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.
Hi guys great episode, nice to hear Dan again 🙂
@Noriega sues: Yeah I thought like Jordan that generally former Dictators are dead ones. He should just be happy to have made it to 80.
@Sims 2 Ultimate Edition: My wife and I both got our CD versions redeemed for the digital Ultimate edition and I have to say I’m pretty happy to have access to all those packs and expansions I never bought. I still find myself spoiled for some mods, and I had to tinker with special settings to get a resolution other then 800×600. It is nice to play this game digitally and not have the hassle of some 20 cd’s to go through when wanting to install the game to a new computer. I don’t know if it’s nostalgia glasses or not but I swear the game looked better than what I started up in Ultimate Edition.
I remember you mentioning in regards to Sims 2 not liking that your Sim ages while a neighbor doesn’t and you’d have to go to their lot to age them. For me it’s the inverse in what they do in Sims 3. I like to jump from lot to lot controlling multiple families and creating Dynasty Legacy families. I didn’t like in Sims 3 if I was playing a family and went to another house, only to find the first family had moved, split up or had a baby without me. This happened to my wife who was trying to get one sim with someone else and she went to another house and when she game back he was gone, he had moved out. So for me I like the “rabbit holes” or “hamster cages”. If you couldn’t tell I like gameplay that allows me to feel like a god controlling the lives of these mere digital blips on my computer.
@Codemasters respond: Yeah people need to realize that giving money to companies promotes them to make more of what your buying. Vote with your wallets people, this is why I backed Pillars of Eternity, to show my support for the types of games I want to play.
@Ex-Call of Duty found new studio to make more FPS like we need that. I don’t think people are going to want to play with a big headgear thing on their head. I’m sure they will make a game with Ninja mutant Zombie Nazi Robotic terrorists for all the kiddies to play. Okay bored now next topic
@Adam West playing himself. I’ve been entertained by his role of being “himself” like in Family Guy, I appreciate when an actor embraces a role that made them famous, as opposed to being resentful about it.
@Civ Beyond Earth: I am looking forward to playing this game, I’ll probably be Harmony since you get Sand worms, I look forward to assimilating Dan with the Mother Brain Flower.
@Sony Remakes: Yeah I’m not sure about remakes for PS3, now if they remake PS1 or PS2 games that might interest me. Namely Suikoden, need more Suikoden.
@Spore: “Install spore and see if I like it again” See that’s just an incorrect statement, that game is completely unlikable.
@QotW: I think I am looking forward to Pillars of Eternity the most since it’s a spiritual successor to Baldur’s Gate of which I want more of. I also am looking forward to Civ Beyond Earth as well for MP with my Polycast/craft friends. My family is looking forward to LittlebigPlant 3 and my wife wants Sims 4 but I’m very cautious of it, I didn’t like the “buy next expansion pack merry go round” with sims 2 and 3. I have to admit I am tempted by the Dragon Age Inquisition as well, I really enjoy the open world gameplay and not being handheld or railroaded from point A to Z. I like taking my time and savoring the game.
Looks like Alphashard had a slow work day 😉 Good job with the comments!
@Sims2 – I never played the game as I’m not that interested in endless titles and I also hate interior design and decoration. However, I saw online somewhere that the Sims2 are being given out for free to anyone who has an Origins account and enters a special code in there. I’m not sure if it includes all the expansion packs or not. I redeemed the code and maybe one day I’ll look into that or have my wife try it out.
@Sony Remakes: I don’t think all the remakes are such a bad idea from a money making standpoint. They have the numbers and they probably see that a lot of people how didn’t own a PS3 jumped on the PS4 and they want to accommodate them by remaking some really great games (TLoU). As a PS3 owner since 2009, I managed to play through most of the recent hits so I don’t really care that much about those remakes.
Obviously, I would prefer to have new titles to play, especially new IPs, but I’m so far behind with my backlog, I don’t mind the ‘drought’ so much. I just finished Bioshock Infinite so that says something. On the other hand, I understand I might be the minority and there are thousands of gamers hungry for new and exciting experiences. Well, 2015 is the year to look forward to.
@QotW
Looking at the list of fall releases I don’t think there’s anything I’m particularly excited about. Maybe the Infamous DLC. I enjoyed the game and I liked the Fetch character so this could be cool. There’s also NHL15 – the first PS4/XBone title in the series. I might give it a go. Far Cry 4 had an interesting demo at E3 and people seem to be excited about it. I haven’t played any of the Far Cry games but I’m not sure I want another open world game from Ubisoft just yet.
By the way, Alphashard’s LittleBigPlant could be amazing 😉 What kind of plant are we talking about? Nuclear?
Hey Pawel the Ultimate edition give away does include all expansions and stuff packs.
I obviously did a typo and meant LittleBigPlanet 3.
Hey Alpha.
Sure I knew it was a typo but LittleBigPlant sounds so much cooler 🙂 Even though I really like platformers, I never got into LBP that much. I beat the Vita version but I didn’t spend endless hours playing user-generated levels.
Thanks about the Sims tip.