Fed Up of Being Nickel & Dimed This Gen!

[The Beans]

I hardly think the rise in fuel costs would impact much on the cost per unit to manufacture a video game relative to the huge per unit cost savings of no longer using game cartridges.

Cartridges "not even remotely viable", huh? Better go tell that to Nintendo then after the DS sold over 150 million units and its cartridge-based games made them mountains of cash. They've persisted with cartridges for 3DS too (not flash memory-based carts like PS Vita, but proper carts) so claiming "cartridges are not even remotely viable" is rather wide of the mark. Unless you were referring to home consoles only that is, then you'd of course be correct.

I'm talking about the home consoles. That's where the major changes in DLC and distribution are taking place and where the big development costs are.
The thing about fuel is it does have a huge effect on distribution. Games don't magically arrive on shop shelves, they have to be transported. It all costs money and the costs are rising. It's not just fuel it's also wages, taxes, delivery fleet maintenance - all the hard costs that a business incurs. This is normally stuff totally outside the control of the games industry and why a digital sales model is very attractive to the publishers right now.
The change from expensive cartridge to cheap CD occurred about a decade ago. There was definitely money saved at that time and it was passed to the customer. But we're ten years further on and other costs have risen. Even the arrival of the mainstream, and therefore the ability to sell at a lower profit margin because there's a lot more customers, isn't enough to guarantee a profit. The money saved by abandoning cartridges probably isn't enough to offset all other cost rises nowadays. It was never going to do such a thing forever anyway. Not by a long way.
When you look at it the next big change is the digital distribution thing and the dropping of physical copies altogether. Assuming the industry wants to keep prices static. In theory we should see the savings passed on to us if the past is anything to go by. I don't have much faith on that one tbh.

[DreamcastRIP]

I hardly think the rise in fuel costs would impact much on the cost per unit to manufacture a video game relative to the huge per unit cost savings of no longer using game cartridges.

Cartridges "not even remotely viable", huh? Better go tell that to Nintendo then after the DS sold over 150 million units and its cartridge-based games made them mountains of cash. They've persisted with cartridges for 3DS too (not flash memory-based carts like PS Vita, but proper carts) so claiming "cartridges are not even remotely viable" is rather wide of the mark. Unless you were referring to home consoles only that is, then you'd of course be correct.

I'm talking about the home consoles. That's where the major changes in DLC and distribution are taking place and where the big development costs are.
The thing about fuel is it does have a huge effect on distribution. Games don't magically arrive on shop shelves, they have to be transported. It all costs money and the costs are rising. It's not just fuel it's also wages, taxes, delivery fleet maintenance - all the hard costs that a business incurs. This is normally stuff totally outside the control of the games industry and why a digital sales model is very attractive to the publishers right now.
The change from expensive cartridge to cheap CD occurred about a decade ago. There was definitely money saved at that time and it was passed to the customer. But we're ten years further on and other costs have risen. Even the arrival of the mainstream, and therefore the ability to sell at a lower profit margin because there's a lot more customers, isn't enough to guarantee a profit. The money saved by abandoning cartridges probably isn't enough to offset all other cost rises nowadays. It was never going to do such a thing forever anyway. Not by a long way.
When you look at it the next big change is the digital distribution thing and the dropping of physical copies altogether. Assuming the industry wants to keep prices static. In theory we should see the savings passed on to us if the past is anything to go by. I don't have much faith on that one tbh.

While I still think your point about fuel and logistics is largely insignificant in terms of what I originally stated, i.e. manufacturing when viewed on a cost per unit basis, the rest of your post is well stated.

Here's a chart I just found via a quick Google search.



I believe $60 is the typical price of a new PS360 game in the USA so even with all those dramatically increased distribution costs you claim exist it only amounts to a paltry figure. That mere $4 per unit of the price of a game includes manufacturing, box art design, printing , etc, costs so it may be reasonable to assume fuel and distribution costs may only amount to, say, a meagre $1 per unit. Not an irrelevance but pretty close to it.

