Game News Where does the money you spend when you buy a game go?
The love for video games is expensive: between consoles, accessories, games and their extensions, the wallet sometimes has trouble keeping up. Today we’re going to talk about the price of games, and specifically where the money you spend goes when you buy it.
- Is there a fair price?
- Where does the money go when I buy physical?
- Are the margins negotiable?
- What about used games?
- What about online store games?
Is there a fair price?
This is a question that everyone asks. We often find games too expensive, and now with subscriptions too, we wonder if it’s worth it. It must be said that the big names in the industry have always expressed themselves on this hot topic. In 2021, for example, John Garvin, creative director of Days Gone, protested against the purchase of games for sale, explaining that there is no need to complain that a game does not get a sequel if it is not supported at best. . Simply put, players don’t support the developers if they don’t buy the games at full price. To this, players responded that they are ready to buy expensive games as long as they do not show any bugs when they are released.
It must be recognized that the increase in the price of products managed by publishers such as Sony, Gearbox or Take Two has become bad for some players. Nowadays, you sometimes have to pay up to 80 euros to get your hands on the latest triple-A on the market. The main arguments for this increase in the price of video games are in inflation and the increase in production budgets, especially regarding the price of labor. If we take inflation into account, a software that costs 59 euros in 2002 will in fact be equivalent to 80 euros in 2022. In addition, we must not forget that currently the video game industry is experiencing a crisis of developers. If they ask for a raise, payroll costs will increase, and affect the final price of the game.
Where does the money go when I buy physical?
Consumers and professionals in the sector apparently do not have the same expectations about prices: the first wants more competitive prices, while developers want to raise prices, because publishers, manufacturer, but retailers also get a percentage of the amount that customers spend in the store. A game sold at a higher price therefore means, in theory, more margin for some players, although this hypothesis can be balanced by the fact that according to the publishers, the increase of 10 euros there to pass the price of inflation and the increase in the cost of development.
However, in 10 or 20 years, the sector has evolved, as has the number of players. In the same way, business models have increased: it is common now to see games sold at high prices with microtransactions that allow you to earn more later. We contacted SELL (Union of Recreational Software Publishers) to learn more about where the money goes when we buy a new game from the store, but the organization referred us back to the publishers. Finally we got some data. If you buy a game for 70 or 80 euros, about 30% of the amount goes to the distributor (the store), then 30% goes to the publisher (the developer), and finally the remaining 30% goes to the platform : Microsoft if it’s an Xbox game, Nintendo if it’s a Switch game, Sony if it’s a PlayStation game. It should also be noted that the distributor’s share also includes VAT, which amounts to 20% of the amount that goes to the store.
Are the margins negotiable?
The distributor’s margin, like the publisher’s, may vary depending on the commercial conditions agreed upon. For example, if the publisher wants to offer a game that is not well known in the stores, he can give up a small part of his margin for the benefit of the distributor. On the contrary, if we talk about an important title for a distributor like FIFA or Call of Duty, the bargaining power is found on the part of the publisher.
On the user side, sometimes there are price differences depending on the store. The publisher does not set the prices of the games in stores, because in France, competition law prohibits suppliers from imposing prices. So it only recommends a certain amount to distributors with a product sheet, leaving the brands free to set the selling price themselves. From there, the methods diverge. Some companies lower the price to make the video game a loss leader, and others organize disguised reductions by adding games to the pack. Prices cannot be arbitrarily slashed in stores, as resale at a loss is prohibited.
What about used games?
Of course, the details of the various features mentioned above are valid for new games bought in stores and not for second-hand games. When you buy a second-hand game, the entire amount goes to the store, which makes a profit on the difference between the purchase price and the selling price. The game publisher therefore has nothing to gain from these sales, and for this reason the big groups have been looking for years to find an effective way to fight against the second-hand market that they considered a threat.
Among the solutions found, there are particular codes inserted in the game boxes that give access to unique content, or the impossibility of deleting backups. Microsoft even tried to prevent the practice of the opportunity that is still popular among players by imagining an Xbox One that requires mandatory and constant validation of purchased software, which prevents its sale. With so many microtransactions available in the game, publishers have relaxed their attention a bit on the second-hand market.
What about online store games?
The dematerialized segment is increasing significantly in the turnover of the main publishers. More and more players are buying their games in 100% digital versions. A very useful system for platforms, because there are few intermediaries. For example, Sony, Nintendo, and Microsoft get 30% back on every transaction made in the PlayStation Store, Nintendo eShop, and Xbox Store. In other words, the platforms recover a third of the sale price of a dematerialized game, and the remaining 70% goes to the publishers.
For first party games, the giants will get back 100% of the bet. There are sometimes some differences, for example Microsoft only requires 12% if the purchase is made in the PC Store rather than the Xbox store. This decision was made to allow the Redmond company to be competitive with the likes of Epic Games Store, which also charges 12%. Steam continues to take a 30% commission, but drops to 20% after $50 million in game sales.