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The gaming market is much more larger than it used to be 10 or 20 years ago. So Blizzard are selling way more games. Wow doesn't cost only $60, it's a subscription.

The argument that games should cost more than $60 because "inflation" is preposterous. By the same logic, personal computers should cost $100,000 because "inflation" since they cost $10,000 in the 80's.

Have wages among their demographic kept pace with inflation?

Productivity improved. With engines like Unity or Unreal, a single person can make a game in a few years.