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.
EA Committed
Man, first you knock Final Fantasy and then Darkwing Duck? I felt that Darkwing was as well rounded as Rebecca from Talespin, love both shows by the way, yes he self promoted but I think he did that in part to help take care of his adopted daughter Goslyn. He also used non-lethal means to fight villains, like Batman. I’m surprised that you guys didn’t talk about the video game counterparts to Talespin and Darkwing Duck.
One last thing about why I back any kickstarter game, there is a game Sword Coast Legends being made by N-space. The companies president, Dan Tudge said “I think that consumers have proven by voting with their wallets that not everyone wants to play a hundred-million-dollar blockbuster, though we certainly all enjoy them,” said Tudge. “There’s a place for really creative story-driven RPGs that do things like remain isometric, do things like party-based-tactical combat with pause-and-play.”
To me that statement validates my backing games like Pillar’s of Eternity as a vote for those kinds of games to be made. I had thought it was very oddly coincidental that this game was coming out along with PoE and the others.
@Lenovo: People like him are one reason why I like building my own computer and staying away from pre-built “brand name” computers. Having some companies unnecessary software is bad enough but to put in underhanded adware and spyware is just ridiculous.
@FCC and Net Neutrality: This is one of those things I know people debate about whether or not the Government should be regulating this sort of thing. From what you guys have outlined it certainly seems like something that needs to happen. I know my own internet seems to get throttled or some sites not work at all for no apparent reason.
@Capcom and Modders: I love Modders, always defying what Companies state can or can’t be done.
@Star Trek tribute to Spock: I was born after the show had aired but I grew up with the movies so I have an attachment to the old cast of sorts. TNG and DS9 is still my favorites and even there Spocks’ presence was felt in episodes he showed up in like Unification. I love how the gaming community can honor their fallen icons, much like WoW did with Robin Williams and now Nimoy in STO.