Maybe but what numbers are you able to provide to support that claim ?
Over the last....gosh,
that long?.... 40 years, I've worked for and with several game manufacturers. Starting with TSR (the makers of D&D and AD&D) in the Accounting office. Overall, manufacturers budget on the assumption that their
Revenue will be roughly 40-50% of the retail price. The balance is the cut that is taken by the distributors and sales reps. Of the Revenue, at least 60% of it (@30% of the retail price) is spent on Operational Overhead: building leases, equipment, payroll, insurance, Advertising, shipping costs, printing, packaging, etc. The largest expense in that mix is the printing and packaging and distribution (shipping costs). [Unless a decision was made to go for MASSIVE Advertising.] Of the remainder (40% of Revenue/15-20% of the retail price) that is what actually pays for development, much of which is going out to royalties for authors and outside artwork. The distinction being between "in house" and "outside contractors". "In house" are salaried employees. However, it is quite common for authors to also work for the company, collecting salaries, but also collect royalties as authors. (That's what Gary Gygax was doing as the President of TSR and also the company's principle author.)
The company's bottomline
Profit is usually less then 10% -- and on a hot title like
Call of Duty or
HALO that sell several million copies, that profit still yields the company several million dollars. And much of that gets paid out as dividends to the stockholders. (Which is why stock options is such a work incentive to company executives.)
Then along comes digital distribution. No more printing costs. No more packaging costs. No more physical (UPS, FedEx, trucking) distribution costs. Having to no longer pay out that portion of the overhead effectively
triples the usual Profit margin. Or it would if it wasn't for the fact that consumers wouldn't let them pocket _all_ of the savings by maintaining the same retail price. That's why Steam and Green Man Gaming and Good Old Games and similar distributors regularly offer 20-30% discounts. [Stop and think about it: when was the last time you paid full price for a digitally downloaded game?] So instead of netting a bottomline of
tripled Profits, the manufacturers are only getting between 1.5 and 2 times as much as they used to. As a bottomline, that's actually quite significant.
The increased Profits probably also explains why there has been a slow but steady rise in the production of video games. New game releases are starting to become nearly as frequent as new movie releases (on average about 3-5 per week). When I consider that ten years ago there was serious talk that video gaming was gradually "dying", I now note that it seems that digital distribution turned that trend around. Locally, retailers of video games became fewer and fewer, and the displays of PC games still available at the few retailers that remained shrunk from 2-3 aisles to less than just one-half of one side of an aisle display. But at the same time, the number and variety of PC games offered by Steam and similar distributors exploded. I now have considerably
more choices for where to spend my gaming dollars.