What Really Goes Into The Cost Of Games?

Firewatch-3-of-11

Recently it seems people are increasingly becoming unsure about the pricing of independently-released games. The most recent case of this was a thread on the Steam forums for Firewatch where over the weekend one of the game’s developers stepped into the conversation when the thread starter suggested they might refund the game. The developer’s response get’s at the heart of what I think is a discrepancy between how customers see the value of a game and how developers and publishers see the value of a game.

Of course we also saw this conversation creep up when The Witness, which I haven’t played, launched at $40, but I’ve been thinking about this at least since Gone Home launched for $20. As indie developers get more experienced and the tools at their disposal get more powerful, we’re starting to enter a new stage where the perceived value behind their games is markedly increasing, but that perceived value comes from a lot of different factors involved in making games.

A lot of people seem to think of just one thing when talking about game pricing: the length and amount of entertainment in the package. I think we need to remember that when pricing games developers and publishers are also probably factoring in things like production budget, the man hours spent making the game, and sales expectations, all coming together to create a target they need to hit to break even or make a profit. I say this without any real knowledge of the business or economics or whatever, but I think there’s some common sense in looking at those factors compared to what the enc consumer sees.

If you take a look at that Steam thread, the thread starter is more or less thinking about the value of Firewatch based on the amount of time it took them to complete it. In my experience that was around four hours. Now that Steam let’s people refund games within a certain window, we now have the possibility of short games being completed and quickly refunded, not unlike what some people do (used to?) through GameStop with $60 console games that can be completed almost as quickly. It’s easy and logical for the end consumer to think of a game’s entire worth in terms of the sheer amount of entertainment it delivers. This is part of why the big publishers are bloating some games up with features like multiplayer, experience points, crafting, and open worlds to extend the amount of time users play them and thus each game’s perceived value — to increase player retention.

The developer’s response in the Steam thread however goes into all the hard work that went into making Firewatch. On top of that the thread starter says what’s keeping them from refunding the game is, in a way, the “craft” of it. Firewatch is being praised for its writing, voice acting, art direction, and the atmosphere of its world. For a quick contrast I’m gonna bring up Oniken. It’s a very good action game with 8-bit graphics that took me slightly longer to finish than Firewatch, but I only bought Oniken for around $5 (maybe less). I’m not saying Oniken didn’t have serious work put into it, but Firewatch in comparison looks like it had a lot more production value put into it, which is why I felt fine paying around $18 for it. For the same reason I was fine paying $20 for Gone Home (a two-hour game) as well as The Vanishing of Ethan Carter (similar length to Firewatch). Simply put, these are more expensive games to make than the pixel graphics indie games we’ve beome accustomed to.

A commonality between these games I’m mentioning is they’re first person adventure games (or walking simulators) that can be completed in less than six hours. On an episode of the Idle Thumbs podcast which is partially run by one of the makers of Firewatch, they explained that this is because these games don’t really have a recurring gameplay element like shooting things or jumping on platforms. Their main purpose is usually to tell a story, though some of them have puzzles, and without recurring gameplay elements there’s only so much “content” a development team of half a dozen people can produce. You could say the polar opposite of this are the aforementioned mechanics big publishers seem to pack into $60 games these days which relatively easily extend play time. That’s actually one of the main reasons The Witcher 3 is such an impressive game — it has 100-plus hours of quests and stories that all feel unique in their own way, and almost never has to rely on anything that feels like filler.

Now let’s talk about sales expectations. The reason indie games tend to cost less than packaged retail games from big publishers isn’t because of some rule, it’s because they often don’t cost as much to make and aren’t expected to sell as well. If something isn’t expected to sell as well, its price tends to go down. Also, indie games aren’t marketed like big retail games so they more often come across as an unknown quanitty to consumers. A lower price is a good way to decrease perceived risk to the consumer. The extreme end of this is the race to the bottom we saw in the mobile game space.

Games like Firewatch or The Witness are actually examples of that “unknown quantity” effect dissipating in regards to some indie games. Exept for Oniken, none of the indie games I’ve been talking about are the first commercial releases from their developers. Many of them were made by people who’v worked for the big publishers. The Witness get’s to advertise its credibility of being “from the guy who brought you Braid.” In these cases the games are able to ask for a little more money because 1) their develoeprs are able to put more resources into them after the successes of prior games, and 2) consumers know these people have the ability to ship a completed video game (a guarantee that used to come with the backing of a publisher).

The other extreme end of the sales expectation factor however is when games are expected to sell a whole lot, or when they’re expected to sell to a very reliable audience. Grand Theft Auto V had five years and $250 million put into it, which is insane even for a $60 video game. If you judged things just by man hours or production budget (or even potential gameplay time) someone could aruge the game should cost $120 or something, but Rockstar and Take Two can get away with selling a game for $60 a pop that cost $250 million to make because that game is called Grand Theft Auto V. Everybody knew it was going to immediately sell in the multiple millions of copies at the $60 price point, and lo and behold it made back a billion dollars in three days.

Assassin’s Creed games have this effect to a smaller degree — they have hundreds of people working on them all over the world but sell in the multiple millions of copies, so I imagine they can make back the money from all those man hours. On the flipside, Nintendo’s first party games are $60 but seem to have smaller budgets and fewer people working on them. I don’t know what those budgets are but we know Nintendo usually doesn’t spend millions of dollars on celebrity voice acting, hyper-detailed textures, and Hollywood-like cut scenes. Weirdest of all is how Nintendo games manage to maintain their full retail prices for years. This is because the name “Nintendo” still means something more to retailers and its intellectual properties have a lot of credit. The games also still sell pretty well too. Didn’t the last Animal Crossing game sell something like 8 million units?

Another situation to think about are the niche Japanese games that sell for $60 despite being more cheaply made than AAA western games and selling a lot less too. My (admittedly layman’s) theory there is that games like Hyperdimension Neptunia or Disgaea have settled on a small but very reliable consumer base that’s so passionate it will pay high prices for those games. Japan is a country where they’ll sell anime Blu-Rays with an hour’s worth of content for $80 a piece because production companies have decided to pander to the ultra fans who will pay that price, not to mention the money that comes from merchandise.

Another comparison to look at I remember being made was between DoubleFine’s Broken Age and a similar adventure game (I can’t remember what it was) that seemed to feature a similar amount of content or more for what I believe was a lower price. The argument in DoubleFine’s favor was that Broken Age was developed in San Francisco — a very expensive place to live lately, and the high cost of living translates to more costly man hours. The Witcher 3 had a pretty small budget compared to other AAA games despite offering so much content with such high production values is becaues it was developed in Poland, where the cost of living and thus man hours are probably cheaper than in western Europe or North America. Just something to think about.

What sucks about all this in video games is that only one of these factors matters to the end consumer: the amount or quality of entertainment they get. They don’t see all the hours worked or the money spent to get the game made. They don’t see the revenue target the makers need to hit to stay in business. Part of me however thinks there’s nothing really wrong with that — that the consumer should indeed only care about their end of the experience and that it’s up to developers to make cost-effective and profitable games.

Maybe an actual economist or someone who has actually been inside this busineess will have something more informed to say.

BULLETS:

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