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.
Welcome to the TD Gaming Podcast! This week we discussed:
@GameStop developing console and PC game streaming
This is quite funny, since I remember Derrick and Jennifer talking about GameStop as the iconic brick-and-mortar type of shop, not willing to buckle up on the pressure put by digital distribution channels.
The big problem I see is the fact that now there are quite a lot of digital distribution channels: Steam, Origin, Desura, not to mention the console based ones. It got crowded, and getting a slice of the pie is (now) very difficult.
Now, in terms of streaming, the only competition is OnLive. They will need to do something differently, however, if they want to become top dog. I’m curious as to what will that be.
@Is the Xbox 720 chip set
Well, the technology is already there. Call it Sandy bridge or ‘fusion’, CPU+GPU+memory controller are here to stay.
The hardware technology was already tested (well, Intel had some issues with Sandy bridge …) and deemed suitable for marketing.
SoC means ‘System on a Chip’, meaning everything (CPU, RAM, ports etc) is on the same chip.
Jordan, I see the 720 as just a hardware upgrade of the 360. It will be (just like 360) still based on PC-like hardware, so I say the 360 games will be perfectly compatible with the 720. This means the 720 already has a good library.
The way I see it, Microsoft decided to steamroll the competition.
@industry is failing female gamers
I say put your money where your mouth is. Instead of complaining about the fact that the market represented by female gamers is not being properly exploited, I say take the opportunity and make a game that will bring you the moneyz 😛
My sister also loved UT. She also played Quake 3 and Medal of Honor: Allied Assault, but her arena of choice remained UT. Another game she liked a lot was the first Unreal game.
Back to the UT/Quake3/MOHAA, she also played them in multi player.
@QOTW
I take pretty much the same approach as Jordan. I don’t look at bullet points.
But, be it FPS or RTS, I want a nice, plausible story.