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I came across the textbook example this morning of how and why many core developers and publishers are fueling GameStop's used game business. Let's take a look at Arcania: Gothic 4.
Here are the stats (I'm using the PC stats, console stats were N/A):
Released - Oct. 2010
Metacritic Score 63
User Score - 4.9
Sales - 31,304 copies in first month 46,729 to date.
Yet, as of today Arcania is priced as follows:
- GameStop: New - $49.99 (PC), $59.99 (360)
- Walmart: New - $49.82 (PC), 360 Out of Stock
- Best Buy: New - $29.99 (PC), $39.99 (360)
So both consumers and critics agreed Arcania was a bad game. Walmart no longer stocks the 360 version. But despite the low metacritic score, horrible user reviews and dismal sales, after nearly 24 weeks on the market the price of Arcania has only decreased by 17% at two of the three largest game retailers in the US. Amazingly, Best Buy is the only chain who had the good sense to discount the game by an additional 16%.
Now, Arcania hasn't officially reached the 6 month mark yet so GameStop's used price is still too high at $49.99. But in the next 4 to 6 weeks, they'll lower their price down to the $19 to $29 range. At which point JoWooD Entertainment and DreamCatcher Interactive will lose virtually every sale of the 360 version that follows.
And frankly, they have no one to blame but themselves. Because the game never should have released for $60 to begin with. Then after the bad reviews and sales nose dive by week two, the price should have been immediately been lowered to $29.99. Where it should have been from the start.
The fact that the price of a new copy of Arcania: Gothic 4 is still so high is absolutely ridiculous. It also highlights why many AAA developers and publishers actually fuel used game sales and why are doomed if they don't change. This includes giants like EA, Activision and Ubisoft.
Corporations insist the free market will always determine prices by separating good products from bad products through competition. That is, until the market works against them at which point they turn to lawyers, lobbyists, ad agencies and threats.
Like it or not, GameStop and other used game retailers are the free market in action. They represent the invisible hand that conservatism claims will cure all the world's ills. So the game industry needs to collectively stop playing games (no pun intended) and own it! Time to actually compete for those "stolen" profits instead of crying foul and treating the people who pay your bills like thieves.
The solution is very simple: consumers will start buying new games instead of used only when the price of new titles (and DLC) reflects the true value of the content, the actual quality of the content and the total volume or quantity of the content.
This means games like Arcania: Gothic 4, Naughty Bears, Venetica, IL-2: Birds of Prey, Sniper: Ghost Warrior, Splinter Cell Double Agent, and Mercenaries 2 to name just a few, must be priced accordingly. These simply are not $60 games.
When games like these release, they should be priced between $30 to $35. If the developer or publisher can't turn a profit in this price range, then don't make the game! Because the long term affect of selling low quality games like these for the very same price as higher quality titles like Red Dead Redemption, Dragon Age: Origins or Mass Effect 1 is it destroys consumer confidence in the industry as a whole.
Each time a consumer gets burned paying $60 for a low quality game, it hurts the entire industry, not just the publisher or developer responsible. This drives the consumer to GameStop for used copies of the games because dollar for dollar, it's the better value.
Or... all of these developers and publishers can continue to flood the market with low quality junk and the industry can collectively keep working towards forcing the exploitative pricing on consumers through EULA's and the legal system. Which ultimately will put all of them out of business and honestly, that may be best possible outcome for consumers and the industry as a whole.
Seems like a pretty clear choice but then, I'm not one of Ayn Rand's elite "thinkers" so my opinion is irrelevant. According to some people.
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Also by restricting the price range I'll purchase in, when I do trade in older games for credit it often allows me to purchase two two new games priced between $20 and $30 instead of one. I think purchasing behavior like mine is much more common that many developers and publishers realize. Just something to think about.
1) Used games barely scrape 10% off, in many cases - a "used" $50 game can be between $45 and $49.
2) "When games like these release, they should be priced between $30 to $35. If the developer or publisher can't turn a profit in this price range, then don't make the game! Because the long term affect of selling low quality games like these for the very same price as higher quality titles like Red Dead Redemption, Dragon Age: Origins or Mass Effect 1 is it destroys consumer confidence in the industry as a whole."
