Wallets Shrink, Used Game Market Grows

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.

for-saleThis 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.

0 thoughts on “Wallets Shrink, Used Game Market Grows”

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Post

Microsoft Says They’ll Win Console WarMicrosoft Says They’ll Win Console War

Apparently the war is in full force and Microsoft’s Don Mattrick is ready to poke the flag in the ground and call it a sure fire victory (in so many words). He said he’s “willing to declare here today that Xbox 360 will sell more consoles worldwide this generation than PS3” (eurogamer)

They’re either not seeing the Wii as a competitor or are trying to avoid that evil word considering the growth of the tiny little console in the market. After telling the audience the Xbox 360 has already outpaced the PlayStation 3 and Wii he failed to mention the one-year head start the 360 had over its competitors.

There are, of course, bonuses to talking figures when you were first out of the gate. The interesting facts, which won’t present themselves for years now, will be the end unit sales figures for Wii, 360 and PlayStation 3 when all boxes are end-of-life’d. We’re sure to hear each side declare victory when they’ve decided when the war actually ends. In Microsoft’s eyes, the console war will probably end when they release the next-generation box, barring the fact that they should wait at least one year before claiming the title.

You can’t argue with the facts, Xbox 360 is doing very well in the United States (if we ignore Japan). The Nintendo Wii has sold 8.8 million units to the Xbox 360‘s 10.3 million units. How many units did the Xbox 360 have sold around the same time Nintendo boasts 8.8 million? Probably a bit less.

Press can be a great thing when you have numbers to play with and figures to skew. Oddly enough, if some of us are any indication, we’ve purchased multiple Xbox 360’s because of dead systems. Sure, we’re stupid for actually doing it, but those figures will work into the total units sold for the Xbox 360 hardware sales. Imagine, their failing systems may have actually boosted sales figures a bit; probably not statistically significant but funny non-the-less.

We can’t wait to see what type of numbers Sony and Nintendo are going to fling out. If we ask each competitor, we’re sure they’ll say we’re going to win the console war. Nintendo may just ask, “what console war? We just make game hardware” and you can’t fault them there!

E3 Brings Back The Booth Babes, oh, and DevelopersE3 Brings Back The Booth Babes, oh, and Developers

e3As not to be shown up by other conferences, E3 is bringing back the booth babes, the glitz, the glamor and the publishers and developers. All but NCSoft is reported to be making it to E3 this year and they’re opening up registration again, without having an invite only exclusive club.

Is it really that easy to breath life back into E3? It makes me question why they changed it to begin with as developers and publlishers were the ones reported to not want to spend the millions of dollars in cost to obtain a few extra eyeballs on their products. We all contemplated mini-conferences with each major developer to take the place of the big E3 where each confierence would focus on just a few small brands.

Now, we’re heading back to the way it always was… isn’t this what the big boys were trying to avoid? Apparently not, because they’re all signed up and ready to return and hype their product. Perhaps these same developers saw some falling trends and realized E3 is needed to push their new games?

Sony, Nintendo, Microsoft and all their friends are back again to battle, this is like a long awaited Street Fighter sequel. The new Super Smash Bros Brawl of press events with the hot chicks in tow hoping to flash the lights upon their awesome next greatest game development.

Will this really reinvigorate the conference? Will it cause other conferences like TGS and GDC to lose attendance this year? We know many mainstream press folks are sighing as they realize they’re going to all have to show up and really work the show, for them this is business and ratings. While a few of us are impressed by the anime clad chicks, most of the folks there are actually working for a living.