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.
Hey guys great episode, lots to respond to, I agree with you Jonah on the perspective of those that way to hire people already working. It does make a person seem very disloyal but that doesn’t seem to be a valued thing anymore.
@Returns: I have no problem admitting to making bad choices so I don’t make up excuses either when returning something. Though most of the time it’s a faulty product for whatever reason. I think I’ve gotten myself to the point where I am very careful about impulse buying without ensuring I like or really need this. With Games I’m always trying to do the Demo or watch YouTube videos of a game, but I have had games bought that I wanted to return and now I even have some on my steam list. I may have to do some trading to clean that list up a bit.
@Gameplay versus Story: This seems a balancing act at times; there are games that had great story but painful gameplay (Legacy of Kain and Soul Reaver). Then games with great game mechanic but weird story like Eternal Sonata. It’s great when a game has both, I think story is the bitch as Paul said as so many a lot of times skip or ignore to get back to playing the game.
@Valve: I am glad they are doing this to help clean out some of the crap that seems to get through, in complete games and games that just should never have been started; I’m looking at goat Simulator there. I agree that you shouldn’t have to pay to beta test something. I do feel like this whole early access and beta testing is getting abused and allowing lazy game developing to happen. Beta testing is a skill set because you need people that are not only willing but actively look for ways to break a game or do things the game designers didn’t intend to happen.
@Sony getting hacked: On one hand I do want these companies to have better security for their customers but on the other it really isn’t right for hackers to be giving out password information either. I don’t trust these hackers motives either, and I am experiencing similar password changing/managing exhaustion as you guys as well.
http://www.geek.com/news/sony-just-got-hacked-doxxed-and-shut-down-1610274/
(I like the idea of a Pastabin, let’s do a Kickstarter for it)
@Game Devaluation: I wonder if Beyond Earth is considered a AAA game or not, since I got it digitally it was $54, nowhere near 35 much less 22. I think they’ve only recently been put on sale for lower prices for Black Friday, and of course it’s priced differently US, UK, EU and Aus all have different prices for said game. I do expect digital games to be cheaper than physical copies of the game. This also reminds me of an article where we maybe don’t value games as much as we used to due to very cheap prices and how easy it is to have a collection of a 100 games on your steam list and you’ve maybe only played a handful. That when we were children it was much harder to get a game, often you’d only have one and you played it bugs and all because that was your game. I’ve gotten a few of these bundled games and I have to admit I don’t feel the huge desire to play them much if at all. I don’t feel that same desire I did as a child when I would do extra chores and save up money just to buy ONE game.
@QotW: I would have to say my favorite Game based Cartoon would be “Where in the World is Carmen Sandiego”. I loved that she wasn’t a typical Villain, she seemed to encourage the kids to try and catch her and you were learning stuff about the world as well as being entertained. I also hated the way they depicted Simon in Captain N, I think I found the “Icky” Pit and “Mega” to everything very annoying, it could be that I was slightly older at the time 8-10 so I think that act was wearing thin. I did love the Zelda Cartoon but vote goes to Carmen for helping me learn more about the world around me.