[The Beans]

I believe $60 is the typical price of a new PS360 game in the USA so even with all those dramatically increased distribution costs you claim exist it only amounts to a paltry figure. That mere $4 per unit of the price of a game includes manufacturing, box art design, printing , etc, costs so it may be reasonable to assume fuel and distribution costs may only amount to, say, a meagre $1 per unit. Not an irrelevance but pretty close to it.

You've pulled an arbitrary diagram off the web that even the associated article points out features "back-of-the-envelope" figures. ie: guesswork.
Even if the diagram turned out to be 100% accurate it makes no difference. Distribution costs aren't irrelevant. None of the costs involved in making a game are irrelevant. It's why the industry is changing. Costs overall are up. The general costs of distribution have gone up. To deny it is blinkered. To use the fact a game comes on disc instead of cartridge as a reason why games should still be as cheap as they were ten years ago is just wishful thinking or outright ignorance. Such a stance tries to offset everything that affects a game's price with a convenient McGuffin. Real outlays underly all game releases. Distribution costs included.

[DreamcastRIP]

... Even if the diagram turned out to be 100% accurate it makes no difference.

Okaaaaaaay.

[The Beans]

... Even if the diagram turned out to be 100% accurate it makes no difference.

Okaaaaaaay.

It doesn't.

Look at the diagram. I think you're seeing the $27 made by the publisher and thinking "wow, that's a crazy amount of money" and that's all you're seeing.

But if the company needs to make $27 dollars a copy to break even then even a dollar rise in distribution costs sees them making a loss.

Which is why distribution costs are not "irrelevant" and why your diagram is completely arbitrary. It's just a digram in complete isolation and that's all it is.

[FatTrucker]

The cost of production and distribution, while not insignificant represent a very small cost per unit when compared to the development and marketing cost of a title.

The real draw with DD for devs and publishers is all about control. DD allows publishers to market directly to their customers without the associated potential losses implicit in retail outlets that offer pre-owned software, and losses incurred through piracy (which i still don't really buy into as I don't think most pirated software equates to a lost sale in the vast majority of cases). In a model where DD is the only outlet, the publisher retains control over the price and availability of their product and ensures that every purchase results in income for the publisher.

DD is a more environmentally friendly option, but i would be surprised if there's any significant cost difference to the publisher compared to the costs associated with a digital release. I would presume that the publisher still pays a percentage per unit to the owner of whichever portal the product is sold from or they have to incur their own cost in running their own portal and servers, either way its not a cost free option. Certainly with games, the value (and costs) relate to the development of the software product so DD vs Retail should have no real impact on the cost of a title to the consumer.

The difficulty with statistical diagrams like the one above is that relative production and distribution costs are affected by the economy of scale. Games selling in excess of 1 millions copies will represent a much smaller cost per unit in terms of distribution. A game that sells one or two hundred thousand copies will incur a higher ratio. Production and distribution generally don't charge on a per unit basis, so the more you make, the more you move and the more you sell, the less it costs per unit. Either way DD has nothing to do with logistics costs to the publisher, its all about them taking control of their products and in the process changing the way we own games and our ability to retain ownership of them in the longer term.

[DreamcastRIP]

Okaaaaaaay.

It doesn't.

Look at the diagram. I think you're seeing the $27 made by the publisher and thinking "wow, that's a crazy amount of money" and that's all you're seeing.

But if the company needs to make $27 dollars a copy to break even then even a dollar rise in distribution costs sees them making a loss.

Which is why distribution costs are not "irrelevant" and why your diagram is completely arbitrary. It's just a digram in complete isolation and that's all it is.

Nope. I'm not just seeing that $27 figure at all. In fact I paid it no attention whatsoever as the discussion point you raised solely concerned distribution costs. Therefore it was distribution costs I looked at and commented on.

You've claimed fuel has a "huge effect on distribution" and while that may indeed be true the fact of the matter is that total combined distribution and manufacturing costs apparently amount to approximately $4 for a $60 video game. As I've just stated, the distribution costs element of that $4 figure may only be around $1. Like I said, "Not an irrelevance but pretty close to it."

