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.
Gamers around the world are going to feel the pain in the 2009 holiday season after the economy shakes apart many great development studios. Electronic Arts feels the pain of being a public company as their investors complain about lackluster revenue, THQ deals with closing studios to extend their runway and other firms will lose more headcount in the coming months.
Portable Xbox
Veterans to the rescue!
Maybe I’m not a ‘true’ veteren but I’ve been writing in for over a year now so I’m starting to fall into that category, I guess.
Anyway, I’m waiting for the plane to leave after a week’s vacation in Sicilly which I used to relax on the beach and at the pool but also to give Metal Gear Solid another go (hurray for the Vita!). I played through MGS3 (19.5 hours – embarrassing) and I really enjoyed it despite my two previous unsuccessful attempts to get into the game. Do you guys have any experience with the series?
@qotw
You mentioned Red Dead Redemption in the episode. I played tens of hours of the game, including MP (Platinum, yo!) and I had to play in the violence-less mode because it was impossible to focus on anything else with people riding around and shooting each other in the other mode. I tend not to play MP games a lot but when I do I try to get together with people from specific communities from podcasts and message boards. This decreases the number of unpleasant encounters.
Hey guys, I didn’t comment on the last two because I felt that I had answered the QotW and didn’t have anything to add.
@Dungeon Keeper: I think the Mobile version of the original is very poor with these arbitrary time restraints. I agree that players get very tired of being nickeled and dimed. It doesn’t feel like a real game with these limitations.
@Bartle: I’d like to second Jordan’s comments that your segment on this was so through that I can’t really add anything myself without being a broken record on this topic. I really do feel that the Free-to-play games need to change and find a different way to work.
@QotW: I have to second what Pawwel said, I tend to stick with a close nit group of people who I know relatively well. I remember once trying Red Dead Redemption in MP and got sniped three times by the same person in the starting area, I quit MP of that game right there. I feel like Paul in that I am getting older but also been quite content to play single player. I found the WoW experience to be “Too many people in the pool”. I’m not very comfortable even with the anonymity of the internet with just talking with random people. Perhaps because I never forget these are real people I am talking to and never just a handle and avatar.
There was also a StarCraft II custom Map game called ‘Mafia’ that my Polycast group played. In it you are a Town trying to find the Mafia members before they kill all the Towns people during the night. There was a number of trolls going on with that game, those not taking it seriously and just trying to ruin it for everyone that did cause me to quit a few times.
So yes the few times I have done Online MP where random strangers were involved I have quit. Hence why I stick to people I know well enough.
I wanted to add a question:
You talked about Rockstar Games in a previous episode and how the hero dies no matter what. I remember at the time it upset many people that this happened. It also happened in other Rockstar Games, *spoiler* LA Noir *spoiler* and I’ve been told each GTA protagonist dies by the time you get to the next game. So I wondered why when people don’t want the “cliché” happy ending and they get the Hero dies ending instead, that they get upset about. They can’t seem to make up their mind if they want a good ending or a “bad” ending (by that I mean the Hero dies or something similar).