XBLA Is Not Getting More Expensive

There's a bit of a dustup online over the price of XBLA games. Kotaku, among others, is claiming that XBLA is becoming more expensive. The Consumerist chalks this up to increased damand for games, even while admitting that digital distribution elimits the supply side of supply/demand.

Needless to say, it's more likely that neither are true. While "games" as finished units have increased in price over the last year, it's unlikely that the increase is due to an increase in "demand" as such, but rather that XBLA has proven itself able to effectively sell more expensive games, and so developers are less hesitant to investing more resources to create a stand-out product. Of course, maybe developers are more experienced, and it takes the same amount of "time and effort" to create a $15 game that it used to take to create a $10 game. Why should that matter? After all, experience and efficiency is a resource in and of itself, and has its own associated expenses. An hour by an experienced developer could easily be worth 1.5x the time of a novice.

You can imagine a model where prices are invariate to the expense of the project, like movie tickets, where you'd pay $10 for every game, no matter how expensive to produce, and games targeting different units would simply make widely different profits. Like a movie ticket, in a sense you're getting a "deal" on a blockbuster which cost some 200 million to produce, while an arthouse flick is a premium good. But I can't think of very many pricing schemes that work this way. Usually, the more work that goes into something, the more it costs.

In fact, if anything, it's likely that these games are getting cheaper. Developers are getting more experienced, there's more competition, more risk-taking. And if it costs me $15 instead of $10? I won't care, so long as the game appears to have an increase in quality of about 1.5x.