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.
Microsoft has come out and validated some earlier rumors about Xbox 360 Avatar’s and their 3D dashboard design. Apparently, this is to build more of a community and bring a bit of the Mii-like influence from the Nintendo Wii to the 360 hardware.
@Deus Ex: Human Revolution film director tabbed:
“I didn’t ask for this” – Deus Ex guy (sue me, i forgot the guy’s name)
“But i’ll take it… gladly” – Me
@QOTW:
I have a list…
Cthulhu Saves the world (epic fun awesome RPG)
Terraria (bought for 2.50)
Space Pirates and Zombies (2.50 as well – all hail Ganben)
I could go on, but these are the high awesomeness ones!
Have not yet listened to the podcast, but I thank you very much for the games. Made my crappy day a lot better =D.
Jordan, glad to hear about the job.
@Star Citizen hits $4.5M stretch goal
Jonah, good point on stretch goals. If I ever ever come up with a project that requires funding, and if I put it on Kickstarter, it’ll have all the requirements mentioned, no stretch goals.
@Black Ops 2 1.03 patch doesn’t fix server issues
Ah, EA’s way of pushing Origin … just kidding!
Still, gotta hand it to them the way they do their testing :P. You can test for server outages, bad network conditions, you can test that.
What can I say, COD lost me at Modern Warfare 2. It became just waay too action movie like. Now, Medal Of Honor, that’s a modern warfare game that I liked!
@Deus Ex: Human Revolution film director tabbed
Meh … i liked Mortal Kombat, but that’s pretty much it on games turned into movies.
@QOTW:
Ib. Free game, no microtransactions. It went waaay above my expectations, becoming a point of reference for “story and characters beat graphics”.
Black Ops 2 is Activision, not Electronic Arts.
@Deus Ex: Human Revolution film director tabbed: Seriously, how many video game movies have been announced and then they run into problems? Just wait until you actually have finished something, and just announce it with a trailer because I’m getting sick of this. Halo, Uncharted, God of War, Castlevania, World of Warcraft, Devil May Cry, Shadow of the Colossus, Bioshock and Gears of War are just a few of the many that will probably never see the light of day.
@Epic Mickey 2: Seeing as the sequel got pretty much the same reviews as the 1st one which I loved, I will probably end up playing this. Would be pretty excited to play it if I hadn’t like 6 new games which I would like to play.
Epic Mickey 2 is getting worse reviews, actually.
@Kickstarting the Party
As fun as Kickstarter sounds, I stay away from it. I am very conservative about how my games are made and frown upon the Rise of Communism in gaming. I still think that Kickstarter is just a passing fad and will eventually wither away.
@Patchy Black Ops
Haven’t played multiplayer. Although I own the Xbox 360 version so I should be safe. People expect Xbox games to run well on-line because we pay the Gold Tax and are entitled on it. Maybe PS3 should have had a payed subscription. It’s on-line is a mess compared to Xbox 360. It’s not just Black Ops that runs bad.
@Deus Ex
At least it wasn’t Uwe Boll…
@Taking the Mickey
Jonah’s right. Epic Mickey 2 is taking a critical beating. It doesn’t matter how many endings you have if your AI partner puts all effort ensuring that you never make it to the end.
@QOTW
GunZ Online. I played it back in 2006 before it went freemium. Back then there weren’t that many free on-line games. Especially action games that weren’t MMORPGs. That made GunZ stand out and I sunk a good few life-times into that game. Occasionally I come back there but the smell of nostalgia is not enough to keep me interested for long. Better games to play these days.