In a recent interaction with GamesIndustry.biz, former Sony Worldwide Studios chairman Shawn Layden shared his observation on the price of video games and why the industry is going through difficulty.
Former Sony Worldwide Studios chairman Shawn Layden
Firstly, Layden believes the tougher economy and increasing cost of things like housing and food mean people are tightening their spending, and that video games are taking a hit because of that decision.
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“In America right now, because of fears of recession, because of inflationary impacts, whether they’re tariffs or just current industrial policy, everyone’s feeling like, ‘I shouldn’t spend as much as I used to spend,’ just full stop right across the board,” Layden said. “So, of course, gaming is going to be affected by that.”
Due to these challenges, Circana predicts that there will be around 4.7% decline for the US games market in 2025. However, Circana senior director Mat Piscatella said it is hard to make predictions in the current game industry climate, and that he would not be surprised if the decline ends at around minus 10% or plus 5%.
Circana senior director Mat Piscatella
During the 2008 global recession, the video game industry was hardly impacted, earning the industry the reputation of being “recession-proof”. This was because people cut down on other forms of entertainment in favor of video games, as it offered more value for money.
However, times have changed. While there was a surge of new players during the COVID-19 lockdown, Ampere Analysis head of games research Piers Harding-Rolls said many of them favored free-to-play content—and that there are lots of them now.
Former Sony boss airs opinion on game price
Layden thinks it’s strange that a generation of gamers has been shown they don’t need to spend on games, at a time when publishers are saying video games are too cheap. The former Sony boss said the price of premium games has not shifted in about two decades, notwithstanding rising development costs and inflation.
Outer Worlds 2
“I think it’s because everyone’s afraid,” Layden said. “No one wants to be the first one to raise the price, because you’re afraid to lose traffic. So, what you do is you just end up eating into your operating income, your profit margin.”
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“There were more sports cars in the parking lot in the PS1 era than there were in the PS4 era, because if you’re selling 20 million units at $60 for something that only cost you $10 million to make, that’s different than selling 20 million units at $60 for something that cost you $160 million to make.”
Looking back, Layden believes the price of games should have been gradually bumped with every generation. Instead, the industry threw everything at growth, thinking it would ensure its continuity.
“The cost of construction is just way too high,” Layden said. “If you’re going to spend over $200 million to build a game, your margins are super tight, unless you can expect to sell 25 million units. Unless you’re Rockstar, [you] should not expect to sell 25 million units.”
“They said, ‘Okay, what if we maintain the price and then we nickel and dime you with the DLC, microtransactions, battle pass, season pass, whatever you want to call it, and try to make up the excess there?”
Recently, there has been a push to make the standard cost of games $80. However, that decision has faced fierce criticism. Recently, Microsoft had to reverse its decision to charge $80 for The Outer Worlds 2.
Do you see publishers and gamers reaching a pricing model that is acceptable on both sides, given the recent realities? Share your thoughts in the comment box below.
