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.
You know why I hate Windows sometimes? Because it decides to do a reboot and a system update while I’m in the middle of writing a comment on a podcast episode…
Anyway, let’s cut to the chase. I will keep it brief because I don’t feel like writing an elaborate post again after what just happened.
1. I got the T-shirt, thanks a lot! It fits perfectly and the cotton quality is excellent. Great gift.
2. X-bone launch date. It will not launch in Poland and some of the neighboring countries so it makes me care even less about the console that I did previously. Because of the limited launch range, the date hase everything to do with Black Friday and nothing to do with the PS4 double release date. We sort of have some sales like this before Christmas and people do get trampled over in stores but still it’s not as crazy as over there. Thankfully, there’s always Amazon and Cyber Monday so I’m going to stock up on stuff then. Also, we didn’t have labor weekend or anything like that last week 😉
3. PS4 controllers. Do they mean 4 Dualshock 4s or 4 controller of any kind? Maybe it’s the former which would mean that the console will support more RockBand or Buzz controllers? That would make little sense, though. Still, I don’t care that much. The last time I played couch co-op was maybe two years ago when I played NHL 3-on-3 Arcade with two of my friends. Other than that, I don’t remember what else I played. I use my second controller while the other one is charging and that’s it.
For move games you usually don’t have enough space in the room to fit 3 or 4 people playing so it’s 2 people time 2 controllers = 4 total and that’s enough.
4. External hard drives. This is unclear to me. Do they mean media storage as well, i.e. movies and music on an external hard drive? This wouldn’t make sense, again. It shouldn’t be that hard to support an external USB drive in the OS so maybe they do mean games and game data.
500 GB is not that much if you count all the games you download with PS+. I own a 120 GB PS3 and I need to cycle my games constantly, which is not convenient. I’m getting a 1 TB disk soon and I wanted to put it in the PS4 and move the 500 GB into the PS3. I’m not sure the warranty is void if you do it, to be honest, since Sony encourages the disks to be exchanged (see, the 12 GB Flash iteration of the PS3)
5. FF XIV – I believe the only reason they’re continuing to realease new games is to learn the Roman numerals…
6. QOTW – If it ain’t broke, I’m not getting a new one – that’s my way of thinking. And since I’ve never had a console break, I’ve never exchanged one. To be fair, I only owned an NES, a PS3 and a Vita (I’m not counting some old, old TV consoles that played Pong…), so my experience is limited. Maybe it will change with the PS4 which I will get at launch. The chances that it will last for 6-8 years are slim, I guess but hopefully I’m wrong.
7. @Jordan – have you played Killzone: Mercenary on your Vita? That’s a AAA exclusive you’ve been waiting for. I’m not a huge FPS fan and I’m not that good at them, especially online, but I really like this game and it plays extremely well on the handheld.
8. I’m going off the grid for over a week so I will miss the next episode. You will probably talk about the new Vita model. Have you noticed that the mysterious connector has disappeared from it? The one next to the game slot on top of the device? Any ideas what that was supposed to do anyway? 🙂