Why are you now pointing out "distribution costs are not "irrelevant"" when I never once claimed they were?

Why you're persisting in arguing this point is at all sensible...

... Even if the diagram turned out to be 100% accurate it makes no difference.

... is quite frankly bizarre.

The cost of production and distribution, while not insignificant represent a very small cost per unit...

Thank you, FatTrucker, for echoing the point I was making.

[The Beans]

The cost of production and distribution, while not insignificant represent a very small cost per unit when compared to the development and marketing cost of a title.

The real draw with DD for devs and publishers is all about control. DD allows publishers to market directly to their customers without the associated potential losses implicit in retail outlets that offer pre-owned software, and losses incurred through piracy (which i still don't really buy into as I don't think most pirated software equates to a lost sale in the vast majority of cases). In a model where DD is the only outlet, the publisher retains control over the price and availability of their product and ensures that every purchase results in income for the publisher.

DD is a more environmentally friendly option, but i would be surprised if there's any significant cost difference to the publisher compared to the costs associated with a digital release. I would presume that the publisher still pays a percentage per unit to the owner of whichever portal the product is sold from or they have to incur their own cost in running their own portal and servers, either way its not a cost free option. Certainly with games, the value (and costs) relate to the development of the software product so DD vs Retail should have no real impact on the cost of a title to the consumer.

The difficulty with statistical diagrams like the one above is that relative production and distribution costs are affected by the economy of scale. Games selling in excess of 1 millions copies will represent a much smaller cost per unit in terms of distribution. A game that sells one or two hundred thousand copies will incur a higher ration. Production and distribution generally don't charge on a per unit basis, so the more you make, the more you move and the more you sell, the less it costs per unit.

I don't think anybody has said DD is a cost free option. As you say, it's more about selling the product direct, maintaining the full price window for as long as possible and gaining a profit from every sale while at the same time reducing costs incurred by physical media to enhance this.
I disagree with those saying elimination of physical media wouldn't offer much saving on the manufacture of a game etc. Even the diagram shown by DreamcastRIP indicates a saving of roughly 6.5% on the product if there's no physical distribution and the digital distribution is included in the platform royalty payment. It depends on how it's all done.
I don't expect prices to drop if physical media disappears though.

[samhain81]

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

[FatTrucker]

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

I disagree, with the universal rollout of broadband access and the developments toward digital content across every other media market, I think its inevitable and I think the groundwork is already being put into place. Next gen will see a general shift in that direction with the following gen becoming a digital only market being serviced by dedicated stores or stores within a store as Apple have done. Across virtually all media platforms there's already a trend toward digital product as opposed to physical product and its showing no sign of reversing or slowing down. The way games are marketed, advertised, and delivered is already changing beyond all recognition and kids born into this digital age don't and won't have the same emotional marriage to physical media that we do.

[sscott]

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

Its certainly heading that way with music, so why not games?

[Dudley]

Sorry for the Epic-quote-a-post.

For instance, those times there's a 2.0 (115hp), 2.0 (130hp), 2.0 (150hp) model etc. Frequently just a software difference for your 3 grand.

Which model car is that?

The example was fictional but Vauxhall and VW have both done it.

I'm a bit of a ludite, but I just wish that I could walk into a game shop, buy a factory sealed game for a reasonably price, and just censored off home and enjoy the full experience. You know, just like the old days.

While that is completely true don't forget the physical cost of duplicating current-gen home console games on their DVD/Blu-ray Disc formats is a matter of pennies. Games for the likes of Mega Drive, SNES, N64, et al, came on expensive to produce cartridges... and commonly with nice chunky instruction manuals too unlike many current-gen games.

So the fact game prices have fallen in real terms has been partly offset by the significant manufacturing costs per unit the publishers have saved ever since the time CD/GD/DVD/BD-ROM based consoles became commonplace.

Which is why if you check my original post you'll notice my example from 1993 was PC games. 44.99 in 1993, usually 30-40 now 20 years later.

