Why AAA video games are a bit daft

The world of video games is full of contradictions: expecting high quality sequels of favoured franchises to be delivered year on year, despite these games being incredibly resource intensive in production; a series of complaints about payment systems in modern games leading to the divisive loot box system; even Half Life 2 is an anachronism, another double-edged sword. Valve’s golden goose – a game that spent 5 years in development hell and cost $40 million to produce – heralded the arrival of Steam, the latter-day go-to platform for cheap PC games, and a catalyst for indie game development in the mainstream. Valve, purveyors of crafted, high quality experiences, are effectively responsible for a new renaissance. And yet, in spite of this vast sea change in the market for video games, the pricing structure of those at the top has remained stagnant. Why?

I’m writing this article because of the recent slew of videos on the YouTube channel Extra Credits, focused primarily on AAA price points and why a combination of inflation (roughly 25% in the US since the standard $60 price point was set), marketing and business structures mean that, logically, the prices of games ought to increase. More specifically, Extra Credits affirms that the absence of a price increase is what has led to the ubiquity of loot boxes, DLCs and a series of microtransactions (purchases that take place in game after a player has purchased it). There are two assumptions at work here, with one being much larger than the other. Firstly, it is assumed that these sorts of microtransactions are, at least to some extent, a replacement for a flat price increase designed to increase long term revenues and ensure an otherwise unknown profitability. While this makes sense on paper, it’s worth remembering that the market equilibrium for a certain videogame is still $60, implying that this was the price where publishers assumed they would maximise revenue for a chosen game, as a result of the expected purchases at that price point.

There are two attitudes we can take on microtransactions from here: that the average spend on microtransactions should simply be added on to the supply and demand diagram, thereby revealing that the price consumers pay at the end of the day has effectively increased, or, that microtransactions, DLCs and the like deserve their own supply and demand diagram, because they are a different good entirely; while the two are connected (the former is required to have the option of purchasing the latter, in most cases), this does not imply they should be treated as the same good; in terms of the supply and demand for ovens, you wouldn’t include all the trays, utensils and other instruments that you buy after the fact on the same diagram.

The key here is that an increase in the box price of a video game wouldn’t necessarily imply a reduction in microtransactions; they might be just as ubiquitous. However, this still shows that a connection exists. Perhaps it’s simply the case that microtransactions will bloat AAA titles until there is no more money to be made – put economically, when supply exceeds demand. It’s also assumed that we’re probably not there yet.

The other assumption Extra Credits make – and the one that I find most disingenuous – is that this pricing problem is some kind of injustice, that it’s a problem we should sympathise with and try and solve through private ingenuity. Don’t worry, I’m not about to argue for market intervention in video games, quite the opposite; what if microtransactions are a market failure we should allow to reach its natural conclusion? What if they prove that the AAA game – or rather, a relatively expensive video game that doesn’t try and sell you more stuff after you buy it - has had its day?

Half Life 2 was revolutionary when it released in 2004, and it’s still a remarkable game today. The setting is tuned to perfection, both the combat and puzzles are satisfying, and the pacing is, I’d argue, unparalleled to this day; except, perhaps, by the title’s cousin, Portal 2. Despite the fact that Half Life 2 is an exceptional game, it is now eclipsed, far and away, by its deliverer – Steam. The market for video games has evolved en masse since its reveal 15 years ago, and you can buy Half Life 2 on Steam today for a paltry £6.99. The necessity to ship something on a disc, or to market it to recoup costs, or even to find a publisher, are no longer in play. It’s become far simpler, and indeed cheaper, to realise your vision and get your game released. Of course, these systems have also led to myriad problems with bloatware and cheap rips showing up on Steam, but the fact remains: game development no longer necessitates a vast team of employees. Many of the greatest games of the past 20 years, from Minecraft to PUBG to Garry’s Mod, began, and found their niche, as the work of one man.

What we can draw from this – or what I’d like to draw from it – is a piercing criticism of the continued use of an incredibly antiquated development structure by AAA developers and publishers alike. The problem with the Extra Credits view is that it presents the price debacle as a problem, rather than a necessary symptom. The market for games is changing, and, above all, AAA games, like Hollywood films or pop music, will always offer a more refined experience than the indie and mobile games that stand by their side. That is the only way they can defend their price, their DLC, their microtransactions; by proving that the absurd amount of money pumped into these titles goes to producing something genuinely superior at the other end. With Call of Duty touching its fifteenth installment, and Ubisoft releasing titles that seem to meld into one another, the defense of AAA gaming as a 'cut above' is increasingly in question - as its developers increasingly move away from innovation and towards iteration.

The market is fierce; it's live and let die out there. If AAA gaming is no longer affordable for publishers, maybe we should let it be, and hope, however naively, that better things are coming.