Game Prices are Too Dang High... or Are They?

Microsoft has become the latest big-name publisher to jump to a $70 asking price for the launch of big-budget games. The company said in a statement to IGN that the new pricing will start in 2023 for games built for the Xbox Series X/S and will include titles like Starfield, Redfall, and the next Forza Motorsport.

A $70 MSRP "reflects the content, scale, and technical complexity of these titles," a Microsoft spokesperson told IGN. Despite the price increase for a la carte purchases, Microsoft isn't currently raising the price of its Game Pass subscriptions, which include launch day access to all of Microsoft's first-party titles. Speaking at a WSJ Live event last month, though, Xbox chief Phil Spencer said he thought that "at some point we'll have to raise some prices on certain things..."

Publishers last raised their ceiling for game pricing back in 2006, when big-budget PlayStation 3 and Xbox 360 titles started retailing for $60 en masse. Take-Two was the first to break that ceiling in 2020, selling the PS5 and Xbox Series X editions of NBA2K21 for $70. At the time, the publisher said that price would apply on a "title by title basis" going forward. In the years since, companies like Sony, Activision, Square Enix, and Warner Brothers have begun experimenting with $70 launch pricing for a handful of their biggest games. And in September, Ubisoft CEO Yves Guillemot told Axios that "the big AAA games" from the company, including the oft-delayed Skull & Bones, would cost $70 at launch.

While $70 represents the current high-water mark for nominal game pricing, big-budget games used to routinely be much more expensive when accounting for inflation, as we discussed in detail in a 2020 report. And since 2020, the US economy has seen months of rapid price inflation that has made a $70 price more justifiable on a relative basis. That same rapid inflation has been used to justify practically unprecedented price increases for hardware like the Meta Quest 2 VR headset and international versions of the PS5. Though $70 isn't as much as it used to be, today's big-budget games also face strong competition from a wide range of free- or cheap-to-play titles, as well as gaming subscription plans like Microsoft's Games Pass. Still, as NPD analyst Mat Piscatella told Ars Technica in 2020, "the biggest franchises that drive the highest demand should have no big hurdles with that $70 base price point... and many will choose even higher-priced versions with additional content."

Last July, Take-Two announced that NBA 2K21 would be the first game to ask $70 for the standard edition on "next-generation" systems (i.e., PlayStation 5 and Xbox Series S/X). Take-Two CEO Strauss Zelnick doubled down on that decision, saying the market was ready for an increase in gaming's de facto price ceiling. "We announced a $70 price point for NBA 2K21, our view was that we're offering an array of extraordinary experiences, lots of replayability, and the last time there was a frontline price increase in the US was 2005, 2006, so we think consumers were ready for it," Zelnick said at the Morgan Stanley Technology, Media & Telecom Conference (as transcribed by Video Games Chronicle).

That's not all that surprising, considering the source of the quote. But we shouldn't have to take his word for it. Four months have passed since NBA 2K21 launched on new consoles, and six months have passed since it launched at a lower $60 price point on the PS4 and Xbox One. That should be enough time to determine whether players at large were willing to spend extra money on a big-name "next-gen" experience and whether Take-Two's pricing experiment is worth repeating, right? As it turns out, answering those question isn't so simple at this point.

A large part of the problem with analyzing NBA 2K21's $70 price point is that the game was also available in a $100 "Mamba Forever Edition." That special edition included both the last-generation version of the game and an upgrade to a new-generation version, as well as a number of digital freebies. "Many people who bought last-gen versions of games are now playing them on their new consoles having upgraded the game [through the Mamba Forever Edition]," NPD video game-market analyst Mat Piscatella tells Ars Technica. "However, the original sale is still allocated to the old-gen version. I'm not even reporting platform splits, tie ratios, or attach rates for these new consoles because these data points are not currently reliable."

