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.
In this episode we’ve got a lot of MMO-style content and news. Although we’re not reviewing Wrath of the Lich King yet, we’ve got other subscription based news. This weeks gaming flashback is Defender and this weeks news includes:
Don’t feel bad guys, I listen every week. Even though its a bit hit/miss when one of you starts on a rant it’s still a good listen and a good place to get in depth gaming news 🙂
I’ll try to keep this one more brief then my last post, hopefully bullet pointing will help.
* I’m sorry to hear about your foot, I don’t know what could do that but I guess the one silver lining is you can say you will be a Cyborg now or training up to be the Six Million Dollar man.
* The Bobba Fett game: All I can say is Ouch, that would have made many a SW fan happy. I am in the camp of “meh” about Bobba Fett, I agree with Jordan’s assessment on him.
* Dying Light: I certainly hope that it isn’t another DI, I found that game to be boring very quickly. Just the unending swarm of Zombies can get tedious.
* Watch Dogs: If it requires the install, might as well get it for PC.
* This episode pretty much confirmed my decision to stick with PC and get 3ds for the family to play together. If Atari and Sega can survive on software sales so can Nintendo. I feel that Nintendo has been behind the hardware race really since N64.
* It just seems like a lack of foresight to try to make their previous libraries available on PSN (and same with Microsoft) If they make more money on software then they are losing money from this potential customer that wants to buy games they refuse to have on digital stores. I end up having to buy PC versions or emulate them on PC.
Okay I think I managed to keep that shorter, great episode guys lots of laughs and I told Dan to write you.
Oh and the guy with “yo-yo” weapon was Rygar. he has one of the best themes ever.
I considered using only consonants to shorten the post but then I decided to simply write less 😉
* Shout out to Red Letter Media. I love those guys. Mr. Plinkett reviews are awesome and their other shows – Half in the Bag and Best of the Worst are very entertaining.
* Shout out to Dying Light – Polish guys know how to develop great games – remember Robbo?
* Anti-shout out to Ubisoft – at least I’m getting that 1TB drive for the PS4. Maybe it will be enough for Watch Dogs. I’m really looking forward to that game.
http://www.gametrailers.com/side-mission/63162/gabriel-knight-returns-interview-with-jane-jensen
Jane Jensen is getting the license to remake the GK1 game Sins of the Fathers. According to that article it’s because of all the adventure games being crowd funded on Kickstarter. The Adventure series of GK may be getting new life if this remake does well. I’m excited not just for this game but for the fact that Kickstarter games seem to be making a difference now in giving Adventure genre another chance.