A price war is about to hit the games industry – and for once it's not good news for consumers. Last month, Activision announced it would release its eagerly awaited shooter Modern Warfare 2 with an RRP of £55 – £15 more than most new console releases. And there was more: the former boss of Sony Europe, Chris Deering, said publishers would soon consider pricing games at £70 to make a profit. This seemed to embolden Activision's chief executive, Bobby Kotick, who told reporters last week he would be willing to go higher than £55, especially with "premium" editions of games.

One thing is clear: it now costs around $30m (£18m) to build a title for PS3 and Xbox 360, 10 times more than the average PS2 development budget, but publishers aren't making 10 times more money. Something's got to give – and it looks like it's going to be us, the gamers. In some ways, we can't really complain; cartridge titles on machines such as the N64 and Snes regularly retailed for £50-£55. It's only with the advent of cheap optical media that prices dropped. And these days publishers have to provide significant post-sales support.

Retailers are worried, pointing out there's a bit of a recession on, so perhaps raising prices isn't the best idea. The tactic could lead to a horribly misshapen industry, in which a handful of "tent pole" titles are released every year – doubtless big sequels and entertainment franchise tie-ins. Original projects will migrate to download services such as Xbox Live, creating a chasm between budget releases and the massive Triple A showcase releases.

There's got to be a better solution. The answer may be dynamic in-game ads, which have been employed in a number of Xbox 360 titles. According to the market research outfit Emarketer, US companies are set to spend $170m on in-game advertising by 2013, which should help to offset those dev costs – although gamers aren't always pleased about the intrusion, and ads were recently removed from the PS3 title WipeOut HD as they doubled loading times.

Ultimately, publishers may just have to sit down, read Chris Anderson's latest book, Free, and rethink how they deal with pricing. Perhaps they should look at the mobile phone or pay-TV businesses, offering different tariffs for differing groups of customers; a fixed low price for those who just want to bomb through the single-player missions and don't mind a few ads popping up in the process; and a higher price, or subscription charge for those who spend weeks playing online and downloading new weapons. It'll be complicated but at least it could mean not filling shelves with £70 copies of Michael Bay movie tie-ins.