Another problem, Piscatella says, is the small sample size. After NBA 2K21 very publicly moved to $70, only a few other major franchises followed suit, including Activision's Call of Duty Black Ops: Cold War and a handful of first-party PlayStation 5 exclusives. Most other major publishers stayed at $60 for this holiday season, including many that offered free new-generation upgrades to players who bought games on older consoles, further complicating any comparisons. It's even hard to judge any of those new titles against expectations so far, Piscatella says, in part because supplies of the PS5 and Xbox Series X/S have been heavily constrained well into the new year. "Given the small sample size and challenges around upgrade versions and restrained hardware supply the data doesn't suggest a particular answer yet," Piscatella said.

Things shook out a lot more clearly the last time console-game prices saw a significant cross-generational increase. Back in late 2005, it was Activision breaking through gaming's then-$50 price ceiling, asking $60 for Call of Duty 2 on the then-brand-new Xbox 360. The increase was even more notable given that Activision had charged $50 for the PC version it had launched a month earlier.

Unlike today's price bump, though, 2005's price increase was an immediate and unmistakable success. In December, IGN cited NPD data showing that a whopping 77 percent of Xbox 360 owners had purchased Call of Duty 2, even at the increased price. With a strong showing like that, it's no wonder that every other major publisher felt comfortable following suit within a few months. "They were selling so many copies of Call of Duty 2 at $60 that the rest of the industry was like, 'Well, hell, if it's going to be 60 bucks, let's go to 60 bucks,'" Piscatella told The Ringer.

Thanks to inflation, of course, a game worth $60 in late 2005 would be worth over $78 in late 2020 dollars (according to the BLS inflation calculator). But inflation aside, the industry has undergone plenty of changes that might make a higher price point harder to swallow these days. "There is much more [price] variability across the board than in prior gen launches, plenty of games releasing at all types of price points," Piscatella points out. "In prior [console] generations, we'd basically have 2 price points maybe."

Then there's the rise of subscriptions to consider. On Xbox platforms, for instance, Wedbush Morgan analyst Michael Pachter tells Ars that new software sales are down generally "because 50 percent or more of new Xbox owners subscribe to Game Pass, and they are at 18 million subscriptions." It's too early to know if those subscription gamers will be significantly less willing to pick up a major game at a $70 price point, Pachter said.

This really isn’t new though.  $34.99 for Centipede on the Atari 2600 might sound cheap, but that 1983 price is the equivalent of roughly $90 today. Zelda titles were priced above other NES games in 1988. If you wanted Streets of Rage 2 from Electronics Boutique in 1993, you'd better have been ready to pay extra, costing a premium $64.99, the most expensive Sega Genesis game at the time. $70 was a common price for N64 software, and that was in 1997 dollars!  By 2008, top-end disc-based prices had settled to the current standard of $59.99.

A higher initial price point might also make less sense for games that make much of their money from post-launch micro-transactions. A big-name game like FIFA might make more initial revenue from a $70 price point, for instance, but that could still hurt EA if "it impacts follow-on revenue from in-app spend," Pachter said.

The real proof of whether $70 pricing is here to stay will come later this year. By then, the market as a whole will be able to digest how the current crop of $70 games has generally performed versus expectations. If they do well, you can expect to see a good number of copycats in the fall, Pachter said. Even then, though, Pachter sees the $70 price point being more of a "game-by-game decision" than a new de facto standard for all big-budget games. "People will pay [$70] for some games, [but I'm] not sure if they will for every game," he said. "Most publishers will watch and see what Take-Two does and whether it works." And even Take-Two's Zelnick has said that $70 pricing will be on a "title-by-title basis."

Piscatella agreed that "price sensitivities are evolved" these days and that a $70 price point won't work for every big-name title. "My hypothesis is that the biggest franchises that drive the highest demand should have no big hurdles with that $70 base price point... and many will choose even higher-priced versions with additional content," Piscatella said. In the end, though, "it's all about the individual game."