For gamers with an Xbox 360 or a Playstation 3, game costs are rising; most games for these new consoles now cost $60, a 20% increase over the previous generation’s games. Many developers claim that the increased capabilities of the new consoles and the ever-increasing complexity of developing games have increased budgets to the point where a price increase is inevitable. With game companies needing to sell anywhere from 500,000 to 1 million units to start seeing a profit, the publishing community is becoming increasingly risk averse.

Forbes attempts to break down the $60 that a gamer will spend on a next generation experience like Gears of War. Some of the interesting costs broken out include roughly 45% for art design and programming, about $27 out of the $60 MSRP. Retailers grab another $12 off the top, with wholesale prices ranging at about $48. A little over 10% of the product’s cost goes towards console licensing fees; this averages about $7 going to the hardware manufacturer for each console sold. Other cuts go to the publisher, marketing, distribution, and packaging for the game.

Despite the additional cost to the consumer, it seems like game publishers and developers aren’t seeing their profitability increase. If game costs do break down like the estimates from Forbes, and game development costs are rising, one has to wonder how long a model like this is sustainable. Nintendo has made a conscious choice not to follow the escalating budget path, while other developers investigate other revenue streams like in-game advertising, downloadable content, and episodic releases.