Game Retailers Make Money On The Margins 91
This week's Escapist deals entirely with the business of selling games, and the article A Marginal Business details how EB and Gamestop make their money. From the article: "'Used games are keeping the entire ship afloat,' a vice-president of marketing for Electronics Boutique tells me. 'EB and GameStop make basically no money from new product.' No money from new product? But everybody knows the retailers are the real profiteers of the interactive entertainment industry, brutally extracting marketing development funds and ruthlessly returning product in the name of the all-mighty dollar. Right?"
I'm pretty sure... (Score:4, Insightful)
Re:I'm pretty sure... (Score:2)
EB and Gamestop? (Score:2, Informative)
So what? (Score:1)
Better luck w
Re:So what? (Score:1)
"No, ma'am, this football game is not very good. It's the same dumb game from last year, only with updated player names. If you want a really good game for your child, try something original! We have [[obscure japanese shmup name here]], it's excellent."
Re:So what? (Score:1)
> And is possibly, heaven forbid, honest about it? I know a certain publisher (you
> all know the one) that will not like this idea...
99+% of all the games ever sold have been through retailers which have clearly had no moral qualms whatsoever about pushing shoddy crap at anyone with a credit card.
Re:So what? (Score:1)
Re:So what? (Score:2)
Last two games I bought at a retail store were Blitz: The Leage and SSX: On Tour. Football and snowboarding.
The guy working the register spent about 5 minutes trying to convince me that Call of Chtulu was better. And that I *should* be buying Morrowind because I hadn't played that yet. He went on and on about it.
Finally, the girl that works at the store told him, "Hey- I don't think he
Re:So what? (Score:2)
First Guy: "Oh, Alien Hominid is cool."
Other guy: "Alien Hominid sucks and anyone who likes it sucks, what systems is it out for"
First Guy: "I think its out for Gamecube and Playstation 2"
Other Guy: "See, it isn't out for XBox, it's only ou
Re:So what? (Score:2)
As far as the staff are concerned, they should match the right game to the right player.
The right player is the one in the shop, and the right game is whatever is in front of the player.
Anything else is a luxury that staff can only afford when they own the business.
Re:So what? (Score:1)
Re:So what? (Score:2)
Re:So what? (Score:1)
I'm actually a big fan of Steam and think it works well.
Now they're offering other indepe
Misplaced sarcasm in the story header? (Score:3, Insightful)
But everybody knows the retailers are the real profiteers of the interactive entertainment industry, brutally extracting marketing development funds and ruthlessly returning product in the name of the all-mighty dollar. Right?"
Re:Misplaced sarcasm in the story header? (Score:2)
Re:Misplaced sarcasm in the story header? (Score:1)
Re:Misplaced sarcasm in the story header? (Score:3, Insightful)
It is the incentive for growth - Walmart, Starbucks, everyone, all started with one store and grew to leverage economies of scale. The only place you DON'T see it is where there is no need to succeed to remain in existence - namely the government (with the exception of the military, which does have a genuine survival instinct and much in common with the business world in that way).
Overheads? (Score:5, Insightful)
In terms of costs, it doesn't help that most of these game stores seem to be very poorly managed.
Re:Overheads? (Score:1)
Re:Overheads? (Score:2)
Exactly right: Used games == money (Score:5, Interesting)
Initial sale: call it 49.99 (of which...? is profit?)
Buy it back used, currently popular title: -$25
Sell it used: $45
Buy it back re-used: $-15
Sell it re-used: $35
Buy it back re-re-used: -$5
Sell it re-re-used: $20
Off of that life-cycle for one game, they can easily make $55 bucks off of one game that had a maximum retail price of $50 bucks.
Because used game sales are so attractive, they offer incentives for people to buy and sell used games - I have one of those membership cards, and I get %10 off of the price of used games as well as a %10 bonus to the trade in value when I sell games, and also they'll let me bring a used game back for a full refund if I do so within a week of purchase, no questions asked.
