No, Video Games Do Not Need a Price Hike: “The Sixty Dollar Myth”

Before I start this article, I just want to tip my hat to Jim Sterling, whose passion for video games and desire for a better video games industry allowed me to be privy to a lot of this information. The “Sixty Dollar Myth” as it relates to games is a term coined by him, as far as I understand, and a lot of my research for this article largely stems from incidents mentioned in his videos on Youtube. I did do further research, which I will be citing throughout this article. Go check Jim out, and I hope you enjoy what I’ve written!

I’ve recently become aware that 2K Games is planning to charge $69.99 for their upcoming NBA 2K game on PS5 and Xbox Series X [1], because they believe that the game is that valuable. This has sparked a discussion among gamers about whether AAA game publishers should increase the base price of their games, with the main argument being that “games cost more to make”.

The answer is no.

Note: All prices are in USD unless stated otherwise.

Companies aren’t going bankrupt

  • Yes, games do cost more to make:
    • GTA IV (2008) cost $100+ million to make [2], or $119+ million when adjusted for inflation in 2020
    • GTA V (2013) cost $265 million to make [3] ($137 development, $128 marketing [4]), or $291 million when adjusted for inflation in 2020
  • However, games also make millions more than they used to:
    • GTA IV (2008) made $310 million in one day, $800 million in its first week [5]
    • GTA V (2013) made $800 million in one day, $1 billion in 3 days (3.77 x the production cost) [6], and as of February 2020 has sold 120 million copies [7], making it the most profitable piece of media, ever
    • GTA V Online made over $595 million dollars from microtransactions in 2019 alone [8]

I would also like to add that in some cases, video game companies are even saving money. Digital sales rise each year, to the point where more gamers are buying games digitally than physically. In 2018, 83% of all computer and video games were sold in a digital format, compared to 20% in 2010 [9]. Much to the despair of retail stores like Gamestop, this means that game companies are keeping 100% of the money made on even more games sold, rather than selling them at less than MSRP to retail stores so that said stores can make a profit.

Digital and physical game sales in the U.S. from 2009 to 2017. [9]

Game companies do not pay their dues

Activision Blizzard paid no taxes in 2012 after moving $2.7 billion ($3.03 billion when adjusted for inflation) through an offshore account in Bermuda, or in 2014 after funnelling €574.75 million Euros in profits through a tax haven account in the Netherlands. This is €606,742,712.15, or $699,130,984.33 USD when adjusted for inflation in 2020 [10][11][12].

How is this done? By creating a “company” called ATIV CV (company being in quotation marks as ATIV CV has no actual employees), a limited partnership based in the Netherlands (read: an empty basement in Rotterdam). ATIV CV owns the rights to all of Activision Blizzard’s most profitable intellectual properties – Call of Duty, World of Warcraft, etc. When a copy of the newest Call of Duty is sold, profits do not go to Activision in America, but to ATIV CV in Rotterdam. ATIV CV is able to abuse a tax loophole where Dutch policy wants taxes to be paid to America, and American policy wants taxes to be paid to the Netherlands. So who gets it? No one! Thus, a big fat zero on their tax report. Activision also has “subsidiaries” that make “profits” similarly to their companies in Bermuda and the Netherlands, in Ireland, Singapore, Luxembourg and Switzerland [10][11][12].

Even when Activision made “record profits” in 2018, they decided to lay off 8% of their staff the following year, which amounted to 800 employees. For months, employees were unsure of how secure their jobs were, which would understandably cause anxiety in any person who, y’know, needs a job to survive [13][14].

Funny how Activision was “forced” to let go its allegedly treasured staff even after making more money in a year than they had ever made, how their CEO, Bobby Kotick, is making so much money that he’s the most overpaid CEO in the entire game industry [15], something even investors think is unfair [16]. In 2019, Kotick received $40 million in compensation from the company, allegedly because the company was doing very well [17]. Why would a company who is doing extremely well be forced to lay off almost a tenth of its staff?

