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.
@Wii U priced at $300 for basic, $350 for deluxe
I heard a lot of criticism towards the console after the pricing was announced. This doesn’t look good.
@Obsidian unveils Kickstarter title Project Eternity, raise $1M in 24 hours
I don’t get it, Dr. Evil … Studios going to Kickstarter for money instead of going to producers? I take it they no longer want to cope with the pressure of the producer?
Thing is, “One million dollars” doesn’t keep a studio running for too long, so what’s going on there?
@“no disc based games” next-gen
That’s quite some bandwidth required right there. For this reason alone (and the fact that I’m using a 3G modem) I say that CD/DVD is good, me likes them 🙂
@QOTW:
Not much. I played Shadowrun for SNES during my Internet-less vacation, and I found that game to be surprisingly entertaining.
@Wii U
Not sure. I also think having 2 versions is stupid, considering the Deluxe version is way superior to Basic. The price is not so bad. But in the current economic situation I don’t expect it to sell out like the Wii. Personally, I will play it safe and get it early next year. I will wait for reviews, new title announcements and to see how popular it will get. Don’t need another Nintendo branded brick on my hands.
Especially if it mostly plays Xbox 360 games
@Guild Wars 2
I kind off fell out of the whole MMO world. Level grinding is just not my thing. Usually I get to LvL 20 and loose interest. That’s why I play F2P stuff. Not sure if I should invest into Guild Wars. It has no subscription but does it provide enough content to make me play it long enough? MMOs are just to repetitive these days.
@QOTW
Just finished Yakuza on PS2. Currently playing Witcher. It’s funny. Jonah says he is playing Mass Effect and completing all the quests. I have done that on my first playthrough. Then I did it for the second time as an asshole. I usually play games very thoroughly. I only reached chapter 3 on Witcher but already played over 30 hours. I prefer to do everything on the first attempt. Although, in an RPG that means that I max level half way the game and then kill the final boss with a backhand slap.
@Wii U priced at $300 for basic, $350 for deluxe
good job on the guess guys! i think this price is ok for a console of that caliber, it might be “a couple of wiis taped together” but it will fufill the gamer’s needs for a few years without a doubt (i hope)
@Obsidian unveils Kickstarter title Project Eternity, raise $1M in 24 hours
well, they really do have a history with good games! they deserve it!
@QOTW
mostly Borderlands 2 and Battlefield 3: armored kill. as of now, i am a lvl 19 assassin focused fully on the melee tree… oh god, the carnage! :3
now time for my question: wich classes and wich builds are you guys doing on BL2? and wich you made for BL1? i made mordekai as a kick ass sniper, also 100% focused on the sniper tree.