I've Got The News Blues wrote on Mar 27, 2010, 00:28:
The cost of the media and packaging per unit is fixed in the sense that it is a predictable cost which does not vary (much) regardless of the number of units sold.
On a per unit basis no. But it's variable with respect to the overall cost based on the number of units; hence the term "variable cost".
The rest of the cost of producing a video game does vary greatly per unit depending upon the final number of copies sold. That was my point. Arguing semantics doesn't change that.
You're right, but you're using the terms backwards. Semantics is important in debate.
I don't and didn't dispute that, but as I pointed out and you agreed, that price is very fluid (not firmly fixed upfront).
I don't think it's quite as fluid as you think. As price drops, the number of units needed to be sold to break even starts increasing exponentially. For example, say a game cost $1M to produce with a variable unit cost of $5/unit (i.e. packaging, materials, etc). If the game was sold for $50, the developers need to sell about 22k units to break even. Slash the price in half to $25 and they now need to sell 50k units to break even; more than double the number of copies. Cut the price even further, say $10, and they now need to sell 200k copies, almost 9x as many copies. Etc.
Ultimately it will come down to demand, but there is going to be a cut-off point.
This comment was edited on Mar 27, 2010, 00:50.