Employees at Blizzard, which Activision is the parent company of, began passing around a spreadsheet in July of 2020 to compare salaries, which sparked feelings of fury among employees. Some employees reported being paid so little that they were unable to afford to eat at the company’s cafeteria. Others admitted to skipping meals by using coffee to suppress their appetite. Persons no longer working at Blizzard expressed that their reason for leaving the company was that they could not hope to continue on such a measly salary, and did not see significant increases in pay until they began working for other companies such as Riot Games. Even employees who worked at Blizzard for decades receives wage raises of less than 50 cents per hour, and with fewer overtime hours being worked were paid less than they were a decade ago [17].

Rockstar North, the makers of GTA V, also did not pay any UK corporate tax between 2009 and 2018 despite studios in the UK working for them, all the while receiving £42 million GBP in tax relief from the UK government [18][19]. For reference, it is estimated that Rockstar made $5 billion USD in profits between 2013 and 2019. Take Two Interactive, the parent company of Rockstar Games and 2K Games, stated in their 2019 earnings report that they witnessed their net revenue grow 140% from the previous year, from $480.8 million to $1.249 billion [20]. Other companies such as Sega, Sony and Warner Media also claimed tens of millions of GBP in tax relief, siphoning money away from smaller developers who actually need it [21][22].

It’s therefore very strange, in my opinion, that these companies are saving sooooo much in taxes, and making sooooo much money, yet are unable to pay voice actors [11][23] and writers [11][23] any royalties, even though their work makes up the backbone of their games. Michael Hollick, the voice of Niko Bellic in GTA IV, was never paid any royalties after completing 15 months of work at Rockstar, being paid roughly $100,000 for that time period only [11][23]. The concept of royalty payouts is not a new one, and is widely present in the film, radio and music industries. Strange how Rockstar couldn’t spare any change, though.

Predatory Season Passes and Microtransactions

People are encouraged to pre-order games and buy season passes to access extra content that has not yet been revealed, that releases on the same day as the full game. The “incentive” that is given for pre-ordering a game & season pass is often a cosmetic item or extra mission [11].  If all of that content is already finished (which it often isn’t at the time of advertisement), why not, then, just include it in the game for $60?

Star Wars Battlefront was sold in 2015 at full price for $60 and required another $50 Season Pass to access all the content available [11]. Of course, it is “optional” to buy the Season Pass, but human beings tend to suffer from FOMO (fear of missing out) and are often pressured into paying for things that their friends pay for, so as to not feel left out [11][25][26].

Games like Assassin’s Creed Odyssey took this concept to the extreme [11][26], with the following versions of the game available for purchase:

Base game$60
Deluxe Edition$80
Gold Edition$100-110
Ultimate Edition$120
Spartan Edition$160
Pantheon Edition$220
I mean, it’s absurd, really.
Assassin’s Creed Odyssey Edition Spreadsheet. [11]

The same manipulation of FOMO applies here, and is worsened by the fact that even more expensive editions of the game do not include all the content that was already made by the developers, excluding those who bought even the most expensive of collector’s editions [11][26]. The content exists, and does not cost more to include all content in the most expensive editions, so what is the reason for the exclusion? To make persons buying into “lower tiers” feel special? It could be argued that if the developers thought their games were worth $100, they should have sold them for that much instead of saying, “Hey, you can pay $60 for some of the content, but you could also pay $100 for all of the content!”

The incentives to buy these special editions are also predatory, with Ubisoft dangling the prospect of “3-day early access” over the heads of players [11][26]. What is the justification behind asking people to pay extra to play a game 3 days early when it was already finished anyway? What is the justification behind asking people to blindly pay in advance for DLC that will only release months later? Again, it is “optional”, but they’re still asking, so they obviously want it.

Let’s argue that the DLC was necessary to offset development costs, and that its inclusion is beneficial to the developers. By that argument, game devs should calculate the costs of production, calculate what they need to break even/make a profit, and price games and collector’s editions according to what will help them stay afloat. That way, they don’t have to ask for any more money. Right?

