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.
If you’re in the New York area, you’ll have a chance to meet CEO Mike Morhaime and executive VP of product development Frank Pearce. They’ll be a New York Best Buy signing copies of the title if you’re lucky to be in the area and plan to go out at midnight to get it. We’re not that lucky, but we’re also not standing in line this year for an event.
No Paul again, you know the drill.
Lately I’ve been ignoring all these articles just spewing out rumors day after day, hoping one of them will be right. First, IGN comes out with “Report: BOTH New Xbox and PS4 Will Be Shown At E3”. The very next day they wrote that an analyst said none of the consoles will be shown. And now yesterday, they came out with “Microsoft or Sony To Quit Console Race?”. Seriously guys, stop guessing and just wait for E3 for goodness sake.
And also I hate when they say an “analyst” says so. Oh, it must be true then because this guy gets paid to “analyze”.
@Rumor: Next Xbox tablet-based?: Even though the Wii-U will be sort of tablet-based, I think that Microsoft wouldn’t be able to pull it off and will just end up sucking.
hey guys… hope you can read this before recording the 247th!
@ps4 and 720: I hope they will be announced at this next e3 but i am ready for dissapointment. and yes, if the ps4 do not have some awesome co-funtionality with the vita, sony will be effectivelly killing the it
@diablo auction houses: not only south coreia: you guys talked about south coreia and russia, but you did forget about the prisoners in china gold farming in WoW who are obligated to do it (a few months old podcast). sad stuff
@SOPA: i am a brasilian gamer who has warned all american friends to help not passing this bill project because it will affect not only US but all the world. i like the machinima channel on youtube. SOPA would kill them
@before last week’s QOTW: my only handheld console is my trusty dark DS lite and i play on it since it lunched and still love it!!! SO SHINNY
my most played game of 2011 was CoD MW2 and BF3. i know.. the controversy…
the most surprisingly fun game was terraria most preciselly after patch 1.1.
most dissapointing is Black ops (not even 100h of gametime according to steam)
LOVE YOU GUYS, KEEP IT UP!!!
I’ve heard happier versions of Jonah before.
@Gaming Flashback:
Ha ha ha 🙂
The game was mentioned before, but Jordan made this particular flashback entertaining. The other 9 games? Please make a list.
@Fallout MMO rights belong to Bethesda as Interplay settles
Well, I guess Interplay got what it aimed to get. Jonah, it’s not the ‘wrong people won’. When you sell your IP, you won’t be able to make games on it. They should have known that before selling out to Bethesda.
Yes, they had some provisions in the contract allowing them to use the name for an MMO. That’s just not enough though. Interplay should have known better.
@ Next Xbox tablet-based?
No. They want to use PC-like hardware, so that they don’t have to worry too much about software. Plus, the more components (tablet, base station etc etc) the more expensive. So, no.
They will make it more slim, I suppose. Heck, even add a touch screen front panel. But that’s it.
@Diablo III release held due to South Korea (from GameFront)
Erm … yeah, I guess it a bit more difficult to foresee all legal difficulties, especially when you need to keep an eye on all the countries you want to ship …
@QOTW – hardware specs, as asked by your reader:
My ‘modern’ machine is a single core Sempron 3000+, 1.5 GB RAM, ATI Radeon 4650. 🙂 Pretty ancient.