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.
@Gamergate: Oh what a cluster-duck. Companies need to stay out of politics and people need to keep their personal lives out of the media and business world. Why are these people failing to learn these lessons? Not to mention the whole mob mentality of jumping on a bandwagon that they have no business getting involved in the first place. No wonder I’m an escapist. I had thought that the name Gamergate was a company until I read this story and not a continuation of the Watergate “meme”. I agree with Paul you shouldn’t add –gate to the end of every scandal. It makes it hard to differentiate from real things that have gate in it’s name like Brandenburg Gate or Golden Gate.
@Capcon: I know they are in the business to make money but I’ve always hated this mentality. The idea that if it doesn’t make 2 million it isn’t worth bothering with his a terrible thing, there have been games that did better over their life time then when they initially launched. Some games take time to build up their popularity and this need for them to be block buster sellers doesn’t guarantee quality. There are many AAA games that have sold millions and I have NO intention of ever buying or playing. This is the mentality that killed the original Sierra games and with them coming back I don’t want to go through all that again.
@Mario Clones: There was a similar joke in Sierra’s Leisure Suit Larry, where if your character died and you restarted they showed a cut scene of a new Larry being made and put back in place. So that’s an interesting game concept to imagine your characters going through.
@QotW: My favorite Saturday morning cartoon would have to be the Dungeons and Dragons. I loved Superfriends and Amazing Spider-man (who was teamed up with Iceman and Firesta). I had to use a site (http://www.inthe80s.com/saturdays.shtml and http://www.inthe90s.com/saturdays.shtml) to remember what cartoons were on Saturday morning as opposed to Weekday afternoon or morning. So I can’t seem to find when I watched Silverhawks, Thundercats or GI Joe, which I thought were in the morning. There are just so many to list but those that are very memoriable were Gummi Bears, Garfield, Kissyfur, and Smurfs. I have to agree with Jonah I do remember watching Smurfs mostly to get to whatever was after it and I didn’t stick to just one channel. It was a very warm and fuzzy nostalgic memory of a tradition that it is a shame has seemed to come to an end. I was like Jonah as well as after watching the cartoons I would be ready to go out and play.
The third Question of the week is that I play the Nintendo 3DS, I love all the RPG games and the old nostalgic games that I can play on it. I’m very into the Professor Layton games so that’s another one for Pawel.
GamersGate is the online store.
@EAs eternal struggle against its own credibility
When Battlefield 4 came out I was lucky enough to be at university and did not buy it at launch. I pre-ordered Battlefield 3 and spent the first day trying to get into a game, so I am glad I missed their second fiasco. DICE needs to stop rushing their games out the door. Especially considering that the Battlefield series have a terrible single player component which cannot compensate for lack of multiplayer (unlike Call of Duty).
@Thr Cute Terrors of Nintendo
According to the original Mario manual, Bowser turned all citizens of mushroom Kingdom into blocks. Basically, Mario rescues the princess as an accomplished mass murderer. In fact, Nintendo is full of creepy things which would make the Western audience cringe in fear. Dead Pokemon, Silent Hill-like Zelda dungeons and getting Zelda’s “Ultimate Reward” right in the dungeon she was kept in. Their early games are as good for kids as GTA.
@QOTW
The 3DS is still my favourite. I don’t play small iPhone games. I have KOTOR on the iPhone but it gets continuously interrupted by various notifications and calls, which makes me loose my progress.