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.
This 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.
The TD Gaming Podcast and Videogame Roundtable merge, as Jonah Falcon introduces VGRT regular Jordan Lund to his new listeners, as the VGRT Gaming Podcast is born.
Jonah, you can simply skip the iOS and Facebook games 🙂
@NGP to be called the PlayStation Vita: … I liked more the NGP … Now I could be biased, I never saw the ad you guys mentioned.
@PS4 in development .. oops, no it’s not: Now, if we ignore the PSN security issues, I would consider this kind of inconsistencies funny. Now, what if they’d do the same with PSN? I can imagine the dialog:
Q: Is PSN secure?
A1: PSN is air tight secure.
(a few weeks later)
A2: PSN is not that secure.
@Dungeon Empires out of beta: I see this becoming a pretty big game. It blends some sort of ‘Farmville’ and WoW. It’s … nice!
@Dead or Alive 3DS = child porn?
Besides the age of the characters, proper rating would make this easily avoided.
@Call of Duty: Elite announced: good point, Jonah. They didn’t handle the information properly, and that can turn against them, with or without a real reason.
Jordan, the game you mentioned, ‘Eternal Darkness’, I am following a ‘Lets play’ for it.
@QOTW: none, unfortunately. Well, maybe Rage. While id’s games are not the most cinematic ones, I have to admit I liked most of what they released.
I have not listened to this episode yet, but I’m sure it will be good. I’m glad to see that you are keeping it going. Listening to the show since last November and I’m happy that its not going to die.
Hey fellas, glad to see the TD Gaming Podcast is still alive! I’ve been a fan since episode #118. Just a heads-up – the Schommers used to use a program called “Levelator” to even out their audio. I don’t know if you guys do as well, but if not it might help your output.
http://en.wikipedia.org/wiki/Levelator
I’m keeping the Schommer family in my prayers and wishing you all the best as I continue listening faithfully 🙂
Just listened to the podcast, really enjoyed it, but thats what I expected.
About the “Vita”, I’ve been hearing complaints about the naming , but it seems like no matter what they name it, people are still going to complain.
PS4 – I’m glad that they aren’t working on a new console, they need to work on getting the PS3 back to where it was before all the hacking, but again, it seems like no matter what Sony does, people will still complain. They just can’t win.
Bungie – I can’t wait to see this game. Bungie has really only been known for Halo, and I’m very curious to see what they are going to be able to follow it up with. This game will really show what Bungie can do now that they aren’t tied down to one franchise. Also, saw the trailer for Halo 4, seems unnecessary, I thought the trilogy was fine, but 343 seems capable of making a solid Halo without the help of Bungie.
Call of Duty Elite – I am one of the many that watch Call of Duty commentaries on Youtube, and it was clear to see that the majority weren’t happy about the announcement that you will have to pay. That was before it was announced that you would get most features free. Patience certainly isn’t too common in this community. It sucks that that was the way it had to be revealed.
QOTW – I am really excited for Bioshock: Infinite. Have been waiting to see more on it since the first trailer came out. I love this series and to see that they are taking it to the sky makes it seem like the series is being reborn.
@Will, PS4 issue:
It’s more complicated, the ugly way I’m afraid.
The issue with PS3 is that (1) the root key, the one that validates if the DVD is legal or not, was ‘coded’ in the silicon chip, and (2) that key was discovered.
This means that anyone can build custom software (or pirate games) and ‘stamp’ them as legal.
One way to ‘fix’ this is to change the key.
This means that future PS3 have encoded in them the new key, and all games that follow will also use that key. The issue is that the new PS3s won’t be able to play the older PS3 games (different keys), and that the old PS3s cannot play the new games.
The PS3’s root key issue was using a sloppy “security by obscurity” strategy.
The PSN case is strikingly similar: once the hackers discovered the what (old) version of software PSN used, they could then use a list of known security exploits for them.
If you’re wondering where the podcast is, it’s coming soon. We will be adopting a regular schedule once things settle down post-E3.