Wallets Shrink, Used Game Market Grows

Over the last year we’ve seen developers scrambling to find “value add” features to new game purchases. Their goal is to convince the customer to buy new instead of used because developers don’t see a penny from a used game sale. While GameStop sees 48% profit margins from the used game market developers struggle to stay floating in the industry.

for-saleThis is not the fault of GameStop and their 48% profit margins because they’re only getting 7% to 20% profit margins (say analysts) on new game sales. As someone that’s run a game store online, if you’re getting 15%+ on a new game you’ve got some great hookups in the distribution channel or are buying in huge quantities.

Buying games in huge quantities to build profit margins can be a huge mistake in this industry. Gamers are fickle little creatures and they’re going to buy their top tier games for a few weeks and then sales will drop significantly. No retail chain wants to purchase a thousand copies of GTA IV (only as an example) and sell seven hundred over the first few week to be stuck holding onto a few hundred copies when the dust settles. Now you’ll have to put them on sale to get them out of the store because the hardcore gamer have already done their shopping and you’re not going to get any price protection if you’re not a major player in the industry.

Why take 7% profit margins when you can get 48% on a used game? The gamers don’t seem to mind because they’ll trade in a used copy of a sports title like Madden to save $5.00 on the latest franchise release. Gamers will buy Fable 2, beat it in a week and rush to the store to get the “most for their dollar” before the game gets stale and buy-back prices drop like a stone. Why not rent Fable 2 and save yourself $50.00? Of course, renting pisses off developers as well because they see no additional revenue.

While the economy struggles and consumers fight for their jobs, the entertainment side of life continues to grow. People would rather “cocoon” in their homes playing video games and watching movies on their brand new HD television because it takes them away from the low points of the economy if only for a few hours. History has shown us trends in entertainment during the down points of economies, it’s natural to want to get away for a bit.

But, consumers want to play these games on the cheap because their job may not be there tomorrow. Saving $5.00 knowing the store just took the title in for half the price doesn’t bother you; $5.00 in your pocket is better than in their pocket right? The fact that they just pocketed upward of 40% on the game doesn’t matter to you — it’s all about your bottom line!

While we’re bargain hunting during the recession developers are going to try and up sell you to a new copy of the game. If that means giving you special game items and features with a “one time code” upon purchase, it will be up to you to decide if it’s valuable. All the while GameStop will lock out the game industry from selling used games because 42% of their overall gross profit is from used game sales.

You, the consumer, benefits from a slightly cheaper game, bargain bin fire sales and additional game features if you do choose to buy new. The economic down turn is a great time to be a gamer, as long as you remain employed.

0 thoughts on “Wallets Shrink, Used Game Market Grows”

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Post

Fanboy Turf Wars and Metacritic’s The TurfFanboy Turf Wars and Metacritic’s The Turf

Gamers are passionate about gaming, love their games, follow the industry all while living and breathing all things game. This is the green pastures upon which fanboys are born. As we’ve seen at gamingpodcast.net, where we were hit hard by fanboy rage a few days ago the blood boils with hate and rage.

Although our site only received 30+ comments, other sites whom picked up the article have 100+ comments on the article about Blu-ray and my opinions of it. PS3 fanboys ran wild telling me how my name has been “dragged through the mud” followed (and preceded) by many curse words and name calling, many of which I simply refused to post because of the vulgar content.

They have moved on to larger more popular platforms to voice their opinion, by dinging Gears of War 2 prior to the games release on metacritic.com dolling out a 3.5 user submitted review (which has since gone up upon the release). Why did they target GoW2? Because the 360 fanboys nailed LittleBigPlanet with crappy reviews, says smashpad.com.

The response was to hit Resistance 2 for another bad user review score all while forcing metacritic to change their user review process to only allow users to post reviews after a game has hit store shelves. Metacritic isn’t to blame here, although it is sensible to only allow reviews prior to a games release, the fanboys have found a way to hold their turf wars.

Who’s next? Amazon.com allows reviews as well and, as we saw from Spore, it can get pretty dirty there too. Now that Metacritic is altering their review process will gamers wait until they’re allowed to spam with bad reviews to do so, or will they hunt for new social networking proving grounds to give games a bad name?

Perhaps they’ll compete for google keywords to rank #1 for a fraud review of a title to beat out other sites or they’ll find another popular user-generated review site to scar the name of a to-be released title.

There is a gang war on the Net and it involves fanboys finding social media outlets to spread their hate and deception on the opposing consoles. For us, we’ll stick with gaming and leave the rage to someone else.

Episode 304: Heart of the Swarm GiveawayEpisode 304: Heart of the Swarm Giveaway

Despite being recorded on April Fool’s Day, the podcast has no pranks, just a long political discussion and has Paul demanding no one say anything about BioShock Infinite. Speaking of that game, the crew announces the winner of the BioShock Infinite contest. This week has a Gaming History about the development of XCOM: UFO Defense.

This week’s news includes:

  • Cruel April Fool’s Joke posts fake Half-Life 2: Episode Three Steam page (see image below)
  • Path of Exile to feature yearly major expansions
  • Gamers want Assassin’s Creed every year, states UbiSoft Montreal
  • Former Diablo III director states the auction houses were a mistake
  • EA prez Gibeau: “DRM is a failed dead-end strategy”

There is a ton of feedback, plus a new contest to win a copy of Starcraft II: Heart of the Swarm. The rule is the same as BioShock Infinite: listen to the podcast and comment on what is discussed.