Update, Nov. 6:.
In 1992, when I was around 11 years old, my mum paid £65 for Street Fighter 2 on the Super Nintendo.
65 British Pounds. With today's exchange rate, that's about $85. But in 1992, rates were different. Back then £65 was closer to almost 100 US dollars.
My mum paid $100 for Street Fighter 2: World Warrior. But it gets worse.
From 1992 until 2020 the rate of inflation was roughly 2.25% annually, so when you do the maths, things get even crazier. Adjusted for exchange rates, adjusted for inflation...
My Mum pretty much paid 186 US dollars for Street Fighter 2 on the Super Nintendo.
Today Sony, while revealing ($499, or $399 for the Digital Edition), also revealed that many next-generation video games are getting a price increase. Games like the upcoming Demon's Souls, that once cost $59.99, will now cost $69.99 on the . Some people don't like that.
My first instinct upon hearing the news was to remember my poor old Mum, who once paid $186 for a video game. In that context it's hard to complain about a $10 bump in prices. Maybe the bump was long, long overdue?
Over the last decade we've watched video games evolve dramatically. We've watched production costs increase. We've watched studios and human beings buckle beneath the oppressive weight of fan and market expectations for big budget games like Destiny or . In 2020 a video game like , that cost Nintendo $100 million to make, requires around 2 million units sold to break even.
Just to break even.
It's obviously a lot more complicated than that. Development costs have increased, yes -- but in most cases production costs have decreased. One of the reasons Street Fighter 2 was so expensive in 1992 was the cost of the cartridges themselves. In 2020 the production and distribution of video games has become far more streamlined. The way we play (and pay) for video games has changed dramatically. Despite inflation, in many ways we're paying less for video games. In some cases, we pay nothing at all.
Fortnite, maybe the biggest game of the last five years, is free-to-play and makes the majority of its money from micro-transactions. Many games, like Apex Legends and Call of Duty: Warzone, followed in those footsteps.
Add to the mix services like Xbox Game Pass, which charges players a Netlix-esque monthly fee to play an ever-growing catalogue of video games we'd previously have paid full-price for. If you were a Game Pass subscriber you could have played a big budget AAA single player experience like Gears of War 5 essentially for free, on launch day.
Now that consumers have become conditioned to those types of offers, it might be difficult to put that genie back in the bottle. In the near future, will consumers still be prepared to pay -- not just full price -- but full price plus an additional $10? It's difficult to say. I suspect the answer is yes but who the hell knows at this point.
The safest bet
One crucial factor is the transition to digital. Sony and Microsoft's long term battle to wrestle control of video game sales from retailers like Gamestop began last generation, but it'll step up dramatically in the next.
This time around, with both the Xbox Series X and the PS5, consumers have the option on day one: They can buy a version of the console that plays discs and continue buying video games in stores like the "good ol' days" or they can buy a console that plays digitally acquired games only.
And when you do that? You're completely at the whim of what Microsoft and Sony charge for their video games. Until now, big retailers have aggressively discounted new titles, particularly in stores like Walmart where video games serve as loss leaders for other products like toasters. When games go digital, those juicy discounts will stop.
And that future is all but guaranteed. As of 2018, 87% of all games sales were made digitally. At best, disc-based consoles are a token gesture for a retail video game market in steep decline.
But regardless of their perceived similarities, Microsoft and Sony seem to have increasingly divergent goals. Sony is more traditional. It clearly seeks to make money selling the games themselves. This video game price increase reflects that. Microsoft appears more future facing. It sees its future in the subscription model (gaming ( ).) and cloud
The truth is publishers have been experimenting with pricing for years. Many full priced games regularly still feature microtransactions. EA experimented with running literal advertisements in its most recent UFC game, a game most paid full-price of $59.99 for. It's hard to justify price increases when you're milking the cow from both ends.
But the elephant in the room is COVID-19. We're in the midst of an epidemic and a global recession. In the US employment is starting to rise, but as recently as August over 10% of Americans didn't have a job. Hardly the best time to factor in a price increase for video games -- a pastime that's grown dramatically as people are stuck at home in lockdown.
It's a contradiction that reflects the complexity of this issue. We've never been more desperate for video games, but there's a chance we can't afford to pay for them. We live in an economy where it makes sense to charge more for video games, but we've also spent the last decade giving them away for free.
The balls are in the air and there's no definitive way to figure out where they'll land.
The safest bet is this: The games industry has grown to such a size it can support all sorts. The hardcore early adopters willing to play $69.99 for Demon's Souls at launch; the teenagers for whom the PS5 will be nothing but a glorified Fortnite machine; the casual players who buy consoles years down the track and play catch-up with discounted games; the folks who are happy to lock themselves into Microsoft's subscription based vision for the future.
There's room for all of us in the video game universe. Some of us are even willing to pay $186 for Street Fighter 2.