WRONG! Games like Destiny 2 have multiple editions (Base = $60, Expansion Pass Bundle = $90, Digital Deluxe Edition = $100) and still had microtransactions [11]. You, the consumer, were asked to pay $60-100 for the game, and then were asked to continue to spend money. And these microtransactions aren’t just any microtransactions – they’re in the form of loot boxes.

So at this point they’re asking for $60-100, and they’re also preying on vulnerable people with addictive personalities by introducing gambling into the game. In the case of developers like 2K Games and EA, they are also exposing CHILDREN to predatory gambling mechanics in games such as NBA 2K and FIFA [11], coercing them into spending up to thousands of dollars that neither they, nor their parents have.

Given the aforementioned information, what exactly is the motivation for corporate businesses to cease making money through collector’s editions, season passes and microtransactions, should game prices rise to $70? If GTA V Online makes hundreds of millions of dollars EXCLUSIVELY on microtransactions [8], why would they stop? Would the extra $10 per sale would make up for the obscene amount of money being made by selling multiple small purchases to people? No, it probably wouldn’t. Would investors take a significant loss such as that very kindly? Also no. So not only would we have $70 games, but $70 games with microtransactions. Lovely.

The Value of a Dollar

I often hear the sentiment that video games deserve to be more expensive because the prices have not changed much in the last 15 or so years. However, this argument fails to take into consideration that video games, which technically remaining at $60, are not the only product that we buy, nor is their stagnant price reflected in other products and services we consume.

The dollar stretches far less than it did 20 years ago [27]. Due to war, disaster, recessions and other influences, the prices of housing, education, and food have gone up drastically. Think back on all the things your relatives or friends’ relatives were able to do, like own a house (what a concept!) that millennials and Zoomers can’t even begin to envision. And many back then achieved it on a single income per household, no less, while today’s norm for many around the world is multiple streams of income per person, per household. If everything around is us more expensive than it was 10 or 20 years ago, that means that there is less money left over for leisure and hobbies.

One could argue that this would mean that the cost of living is thus rising for video game company employees, which means that surely they deserve more money? Well, as we’ve seen above, employees are not granted job security or a living wage whether or not companies do well, as “record profits” don’t even guarantee you a shield from unemployment [13].

+The argument that stagnant video game prices does not make them more afforable is further supported by the fact that the current minimum wage in the United States (which obviously does not reflect the global gaming community, but makes up a very large part of the market) is not a living wage, anywhere in the country [28].

The federal minimum wage in the U.S. is $7.25 an hour [28]. As of 2020, the United States Department of Health and Human Resources placed the federal poverty level at $12,760 for a single adult, $17,240 for a family of two, $21,720 for a family of three and $26,200 for a family of four [28][29]. This means that full-time workers would have to be making $12.60 per hour just to achieve the federal poverty level [28]. I think we can both agree that a living wage should kinda sorta place you above the poverty line. Maybe, I don’t know, I might just be too radical or something.

Even if you were to live in the least expensive city in the U.S. (in this case, Brownsville-Harlingen, Texas), you would need to be making $10.47 an hour to afford to live there [28]. And of course, not everyone makes minimum wage! But many, many do, and some service workers make even less than that, relying on tips to get by. A lot of these people are gamers, and the entry fee of $60 for a video game gets harder to come by every year.

Final Thoughts

I’m not really sure how to end this. Writing this was upsetting, and I really want things to be better. Unfortunately, I don’t see how it can get better as long as corporate capitalism continues and is allowed by governments to shine. Before you fight me – no, this article should not be reduced to “cOmMiE pRoPaGaNdA”, but rather as an advocacy article for fair wages for all people, including those who work so hard to make the video games we enjoy.

To those who know me, you know that Nintendo are my main squeeze. I do want to clarify that I do not think Nintendo is a perfect company, as they are still a corporation. They have engaged in some slimy practices, such as locking game modes behind amiibo in Metroid: Samus Returns [30], and DLC, such as in Breath of the Wild [31]. However, I do appreciate some of the employee-friendly practices held by Nintendo as a company, such as the late president Satoru Iwata taking pay cuts by up to 50% when the Wii U became a commercial failure [32], and the fact that despite Nintendo franchises being some of the most popular video game franchises in the world, their executives make significantly less than other execs in the industry, with Nintendo president Shuntaro Furukawa making $2.4 million, compared to Activision’s CEO Bobby Kotick making $40 million in 2019 [33].

