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.
Nintendo Making Users Pay for
@Nintendo announces XL version of Nintendo 3DS: No surprises there. It’s kind of a given that they make new versions of their handhelds after it has been proven very profitable for them.
@New users must now pass “review process” to unlock full Diablo III: All this makes me wonder is, how much higher would the number of sales be if there hadn’t been all this stupid DRM on the game? Don’t know why they feel the need to punish their customers. It seems that only Valve knows that the way to being a loved company is by being loyal to its customers.
@Valve and Cartoon Network collaboration hints at Team Fortress 2 show: After I’ve seen what can be done with the “Meet” shorts, I can say that I’m interested to see what they come up with.
@QOTW: Nope, not really. Apart from making sure I have proper lighting and heating/cooling, I don’t do anything special.
Jonah, no rush on Mission Impossible. I can come up with other weird NES games 🙂
@Nintendo announces XL version of Nintendo 3DS
I’m curious if this has to do with the pixel size as well. When the console was announced (display size and resolution) I crunched some numbers to find out the view distance to fully use that resolution. It came up as about 8 inches. That’s too close.
A bigger screen would also mean a bigger view distance.
@Dev claims Microsoft killed XBLA version of Stranger’s Wrath
This is so odd. What’s it to MSFT if the game gets distributed or not on XBLA? Normally a publisher would not care that much as long as some quality standards are met.
I mean it’s not like they’re worried about shelf space, we’re talking about a digital distribution channel.
@New users must now pass “review process” to unlock full Diablo III
*clears throat* Ahem!
Bwa ha ha ha ha 😀 😀 😀
And I thought that online DRM was the worst thing that could happen to a single player game. Boy, was I wrong!
And if this doesn’t ramp up piracy, then I don’t know what will.
@Valve and Cartoon Network collaboration hints at Team Fortress 2 show
Dunno … they’ll have to move outside of the game in order to make it happen.
We’ll see.
@steel battalion poor reviews:
well to be fair the problem doesn’t seem to be its complexity its that as per usual with kinect it just doesn’t interpret your commands correctly 75% of the time.
and hey ubisoft press conference had more than watchdogs ….rayman legends looks amazing. =p
What is this place? Why am I writing this? Who are you people? Must…save…Skyrim. VAMPIRES ARE EVERYWHERE!!! THE DAWNGUA OK I am back in the real world now.
@3DS XL
Enjoy not having any games to play in greater resolution. Good point made by Paul: it’s not the size that matter’s. It’s the way you use it.I bought a DSi because it was a massive improvement over the original DS in terms of hardware and software. 3DS XL is just a bigger brick with bigger screens. A premium brick is still a brick.
@Oddworld: Strangers Wraith
I loved the game. It was a very interesting twist on a first person shooter. An adventure FPS with an interesting story and fun gameplay. As far as I remember, EA killed it by not advertising it. When it came out there was not a single mention of the game in media. And you had FIFA 2006 adverts posted on every bus, wall and toilet roll in London. Thanks a lot, EA.
@Diablo 3:
Que Blizzard: “No you can’t play the game offline. No, you can’t play it online either. Just give us your money, sit down and shutup. We made the game. We decide who deserves to play it and you clearly don’t unless we perform a full criminal record check and ensure that your credit card is American Express Mega Gold Platinum X”
To follow up a point made last week, just out of quriosity, if you have an opportunity to customize your game(i.e. create a character or change his name) do you personalize them and give them your name (or nickname) and your likeness? Or do you leave default settings? I tend to try and represent myself as much as I can in an MMO or Skyrim, but usually leave default settings in games where they are definitive of the series. All of my Zelda characters are called Link and my main Mass Effect character is the front cover Shepherd as he is on every media advert on the planet.