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.
Circuit City seems to have a problem paying their bills or so it seems, as Sony stopped their shipments mid-transit and returned them before hitting the distributors command center. In this unfavorable market climate, with the holidays around the corner, it seems bad for Circuit City to lose the trust of Sony.
@GameStop vs. Deus Ex
Paul, Deus Ex are two separate words.
As for the news item itself, well, we talked already in the forums. Just one thing I want to say: they should have pulled the game from the shelves right at the beginning, instead of taking out the coupon.
That’s tampering with a product, so I agree with Paul.
@Origin EULA:
Jonah pointed it clearly, the new formulation says absolutely nothing of what they will or will not do.
If this is not an excuse for pirates, then I don’t know what is …
Paul, the question is, once you have the power to access a lot of customer information, what will enforce a corporation to only do “the good thing”?
Yes Jordan, you can call me Mr. Alien.
And Jonah, the reason my sister liked UT is because of the flak cannon: she loved shredding enemies to pieces with it.
@Are you interested in Epic Mickey 2?
No. Sorry, just can’t see myself jumping from STALKER/Doom 3 and the likes to Epic Mickey 1, 2, 3 or 999.
Paul, Jonah doesn’t dismiss your opinions. He dismisses any opinion that doesn’t fit with his. So yeah, he’s a bit of a bully.
Still, while he doesn’t agree with some of the stuff that I write, he still gives voice to my comments (although now it seems to be Jordan).
Jordan was right, this kind of conflicts do give the show some charm.
@ Flop vs. Failure:
The two terms are interchangeable when it comes to the subject at hand. Heck, one of Miriam-Websters’ definitions of flop is “To fail completely.”
@ Who has one console?
If you count current-gen consoles, I only have one. If not, then I still only have two, the other being a PS2. The Wii never managed to grab my interest outside of its initial scavenger hunt craze to find one. (Which I didn’t.) The PS3 was out of my price range long enough for me to skip over it, and the bulk of the people I play with are either mainly or only 360 owners, as well.
@ Episode 227’s Question:
I used to dream of DDR, and still see stepcharts in my head while listening to music daily. Now that I’ve been watching some MLG videos, I’m dreaming about being there and wondering what the heck I’m doing.
@ Epic Mickey 2:
Possibly, as the first seemed to have interesting concepts, but I never got to play it, as I don’t own a Wii. I would think about picking up a sequel if it comes out for the platform I own.
(And, yes, I know that askewed isn’t a proper conjugation of the word, that’s kind of the point.)
Is this where I send my hate mail for VGRT?
haha.
not sure what that was about…
Paul sounded like he was PMS-ing pretty bad…
get that guy a Midol! stat!
funny show, with lots of good info, and, though
I hate to admit it, the arguing makes it even more entertaining…
He’s like your Bababooey or something.
anyway, thanks for the info & laughs!