My view on this issue (from an armchair perspective with no real numbers to back it up) is as follows:
Games that retail at 8,800 yen (9,240 yen with tax) actually street at around 7,000 yen (6,600 - 7,800 is the common range). Breaking that 7,000 yen down:
Retailers don’t get much - maybe 1,500 yen per sale.
Distributors take a cut, I don’t know how much, let’s say 1,000.
That leaves 4,500 yen per copy. That has to pay for:
A project director
A scenario writer
A lead CG artist
Several supporting artists (colorists)
A programmer
A publicist
A graphic designer (for packaging, menus, etc.)
An accountant
Voice actors
Replication costs (disc printing, packaging, manuals, extras)
Advertising costs
Rent on any office space the company may use
Sofurin review fees
Over the term of the game’s development, typically 3-8 months. Depending on the title, some of these positions may require more than one person to fill.
Now let’s say a given game sells 10,000 units - that’s 4,500 x 10,000 = 45,000,000 yen, or 450,000 weak American dollars. Let’s say the game company has a full time staff of ten, and that they make an average of 2,500 USD a month. That’s 25,000 a month x ~6 months in development = 150,000 USD in payroll, plus bonuses = 200,000 in payroll. That leaves 250,000 USD for the voice actors (let’s say they take 80,000 of that), leaving 170,000 for replication (20,000?), advertising (20,000?), rent (28,000?), and fees (2,000), bringing the leftover to 100,000 USD.
If we stretch the imagination just a bit further, say the distributor and retailer take a larger cut, or say the game sells less than 10,000 units, and that the full time staff on the payroll is more than 10 people - that extra 100,000 evaporates pretty fast. I’m guessing companies that do pull in that sort of profit margin set a lot of it aside for a rainy day.
That’s an off the cuff analysis of the conventional “niche market” eroge production model. It breaks down, however, in the face of the truly successful franchises, both on a macro scale (Type Moon, Alice Soft, Leaf, Key, Age, Nitro+, etc.) and a micro scale (Lilith, Valkyria, other professional “soft circles”).
While players in the middle of the market charge high prices for their games because they must (they can’t recoup dev costs if they charge less, given the low volume of sales), big players charge those same prices because they can - and they become successful, profitable companies because of it. They have correspondingly higher development budgets, and some of the best companies no doubt plow a LOT of their profits back into game development, and extras (Alice Soft, how I worship the ground you walk on) instead of using it to line their pockets, but as long as they stick to the traditional ADV formula there’s a definite cap on the amount they can spend on development, beyond which sales turn into pure profit.
While the giants of the industry focus on profitability through high volume sales of full-price blockbuster titles that come out once or twice a year, upstarts at the other end have discovered enormous profitability in even higher volume sales in what amounts to eroge micropayments, with much smaller production budgets and development cycles leading to correspondingly lower prices (which spurs the higher volume of sales). Lilith is the master of this formula.
To sum up my perspective: businesses exist to make money. Profitable eroge companies make money in three ways:
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At the top, companies leverage the low development costs associated with the simplicity of the ADV genre and produce games that are enormously popular due to a combination of writing and character design. Their high profit margin means they can produce enhanced releases with a lot of extras, and get away with charging the same prices as the mid-range makers, who charge those prices out of necessity and keep per-unit cost as low as possible.
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In the middle, companies target niche markets with lower volume sales, but high prices they know the fetishists who buy their games will pay. They’re not typically able to include significant extras with their releases because they need to make the most profit possible from each unit sold. Their profitability is the most tenuous as they have the smallest user base.
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At the bottom, companies target niche markets with high volume, low price sales. Their rapid release schedule targeting a variety of fetishes diminishes the risk of failure of a particular title, and low prices ensure a steady revenue flow from gamers who might balk at the full price of bigger games. This seems to have emerged in recent years as the most stable business model in the eroge industry, and some industry giants have been adopting it of late to diversify and mitigate risk as they continue development of their flagship titles (the Crowd brands, Will brands, Light, Alice Soft, and to a lesser extent Nitro+ are all doing this, as are others).
In my opinion the prices charged for eroge in Japan are largely fair, and reflective of market realities - but I may be totally wrong. It would be nice if someone like Nanatuha would weigh in on this, who knows a bit more of what’s going on. ^^;
Edit: I forgot to mention another cost associated with game development, which is the one-time (occasionally repeating) capital investment in computers, software, and game engine licensing (if applicable). This is 2,000-3,000 per person (at least), which is another significant chunk for a company about to release its first game.
To boil down my theory of pricing even further, and answer “the $90 Question” directly:
Eroge in Japan cost $90 because companies in the middle can’t afford to have them cost less. Companies on top take advantage of this by reaping additional profit from higher volume sales of premium price games, and companies on the bottom take advantage of this by competing in the same niche fetish marketplace and undercutting in terms of price, speed, and development costs.
