If they sold 500,000 at ~$50 , but could have hypothetically moved 3 million at ~$10, they might have come out 5 million dollars ahead (negligible per-copy cost incurred, so volume can pretty well be adjusted at will without repercussion).
That's way beyond unrealistic. I don't believe even half of the pirates would pay $10 for a game, let alone 80%. By that logic, video and music -- both almost universally available for download at pretty darned reasonable prices -- piracy wouldn't be a booming business (and it is a business for some pirate sites).
That's not to say that I disagree that price reductions could be implemented that would benefit the video game industry (there's probably a sales-enhancing middle ground between $10 and $50 per game) but given that video game prices haven't changed significantly -- compared with inflation and considering increased game development costs -- in 20+ years, I think we're dealing with a situation where most people who pirate won't pay any price for what they're downloading. Of course, that means that annoying DRM practices are still an exercise in futility.
Agreed that the download latency would suck today, but it's not always as bad as your example. We have 100/100 fiber, and in principle it would take about 70 minutes to download 50GB. In practice, downloads can be slower than 100Mbps, especially when downloading stuff from other countries, but when downloading from a major reputable company we usually get 30Mbps or better per site (and can saturate the 100Mbps by downloading several items simultaneously).
In principle console game companies want everyone to want/buy their product, not just the subset with high-bandwidth, no-cap (particularly important - many caps wouldn't even allow the download of one BD game before extra fees/slowdown/disconnection) broadband connections.
I love downloading games, especially for the PC, but I've also had to wait overnight for Steam to finish downloading, usually due to either general network or Valve server congestion. Being able to decide on a game, go to Gamestop to buy it, come home and start playing over the course of 2 hours (I ride the bus) is very nice. The fact that removing this capability would also limit the available market means that optical discs aren't going away anytime soon.
It's too simplistic an explanation that doesn't take into account multitude of variables.
If you want to do a more complex analysis, I'm certainly open to correction. However, keeping in mind the increased spending in game development, I think you'd be hard pressed to find today's games to be anything other than a significantly increased value compared to those sold in the 80s and 90s.
If you look at console games, you'll note that the price point is now roughly between 60 and 70 dollars, whereas it was 50 a generation or two ago.
No, you won't note that. You'll note that the price point is now roughly between 50 and 60 dollars, assuming you're talking US dollars. You'll also note that $50 was the standard price for console games for much longer than "a generation or two" - more like over 20 years. Heck, I remember Super Nintendo games up to $75 at retail and N64 games sometimes debuted at even higher prices! Playstation prices bucked the trend (and in fact set a new trend) by being cheaper because pressing CDs cost publishers next to nothing (just as DVD and even Blu-ray duplication is extremely cheap compared to cartridges). In short, adjusting for inflation, retail console game prices have gone down over the years. This is thanks, again, to the disc formats replacing cartridges and the economies of scale. Even with significantly higher game development costs, more games sold means profits can be realized at lower retail prices. I think the reason people think that game prices are higher today is that the average age of gamers has risen steadily over the years which means that more people playing games today bought them with their own money. I was buying games with my own money before the Genesis and Super Nintendo hit the scene, so I've had to know game prices for over 20 years.
Everything that can be invented has been invented. -- Charles Duell, Director of U.S. Patent Office, 1899