How much should blockbuster video games like GTA really cost?

Video games are constantly evolving. New technological advancements and creative storytelling continually push the boundaries of what each experience can offer. This continuous evolution has also led to ever-increasing costs, sparking discussion about the pricing of video games.

This debate came into sharper focus following the recent remarks from Take-Two Interactive's CEO, Strauss Zelnick. Zelnick's perspective on video game pricing, particularly in light of the initial trailer release for Grand Theft Auto VI sheds light on the intricate balance between the value provided by a game and its cost to consumers.

In an era where the standard price for new video games has risen to $70, the argument that games could be underpriced may seem counterintuitive to many. However, Zelnick's viewpoint is grounded in a valuation model that considers the expected entertainment usage of a game.

This model calculates the price by considering the per-hour value of a game multiplied by the number of expected hours of engagement, plus the perceived terminal value if the game is owned.

According to this formula, Zelnick argues that games like GTA 6 offer an incredible value proposition due to the extensive hours of engagement they provide, along with their high-quality content.

The Grand Theft Auto franchise is an excellent example of this value proposition, specifically, GTA 6. With predictions of "new record levels of operating performance" in the next fiscal year, the game is poised to deliver an experience that justifies its cost.

Despite rumors of a possible $120(!) price point for GTA 6, Zelnick's comments suggest a more measured approach, recognizing the importance of meeting consumer expectations while avoiding a situation where you're pricing yourself out of business.

While the industry should never judge the quality of a game based exclusively on its length and/or development costs, the ever-vocal CEO's argument emphasizes the substantial investment in creating immersive, expansive worlds that the players can explore for hundreds of hours.

This investment often includes intricately woven narratives and well-developed characters as well as extensive gameplay content that, when combined, create a comprehensive entertainment experience.

This, however, doesn't come cheap. GTA 6 is expected to be one of the most expensive video games ever made, with its costs potentially reaching up to $1 billion. From that perspective, it's understandable why Zelnick believes Take-Two should price GTA 6 accordingly.

Comparing the current pricing model to the history of video game pricing reveals an interesting trend. Adjusted for the costs of inflation, games in the 1990s would sell for significantly more today, yet the industry has seen only a modest increase in prices. This restraint, despite the rising costs of game development, highlights the industry's commitment to providing value to consumers, contrary to popular belief.

Let's not forget microtransactions and post-launch monetization strategies though, which add another dimension to the pricing debate. These have been a lucrative source of revenue for games such as GTA Online, complicating the discussion around base game pricing. It's worth considering whether these additional revenue streams alleviate the need for higher base prices.

Furthermore, Zelnick's comments echo sentiments expressed by other industry executives, who recognize the difficulty of weighing the costs of game development and the consumer's perception of value. The challenge lies in providing high-quality content while maintaining a price point that remains acceptable to consumers.

The move to $70 for certain frontline products was the first significant price increase in years, reflecting the industry's cautious approach to pricing. This increase, though met with some resistance, can be seen as a natural progression in an industry that continually pushes the boundaries of technology and storytelling.

Ultimately, Zelnick's stance on video game pricing serves as a reminder of the complexity of valuing entertainment. His perspective provides a rational framework for understanding the current pricing landscape.

As video games get bigger, better, and more expensive, these discussions will undoubtedly become more important as they shape the future of game pricing and development strategies.