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Where Does the $60 You Pay For a Game Go?


An L.A. Times post revealed this chart and data based on a slide show by OnLive, an on-demand video game system launching later this year.

This chart shows that publishers such as Rockstar, Activision, Capcom, etc. receive about $45 and retailers like Walmart and Gamestop get about $15 per game. Publishers then pay a $7 licensing fee to the platform companies such as Sony, Microsoft, or Nintendo. Supposedly $4 was spent on manufacturing, packaging, and shipping the game to the store, while the publisher expects $7 to cover costs for the unsold games that get returned. The publishers profit is then about $27 per game. After paying for development and marketing expenses, this profit is probably a lot less than expected.

There is no mention of where the data actually comes from. It was most likely used to promote OnLive as a larger profit margin for the publishers. OnLive will be an on-demand only system, and I can see where that alone could increase profit margins. It would completely cut out returns and distribution costs, due to playing on-demand. With on-demand games there is no downloading or installing. The games are played directly from a server. This would also cut out the retailer margin, as again, all games would be available directly from the publisher or OnLive. Cutting out just those three areas could bring the game prices for OnLive down to $35 per game, with the publisher and platform company making the same profit. At even $45 per game, more games would sell and the publishers and platform company, OnLive in this case, could make an even greater profit. With this reasoning, downloading a game, from PSN for example, would also grant a greater profit for the publisher.