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.
🙂 No, Jonah, I don’t have it (Heart of the Swarm). It’s just that I have a lot of things going against this game: first of all, Starcraft II requires constant on-line DRM. This is a big no-no for me. Big enough to not buy either Starcraft II or Diablo III.
Add to that the fact that I have less and less spare time; so what’s the point of getting a game if I won’t play it? Better leave it for somebody who has the available time.
@Thief to feature “classic mode”, removing all assists
Props to that! I’d love to see that kind of approach used in more games.
@The Witcher 3 confirmed to be DRM-free
Talking about DRM never being an issue, to quote somebody from EA … I know, Jonah, you already mentioned the previous installments last week. Still, I find it amazing that nobody tries the same.
@Bethesda confirms “new version of Doom 4” being worked on, Rage 2 cancelled
Oh man … if only id could remain independent …
Yeah, new Doom 4? What happened with the old Doom 4?
Different kind of flashlight batteries? 😛
Didn’t play Rage; Doom 3 felt a bit stretched – a bit too short of a story for the length of the game. While the choices of flashlight vs. weapon felt artificial, the overall shooting mechanics felt ok.
As for South Korea not having nukes, it doesn’t matter that much, they have pretty much all western countries behind them.
Jonah, get well. Your voice is still … erm … “sexy”?
Hey Jonah, after seeing a Hitler video parody about you that I thought sucked, I thought I would take the time to make you a proper one. I hope you don’t mind!
http://www.youtube.com/watch?v=XH80Mgbt4ss
@Witcher’s great big sword
For those who have not played it, Whitcher is a dating simulator set in the fictional medieval era staring an albino Ron Jeremy. The aim of the game is to have sex with every female species in the world, including (but not limited to) elves,princesses, vampires and sentient plants. To fill the time between plowing the fertile fields of Temeria there is a light RPG mechanic and combat side missions with some sort of a secondary quest of revenge.
@Lucasarts
Pity really. I enjoyed the Jedi Knight series back in the day. Although I didn’t care about their more recent games. Kinect Star wars was a special case. First time people could tell the game was crap just seeing it at E3. On a side note, it’s sad to see all these studios closing. I’ve spent so much time playing THQ and Lucasarts games. Not to mention Midway. Oh well. As long as the talent of the developers lives on and joins another studio it should all be fine. It’s people that count.
@Doomed Rage
Don’t know why anyone cares. Doom was the original FPS. But now we have Halo, COD, Half-Life and all those franchises. Doom 4 has no chance of competing and will most likely crash and burn on day one. Not unless it brings something innovatingly outstanding. Regarding Rage, there is a popular opinion that Bethesda should just stick to Elder Scrolls. Everything else they bring out ends being crap or overlooked (WET, Brink, Rage)