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.
Recorded on 16th – that’s before posting the comment on ‘Computer specs’. Still not the happiest Jonah.
@Mass Effect 3 is Origin-only
It’s a pretty aggressive move to push for Origin. I’m sure they will have higher revenues if they would sell on both Steam and Origin.
I think that it will take a bit until every Steam user will have an Origin account, so, at least on short term, I see EA taking a bit of a hit.
Paul, I liked your point on this one.
@EA passed $1B in digital sales in 2011
I also have an opinion that a good chunk came from Steam. Because yes, EA also sold games on Steam in 2011.
Jordan, I like game boxes as well. And Paul, I also loaded games on a Z80 computer from an audio cassette.
Jonah, the games online cost (at launch at least) exactly as much as the ones from the retail store. Why is that? If I’m to pay the same price, I’d rather get the boxed copy, thank you very much.
@Gaikai: Sony or Microsoft won’t have next-gen console
MSFT has it a bit easy: stick to the PC-like hardware, that evolved from XBox360 until now.
As for Sony, don’t know, don’t care.
🙂 Jonah, loved your input 🙂
@SOPA:
Not touching it, it has been discussed to death. Every person who listens to podcasts is aware about SOPA.
@Thief 4 rumored to have multiplayer
All engines do light calculations on all entities now, in order to have a realistic rendering. As long as there is a way to access the results of that computation, any engine should do ok.
@QOTW:
I would say that my first MP game I played was “Battle City” (called “Tanks 1990” on the NES clone we had). A lot of other games followed, like Chip & Dales Rescue Rangers 1 & 2, Monster In My Pocket and a bunch of others.
Favorite game? Man … dunno … maybe Medal of Honor – Allied Assault, close to it would be AvP2. That doesn’t rule out Battle City or Teenage Mutant Ninja Turtles – Tournament Fighters. Too tough to pick one favorite.
@Mass Effect 3 as Origin exclusive
I think EA move to get its games as Origin exclusives (for digital distribution) will be a mistake on the long run. Steam already has a huge player base, and some players like me are not willing to have their games scattered in different accounts of different distributors.
PS: I also think that digital versions of games should be a bit cheaper than the boxed retail versions. Some MMO’s did this in the past, where you could buy a boxed version for a few more $$.
@SOPA I’ve already said my piece on it, but it was really interesting to see the blackout on some sites. Webupd8.org for instance, had a huge part of the words in its texts censored when the user visited the website for the first time during the day.
@QOTW:
First game of multiplayer was probably Kings of the Beach for the pc, or maybe some spectrum game before that. But the first that really made me love multiplayer was Quake2, which was also my first multiplayer online experience.
After that I was amazed with the MMORPG experience, firstly with Project Entropia, as I’ve never seen such a complex universe before, and after that I tried a few MMORPGs . Nowadays I tend to prefer the massive online games to normal games with multiplayer, although I would have loved Skyrim to come with Coop.
By the drill, Paul, I don’t mean instant hate mail. It just means that I will just like the podcast 50% less.
@Bioware confirms Mass Effect 3 is Origin-only: Why? I pre-ordered Mass Effect 3 on PC, but I really hate Origin. Oh well, I’ll have to live with it, but I really hope that the online multiplayer won’t be too bad with Origin.
@Electronic Arts passed $1B in digital sales in 2011: I’ve already said that I like my games in boxes, for the very same reasons you mentioned. And also, I’m paying extra for the box, CD and display? Bullshit! Deus Ex: Human Revolution pre-ordered was €34.45 from my online retailer. 5 months later, it is still €50 on Steam and only €16 from my online retailer. That’s €34 less for getting the game in the box. Digital distribution? No thanks.
@Gaikai: Sony or Microsoft won’t have next-gen console: And they are guessing once again. Also, I think that it’s a little bit too early for cloud gaming to catch on and appeal to the masses.
@“What was the first multiplayer gaming you ever enjoyed?”: I would have to say Heli Attack 3 on Miniclip. It technically isn’t a multiplayer, but my brother would shoot using the mouse and I would jump around the bullets. My computer was pretty crap back then and we had no consoles so flash games were pretty much all that I played.
@mass eff 3: in order to play the single player game is required a constant flow of an eletric courrent trough your computer or console. lol
The Battlelog is actually a good and innovative idea, the bad idea is Origin that requires a relativelly high portion of the PC’s processing power that could be used to help me run BF3 in high specs. That is what i like in Paul: he votes with his wallet, and stand for his principles no matter what. Damn you steam for not having BF3 and ME3 T.T.
What is wrong with CD’s? I still have my total annihilation in 2 epic CD-rom’s. INSTALLING THEM NAO
Dear Jordan, in 94, Brasil was already blessed with the NES and the Super NES.
@sony or microsoft no moar console:no comments. is a stupid rumor that will not come true, since both companies are rock solid on the console battleground and will not give up
@QOTW
1st enjoyed mp game: Counter-Strike… millions of hours wasted… WORTH IT