I’d love to know what you all thought about what I wrote today. It’s a longer article than you may be accustomed to reading, but it’s something I’m pretty passionate about. Thank you for making it to the end!

References

[1] Gartenberg, Chaim. (Jul 2, 2020). NBA 2K21’s PS5 and Series X versions will cost $69.99, hinting at a next-gen price jump. Retrieved from https://www.theverge.com/2020/7/2/21311250/nba-2k21-playstation-5-xbox-series-x-versions-70-dollars-next-gen-price-increase-games

[2] Androvich, Mark. (May 1, 2008). GTA IV: Most expensive game ever developed? Retrieved from https://www.gamesindustry.biz/articles/gta-iv-most-expensive-game-ever-developed

[3] Villapaz, Luke. (Sep 8, 2013). ‘GTA 5’ costs $265 million to develop and market, making it the most expensive video game ever produced: Report. Retrieved from https://www.ibtimes.com/gta-5-costs-265-million-develop-market-making-it-most-expensive-video-game-ever-produced-report

[4] List of most expensive video games to develop. Wikipedia. Retrieved from https://en.wikipedia.org/wiki/List_of_most_expensive_video_games_to_develop

[5] Grand Theft Auto IV. Wikipedia. Retrieved from https://en.wikipedia.org/wiki/Grand_Theft_Auto_IV

[6] Grand Theft Auto V. Wikipedia. Retrieved from https://en.wikipedia.org/wiki/Grand_Theft_Auto_V

[7] Tolbert, Samuel. (Feb 6, 2020). Grand Theft Auto V crosses 120 million copies sold in, Red Dead Redemption 2 and The Outer Worlds also reach new milestones. Retrieved from https://www.windowscentral.com/grand-theft-auto-v-crosses-120-million-copies-sold

[8] Strickland, Derek. (Jan 4, 2020). GTA V made half a billion dollars in 2019, was #3 best-earning game. Retrieved from https://www.tweaktown.com/news/69666/gta-made-half-billion-dollars-2019-3-best-earning-game/index.html

[9] Gough, Christina. (Jul 24, 2020). Digital and physical game sales in the U.S. from 2009 to 2017. Retrieved from https://www.statista.com/statistics/190225/digital-and-physical-game-sales-in-the-us-since-2009/#:~:text=In%202018%2C%20a%20record%2083,were%20sold%20in%20physical%20form.

[10] Frederick, Jesse (Jun 30, 2017) – Bermuda? Guess again. Turns out Holland is the tax haven of choice for US companies. Retrieved from https://thecorrespondent.com/6942/bermuda-guess-again-turns-out-holland-is-the-tax-haven-of-choice-for-us-companies/417639737658-b85252de

[11] Sterling, Jim. (Oct 9, 2017). The Sixty Dollar Myth. Retrieved from https://www.youtube.com/watch?v=pHSso2vufPM

[12] Superbunnyhop (Aug 10, 2017). How American game companies avoid paying taxes: https://www.youtube.com/watch?v=SFKnv1YzI3k

[13] Schreier, Jason. (Feb 12, 2019). Activision Blizzard lays off hundreds of employees. Retrieved from https://kotaku.com/activision-blizzard-begins-massive-layoffs-1832571288

[14] Sterling, Jim. (Feb 12, 2019). Activision begins mass layoffs following record financial success. Retrieved from https://www.youtube.com/watch?v=oMAUHXXMHPk

[15] Sterling, Jim. (Feb 26, 2019). EA and Activision CEOs among the most overpaid in America. Retrieved from https://www.youtube.com/watch?v=rbEtxD9nU6o

[16] Orland, Kyle. (May 5, 2020). Investors argue against excessive pay package for Activision CEO. Retrieved from https://arstechnica.com/gaming/2020/06/shareholder-groups-say-activision-blizzard-ceo-bobby-kotick-is-overpaid/