Even better, they have huge leeway with what they can charge for the games - I tend to get pretty good deals when I haggle a little.
Win win for the retailer and consumer, in my opinion.
Re:Exactly right: Used games == money (Score:3, Informative)
New game sold for $50, wholesale price from distributor was $36 (this is typical, and is in TFA). Gross $14 to Gamestop/EB.
Current title, used, buyback at $15, if you're lucky. Re-sell at $40. Gross $25 to Gamestop/EB.
Back title, used, buyback at $5 (again, if you're lucky. $3 is common now). Resell at $20. Gross $15 to Gamestop/EB.
Total gross over three cycles (assuming it doesn't get sold back as a back title ad-infinitum) is $54.
Re:Exactly right: Used games == money (Score:2)
>
Yes. It is just the developer who gets screwed.
But that's okay, they are probably use to it by now...
Re:Exactly right: Used games == money (Score:3, Interesting)
1) Create titles so compelling that no-one will want to wait for the used market.
2) Create titles so original/replayable that no-one will want to sell them to create that market.
3) Lobby their publishers to reduce the retail price so that more people will be willing to pay full retail.
4) Stop working with publishers who keep amping up prices while forcing absurd schedules making quality slip.
There are many ga
Re:Exactly right: Used games == money (Score:2)
3) Lobby their publishers to reduce the retail price so that more people will be willing to pay full retail.
I think think you mean wholesale price, which would help preserve the margins of the retailers for new games. If they lower the MSRP on new games, all you'll see is the used games being sold for $5 less than the new MSRP. This would hurt retailers in the long run, beacuse their margins on both the new and used games would be l
Re:Exactly right: Used games == money (Score:2)
Unfortunately lower initial price does not always equal higher sales, let alone higher profits. People equate cost with quality (usually incorrectly), and as such cheap
Re:Exactly right: Used games == money (Score:2)
1. Create games with a single-registration online component, such as your account key in World of Warcraft.
2. Pressurs console manufacturers to lock games to the first system that plays them, DRM style.
3. Move to an Xbox Live Arcade style download-only service.
4. Make re-selling games illegal.
I suspect you're right, which is really kind of sad. I'd hope that the people runn
Re:Exactly right: Used games == money (Score:2)
That could happen but wouldn't be a good idea as it would generate a huge amount of ill will towards a publisher. Especially if it wasn't made clear up front.
I thought so too, but Microsoft Windows got away with it and World of Warcraft is raking in the money.
2. Pressurs console manufacturers to lock games to the first system that plays them, DRM style.
Suicide. Remember the backlash that was brewing on
Re:Exactly right: Used games == money (Score:2)
This reminds me of a client I used to have. He was running an insurance program for temp nurses who do not get health care for the hospitals they work for or their temp agency. The policy wasn't a great one but it was cheap enough that if anything catastrophic happened, they wouldn't be up the creek. Nobody was interested. He then took the exact same policy and charged 15% more for it and it s
Re:Exactly right: Used games == money (Score:2)
>
Yes. It is just the developer who gets screwed.
But that's okay, they are probably use to it by now...
What's this crap about the developer being screwed? No on would say that I screwed over Toyota because I bought a used car, so why is it different when it comes to games? I didn't pirate it, the makers got their money. If they don't want people to sell their games, then make then longer or put in some damn replayablity.
Re:Exactly right: Used games == money (Score:1)
Re:Exactly right: Used games == money (Score:2)
Pre-orders don't work for me. (Score:2, Insightful)
Fascinating Article, godawful website (Score:4, Insightful)
Re:Fascinating Article, godawful website (Score:3, Insightful)
While it's not at all uncommon for that to "break" a site, it often renders the text of The Escapist partially or totally unreadable. Fortunately, I find that is also true of the articles themselves, so all in all I'm not missing much. When the Slashdot discussions are routinely several times more interesting or intelligent (and much better laid out on my browser), you have a problem with your website.
