It’s no secret that console games are (were?) based on the razor model. Make a loss on the console; make a profit on the games which will make a profit overall assuming each console owner buys X games (whatever X is).
I say “were” because Nintendo always make profit on both the console and the games. This is the case with the Wii. It is sold at a (small) profit, so in theory the games should be cheaper (are they?). Currently I think Sony are still at an overall loss with the PS3, although it is now selling well. Last time I looked (might have been the worst point), they were $1.9bn short. I remember the PS2 was down $900m before it started to turn and eventually turned a profit for Sony. If someone has up-to-date figures for PS3, please correct me.
So one of the reasons games cost a lot is that you are actually paying for your console, a bit like your mobile phone, over time.
However, I don’t mean to defend the current costs necessarily because I think there’s some unnecessary monetisation here. For example, whilst you are recapitalising the console maker, you are also making scaled up revenue for the retailer. Ie if the console maker could charge 20% less, the retailer would get 20% less (of its otherwise marked up price), and this surplus markup on the console maker’s cut is unnecessary.
PC games are cheaper and I think more reasonably priced. There is no console company getting a cut here. And consequently the retail price (as marked up from distribution) makes the retail price a lot less than the console games. You may think they are still too expensive. Possibly. One clue is that the games come out at high(ish) price and then are rapidly discounted. For example TRU is £25 currently on the PC. But pretty soon I expect to see it for £15 and then £10 maybe even as soon as the new year. £10 IMO is not overpriced, but maybe initial prices are.
Another interesting argument is that there have now been games that have grossed more than Hollywood blockbusters. There aren’t many games in this category, but a lot of films don’t make their expected returns either. On average a “big budget” game, such as GTA4, TRU etc. (ie one with a brand behind it) costs about 1/10 of a Hollywood blockbuster to make. But hey, how come a (good) game can earn more revenue than (good) movie which costs 10 times as much.
According to this argument, gamers are being overcharged for games. But a counter argument says there aren’t enough gamers and if there were, each unit sold could be cheaper. For sure, there are more people that go to see a movie than buy a game. If games could reach that kind of audience, they would indeed be cheaper (expect movie ticket prices or less!).
So it’s difficult to pinpoint the fair price of games.
Personally, I’m happy to pay PC game prices, but would refuse to pay console prices, despite the fact that I have to buy a graphics card that probably costs nearly the same as a console. But at least I get to use that graphics card for other things. I not necessarily saving any money compared to console owners, but I just prefer it this way.