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

Brave. Given you're already wrong about CD Singles (98% digital) are rapidly becoming wrong about album (55.5% digital having only just passed 50% last month).

And you're all but wrong about PC games which have been majority digital since 2010 and last year Codemasters stopped doing physical distribution entirely, like you say they'll never do.

And of course the standout gaming success of the last few years, iOS, is entirely digital.

It'll be slower on consoles but expecting anything beyond a code physical after the next generation is a very brave prediction.

[DreamcastRIP]

While that is completely true don't forget the physical cost of duplicating current-gen home console games on their DVD/Blu-ray Disc formats is a matter of pennies. Games for the likes of Mega Drive, SNES, N64, et al, came on expensive to produce cartridges... and commonly with nice chunky instruction manuals too unlike many current-gen games.

So the fact game prices have fallen in real terms has been partly offset by the significant manufacturing costs per unit the publishers have saved ever since the time CD/GD/DVD/BD-ROM based consoles became commonplace.

Which is why if you check my original post you'll notice my example from 1993 was PC games. 44.99 in 1993, usually 30-40 now 20 years later.

I'm not sure what relevance the price of some PC games 19 years ago has to what I've said in the above post regarding early '90s console games relative to console games of the CD-ROM era onwards?

Pricing for PC games has seemingly long followed a different model to that of other systems. Full price ST/Amiga games were typically priced around £20-£25 in 1993 and, to the best of my knowledge (I don't buy many PC games so correct me if I'm wrong), PC games have long been priced more cheaply than console games for a number of years due to no console manufacturer licensing fee being involved.

I'm not saying your example is irrelevant but I'm not seeing it's significance within the context of my above quoted post. Perhaps you could elaborate?

[Megamixer]

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

Its certainly heading that way with music, so why not games?

Sad but true. I'd still rather receive a CD than a code though. In fact, I only ever download songs that are physically impossible to get on CD (unreleased or vinyl-only tracks for example). Everything else I hunt out a disc for. Same with games and film.

It's just a matter of waiting for better internet download speeds and possibly - like others have said - a transitional generation of consoles before things go 100% digital. From then on, anybody interested in collections or presentation of games are right royally f****d.

Thank goodness there are endless retro games to fill shelves with eh?

[Nemesis]

Physical Media will never EVER dissapear.

It may sound like a silly reason but, the majority of games revenues come from holiday seasons, particularly Christmas. Now, with physical media gone, you would see nowhere near the same amount of sales through digital only game sales.

What will the children unwrap at christmas, or their birthday, a redemption card? Doesn't quite have the same ring to it now does it...

For this reason alone, developers/publishers will never ever abandon physical distribution, if only for the holiday releases.

Times change. Once people used to gather round the piano for an evening. Then the wireless, then TV, now people don't gather round anything! they do their own things, whether it is watching TV, on the Internet or gaming not counting other pursuits.

As other forum members have already mentioned, digital music sales are now surpassing physical media. Both music & games are intangible products. Neither require packaging. Music only required packaging because of the mediums they used which required protection from damage. The same applies to games too.

Look how far we have come since the Xbox/PS2/GameCube generation where there were virtually no downloads. This generation has PSN, Xbox Live & the Wii store not mentioning their portable equivalents. My iPad, PSP, DS & 360 all have downloaded games with no requirement for any packaging. The idea of little Timmy opening his present & finding COD Revenge of the Zombies, seems quite quaint to me. Technology is constantly shaping how we live our lives & the way, we as consumers, consume the products that people create. Who would've even considered the possibility of the internet back in the mid-eighties?

The big three of Sony, Microsoft & Nintendo look to have resisted the need to go to 100% digital distribution this time but it won't be long. I suspect when the following generation of consoles appears, 2 out of the 3 big guns, if not all of them, will go completely digital. The advantages are too big. No physical distribution, no packaging & importantly, no 2nd hand sales. Game is facing extinction & will need to adapt to survive, either becoming a purely online store or perhaps just specialising in Retro games. Who knows.

Now, where's that piano, I feel like a sing song......