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.
@Diablo III‘s Wilson on former Diablo dev’s mixed feelings on game: “F- that loser”
The criticism sounds fair. I’m with Jonah on this subject, Diablo 3 didn’t do as good as expected, so it could be that the current team ended up venting some of their frustrations.
I’ll stick with how I feel about Blizzard after opting for all time Internet connection DRM: f*ck Blizzard.
I like what Brevik said:
“so I am happy that it has come to light that how talented that group was and how unique and special that group was. I am hoping that, as this happens very often in the industry, you see it with Call of Duty and things like that , when the people leave the game changes and it shows how critical people are in this industry.”
@C&C: Generals 2 will be multiplayer-only at launch
🙁 … why … I liked the story mode in Generals …
If however they release also modding tools for it, I can see fan made stories.
Thing is, if the game is MP only, I can see it forcing you to play with a constant online internet connection, no modding tools available.
Hmm ….
Jordan does have a point, to me the story sold the game. I did play MP and lots of skirmish, but it was the story that hooked me.
I will give it a play though, who knows …
@QOTW: I guess 2-3 months before announcing the next generation.
What happened to the “There’s a zombie on your lawn” song?
Hmm, “I can see” too much 😛 …
It’s good to hear that Paul is all right. We really need that “Paul touch” he adds to the podcast. I already miss his emotionally spurred illogical arguments. Reminds me of my ex-girlfriend.
@Diablo 3 bitching
It’s easy to see why Blizzard gets so emotional about that comment. It takes a lot of time and effort to develop a game. When someone criticises your work, you are bound to lash out. But if you do it on twitter and it makes into the news then you are daft and should probably go back to school. Next time just break into the guys house and discreetly take a shit on his carpet.
In reality, Diablo II was better and more successful then it’s sequel. That is a fact for many. But that was a long time ago. Blizzard attempted to modernise III to contemporary standard. This may have been a mistake. Poor fan service. Still, the game is out and nothing will change that.
@Guildwars
Wanted to play the original but never had an opportunity. For me there was always a barrier to playing MMOs. As I am a student, I am forced to own a laptop rather than a desktop. That means I can play an hour of an MMO at most before the thing goes into a critical meltdown. Recently I got a PS3 and downloaded DC Universe. I played the game before on my laptop but had to quit because of heating and lag problems. With the PS3 that problem is gone and I am actually enjoying myself. Wish they would release more MMOs on consoles. I am actually looking forward to FFXIV.
@Command and Conquer
The series is just not the same after Westwood fell apart. I enjoyed Red Alert 1 and 2. Played C&C 3 and wanted to kill something. That game was cancer. I still prefer to stick to Red Alert 2. Believe it or not, but there are still a 100 or so people hanging out on the on-line servers there.
@Prey’s great escape
Prey was a launch title for Xbox360 as far as I remember. Wouldn’t surprise me if they made Prey 2 for the next gen launch. A bit too risky to release games at the moment, unless they start with Halo, Assasins or Call.
@QOTW
Depends on the popularity of the console and the economic situation. In standard cases, you should cut the price a year or so after the release. By then most of those interested in shelling out full price for the console probably bough it. Others need an incentive and the price cut will do the trick. In special cases like PSVita, you should cut the price preferably before the sales figures go into negative numbers. With cases like PSP GO you shouldn’t make the console in the first place.
PS: I was enraged when BBC NEWS spent most of it’s report on Brevik’s conviction talking about how he played WOW and COD. Cause obviously all mass killers are influenced by video games. Should make a decent QOTW: does playing games make you want to pick up a gun and massacre people?
Greetings from Portugal!
Can’t wait to get a chance to play Guild Wars 2. I’ve already got enough games for now. If it receives enough praise by the end of this year, I’ll probably buy it. I’m also mildly excited for Plants vs Zombies 2, the original was great.
@QOTW: I think that any time hardware is not coming close to target sales, that should be the time that the company considers a price cut.