If digital became the new standard and they charged 40 bucks for each digital copy of a game, assuming they had a 80% profit margin, they'd make 32$ per copy downloaded. That extra 5 bucks, while seemingly insignificant, would mean Publishers only have to sell hundreds of thousands of copies, instead of millions, to cover their production and marketing cost.

Oh course, why would developers charge 40 bucks when consumers have already proven their more than willing to pay 60 (80 or 100 with DLC).

I've never paid 60 USD for a videogame.

this confirms for me that games should and can drop in price after a month on shelves and still make money. Especially if publishers can get sony/micro/nintendo to also drop some of the licensing fee if they drop the game price.

To Snesboy;

Dunno if you own or plan on getting a 360 or Ps3, but if you do, unless you got connections or tons or patience, be prepared to fork over 60+

I own a 360 and I have only payed full price for maybe 3 games, had about 3 games bought for me at full price I assume since they were new, and the rest of my games I got off of ebay for about 5-15 dollars a piece unless it was a bigger release then maybe close 30. I have about 25-30 games I believe. So I think snesboy will be fine. Used games are to cheap to pass up when basically all new games cost 50-60 dollars

I as a Nintendo fan, have a mental block for $60 games, and pretty much won't buy a brand new PS3 game at $60. I grew up seeing $65-70 N64 games and seeing the $40-50 PS1 games and thought that it totally sucked to pay so much. Then the GC came out and prices dropped to $50, and I can happily pay that. Never again do I want to go to $60+ games unless it also comes with additional peripherals.

So that means thata 1st party games makes roughly 33$ Still, IMO retail margin looks a bit high on this chart, and seeing that its from OnLive I believe that they are probably taking the most extreme ammounts here just to show off the low-cost of DD

Ok here is a copy paste from a guy who posted a comment on Kotaku. I can say from what I know, this guy is 100% correct so I thought it worth a report over here.

Note this was originally posted by http://kotaku.com/people/woggerman/ over at Kotaku, and not by me.

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woggerman:

Ok here is how the video game retail industry works. As I said before I was a buyer for many years. If you need to know where, it was EB Games.
Retailer buys X copies of a $60 game at $48-$50 per copy for a margin of anywhere between 15%-20%.

Lets say the company sells half of the games in the first couple weeks and sales slow to a crawl. The retailer either fights with the publisher to return as many unopened copies in their warehouse or asks for a price protection(A credit on their invoice for each copy they have left in stock to bring the average cost down.) This allows them to retain a margin(though it may now be around 10%) while pricing the game lower to move the remaining units. This continues until the game is sold out and in most cases the retailer takes a hit to get rid of the last of the copies.
This brings me to the second point which is preowned games and why they are so important.
Average cost plays into this as well. Let's say the they take back 100 copies of a game at $35 trade-in value, but the game drops to $39.99 retail. As more people beat the game , more will trade it in. Now the trade-in value is $15. Let's say 900 copies get traded in at the lower value.
There are now 1000 copies of the game traded in and the average cost has now gone down to $17(100x$35=$3500, 900x$15=$13500, $13500+$3500=$17000/1000=$17)
As long as that trade in value stays low and they hit the 50% target Margin on preowns, they are golden.

I can tell you from experience, New games generally do not turn a profit unless they sell out right away. Otherwise both the retailer and publisher need to find a way to both get out of it with minimal exposure. Retailers have a great way to compensate for that with trade-ins. Publishers do not. Not yet anyway. Not until digital downloads become more mainstream. The system is flawed for the publisher and developer

What happens with a budget re-release?

if this is true then DD should be atleast $15 cheaper...