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.
A great nostalgic episode, I do enjoy gaming flashbacks, keep them coming.
@Nintendo Game boy emulation: I do hope this means they will port more of their games to other platforms. I do remember the Bleem! Emulator for Sony games but that ended up getting sued for it. As for Nintendo I can only hope this will lead to more access of their games legally.
While we are on the subject of Nintendo I was thinking we could really have explored more of the Greco-roman games, not just Kid Icarus but also Battle of Olympus another side scrolling game from NES days. They seem afraid to try to push new IP’s and just stick with their tried and true ones. Which I think tends to make them feel stale. When Paul was discussing the end of the Zelda Cartoon and how Link and Zelda had to team up to find her father, I thought ‘Well that would have been a fine game right there!’
@EA: I guess they can’t be all that bad if they really are equal treatment. They HAVE had a long history of games with LGBT relationship options. I remember in Sims 2 there were apparently hidden stats you had to use an external program to see. One of these stats was a persons attractions tendencies, a score both for male and female, which ever ranked higher the character tended toward. I just thought it was neat that they went to this extent to make a character unique and even a little beyond your control.
@Sony Settles: I do remember those ads and I was tempted by them. Boy would I have been PISSED to find I would have to buy the game TWICE. I thought the whole point was that any game bought on the main PS3 could be transferred and played on the vita.
QotW: I started my shopping in November, but not on black friday or cyber monday.
First I want to apologize for not commenting much, but I tend to be too shy to comment much (and I didn’t get your podcast because I have been with my family doing a vacation-type thing for a few weeks). I feel like your commentaries on this, though have garnered my responses.
About Nintendo:I feel like they are trying to make a bit of a fuss over something that was not a very big fuss in the first place.
About EA: I have a number of friends that work for EA here in Orlando (mostly they worked on Tiger Woods games back in the day and now work with Madden games). I love that ya’ll commented on this and brought it to light to your followers. I really like that they truly care about their employees. I think you missed the nail when you say that you think Bioware was inclusive before EA was invloved.
On Sony Settling: Those ads were quite frustrating to understand as a consumer and, luckily, I was not willing to buy their pitch. Deutsch was quite poorly represented before they even posted those twitter comments. Barring them from repeating the exact point – I feel – doesn’t exactly prevent them from doing the same thing again: something I feel like they may do in order to make more money. You really do nail it when you say they only “got caught.”
On a side note: I think Jonah is incredibly insightful in general.