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.
@Sony drops 3D support, saying customers rejected it
😀 really? How about their pricing, can we reject that as well? The main issue with 3D TV for for now is the lack of 3D content (ah, where’s the porn industry when you need it …). Add to that a pricey TV and you start asking yourself if it’s worth it.
My issue with 3D gaming is that in order to properly display it in 3D, you need to render the scene twice. Basically you need hardware that can do 120fps in plain 2D mode in order to have 60fps in 3D. Don’t know how many can afford buying such gear.
@Oddworld creator to EA: “F— you very much”
😀 I love this guy! As long as he has a good game, there will be somebody willing to distribute it.
@Wii U launch developer complains of lackluster CPU:
Oh my … this is definitely not good. They just aimed for a different ergonomics/usage type and forgot about the computing power …
This reminds me of a particular phone, where the manufacturer focused mostly on user experience, completely forgetting that the device is still a phone that uses radio waves to communicate 😛 *ahem* iPhone 4 *ahem*
@Mists of Pandaria sales below expectations according to analyst firm
Well, there’s that many times you can sell the same game again and again 😛
Kidding aside, Jonah does provide a very good explanation.
@Nintendo Power: it’s bound to happen, due to Internet alone; the more specialized magazine (more niche type of market) the faster the printed version will dead.
I’m with Jordan on this one. Jonah, I send links to my friends …
@favourite game of the 90’s:
Jonah, good point with Unreal Tournament, that game was (if you ask me) the bets of the series. Everything from music to weapons felt better than any of the sequels.
Now, the reason why I went for Quake 3 is (believe it or not) the bots. Play on nightmare any of the maps that has just one bot, and if the hair on the back of your neck stands up due to fear of being fragged, then you might understand. UT was fun, but could not do THAT.