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.
This week’s episode is the final episode before E3, and next week, an outtakes episode filled with Dr. Who and Game of Thrones discussion will run. After that, we’ll have some serious E3 2013 discussion, especially about what happens with Microsoft and Sony in particular.
@Pachter predicts $349 for PS4, $399 for Xbox One
Interesting. I don’t see this happening though, the hardware behind them is basically identical. And for the same stuff, Sony has a history of running higher prices.
@World of Warcraft movie
*sigh* … why the hell not … I’ve seen Mario, Prince of Persia, so why the heck not. I mean it’ll have a ton of CGI, so does it really matter the origins of the story/script? For all it’s worth being “made after WoW” will most likely be used as a marketing tool to get more people in the cinema.
@Robert Bowling’s Robotoki raided by LAPD, mistake COD figure as armed intruder
… really? I blame the dev who pressed the panic button.
Jonah, Ghost is wielding an M4 with an M203 under-barrel grenade launcher and a red dot reflex sight. Not sure what to make out of the sound suppressor though.
@Documentary seeks to unearth 3.5M E.T. cartridges from landfill
… waste of time if you ask me. But hey, they have money to spend, the contractor has people to pay.
@Oculus Rift developer Andrew Scott Reisse, 33, killed as bystander in police chase
Manslaughter. That’ll be the verdict.
As for Andrew Scott Reisse, R.I.P.
@Shadow of the Eternals Kickstarter fundraising struggling
So I remember that at one point we were wondering when we’ll get the first failure on kickstarter. Now if I remember correctly, what we wanted was a project to meet the goals, but then to not deliver. This one doesn’t quite meet the requirements but still, it is the first project that could fail while still being under the spotlight.
@EEE
Didn’t watch any conferences. They were all at some awkward time; 12pm pdt is the worst time to have any conference. It’s middle of the night in Japan and workday in US and UK. Only suitable for Chinese where consoles are banned. Regardless, the news was all right. It’s surprising to see the console battle so one sided. PS4 definitely plowed Microsoft. I am genuinely surprised to say this but Sony seems to have learned from it’s mistakes and is doing what the gamers want. As opposed to Microsoft, whose vision of the living room seems to be inconsistent with our own. That said, I will probably be getting a PS4 on release. That and Battlefield. Glad to see that some very good MMOs are coming to consoles.
@Xbox 180
Composed the post above a week ago. So much has changed. I have never seen Microsoft so humbled in its entire existence. Bill Gates is rotating in his grave. And he ain’t even dead yet. From one side they slapped themselves in the face hard by going back on their “vision of the living room”. On the other hand, it speaks volumes that they take PS4 as a serious threat and a more appealing console. Which means they still have time to turn things around. Still, I am set on the PS4 but will eventually get an Xbox. Once the price is right.
@WiiU
I am currently taking bets on if the WiiU collapses before the core Nintendo titles come out. Since my Lovefilm subscription ran out I haven’t even touched the thing. And not really planing on doing it any time soon. I am tired of Nintendo feeding me promises.
PS: I love the fact that Microsoft is ripping of Playstation plus, but considering that the first 2 games available are Halo 3 and Assasin’s Creed 2 are a joke. Here in UK Halo 3 costs a pound and practically every person who owns an Xbox has it.