Which costs time, money and opportunity cost. Something that all the "rack and stack" people seem to forget when they compare owning bare-metal servers against managed cloud providers.
The amount of time these "bare-metal" shops waste building and maintaining infrastructure management tools, scaling tools, reporting and monitoring tools is mind boggling. None of this stuff has anything to do with the core business the company actually is in. Opportunity costs here are immense....
You pay for hardware that you need to mange and have to be sure that you will be using it after the game launch. ( most games player base decrease by 2x just after release. )
No, it's cheaper once you factor in the real performance of physical vs virtual machines.
Someone really needs to bring some actual numbers to this conversation.
Extraordinary claims require extraordinary evidence.
Brendan Gregg has written here and elsewhere about the performance of VMs on EC2. Worth reading if you're interested in figuring out how close it is (or isn't).
Maybe it's possible that you're wrong?
Auto-scaling instances on EC2 only makes sense if you don't have the in-house skills to troubleshoot/manage hardware servers or if the traffic is unpredictable and the bursts are infrequent (e.g. once or twice a week or just busy for a short time period of the year).