Re:Fascinating Article, godawful website (Score:2)
Re:Fascinating Article, godawful website (Score:2)
Re:Fascinating Article, godawful website (Score:2)
Now I'm used to it, I actually quite like flipping through the pages on a key press.
Publishers Publishers Publishers Publishers (Score:2)
Anyhow... of the 50$ of the game, the store usually gets 10. The Developer gets 5. Who gets the rest? Congrats, you get a biscuit. Yup, it's the publisher/di
Buying games at the store? (Score:2)
Put it this way, people shop around online to buy hardware. More and more are doing the same for software now. If you had to buy the latest Radeon, would you just hop into the next door computer store or look around online for the best deal?
The thing with brand-name computer parts is that you can be sure they're all the same. The Gefo
Re:Buying games at the store? (Score:1, Insightful)
Re:Buying games at the store? (Score:2)
Read a EULA lately? You can have your CD Key banned from the master server on a whim.
How do you make out on that deal?
Well, it's cheaper than retail, and you get it on the spot. You also know that your money isn't going to Vivendi.
EULAs (Score:2)
Re:EULAs (Score:1, Informative)
When I worked at Gamestop, we couldn't take back any game with a serial key like Everquest (PS2) or Phantasy Star Online (DC, et al).
Move along, Nothing to see here (Score:1)
economic rant
Almost every retail entity works on razor thin margins, really! Were talking 1 or 2 percent. When I was in retail, we were happy if we made 1 cent on a 20oz Pepsi. It's not some bizarre phenomenon specific to new computer games, its just the way it is. To be successful, you have to sell a LOT of sodas! (ne: Wal-Mart).
As for the 'insane margins' on used games... Clue time, the same thing happens in other used areans. The used music stores here in New York, for example, may give you a dollar or
Re:Move along, Nothing to see here (Score:2)
Re:Move along, Nothing to see here (Score:1)
Retailers always work on the margins (Score:3, Informative)
Where do they get the money to keep afloat? From other sources. Some companies get paid by their distributors or manufacturers to advertise. That's right, Retailer Y gets paid money by Manufacturer X to advertise Retailer Y's store. Since advertising is money that has to be spent anyway, this translates to free cash. Others get cash from investors who believe if they can hold on one more year they'll hit it big. Others have some other service or plan that they are selling besides the product.
Retail is about living life on the edge, with barely enough ground to stand on. When times are good, they are really, really good. (And Christmas is a really good time for everyone!) When times are bad, numbers turn red, and managers start sweating more and choosing which salespeople to let go. For most of the year, no one really knows whether they'll get bonuses or get fired.
It's a tough game. It's tough because if you are a clerk or a salesperson, unfortunately, your higher salary works against you. One store I worked at told me upfront. "If you're good, we'll give you a raise." And then the manager said, "If you make too much money, we'll let you go!"
But this is the same everywhere. Publishers are trying to find out how to whip out more product from their factories for cheaper. Distributors are trying to justify their take on the supply chain, wining and dining both suppliers and buyers. And retail shops are trying to manage the head-ache that dealing with people instead of lifeless products brings. Add to that the workers who want to bleed every dollar from their employers, consumers who are about as loyal as a goldfish, and then the government who wants to tell you how to run your business and take their cut of your money as well, whether or not you are profitable. It's a game where everyone is pitted against everyone else.
Remember, one reason the internet is great for retailers is because you can now run your mail-order business for much cheaper and have more content that interacts better with the catalog readers. We've come a long way since Sears has published their first catalog, and we have a lot of ground to cover yet, but all signs point towards the internet solving a lot of problems mail-order has.
But you know what? All of this uncertainty and stress and competition leads to a superior product and distribution chain. In America, you CAN buy almost any game you want in almost any condition you want for a pretty decent price in pretty much any locality. Not so in most of the rest of the world. In America, you CAN start a new publishing or producing company to compete with the big dogs. It's not easy, but if you are good, you'll succeed. It's what makes it all happen. It's all because we have these free markets where people compete for money and no one is coerced to do anything they don't want to do (except in special cases).
