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.
Welcome back guys, another good show.
I’m sorry I can never manage to send hate mail for Paul cause I’m just too busy sending it to Jonah. Just kidding, this is more “nerd rage mail”, because of the topic of Final Fantasy from previous episode.
Saying your not into FF because you’ve only played 10 and up is like saying you don’t like Star Wars because you’ve only seen the pre-quels. I’m sorry but as far as I am concerned you’ve only played the BAD Final Fantasy games. The Golden era of FF was parts 4, 5, & 6; 6 being my personal favorite. It had the best story, art, music of the entire series.
The thing about Final Fantasy was the first one was supposed to be the last and only but it had done so well they decided to continue, so the only thing final about them was that you only saw one world per game, you never went back so there wasn’t truly a sequel in the sense of a continuing world.
That changed after FF10,now even FF4 and 7 have sequels. FF6 was the last to have that 2d style art that I still love, ff7 had a real mix bag of art from beautiful backgrounds to horrendous 3d models. FF8 just had a terribly convoluted story and it felt too modern, FF9 I think was the last one that I really enjoyed but still missed and preferred the 2D art style over the still awkward 3D models. FF10 had unrelatable characters, it looked pretty but felt so shallow.
FF11 was the first MMO which I never played, FF12 was too easy to cheese with grinding out the chessboard skills. Just about everything is wrong with FF13, I know the bird in the dudes hair was wierd, but they did it in Suikoden V as well, maybe it’s a cultural thing. I couldn’t stand the dude with the beanie who constantly had a lock of hair in his face.
What was really obnoxious was the star rating they would give after each battle, after the first few I realized they were going to be doing this the whole damn game, I couldn’t go on after that. The game just insulted my intelligence way too much. It was a great run but I think I’ve had my Final Fantasy with that series.
@Kickstarter: It is true you have to be careful with investing but I wouldn’t say 9/10 video game kick starters have failed. You guys keep seeming to forget to mention the ones that have succeded: FTL, Divinty Original Sin, Shadowgate, Shadowrun, Pillar’s of Eternity, Wasteland 2, etc
Here is a link with a long list of them:
http://en.wikipedia.org/wiki/List_of_video_game_crowdfunding_projects
I will concede one has to be careful in choosing products or at least keep in mind that the project may fail and you will get nothing. Kickstarter DOES have on it’s site that there are no guarantees of any products being completed. I like what Hilary said about trying to help these developers out and giving them a chance and I do think Paul is also right that there are those shady individuals that make crowd funding look bad.
@Greg Zeschuk: It’s a shame the title made me think he might work on Baldur’s Gate or something. The idea sounds well meaning but I agree with Jonah I remember just using my imagination to fight strange aliens or playing spys or whatever.