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.
:)) ha ha ha … they forgot to buy domains related to the names of their products …
Quite funny though, I wonder what the site will be about.
Jordan, regarding ratings, you should also check out http://www.tigrs.org
Jonah, Dead Island sounds pretty nice. You should try your hand at writing reviews. But with less spoilers 🙂
😛 Jonah, PCs have something that consoles lack: flexibility.
It’s fun to have an episode like that from now and then.
haha, don’t worry Paul, I’d take Star Trek over Star Wars any day as well. Yes, even Enterprise 😛
Unfortunately, that means you STILL aren’t getting any hate mail. You really need to try harder ^_^
Hey guys,I was just listening to the podcast from July 3d and was pleasantly surprised to hear my own name being read up and subsequent comment..I had to rewind that just to see if I had heard right:P As to the 360/PC compability,I was mainly referring to most games coming to PC being console ports these days and thus having their native 360 gamepad controls intact with it..an example of this is FIFA 11 where me and my brother can use both of my 360 gamepads to play 2 player game..as for the WOW counterpoint..touche..but there are ways around that as well,namely Xpadder where you can plot the keys into Xbox/gamepad button counterparts so you can play WoW with it.
However most of the PC games coming out now are console ports and does support especially the 360 pad in particular,what sparked my previous comment was when you were bringing up the conviviality of not having to sit in front of a 15 inch screen..i was just trying to make a counterpoint saying that you for the most part dont have to…sorry for the rant and thank you for including me into a great podcast:)
Nice talk in the beginning. Wouldn’t mind hearing this type of show every couple of months. You guys managed to sell me on Dead Island as well. All in all a great show for just being outtakes.