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.
Another PSP Coming:
Podcast
@PSvita loosing weight
I am not sure this is necessary. Especially since I hear this is more of a step back for the Vita. PSP needed a slim version because the original was chunky and had loading time issues. Is there anything so wrong with the Vita that needs fixing? Especially in UK? For me it’s a problem because I wanted to buy a Vita as it’s gotten quite cheap here. The new version will play havoc with local prices. I am not sure how this will play out.
@First the manuals. Now this.
I agree with Paul. The industry is not ready for discless consoles. And not just because people like hard copies. Major concern is that it requires a system of digital game sales on consoles that will actually work. At the moment, a digital game release costs almost twice the price of a hard copy. £60 for a new PS3 title from their online store as opposed to £40 for a disc. I am not OK with that. If digital stores were along the lines of Steam, this would work well. Otherwise it would just kill the used games market and force us to buy games at extortionate prices. On the account of the disc less Xbox I say meh. It will be an alternative that no one will buy. It will be seen as lacking compared to the standard Xbox one.
@Rescuscitation of the walking dead
The heads of Nintendo took a pay cut because it’s their fault Nintendo tanked. No one else’s. In my opinion they should have stuck the whole management crew into a space cannon and shot them to Alpha Centauri. The stubborn old fools will only damage the company further of they stay in power. This restructuring move should have happened a year ago. Instead Nintendo carried on as usual and sunk itself even further. Now it’s in dire straits and needs extreme measures. I hope that Disney buys Nintendo and makes Satoru Iwata work in one of their parks in a Micky Mouse suit. He deserves it.
@QOTW
Has to be Crysis. The game took a nosedive once the aliens started shooting everyone but the ending was of the shelf action movie crap. “A gigantic alien mothership is attacking. I wish we had a super mega ultimate secret weapon to shoot it down. Oh wait, it’s right over here.” Worst part was that the ending suggested that everything you just did was pointless and you have to go back to the island to “roll credits”.
Great Episode guys.
@Kotor II: I am with Jordan and I didn’t notice that it was unfinished, only that I was an overpowered character destroying everything in my path. I also didn’t find Kria impressive, just seemed like another whiney character who didn’t get their way and is taking it out on everyone else.
@Miner49er: I loved that you guys mentioned this game, I played it as a child and I had forgotten it’s name! I also played Jumpman Junior along with that one.
@Chocobo Tamagotchi: There was in fact a companion App game for FF8 on the Pocketstation. You played sd the Chocobo who got to fight monsters and collect treasure so it wasn’t too bad. It never came to America though.
@Black Isle: Speaking of Baldur’s Gate what do you guys think the chances are of getting the Baldur’s Gate 3 Beamdog is supposed to be working on? Did the Enhanced Editions do well enough?
@Facebook games: I find the whole Pay to win game mechanic to be very weak. More a ploy to milk customers of as much money as possible and give poor gameplay in return. I used to play Backyard monsters and it would constantly have stopping moments while I had to wait hours or days for things to finish building. It really can take the wind out of your sails to want to play. All the while giving the message “Save on resources by spending real money!” When I keep getting THOSE messages that tells me they don’t have any real game here just bait for you to click the Pay to Win. There was no real consequence to losing you could always easily recover. There just isn’t any challenge for these casual games.
Another example of a terrible Pay to win game is StarTrexels which has giant pay walls preventing you from going forward until you either spend HOURS collecting enough Dilithium or pay $15 to go to the next area.
So to answer Paul’s possibly rhetorical question, Yes I would rather pay for a 50-60 dollar game then deal with the Pay to Win crap.
At least Paul’s game Pinsanity sounds nice if you can actually win physical Pins and you are supporting our Olympic team.
@QotW: Best unfinished game would have to be Minecraft since they are still working on it.