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.
Hi guys.
Sorry for not leaving a comment on the last episodes (the one you read in this episode was months ago ^^), i was very busy the last weeks with business stuff and some personal issues. Anyway, thanks as always for the episodes and your effort you are putting in to each episode. I respect that very much!
Regarding the topics in this episode: I did not play Civ since …. i think Civ 3? The game is good, but its taking so much time …. sadly i dont have that much time π
I played Life is strange 2, God of War (the old ones because i want to play though all of them before i play the actual one), Overwatch, Borderlands 1 (never played any Borderlands before) Hearthstone and a lot of Magic The Gathering Arena. If my friends are online, we like to play some Apex and/or Division 2 as well. I want to start Blood Bowl in the upcoming days, because i played the Board Game .. 20 years ago π I also pledged for “Ant Stream”, the retro streaming platform (will be live for early access on may 28th) … i hope this will be good π Did you heard of it ? What do you think of pledging video games / pc Games in general ?
Regarding the Apex update: the Havoc is ONLY playable with the turbo Charger .. without that it is absolute unplayable π
Did you heard of Splitgate- Arena Warfare? This seems to be a new Arena Shooter which combines Halo and Portal (i think Jonah mentioned it in a youtube review of upcoming games from E3?) Its for free at the moment on steam π
Regarding the backwards compability on PS5: this would be awesome! i would pay very much money for a ps5 which plays ps1,2,3 and 4 (and 5 of course) games. The only problem will be the chip for PS3 afaik.
Red Dead Online? I only see the promotions / advertisments all the time on twitch, but have no intention to play it π
WoW: i really love this game, loved it in the beginning and still love it … problem is, that my friends are not playing it anymore …. and playing a MMORPG on your own is not that fun π I played the last expansion (as far as possible without a raid / group) and it was great gain. I listen to the music very often and like to see the cut scenes and updates. For sure the vanilla version was harder (in my opinion) but that was great … 40 people in a raid .. defeating Raganros for the first time … what an amazing feeling, so much emotions, better then the first time s** π
First question of the week: The last game which has been released and i did not noticed it was Hollow Knight. I noticed it 1 year (or 2?) later and it so awesome, that i was wondering, i did not notice when it came out π
Second question of the week: I think the game i will still play in 20 years or will not age is Magic The Gathering. But its a card game, so i dont know if this is a “real” game regarding to your question π If i had to pick a second game, it would be sth like WoW .. i started playing it in 2004 .. thats already 15 years ago π or one of the so called retro games, like Musha Aleste, Mushihemasama or any of this bullet hell shooters for the 16 and 32 Bit consoles. I still love to play them today π
Thats all for this one. Sorry for this big and long one, i hope thatΒ΄s ok π
When i will be in the U.S. the next time, i will invite you guys for dinner to thank you for all your work you put into this podcast. Thanks for that!
Greetings,
Ralf