[17] Schreier, Jason. (Aug 3, 2020). Blizzard workers share salaries in revolt over pay. Retrieved from https://www.bloomberg.com/news/articles/2020-08-03/blizzard-workers-share-salaries-in-revolt-over-wage-disparities

[18] MacDonald, Keza. (Jul 29, 2019). Grand Theft Auto maker has paid no UK corporation tax in 10 years – Report. Retrieved from https://www.theguardian.com/business/2019/jul/29/grand-theft-auto-maker-uk-corporation-tax-rockstar-north-games

[19] Sterling, Jim. (Jul 30, 2019). Rockstar is just another tax ducking corporate parasite. Retrieved from https://www.youtube.com/watch?v=3giVPhSCAOQ

[20] Evans, Kyle. (Feb 6, 2019). Take-Two Q3 2019 earnings report – Red Dead Redemption 2 has sold over 23 million copies worldwide. Retrieved from https://rockstarintel.com/take-two-q3-2019-earnings-report-red-dead-redemption-2-has-sold-over-23-million-copies-worldwide

[21] Holmes, Oliver. (Oct 2, 2019). Revealed: Global video games giants avoiding millions in UK tax. Retrieved from https://www.theguardian.com/games/2019/oct/02/revealed-global-video-games-giants-avoiding-millions-in-uk-tax-sony-sega

[22] Sterling, Jim. (Oct 2, 2019). Game companies avoid paying millions in UK taxes. Retrieved from https://www.youtube.com/watch?v=TuBGAESIAMg

[23] Welsh, Oli. (May 22, 2008). Niko speaks out on voice actors’ pay. Retrieved from https://www.eurogamer.net/articles/niko-speaks-out-on-voice-actors-pay

[24] Pratchett, Rhi. (Oct 5, 2017). Writers not getting royalties. Retrieved from https://twitter.com/rhipratchett/status/916047539568246785?s=20

[25] Hobson, Nick. (Apr 23, 2018). The science of FOMO and what we’re really missing out on. Retrieved from https://www.psychologytoday.com/us/blog/ritual-and-the-brain/201804/the-science-fomo-and-what-we-re-really-missing-out

[26] Sterling, Jim. (Feb 4, 2019). How publishers exploit your confusion and your FOMO (The Jimquisition). Retrieved from https://www.youtube.com/watch?v=ZM4Dx33p57M

[27] How does the cost of living compare to 20 years ago? Investopedia. Retrieved from https://www.investopedia.com/ask/answers/101314/what-does-current-cost-living-compare-20-years-ago.asp

[28] Amadeo, Kimberly. (Feb 13, 2020). Living wage and how it compares to the minimum wage. Retrieved from https://www.thebalance.com/living-wage-3305771

[29] Office of the Assistant Secretary for Planning and Evaluation. (Jan 15, 2020). Poverty Guidelines. Retrieved from https://aspe.hhs.gov/poverty-guidelines

[30] Klepek, Patrick. (Jul 27, 2017). It seems Nintendo’s locking a “Metroid” hard mode behind amiibo. Retrieved from https://www.vice.com/en_us/article/evdeqz/it-seems-nintendos-locking-a-metroid-hard-mode-behind-amiibo

[31] Kain, Erik. (May 2, 2017). The first “Zelda: Breath of the Wild” DLC should be free. Retrieved from https://www.forbes.com/sites/erikkain/2017/05/02/nintendo-could-learn-a-lot-from-the-witcher-3-when-it-comes-to-zelda-dlc/#2c3fce2e70db

[32] Rigg, Jamie. (Jan 29, 2014). Nintendo bosses take big pay cuts in penance for Wii U failure. Retrieved from https://www.engadget.com/2014-01-29-nintendo-bosses-pay-cut-penance.html

[33] Craddock, Ryan. (Jul 21, 2020). Nintendo’s directors earn a relatively modest wage compared to other industry execs. Retrieved from nintendos_directors_earn_a_relatively_modest_wage_compared_to_other_industry_execs

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