I worked @ CompUSA for a few years (Score:2)
Re:I worked @ CompUSA for a few years (Score:2)
Re:I worked @ CompUSA for a few years (Score:2)
Re:I worked @ CompUSA for a few years (Score:2)
Games aren't quite a loss-leader, but they're fairly close in some cases. BestBuy can afford to make money through the rest of their product and have thin margins on games. If the stopped selling TVs, sterios, and other electronics then they'd probably get
Doesn't surprise me (Score:2, Interesting)
Hokey/hostile copy protection schemes such as Steam and Starforce aren't helping matters either. No sense ragging on Steam since it has been hashed out here before, and Starforce's hardware/software-hostility has a cult following of gamers
Re:Doesn't surprise me (Score:3, Informative)
How is Steam an Evil copy protection scheme?
It seems to be quite the opposite of what most companies are doing. I can play any Valve game I've bought since 1998 on any computer that can handle the software without digging for
Re:Doesn't surprise me (Score:2)
Delivery of applications online is here to stay. Many businesses have come and gone ever since shareware arrived. Yet, I can still download the programs I have paid for.
There are many people already trading pirated Steam games so Valve going out of business isn't a big deal.
Re:Doesn't surprise me (Score:1)
Many businesses have come and gone ever since shareware arrived. Yet, I can still download the programs I have paid for.
But can you upgrade them to the registered version without having them try to phone home to a nonexistent server?
Re:Doesn't surprise me (Score:2)
They can call all they want. Extremely few products absolutely require online access to register. Most often they are just checking for updates.
...including Steam games (Score:1)
Extremely few products absolutely require online access to register.
The point of AC's comment about Valve going out of business [slashdot.org] is that Steam games are among these "extremely few products".
Re:...including Steam games (Score:2)
Yeah but..... (Score:2)
>"If you walk into EB in the U.S., they try and sell you a second hand version of a game
>before a new one. I think that's bad. It would be fine if they share that revenue with us.
>They can also be marketing partners with us, as well. We can have an official refurbished >games policy. That's the problem. Those resold games use server resources, tech support.
>The majority of guys calling up saying "I don't have
Some inside info from an ex-EB employee.. (Score:1)
Re:Some inside info from an ex-EB employee.. (Score:1)
IF you open the game? Tough. You're done. If it doesn't work, you bring it back for EXCHANGE only. If it's not opened okay, refund/trade-in. Otherwise tough beans.
Re:Some inside info from an ex-EB employee.. (Score:1)
Re:Some inside info from an ex-EB employee.. (Score:1)
Re:Some inside info from an ex-EB employee.. (Score:1)
Re:Some inside info from an ex-EB employee.. (Score:1)
Re:Some inside info from an ex-EB employee.. (Score:2)
Shrink Wrap Machines (Score:2)
Actually, most Office supply stores have shrinkwrap machines available for use and if you know the guy there, he can often re-wrap it for you. Doesn't work great for some games that have the harder plastic wrap, but if you pull it off right, it's a charm!
Offtopic but... (Score:2)
Re:Offtopic but... (Score:2)
The 'product' of company A refers to all that company A produces.
The 'products' of companies A and B refers to all that they together produce.
When will developers/publishers sell directly? (Score:2)
Publishers are the problem (Score:2)
What I will say is that I think that the publishers are the problem. They're charging too much for their product, and even Mark Rein, quoted in the article as speaking out against used sales, thinks that publishers charge too much.
The solution is simple. Publishers need to lower the price charged to retailers by at least 33%, but ONLY do it for retailers who agree not to se
Re:Publishers are the problem (Score:1)
Re:Publishers are the problem (Score:2)
Re:Publishers are the problem (Score:2)