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.
This weeks gaming podcast covers two reviews, including LittleBigPlanet and Guitar Hero: World Tour. We also touch on a bit of retro NES history with ExciteBike. This weeks gaming news includes:
@Tiger Woods PGA Tour 12 PC controversy rages
Having an MMO as the multiplayer component of a game is actually a good idea. The problem is the ‘only 3 months free’. I mean in such cases you’d better add a free-mium MMO.
@THQ: Next-gen consoles will be discless:
That will make it easier to distribute games, in areas with good bandwidth.
Question is: if the costs of the physical medium is removed, why won’t the price of the games go down?
As for Steam, do you know that you can back up your games on a separate storage media?
@Quantic Dreams claims they lost 10M euro on used games
Gah! You can’t lose something you never had.
Make the product more attractive new. Dunno, add multi-player validated by the CD key.
@3DS sales jump 260% following price drop
The big question is, does this cover the costs? Otherwise, 260% or not, they’re still at loss.
@Syndicate reboot finally confirmed and unveiled by EA
So, this will become something like DeusEx mixed up with E.Y.E. . Quite original 😛
I guess that if it is well polished, it might become a multi player hit.
As for hate mail Paul, make sure you’re on the show.
“I hope you die”? Really? Here’s a news flash: everybody dies.
@QOTW: I can’t really remember any remakes; on the other hand I became a PC gamer in 2001, so that’s one possible explanation.
And while Doom 3 can be considered a remake of the first Doom, I didn’t play the first one so I can’t compare the two.
@QOTW: but! If UT 2003 can be considered a reboot of the UT franchise, then yes, UT2003 was a bitter disappointment: the flak cannon – turned a bit lame. No sniper rifle. No assault game mode.
help!!!!!! I cant download the episode
somethings wrong with the link plz fix it
yes it now works
Tiger Woods PGA PC – I honestly can’t believe that people play golf games in general, let alone the PC. I can’t see how swinging a mouse forward and back could be interesting to anyone. EA is probably thinking that if you’re dumb enough to buy this shit, you don’t deserve a full game.
Next Gen Discless – Nope. In no way would I see that working out. Like Jordan said, look what happened to Patapon 2. Or just look at the PSP Go, that didn’t work out nearly as well as they thought.
Losing Money on Used Games – I’m sure that they did loose a lot of money on used games, but nowhere near the amount that they claimed. There are various other reasons why there are more people playing than copies sold.
3DS Sales Jump – That doesn’t mean much at this point. Like Herr Alien said, they are still in the negative, as they were when they first launched it at the price of $250. They could mark them down to a dollar and I’m sure the sales would jump enormously, but it wouldn’t be covering the money that they had to spend to get the product to the consumer.
QOTW – Bionic Commando was pretty bad, but that is the only one that I can think of. Wasn’t ever a big fan of Duke Nukem, so that doesn’t apply to me, but I’m sure it does to millions of others.
Now, the hate mail. Paul, possibly being my favorite on the show, is going to be hard to hurt in fear of him calling me a “Loser.” The mere fact that you are asking for hate mail signifies that your bloated ego needs something to take it down a peg, only so that it may rise and be a more cocky, douchey version of the one left behind. No one leaves you hate mail because you are simply undeserving. I care more about the gum cemented into the sidewalk than I do the hopefully fictitious character known as “Paul”. You are the cancer of the earth and may God have mercy on your soul.
Alright. Is that good for Paul. It is out of love that I do this, not hate. Hope to hear back on the next show. 😀
dang, my comments didnt make it can you re post it here plz