According to that, a little 5-person startup company would require about $250K per year to run.

That was during the time of the article when they didn't actually pay people.

I was just going off the figure in the "BREAKDOWN OF COSTS" section at the start.
Startup costs - $5k + $3k per person.
Per month costs - $1250 + $3250 per person.
Per year costs - $6k + $10k if exhibiting / engaging the press.
Adds up to over $200k per year.

I am appalled by how much it costs to create video games

I assure you, everyone in the industry is also appalled. Deal with it.

Why would anyone be appalled?
To be appalled implies great dismay or horror, which imply that it's an unexpected surprise.
Anyone who's ever bothered to glance at the credits section of a game would know that there's often hundreds of names present.
Anyone who's not living off their parents would know that people in large Western cities have living-expenses of a few thousand dollars per month, which means salaries must be at least that high.
Anyone who's a keen gamer knows that games usually take longer than a year to make.
Put that all general knowledge together -- 100+ people * $3k+ per month * 12+ months = $3.6M+ -- and the above generalized person should expect that these big games must cost at least a few million dollars to make.

This really puts things in perspective. I didn't know it costs that much. But I am more apalled at how much people are willing to pay for games.

Games are a pretty cheap form of entertainment!
Say you pay $60 for a new release and get 10 hours of entertainment out of it, that's $6 an hour.
Lately, I've paid $10 for a few games that I've gotten 20 hours out of each - that's 50c an hour!
Last time I went to the cinema, it cost about $30 for two people - which for a 2hr film, is $7 an hour
Last music festival I went to was about $160 for 10 hours of music - $16 an hour.
Last concert I went to was $100 for 2 hours - $50 an hour

Later this year I'm playing IRL shooter, at a cost of $100 for one hour!

Lastly, if you're entertained by slot machines, you can spend $10 on a three second spinning animation ($12k an hour!)

But I am more apalled at how much people are willing to pay for games.

You also have to remember that from a certain standpoint, you are paying $60, but not all of it is for the game. $60 is the total that they charge, but you are paying for the case, manual (printed material), cover insert, disc used, store percentile increase (usually 5%), and then the game. Usually, at least for me, when I buy a game online it is usually $10-$20 cheaper than the physical game.

But I am more apalled at how much people are willing to pay for games.

You also have to remember that from a certain standpoint, you are paying $60, but not all of it is for the game. $60 is the total that they charge, but you are paying for the case, manual (printed material), cover insert, disc used, store percentile increase (usually 5%), and then the game. Usually, at least for me, when I buy a game online it is usually $10-$20 cheaper than the physical game.

Also you are paying $60 for a game but we were also paying $60 for a game back in 1990 so the number of people to make a game has gone up, the salary has gone up, the remt has gone up and the marketing has gone up but, the games are still selling for the same price and even less in a lot of cases.

Games are something people used to do on occasion, when they wanted a social outlet from time to time.

Games have just lost the basement nerd stigma. "Social" gaming has only really taken off in the past 5 or so years. The only social interaction on consoles used to be passing the controller to your friend. And LAN gaming was an absolute logistical nightmare.

When I was growing up in the 90's and SNES/Genesis were at their prime it was nothing to rent a game on Friday night and put 20 hours in it over the weekend. People always gamed lots. Also had some epic Goldeneye four way drinking games. Social media has just recently made it "cool".

Already mentioned but games are cheaper today then they were in the past.

Are there any exceptions to this? A modern game with AAA content?

Are there any exceptions to this? A modern game with AAA content?

All AAA means is big budget, so essentially what you are asking is "are there any big budget games that don't have big budgets?" The answer is fairly obvious.

Also you are paying $60 for a game but we were also paying $60 for a game back in 1990

Where were you buying them? PSX games were $50 on new releases when I bought them in my hometown (I saved to get Metal Gear Solid on its release and it was a majorly anticipated game). PS2 and Xbox went up to $60 and PS3 360 stayed at $60, but Wii usually are $50.

My point is, you aren't paying the $60 for the actual game. I used to work at Walmart and all the merchandise there is usually marked up 5-10% (as all stores do or else they wouldn't make any money back for selling the merchandise), there is also the state sales tax (6% in Indiana) that you are charged, after taking the mark up and sales tax out, that amount is sent out, but then depending on how the game is done (as some companies develop and publish while others have independent developers make it and pay other companies to publish it) either gets divided up even more and fractions of that remaining money is sent to the proper companies or, if the company develops and publishes it themselves, goes to the developer to try and make up their $40-$100Million loss.

Edmund Mcmillen (super meat boy) said that he made virtually nothing from retail sales.

Super Meat Boy wasn't a AAA title.