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.
Hey guys,
A short comment on Naughty Dog. While it is true that people often leave studios after the game is completed this is not the case with NG. The game is far from done, with one of the main villains also leaving and being recast. The game seems to be in trouble and will probably come out later than previously expected. Still, I trust Naughty Dog and believe they will be able to put out a quality product.
Onto the ‘gaming nostalgia’ theme. There are many things I used to do as a younger gamer, playing mostly PC games. Mostly, I no longer buy gaming magazines. I used to be a long-time subscriber of one such magazine in Poland but then I lost interest in PC gaming and when I came back to gaming with PS3, I realized I can get all the info online and/or listening to podcasts. I don’t mind reading as a whole but as far as gaming goes I’d rather read books such as ‘The Maters of Doom’, which I just finished, than read gaming magazines.
Also, I very rarely play couch multiplayer games. Mostly because those modes are rare in games nowadays but also because when we meet up with friends, we usually play board games that can accommodate more people and which our wives can enjoy too. However, Move-based games such as Sports Champions or Just Dance, get played occasionally.
I really enjoyed the episode with all the old-school gaming talk and I find it more interesting than reading pre-prepared gaming history segments. This episode had much more discussion and excitement than previously, but maybe that’s just me. Also, there was something different about Paul’s voice. He sounded clearer and less grainy so I hope that’s permanent π
Hi guys great show I loved the Top Ten fads article no longer in use.
@Gamestop: that just seems sad, I guess they were going for a joke but it would have been nice to show their actual female execs the ones that Jordan had mentioned.
@Naughty Dog loosing people: That does concern me if people are leaving the franchise which has done pretty well so far. I wonder if the quality of Uncharted will suffer because of this. I have enjoyed all three games so far. If Uncharted 4 is going to be PS4 only I may have to break down and get it. I have enjoyed this series so much, any one of the games would have made a better Indy (this time I really do mean Indiana Jones) movie.
@Top Ten Fads:
1) I don’t remember the blockbuster exclusives and the store exclusives seem to be more recent like when you pre-oder a game from Target versus Best Buy and get a different exclusive depending on where you bought it.
2) I was an abuser and sucker for the hint line before game guides and the internet. I think Sierra and Nintendo, though I love them, was perhaps making some of their puzzles so obtuse you were forced to call their hint line or buy their magazine. I remember having a gotten a lot of game guides both from Sierra and Nintendo. This is one “fad” I am glad is gone thanks to the Internet.
3) Demo discs I remember well, it’s how I got Doom and Hexen. It was a nice way to try out games before buying at least.
4) I didn’t mind physical DRM I thought it was kind of fun. There was a Tabloid space magazine with Space Quest V and in it had a star chart for planets for you to go to. So long as you had those coordinates from the chart you could get to any planet you needed to. I think when the DRM was more seamless and less heavy handed like the enter code from page, paragraph, line and word 3, it was more fun and immersive. The SQV star chart felt like it fit with the tongue in cheek nature of the Space Quest series. You could imagine yourself as Roger using a tabloid magazine to chart his way through space.
5) The slips thing I understand though now these days I am buying my games digitally and less from stores.
6) Can’t say that I played any games from cereal boxes, mostly felt they wouldn’t be good games so why bother? Especially when I could be playing games I knew were good.
7) I don’t remember any pin pads for saving progress in Arcade games, that would have been nice to have had more often. Probably would have helped kids memory if they had to quickly remember a password for their next play session.
8) I do miss having those huge gaming magazines that would just seem full of gaming goodness. The Ads were nice since they were tailored for gaming desires as opposed to things that wouldn’t have appealed to us gamers.
9) I remember the cleaning kits and I’m like Jordan I kept my games in their sleeves when not in use also pins facing down so not to collect any dust on those metal pins. The rest of my room was a mess but my games were clean dammit! I do admit to blowing on them a few times but not a lot. There is an article online showing the affects of a (don’t laugh) daily blowing on the cartridge versus one that just used a cleaning kit.
10) I think a sweet one is the one with Robin Williams and his daughter and him explaining how and why he named her Zelda. I remember Sony trying very hard to make Crash Bandicoot a beloved mascot and failing miserably.
I also remember the game genie and it’s game breaking ways of cheating. I’m glad Jordan mentioned that.
QotW: I had to think about this but I suppose going to game rental store like Blockbuster or even going to a game store period. I do everything digitally now. No more worrying about scratched discs or losing a cartridge or any of those worries with physical media.