Fallout creator explains why game prices didn't increase for decades

The higher profits from digital game sales have prevented video games from dramatically increasing in price over decades and multiple console generations.

Fallout creator explains why game prices didn't increase for decades
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Senior Gaming Editor
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2-minute read time
TL;DR: Video game prices remained stable at $59.99 for decades despite inflation due to digital distribution reducing costs and increasing publisher profits. Recently, prices rose to $70 or more as companies seek higher profitability amid rising labor costs and shareholder demands, marking a shift in the billion-dollar gaming industry.

Companies in the billion-dollar video games industry carefully kept prices in check, but in recent years publishers finally bumped the price. After all, as Gestalt media, video games are expensive to make...so why weren't price hikes more common throughout the years?

Fallout creator explains why game prices didn't increase for decades 78
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Video game prices only recently went to $70 (and thanks to Nintendo, some games are $80). For decades and multiple console generations from the NES to the PS4, games cost a flat $59.99 and the prices didn't rise with inflation. Why not? Fallout creator Tim Cain believes he has the answer--it all comes down to digital distribution.

In a recent YouTube video, Cain made a simple and compelling explanation: "Digital probably is the reason games have resisted matching inflation. I've said this before, I bought games for $59 in the '90s. That would have been a really expensive game these days. And these were standard games Super Nintendo. But those cost savings weren't passed down to consumers. They could have."

Cain argues that games could have been cheaper digitally as a result of the savings that companies were keeping.

"Cost of goods and COG. You hear this a lot as a developer, your publisher will be like 'well, our COG is really high.' Those dropped tremendously with digital but those savings weren't passed on."

The PS3 and Xbox 360 generation introduced the digital software economy for consoles, and as we know from Xbox CFO Tim Stuart, digital is a very "high-margin business."

Releasing games digitally reduced COGS, or Cost of Goods Sold. This is generally the price of doing business. Higher COGS means less profit. Digital has low COGS, so companies had more profit because it cost less to distribute the games.

After digital distribution was introduced, everyone was making more profit per sale, which helped keep prices low. As the market grew, and as shareholders' appetite for profit increased, companies raised prices in an effort to boost profitability while offsetting rising costs. The impact of inflation is typically on labor--companies have to pay their workers a higher salary to keep them--which can then lead to layoffs and other cost-saving levers. Profit growth comes first, always, for publicly-traded companies.