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.
Some of the big announcements from Sony’s E3 Press Conference
@QuestionOfTheWeek: I wanted to play Phantasy Star Universe (yes, the single player) on a PC but couldn’t because it required an always-on Internet connection for nProtect anti-cheat software. I lived at home at the time in rural Oregon with a poor connection. My mom still only gets a 28.6 kbps modem Internet connection there. Sad.
Yeah, finally finished with my exams, I am overall satisfied with how I did. Now I just have to wait until July for the results.
The 265 hours in Team Fortress 2 are actually spread out mostly over last summer, and the 96 hours in Super Monday Night Combat are from the day it went live, so in the last 37 days. A huge factor in these numbers is that I listen to podcasts such as yours while playing them, getting double the enjoyment. Maybe that’s why I didn’t feel these exams as very heavy, even though they are a huge stepping stone to the future.
As for where I’m getting all this time from, I have plenty of free time between homework and studying because I am quite content in getting 1st place in the subjects that matter to me the most (Maths, Physics, Computer Studies etc…). So yeah, you could say I’m enjoying my teenage life.
@QOTW: To this day, I haven’t had any problems with DRM (except a small one with Mass Effect 3, damn you Origin), so this doesn’t have any effect on my purchase. I still understand the problems and agree that DRM sucks.
@DICE has Frostbite-powered titles for 2013 that “will require a 64-bit OS”
Thing is, I remember hearing that a 64 bit processor can add two sets of two 32 bit integers using the same amount of registers needed by the 32 bit processor adding one set of two 32 bit integer.
Still, I think that the main call for the 64bit os will be the amount of RAM needed to run the game. Think of textures: although the video RAM is the better place to store them, you can still page them from the system RAM.
@Actors confirm return to recording booth for Mass Effect 3
I’m with Dan, it’ll be like moving from “Here’s a crappy ending” to “Here’s an epic crap ending”.
@The truth is DRM does not work
What’s funny is that game companies that want to publish their games on Steam they must remove any form of DRM; sometimes those said companies will simply use a cracked executable when publishing on Steam 😉
Publishing later on a platform actually kicks down the sales. But I agree, pirates are not going to pay for the game anyway.
@QOTW:
Starcraft II.
When they announced full time internet connection required, they lost me. I don’t care about Assasin’s Creed, but the Starcraft universe was interesting.
I’m not interesting in buying the game anymore. First, I hate that type of DRM. And even if I’d accept it, I still run on a 3G modem, so I would then have to deal with technical difficulties.
So, Blizzard can keep the game for itself.
I don’t have much time this week so I’ll go straight for QOTW:
Diablo 3. Tried the free pass, liked it, but I can’t understand that DRM policy. Torchlight2 ftw!