The cost of games is more or less determined by the break-even point. A game that isn't a blockbuster, and sells only 50k copies (as a PC game) needs to have a price that's going to mitigate the cost of development somewhat. At 50 bucks a pop, 50,000 copies translates into 2.5 million, which after marketing and publishing, puts probably less than a million dollars into the pockets of the developers. Now, when you consider that an average game has around 20 people working on it, for an average salary of 50k a year (at least), for 1.5 years (at least) you end up with a development cost of at least 1.5 million. So, right there, the development team took a hit of 500,000 dollars, and that's assuming they see half of the money from the sales, which would be pretty damn good.
Now, imagine if games cost 25 bucks instead. No developer would be willing to take the risk of their game not doing well. This is doubly true for more innovative games like NOLF (which was a bit of a commercial dissapointment) which don't have blockbuster cachet.
If you're all for knockoff games and a blockbuster industry, we could cut the price, sure.
Also, something to note is that the video games industry's revenue numbers include console sales. 10 million ps2s @ 300 bucks a pop is like 3 billion in gross revenue. So a significantly smaller portion of that 6 billion figure you see is software.