Ok you're saying production costs are high (due to marketing etc. expenses), but development costs aren't?
Production costs enfold development costs. They have both risen exponentially.
But take Madden NFL, one of the most expensive games to produce. Why is that, do you think? The game itself doesn't cost that much to produce, but the entire profit margin is slashed out by the enormous percentage that goes to the NFL, Madden and others. Madden NFL has one of the lowest profit margins of all games out there.
Or take Halo 3. It also didn't cost that much to produce, I mean not relatively, but like I said, I wouldn't be surprised if they spent more on PR than on game development.
And those are two of the top-selling games of last year.
Then take the fact that gaming has an enormous managerial layer that's just getting thicker and thicker. Bethesda has at least a dozen managers to about 70 developers, a lot of whom are interns. That's ridiculous.
And then, only after all this nonsense, we turn to actual developing costs, and what Zaleukos says is correct, development costs are higher because graphical development is a very capital-intense part of game development.
I think some people fail to see how that is not inevitable. Like I said, I suspect they turned to graphical innovation because while it is capital intense, it's also the safest area to innovate in. Meanwhile you can have overly simple AIs like Radiant AI and just market them off as complex. Marketing!