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.
In before Herr_Alien. 🙂
Come on Paul! How many podcasts are you going to miss?
@GOG says customers hate DRM: Of course they do! Just like you said, DRM only hurts the customers and not the pirates. And yes, please bring back games filled with physical content, I would love to have stuff like that.
@QOTW: Sorry, don’t know of any DRM that I could tolerate. I know that pirates shouldn’t be accepted, but unfortunately there’s nothing that can be done about them.
@DynamicJul
😀 Actually it is a nice change. The time zone difference usually works in my favor (Eastern Europe), but it’s not completely impossible for somebody from US to get in first.
@EA forum bans cause game bans:
So apparently they didn’t fix the issue yet … they’re still using one database to handle the authentication for both systems.
If you think of it, you don’t even need two databases with the same user/password data, you only need separate databases to store forum bans from whole-account bans.
Correcting the bug should not be that difficult and it will make a huge impact for the better.
@piracy’s up 20% in past 5 years:
Games for free? Who would think this would ever be a lucrative business? 😛
I for one would pirate the shit out of Assassin’s Creed 2, just to point out that intrusive DRM is not ok. I’m not that much into that kind of game though, so …
@GOG sez customers hate DRM
And for good reason. As long as the code reaches the client, any DRM measures in it will be bypassed. Not might be bypassed, not could be bypassed, WILL be bypassed.
As for physical content, well, you still have those Deluxe editions.
@Steam user database cracked:
Not the best of the possible news. I don’t like to have the credit card info stored on servers, and in my envision of an online store, the credit card info is never stored. Yes, with every purchase you would need to type in the number again, but unless you check out very often (instead of putting more items in the basket then checking out) it should be quite ok.
@QOTW:
Steam, and the regular CD-key.
Jonah, regarding DynamicJul’s comment, I think you mean pseudo-code. And it’s not really about pseudo-code; as long as you know (1) what you want the program to do and (2) how to do it in one language, it will be easy to get the same thing from another language. The main hurdle in all software companies is not about learning a new language, is more about figuring out what the software you’re making is supposed to do.
Actually my time zone is GMT +1 so it’s the same. Also, I forgot to mention that my country doesn’t have things such as ‘Microsoft offices’ or ‘video game shops’ so I have to buy everything off the internet and it isn’t possible to fix an Xbox 360 over the internet.
Wait… taking fallout 3 apart and putting it back together again? This time it’s a brand new engine, so even if they learnt some stuff from the previous games, it’s not like they could reuse that much this time as they have done between previous games.