Breaking Down the Price of a Video Game

An advertising component often brings the price down on content, if it doesn’t make it free. Yet while more games are baking in advertising, the retail price of the current generation of games — ones developed for the Xbox 360, PlayStation 3, and Wii — the price just increased by 20 percent in some cases.

Forbes has an excellent article, “Why Gears of War Costs $60 which itemizes the cost of each component behind the retail price. It’s hard to get a video game publisher to dish on that information; especially when the licensing fees to the three manufacturers are part of the list. It’s estimated that advertising buffers the cost of the game by $3, though that’s taken in by the publisher, not necessarily passed on to the consumer.

Also of note concerning video games and the consoles, is analysis from Joystiq about the effects of a PlayStation 3 shortage. Gamers holding for a PS3 are buying more PS2 games rather than picking up an Xbox 360 or Wii. This will affect third-party relationships with publishers, turning them off to Sony for lack of installed base and therefore sales. It could alter title commitments to the PS3, and even the Xbox 360, and Wii, and therefore hurt in-game advertising opportunities.