A-List video game development tops out at $50 million (the average was $18-$28 million based on what little data is available
Some games have reportedly exceeded $100 million in development costs. And then in order to bring it to market, the marketing budgets are comparable to those of high profile films and DVDs (tens of millions for the US campaign alone).
When you factor in replication, packaging, shipping, retailer margins, wholesaler margin, console manufacturer royalties, profit participation, digital distribution fees, etc., successful games are still profitable, but not quite as profitable as it might appear when reading puff pieces about gross sales.
At any rate when you say " There is absolutely no justification for a profit margin that obscene" - why does any level of profit margin need to be justified? We are talking about a luxury good. As long as there is high enough demand, you can sell your game at any price you like. If demand drops, then you will probably either reduce your prices or go out of business.
And from the consumer's perspective, a $70-100 game that provides hundreds of hours of entertainment is still a higher value proposition on the quantitative level than, say buying a blu-ray, etc. However, the qualitative perceived value of older titles among US consumers has probably eroded a bit over the past few years as a result of Steam sales deals and the like. I wonder whether this will begin to impact sales of new release titles as consumers are trained expect massive online bargains within a certain period of time after release date.