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.
I think the pixie diamonds contest was not endorsed by Disney … o they sent their goons after Paul 😛
Joking aside, I hope all is well with him.
@Duck Tales
That game managed to do several things well, one of them being indeed the multiple uses of the cane and the non linear gameplay. The sound track is also very good.
By the way, I did play both of them on the NES, and both of them were on the same level of quality.
@Pachter’s opinion about Wii U
The issue with Pachter is that he doesn’t have a good track record when it comes to predictions …
He does have a point about tablets and smartphones though about competing for the same market. Hmm … It could be that this is the first time when he might actually be right.
Regarding Nintendo making a profit from the 3DS, hmm …
@Bethesda hiring talent for Xbox 720, PlayStation 4 game
Well, all these rumors hint at a DirectX 11 (or equivalent) console. Jordan, good point on using ports of older games for the initial launch.
As for Bethesda’s new title, other people think at Fallout 4.
@Pachter: Next generation Sony and Microsoft consoles will have 4GB SKU
This makes sense. Heck, even 8 GB makes sense, performance wise. The PC built for my brother in 2008 was equipped with 4GB of RAM in order to give it a long life span. I repeat, in 2008.
I guess 4GB of RAM will be cheap enough for consoles in 2013.
@Sony filed patent For Kinect-like motion device:
Erm, they’re pretty late to the party, about two platforms and two years late. I mean what, waving the magic wand of Move didn’t produce the desired (financial) results?
Regarding Alan Wakwe, you say piracy is the issue? Then why bother launching on PC at all? I mean is the cost of porting the game worth it for such a platform 😛 ?
Sorry for not writing in perfect English all the time, I normally write these comments in a hurry. Today I’m going to take my time and proof-read it.
@First off, I am not a Nintendo fanboy, but Michael Patcher has gotten my blood boiling with this statement.
“I think Nintendo … [have] completely blown the Wii U by not telling people what the price is going to be … [and] I think they’re dead anyway because Xbox with Kinect will be priced below that by the time they launch.”: Since when has any new console released been cheaper than the discounted price of the previous consoles? (Maybe there is an exception but I doubt it) And about people not knowing the price beforehand: most of the people who know about the WiiU are the ones who know about E3 and will probably buy it on launch or never intend to buy it whatever its price. The rest won’t even know about WiiU until next summer when the price is confirmed and the advertisements start rolling out.
“… the decline in Wii and DS hardware and software sales drove them into generating LOSSES. For those of you who aren’t financial analysts, losses mean that the company is worth less than it was before.” : For starters, I know what losses are, you don’t need to be a professional financial analyst to know that. Secondly, there was obviously going to be a decline of hardware and software sales after the millions upon millions of Wii’s sold. Everyone, even Nintendo, knew that it would be impossible to keep the sales rising after a couple of years. Maybe they aren’t in the best position right now, but that is nowhere near an indication to how successful the WiiU will be.
And finally: “If the context above infuriates you, go back to school and pay attention, then read it again” : Screw you Michael and your smug face. Just because it infuriated me doesn’t mean that I didn’t understand it.
I’ve written too much, so I’m going to cut it short. The final thing I want to comment on is when you mentioned that Nintendo doesn’t admit to their mistakes. For that, I would like you to remind you of when the 3DS wasn’t making enough money. They admitted that they had priced it too high and Iwata took a 50% cut from his own salary.
That’s enough ranting for today. I hope that Paul’s alright, and if he is, I hope that he agrees with me.
Except Pachter isn’t predicting anything. These are facts: Nintendo stock has plummeted 80% in the last year. Wii software doesn’t sell, and hasn’t ever sold, with few exceptions. Many major third party titles often sell under 100k, and some that you’d expect to sell through the roof crash and burn (ie Punchout, Monster Hunter Tri, etc)
The 3ds is number 1
They sold the most software and hardware last year
They are fine.
The ds fails, the wii fails is what he says
@Jonah Falcon
Stock falls all the time, and goes up
Wii software doesnt sell and has never sold?
What are you smoking?
Wii games are the top selling games of the gen
Monster hunter tri was the fastest selling third party wii game ever, and according to capcom was a huge success
… Fastest selling? It sold 500K in North America in its entire lifetime. You know how many units Modern Warfare 3 sold on the Xbox 360 alone on its first day?
Stocks may rise and fall, but not 80%.
So every game has to sell like cod?
wii fit sold 50 million units.
Is that the standard all games should sell?
Pokemon white black sold 15 million units on a single system.
Is that the standard?
Did it sell as much as COD? ( monster hunter wii?)
no
but it doesnt have to
“Stocks may rise and fall, but not 80%.”
You might want to look at microsoft and sony financials over the years.
The horror show there is about the equivalent.
And Nintendo’s stock has been on the rise again recently. They will be profitable this year. The first 2 months of the year they have sold the most hardware and software worldwide, you cant do better
Again we dont know how the wii u wil do, like we dont know how any system will ultimately do
The wii u needs to be priced at 200-400 range
It needs to have a first party major title at launch
and then we can only see
We need Paul back to balance out all the Nintendo bashing going on during the podcast!
But seriously, a lot of people have been very critical and negative of Nintendo and their future recently, and yes, their finances aren’t in the greatest shape at the moment, but the 3DS has bounced back strongly from a disappointing start and we really don’t know enough about the Wii U to accurately predict it’s popularity and performance.
Meanwhile, Sony are in pretty bad shape financially too, but it doesn’t seem like many people are talking about that… I want to hear Michael Pachter’s predictions for Sony!
Anyway, rant over. Hope to see a three-man podcast next episode!
“And Nintendo’s stock has been on the rise again recently. ”
Huh?!?! No, it’s been dropping. Where are you getting this?
YES! FICTITIOUS CURRENCY ACQUIRED!
@WiiU
true… nintendo bubble has burst and will take a lot of work to get back to their feet (stocks)
@Bethesda hiring for future gen
oh boy! it’s comming! cant wait for 2013 even if i am not a console player, i might became one if is worth it =]
@psn mini not working on vita
common sony, you had a lot of fails in 2011 and 2012 already began with you in shame… you need to step it up!
@Paul
i guess when paul said “OMG, you made the 10yo joke (jordan – WIIIIIIIIII), im not talking to you anymore, im unfriending you on facebook” he was serious 0.o
hope you are here today! you make 33% of the podcast weight!
exams are ruining my schedule ,,just to let u guys know that I’m still alive and wanting those pixie stuff so I could give it to my friend,since I’m the only one wanting to have them lol