This. ^^^

And that means you have to correctly guess how many sales you can expect based off the budget you want to maintain.  Guess that wrong and you lose money, but obviously gigantic triple A huge costing games aren't the only game in town, even on the PS3, and you can make money off just 100k sales if you know that's the kind of sales you can expect.  

http://www.notenoughshaders.com/2012/07/02/the-rise-of-costs-the-fall-of-gaming/

In case anyone missed this link the last few time's I posted it. Its marks it up well enough.

this picture is misleading.

since the creation of video games they have retailed for about $50-$80. Right now the standard price is $60, thats actually less than many systems games cost of yesteryear. But inflation has gone up incredibly, but game prices have remained reletively static.

So game companies are actually selling there games for significantly less than they did, in years past.

Development costs have gone up, yes. but when you account for inflation, i would guess its hasnt gone up nearly as much as people think. but with game prices remaining static, ofcourse they have to sell more games to make a profit.

i would be willing to bet if game prices would have gone up the same rate as inflation, games selling 300-500k would be making profit.

That is also a false misconception because gaming itself has gotten bigger. There are more customers and more sales than ever before to counterbalance that.

You didn't have back to back 2-10 million seller blockbusters in the old days. The market itself has grown by many times.

Simply being a million seller in the old days was an astronomical acheievement of huge proportions. Now, that rarely even breaks even.

nothing you just said negates what i said.

its negates the inflation adjustment claim. Inflation would only become a factor if the market stayed the same size while the cost of everything else went up. The market has grown by over 10 times what is initially was.

Sales and profits have jumped relatively higher. Inflation does not justiify the price hikes in game sales.

no i said development costs have risen, games prices have remained static. therefore they need to sell more copies to make profit.

i wouldnt matter if the population was 1 million or 10 billion.  if you sell your product for the same price and it costs more to make. you are going to have to sell more of it.

for example lets say a game was released in 1980. it retailed for $70, and it cost $100,000 to make. now account for inflation. that game is now nearly $200, and the dev cost is nearly $300,000. but that game only needed to sell 1500 copies to make profit (i know not all of the $70 goes to them).

now lets look at todays game, in 2012. it retails for about $60, and it costs around $20 million to make. again if we pretend the company get all $60 for selling the game, they need to sell 350,000 copies to make profit. now if we adjust game price to $200, they would only need to sell 100,000 copies.

so yes dev costs have increased. but game prices have actually gone down technically. this is completely independent of the population.

I don't really see a huge difference there though between the better made Wii projects -- GoldenEye Wii probably being the third party game with the most effort behind it, and Super Mario Galaxy being probably the best 1st party game on the system -- both still required 120+ people on staff.

Skyrim is about 300 people once you minus the voice acting/marketing staff.

Saying Goleneye for the Wii had the most effort put behind is a joke. That game had no geomtry or complex shaders, and the most of the textures were low res. Thats an insult to every third party that actual put in a decent amount of effort. Heck, Modern Warfare Reflex had more effort put into than Goldeneye.