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.
@Gaming flashback: did any of you played Mission Impossible on NES?
@“Linear is not a dirty word for an FPS”
Well, what can I say, if you wan to push for a very specific story/experience, then linear is the only way to do it.
However, you get better replay value from sandbox games. Heck, I still love playing all STALKER games.
Jonah, good point on building a climax easier on linear games. I harp back to STALKER: the first game was a sandbox game up until reaching Chernobyl. Afterwards, it turned linear, and it didn’t feel bad at all.
I feel so sorry for GSC having to shut down. I hope Vostok Games (the startup from the former GSC games) will do better.
@Pachter decries on-disc DLC as “just plain greed”:
You know, this time I agree with the dude.
@Crysis 2 returns to Steam:
Hmm, lemme guess, Origin didn’t work that great? Or is it that money has no color, so Steam customers are just as good as Origin customers?
Did Valve lower their demands in the cut from DLC?
@The Old Republic still has one of the biggest dev teams in industry:
It’s hard to sell 3 mil. of copies of anything, never mind a new IP. It’s a risky bet.
@QOTW:
What do you guys think of “Amnesia: The Dark Descent”? That is, if you played it.
i am sorry i disapeared but i do not have much time…
@qotw how long does it take to make a single episode of a podcast from early planning to final editing?
Not much interested in the news, so I’m going to comment on E3.
Plenty of games have been added to my list of games I want to play, among them are:
-Need for Speed Most Wanted
-Epic Mickey 2
-New Super Mario Bros. U
-Pikmin 3
-Rayman Legends
-Tom Clancy’s Splinter Cell: Blacklist
-Tomb Raider
-Watch Dogs
Worst E3 conference was Microsoft, best was Ubisoft. What I don’t get is how many people are “disappointed” by Nintendo’s conference, expecting huge releases such as Zelda, Metroid, F-Zero or even Smash Bros. I think that many people do not understand how long it takes to make the great games Nintendo makes, and expect them to churn them out like Call of Duty. I also think that it’s a smart move by Nintendo, releasing quite a few good titles at launch, and then pace the awesome games one by one for the future. Maybe this way the WiiU won’t run out of first-party games as soon as the Wii did.
2 questions, both for Paul:
So, did you shit your pants when Nintendo announced the WiiU will come out Holiday 2012?
Have you finished Skyward Sword yet?