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 announced they’ll be giving Xbox Live silver accounts access to play some multi-player cross-platform games for free until the fall update. Recently, Microsoft announced free online play with Games for Windows titles, effectively giving PC gamers “gold accounts” to play online.
Rumor:
Hey guys,
I haven’t written in for a while because you failed to speak bad of Vita all these weeks 🙂 the moment I heard Jonah flip flop on what media devices the Vita uses I knew I had to straighten it out (too bad about Jordan). Oh, there’s also work but I guess that’s a minor thing 🙂
The Vita uses cards and is still a great platforms with many great games. I just got the platinum trophy in Velocity 2X, which is just an amazing shoot’em up/platformer game. I wonder if it could break your dislike of the device…
I also haven’t been writing in because I didn’t feel I had much to add on the subject of the recent news items. However, the Windows 10 news is quite interesting. The reason they gave for skipping a number is great. Way to go with consistent naming, Microsoft! I’ve been using Windows since Win95 and they pretty much stick to the pattern of having every second system be terrible, as if they had two dev teams and one of them had no idea what they were doing. I bought a Win8.1 laptop recently (no touch) and I found it very hard to navigate through my apps. The Metro design sucks for mouse-operated devices and it’s not that intuitive for touch either.
Let me end with a little ‘about me’ section so that maybe Paul remembers me next time. We share the first name, after all 🙂 I’m 29, fonished college years ago and I’m trying to do a PhD in electronics/computer science. I also work for a startup which will one day be sold for… ONE MILLION DOLLARS (puts pinky in mouth).
Coming back to tje topic of Vita, my question to you guys. Which handhelds have you owned / do you own and enjoy a lot? Explain why 3DS is better than the Vita without using the words or phrases Link, Zelda, ‘the legend of’, ocarina 🙂
Cheers,
Pawel