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.
Good show guys but I’m missing Paul and Dan.
I heard you mention your playing Shadowrun Returns Jonah, how are you liking the game? I’ve gotten it myself and it seems to have a short campaign seeming to rely on the community to create campaigns themselves like with the Neverwinter games.
Speaking of Sierra Online and Kickstarter, Hero-U being made by the Coreys was mentioning the various other creative leads also kickstarting their old franchises as well. Although changed since they don’t own the original IP like (Space Quest = Space Venture).
As for what I’m playing I’m playing Civ V BNW, Minecraft and Jade Empire. It’s my first time playing JE and I got it off GoG and I can see why it got the reviews it did, it is a well deserved reputation. Good atmosphere and challenge in the fights, at least for me since I’m not a great action game player.
@Getting old
Happy Birthday Jonah. Congratulations on getting one year closer to death. On the bright side, your mid-life crisis is just about over. Roll on arthritis, weak knees and a man-sized diaper.
@Phil Fish is no longer aPHILiated with FISHy gaming business (damn I’m punny)
Man. That sounds so childish. But it would have a better effect if FEZ would be Halo or Mass Effect. Personally, I never heard of FEZ until he started making all that racket. In fact , this could have a good post-mortem marketing effect.
@Shadow of the Eternals back from the dead (again)
It’s funny how the game is already f**king with you. And it’s not even out yet. I really want to see it released. It will be a nice £5 title, considering that It will sell next to no copies on the Wii U. Although I am afraid that this project will not see the light of day regardless of how many times they put it on Kickstarter. Not until Silicone Knights sell off the IP
@Neil Gaiman making games
That sounds terrific. Neil Gaiman is a talented writer, so the story is bound to be good. Lets hope the game can keep up with him. I read a number of his books. Enjoyed all of them. Looking forward to this game.
@The worldwide Internet sensation
I played WoW for the first time a few month ago and was very disappointed. It did not live up to my expectations. But that is most likely because I played a lot of WoW clones for the past few years and I am fed up with the genre. I found WoW to be very basic compared to its clones. I am sure it is a good game, but I just have to much of a life to waste my time on this.
Ps: I haven’t played Walking Dead past episode 1 yet, so I didn’t listen to the last podcast discussion to avoid spoilers. Thought I was successful, but did not expect Jordan’s stealthy revelation about Lee. For the future, it would be nice if you could maybe mention that spoilers will follow or put it in the podcast description, that would be nice.