Can we stop using inflation as an argument? It is not a definitive stance on why MSRP number should go up... Developers/Publishers have found numerous ways to increase their revenue on a per game basis.
That's a per game basis like microtransactions. And stuff like licensing, merchandising, films don't count because they seen as separate business activities from an accounting standpoint.
The most obvious way to increase revenue (without taking a unit price increase) is to increase unit sales. But to do that, you need a lot of units in active use. Even having sold 150+ million Switch units, it still trailing PlayStation 2 in total console unit sales.
There's the option of adding things like microtransactions and/or changing the price of microtransactions. That's why a lot of live service games are free-to-play.
For sure a large game publisher will look at their entire portfolio of titles and seek a mix of games that have various ways of generating revenue whether they are up-front purchases, subscription based recurring revenue (like monthly battle passes) or things like microtransactions.
Nintendo does very little in using microtransactions or in-game purchases to generate revenue which is probably why they feel more justified in increasing game prices. Clearly Switch Online is one of Nintendo's initiatives to generate recurring revenue because they realize there's a ceiling for game price increases. It's not just one thing or another, it's a mix of revenue sources for a large game publisher in 2025.
One thing for sure is that revenue per game doesn't affect hardware COGS. The best way to increase margins is to find efficiencies in manufacturing which is why there are minor hardware refreshes to cut costs (e.g., PS5 changed the heatsink) or maybe pick up a second component supplier to drive cost competition.
Remember that none of these console manufacturers make much profit from the base hardware. The fatter margins are from peripherals (gamepads, accessories, replacement AC adapters, branded headphones, charging stands, whatever). In the same way printer manufacturers often don't make much from the printer itself, mostly on consumables.
One thing for sure, we will never know the gross margin of a title like
Zelda: Tears of the Kingdom. Only Nintendo accountants and senior management really know what. But it is a publicly traded corporation, they are required by law to disclose a lot of high level numbers.
As much as some people will hate reading this, we need companies like Nintendo to make a decent profit in the good years because it'll help carry them through a bad mistake. They (nor has anyone else) hit a home run every time they stepped up to the plate. For videogames whether it be priced at $20, $40, $60, or $80, there's probably some hit and undoubtedly some clunkers.
Again, a lot of this stuff is pretty basic for anyone who has worked at a corporation that has anything resembling stamina and history.
IBM isn't stilling sell scales and certainly not at whatever prices they were charging in the 19th century.
Using inflation to compare hardware console pricing is perfectly reasonable. There are component costs, whether it be silicon, plastic, metal, whatever. COGS is the business term. And using inflation to compare prices of an old game like
Ocarina of Time (revenue generated by up-front purchase) to
Tears of the Kingdom (also up-front purchase) is reasonable. It's worth pointing out that most of Nintendo's first-party titles follow this same method of revenue generation.
If margins changed vastly in the past thirty years, one would see it in a publicly traded game company's financial disclosures. Sure the revenue numbers increase but so have the costs. I know that in some places in the mobile gaming industry (smartphones that is), there's a fair amount of shovelware. That's certainly not the case with Nintendo-published titles even though there is some of that from third parties in the Switch Store.
For sure Nintendo management has forecasted how many Switch 2 units they will sell over the life of the console. It's not like they will hope that they will sell 300 million units when Switch just surpassed 150 million sold in December 2024. Same goes for game revenue, it's not like the average Switch owner will all of a sudden buy 25-30 titles when the long-standing average is about 7 games per console.
I am not running Nintendo but I'm sure the guys who are do a better job at it than anyone else here including me. After all, look at the most of the videogame industry in the Western world. It's in shambles with tons of layoffs, downsizing, toxic behavior, crappy content, failed games, shuttered studios, et cetera ad nauseam. If there is *ONE* company in the videogame industry that could be used a model for how to run a game company, it's 140-year-old Nintendo.
You know, someone should write a Videogame CEO Simulator game. I'm sure they could read through many online discussion threads for inspiration. I'm sure a few people in this discussion would earn the coveted John Riccitiello Achievement Badge!
