Where does the money you spend when you buy a game go?

Game news Where does the money you spend when you buy a game go?

The passion for video games is expensive: between consoles, accessories, games and their expansions, the wallet sometimes has trouble keeping up. Today we’re going to talk about the price of games, and more specifically, where the money you spend goes when you buy it.

Summary

  • Is there a fair price?
  • Where does the money go when I buy physically?
  • Are margins negotiable?
  • What about used games?
  • What about online store games?

Is there a fair price?

It’s a question everyone asks. We tend to find the games too expensive, and now that there are also subscriptions, we wonder if they’re really worth it. It must be said that the big names in the industry have often spoken out on this hot topic. In 2021, John Garvin, creative director of Days Gone, for example, objected to buying games for sale, explaining that there was no need to complain about a game not getting a sequel if it wasn’t supported at its best. . Simply put, players aren’t supporting the developers if they don’t buy the games at full price. To this, players responded that they would be quite ready to buy games at high prices, provided they did not present any bugs when they were released.

It must be recognized that the price increase on productions overseen by publishers such as Sony, Gearbox or Take Two has gone badly for some players. Today, 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 lie in inflation and the increase in production budgets, especially in terms of the cost of labor. If we take inflation into account, a piece of software that cost 59 euros in 2002 is actually equivalent to 80 euros in 2022. In addition, we must not forget that the video game industry is currently experiencing a crisis with developers. If they ask for increases, labor costs increase and affect the final price of the game.


Where does the money go when I buy physically?

Consumers and professionals in the sector obviously do not have the same expectations about prices: the former want ever more competitive prices, while developers tend to want to raise the amounts, as publishers, manufacturers, but also retailers get back a percentage of the amount spent. customers in the store. A game sold at a higher price therefore in theory means more margin for some of the players, although this hypothesis can be countered by the fact that the increase of 10 euros, according to the publishers, is to give the price of inflation and rising development costs.

Nevertheless, in 10 or 20 years the sector has evolved, as well as the number of actors. Similarly, the business models have multiplied: it is not uncommon today to see games sold at a high price with microtransactions that allow you to earn more income 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. We were finally able to get some data. When you buy a game for 70 or 80 euros, about 30% of the amount goes to the distributor (store), then 30% goes to the publisher (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 margins negotiable?

The distributor’s margin, like the publisher’s, can vary depending on the commercial conditions being negotiated. For example, if the publisher wants to offer a game that is not known in stores, he can give up a small part of his margin in favor of the distributor. Conversely, when we are talking about a major title for a distributor like Fifa or Call of Duty, the negotiating power is on the publisher’s side.

On the user side, there are sometimes price differences depending on the store. The publisher does not set the prices of games in stores, because in France competition law prohibits suppliers from imposing a price. It therefore simply recommends an amount to distributors with a product sheet, which leaves the brands free to set the selling price themselves. From there the methods differ. Some companies lower the price to make the video game a loss leader, and others organize hidden reductions by adding games to the package. The prices cannot be lowered arbitrarily by the shops either, as resale at a loss is prohibited.


What about used games?

Of course, the details of the different stocks mentioned above apply to new games bought in stores and not to used games. If you buy a used game, the full amount goes to the store, which makes a profit on the difference between the purchase price and the resale price. The game publisher therefore gets nothing back from these resales, and it is for this reason that for several years the large groups have sought to find an effective way to combat the second-hand market, which they consider to be threatening.

Among the solutions found, there are in particular the codes inserted in the game boxes that give access to unique content, or the impossibility of deleting backup copies. Microsoft has even tried to curb the option, which is still popular among gamers, by envisioning an Xbox One that requires mandatory and frequent validation of purchased software, which could prevent their resale. With the very microtransactions available in the game, the publishers have slightly relaxed their attention to the second-hand market.


What about online store games?

The share of dematerialized increases significantly in the turnover of the main publishers. More and more players are buying their games in 100% digital version. A much more profitable system for the platforms, as there are fewer intermediaries. For example, Sony, Nintendo and Microsoft get 30% back on every transaction made in PlayStation Store, Nintendo eShop and Xbox Store. In other words, the platforms collect a third of the sale price of a dematerialized game, and the remaining 70% goes to the publishers.

For the first party game, the giants therefore recover 100% of the bet. Sometimes there are some variations, for example Microsoft only takes 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 as competitive as the Epic Games Store, which also takes 12%. Steam continues to take 30% commission, but drops to 20% after $50 million in game sales.

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