-level tiers more affordable.”

On the brighter side, I think we’re unlikely to see Sony make a similar move with PlayStation Plus for the sole reason that it literally just did an overhaul of the system earlier in 2022. While a price increase certainly isn’t off the table, it’s far more likely Sony planned the new PlayStation Plus structure to stay in place for at least a few years and certainly with knowledge of the current economic conditions.

As for Nintendo? At $20 for online functionality and a smattering of retro games, that service is likely neither going anywhere else price-wise, nor is it magically going to turn into a free new game vehicle any time soon.

Rising Ever Higher

All told, we’re likely to see things continue to get more expensive in 2023. It’s cold comfort, I know, to hear that actually gaming is more affordable than ever due to inflation. In the end, $70 is still more than $60, and it’s especially impactful when you’re gaming on a budget or there are just too many exciting AAA games dropping in a single year to reasonably buy them all – even if you’re conservative and wait for those big Steam sales to pick a few up.

For now, at least, game prices are unlikely to rise any further than $70. Reports earlier this year indicated that Sony was planning to increase game prices above $70, but SIE CEO Jim Ryan claimed those were “categorically false.” While he did leave open the possibility that prices could rise again in the future, given the heinous optics of doing so immediately after this $70 increase, we’re unlikely to see another bump anytime soon. It’s the kind of situation where if one major publisher tried to pull such a move, all its competitors would immediately flock to brag about keeping their prices steady – a wave of bad press no individual company would be willing to weather.

And Deane noted that while future price increases aren’t off the table, the rising costs of AAA development mean that publishers are looking for other ways to make money that don’t rely on the $60/$70 purchase model. The pricing model of the future, rather, is battle passes, microtransactions, and the like.

Titles that once would have been AAA premium games are now free-to-play.

“Or at least they want to shore up their revenue until they can sell themselves to Sony or Microsoft (or maybe some other tech giant like Amazon or Apple),” Deane concluded.

One other silver lining to all this it’s that as bad as price increases can feel, the games we’re getting for that money are largely better than they’ve ever been in every respect. And, as Elliott concluded in our email correspondence, not every game will be $70. In fact, most won’t be.

“Lessons learned from the advent of free-to-play on mobile have meant that titles that once would have been AAA premium games are now free-to-play,” 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.

“All these choices and entry points to gaming means that—in our view—a $70 price point for all premium games is an absurd concept.”

Price increases may be inevitable, but there’s no shortage of options for excellent, cheaper gaming out there. Subscription services, digging deeper for cheaper games that aren’t necessarily AAA big budget blockbusters, and combing those deep discounts in Steam sales all can offer some relief from the growing expense.

But yeah, we’re with you. It stinks that Final Fantasy 16 is $70.

Rebekah Valentine is a news reporter for IGN. You can find her on Twitter @duckvalentine.

source https://www.ign.com/articles/pay-more-to-play-why-video-game-prices-could-rise-in-2023