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.
@EA always “growing and morphing”:
Riiight, they convinced me already at the “growing”.
What they didn’t realize just yet is that the bad rep they have will end up being very costly.
Jonah, good point about the fact that hiring is not a news subject.
@Rumor: Microsoft finding new ways to “monetize” Xbox Live
Loved Jordan’s point of view; usually a resume is just a resume. Most people write stuff in their resumes even if they only have a vague idea about the subject.
As for Code Hero, Paul, you don’t know hate mail when it’s delivered to you. There, the second piece of it.
Yeah, hardly anything was actually newsworthy so I’ll just skip the news.
@QOTW: Seeing as Paul is already going to answer with Harry Potter, I’ll go with a less obvious choice. The Inheritance Cycle, 4 books by Christopher Paolini. It has magic in a more complicated fashion and it is much rarer to have magical abilities as opposed to in the Harry Potter universe. It takes place in a Lord-of-the-Rings-esque world and I love them very much. I read the first 3 books about 4 years ago (Yes, I was about 11 or 12 at the time), and it’s a shame that I haven’t had the time to read the 4th one which was released a few months ago.
Anyway, Thursday next week I will be starting my GCSEs and will be having 1 or 2 exams per day, so it will be unlikely that I listen to this podcast, although I will still try my best not to miss it.
magic: the gathe–DAMNIT. oh well i have the game already im sure whoever gets it will enjoy the heck out of it.
my favourite fantasy book is .hack//AI buster its a book about a fictional mmo and you can cast spells in the mmo sooo does that count?
I would love to leave you iTunes comments, but I am firmly of an opinion that Apple is the cancer of technological industry and refuse to let any of their garbage stain my hard drive.
@Halo 4 multiplayer
I love the Halo series. It still has that classic gameplay which allows you to have a firefight with an enemy for longer than 5 seconds. Unlike Battlefield or Call of Duty. I just hope 343 industries won’t change that much. I don’t mind seeing the elites go, although they will be surely missed. Sprint as standard is a good addition. But the credit system sounds fishy. Halo: Reach had a good thing going with their monies. I would much rather see a return of that system than some new COD perk thing.
@EA laying people
Why do we even care? We are gamers! We care about EA’s games. Not how many staff they fire. It’s not like EA will go bankrupt. That tumour is too well rooted in the gaming industry.
@QOTW
I will have to go with Neil Gaiman’s “American Gods”. Best book I ever read. The guy leaks gold out of his pen. He was the one who wrote the legendary “Sandman” comic book series. If you haven’t read “American Gods” then you do not deserve to have eyes. Fact.
The book is about gods imported from the old western faiths (Odin, Chernobog) pitted against the embodiments of the modern age (Goddess of Media, God of Money) in a struggle to win the belief of modern day USA. And one unfotunate man stuck in the middle of it. Brilliant read. Highly recommend.
Halo 4 Details – Not too sure about this. They changed a lot from Halo 3 to Halo: Reach and I wasn’t too fond of the change, I actually don’t know many people who were. Regardless I’ll buy it for the campaign, but if the multiplayer is going to be more like Reach rather than Halo 3, then it will not be a purchase for me.
@Arthur V on EA Layoffs – The reason why we should care is because that is a lot of people to suddenly have no job. EA wouldn’t really suffer from it, but the people that were let go suddenly have no income.
Further Monetize Xbox Live – As an Xbox owner, I have to say that Microsoft is doing a really great job with the system right now. Granted the Red Ring of Death thing was bad, but I’m still sitting on my first Xbox, so I have no complaints. The online experience really comes down to this: you get what you pay for, and you pay for what you want.
QOTW – The Secrets of Droon would have to be my favorite magic series because I read those from when I was 7 till when I was 13, so the book series was with me for part of my young life. They are really meant for kids so I don’t see many of you going out and picking up a copy.
Hey everyone, thank you very much for that Civ key. I’ve been a big Civilization fan since CivII so I will be checking out Dan’s podcast. Also, I will be practicing hard so I can challenge Dan for world supremacy one of these days. Too bad they took the Portuguese civ out of the game, I loved the early naval exploration to get to new shores quickly.
@EA layoffs – I guess we won’t know for sure. One thing is for sure, the increasing number of games being released and increasing costs of development, even companies like EA are under pressure.
Every AAA title takes millions to develop, and I guess budgets and therefore personnel costs need to be adjusted all the time.
@Halo details – never been a fan of Halo myself , but I will be curious to know how this achievement for not killing anyone will work.
@QOTW – I won’t be participating in this one, but I’ll leave my answer anyway: Its not easy though, as I’m a big fan of high fantasy books.
But since this is a gaming podcast, I’ll go with: Wied?min, you go ahead and try to read that!
You will know it as The Witcher by Polish writer Andrzej Sapkowski. Even if you just played the game, you know how amazing that whole lore is. Also Geralt of Rivia is one of the coolest main characters I’ve ever seen.
Also, so sorry for not leaving comments on Itunes but I seriously dislike Apple and their I-stuff.
One more thing, whenever you have lack news to cover, try talking a little bit about the Humble Bundle game bundles. Whats your view on initiatives like these that help independent developers and charity institutions.
Happy Happy Joy Joy
PS: It seems like I can’t paste the Polish name of The Witcher because of the funny character, its Wiedzmin .
@being slapped on the wrist for being an incensitive prick towards others
I suppose Will is right. As an economist I tend to look past such trivial matters like suffering of the common folk. Regardless, such is the time we live in. The current layoff of the EA staff is most likely a result of decisions made in the past few years. People don’t get fired on the spot, since employers are restricted by negotiated contracts/projects.
We have all seen how the gaming industry contracted in the past few years. Many publishers were hit bad as a result. The industry started to restructure to survive. Sega shed people. Nintendo took a pay cut. I expect there will be a lot more job loses in the future.
Hope you enjoy PolyCast as well as this one, jfgen.
As for world supremacy, well, it’s certainly enticing. 😀
@Arthur V – Didn’t mean to come off like I was chastising you, just saying that there are people behind this that are affected, and the company usually still makes millions of dollars. Trust me, if there were a way that I could shut down EA and have only the assholes be harmed by it, I would most certainly do it, but I’m just a man, so that won’t be happening any time soon. Any friend of the TD Gaming Podcast is a friend of mine, and anyone that dislikes EA is a friend of mine as well, so no slap on the wrist for you good sir.