I agree that the $30 price range should be considered. However, it is nearly impossible to tell what is marketable before the game is made. A $30 and $60 game will likely have similar development cost when it comes to big publishers.
3) "Like it or not, GameStop and other used game retailers are the free market in action. They represent the invisible hand that conservatism claims will cure all the world's ills. So the game industry needs to collectively stop playing games (no pun intended) and own it! Time to actually compete for those "stolen" profits instead of crying foul and treating the people who pay your bills like thieves. "
Gamestop makes far more profit on Used games than regularly priced games, and in most stores are encouraged to place the used copies side by side, as well as promote the used price. If the used price wasn't as comparable as it is (i.e. the aforementioned used $45 compared to new $50) this wouldn't be as much of an issue.
Most MSRP is a 30% markup. Now, used games are a 50% markup. That same $45 dollar game was bought back for $17.50 cash OR $20 store credit. Profit remains in the store. Gamestop prefers credit since it keeps customers coming back, and $20 is not enough to buy a single game, or a shovelware game with a remander. In other words, they'll retain a profit on a marked dowm $15 shovelware on store credit vs. cash. This is where the dishonesty lies.
For the most part, I agree that games need to be priced competitively with other experiences. In fact, a $30-$40 experience would be easier to try.
2) I agree and disagree lol. Yes, it's difficult to exactly predict what will happen when a product is released to market. There are always successes and failures nobody foresaw. But every industry has standards, defined by market performance, which the likelihood of success or failure can be measured against. So the CEO or senior manager of a new title who has a small budget and a team with little to no experience creating high quality games has a pretty good idea of what to expect long before the game is in production. While I may not have much respect for them, CEO's and senior managers are not generally not idiots. They are smart enough to evaluate what they have to work with and predict the results. But the practice of prefixing prices lulls them into a false sense of security.
3) From what I understand, used games account for roughly half of GameStop's annual profits. Which is one reason why I think the industry has it completely wrong if it thinks GameStop earned approximately $4.7 billion by undercutting the price of lack luster new titles by $5. It's highly, highly improbable.
How GameStop positions titles on shelves has been consistent from store to store based on my experience. I've honestly never seen them place a new and used copy of any game side by side on a shelf. 360, PS 3 and Wii titles each have their own area. Each area is divided into two sections, new games on one side, used on the other. To the best of my knowledge there is always a sign above each section as well as some type of physical divider or open space between the two. The only exception I can think of may be the smaller stores in malls.
The "sales strategy" lol... has also been consistent. I'm laughing because most of the kids who work there do and say whatever they want. Which kind of makes it hard to enforce a corporate strategy. If you bring a new or used game to the counter, it's a two way street. They'll tell you if a used copy is available for the same price or cheaper and they'll also tell you when a new copy is available for a few dollars more. If you're a "power card" member, they'll always point out when a used copy is available because members receive a discount on the advertised price. Again, I don't think that's an issue because the price of the used game isn't a factor for most buyers until the difference between new and used is in the $15 to $30 range.
I understand what you're saying about MSRP vs. used game mark-up prices and I can see why it chaps the industry's collective ass. However, looking at it strictly from the consumer's point of view, the trade-in credits ultimately provide them with more spending power. But only if they are smart about what they buy... and when they buy it. Which translates into never paying GameStop or the developers for overpriced products.
The new product $30-40 price point not been allowed to develop with this gen which means customers immediately peg a product that is not $60 as junk. Compare that to even the PS2 where a lot of work was done by titles at $20-30. It was still quite possible to get great games and experiences at the 'value' level, just a different type of game and experience. Now, the only titles that even see such pricing are pure Wii knockoff shovelware and absolute dogs.
I agree the industry needs to reestablish a multi-tiered pricing structure, but think they have already done a lot of damage with the newest customers about product expectations.
Confusing I know.
I for example had a friend utterly mad, that some really old castlevania titles for Nintendo handhelds never got price drops... And because of our taxes here, it means shelling 150 USD for them... (his "solution" was get them pirated...)
At least he had the consoles... (I don't have enough money even to buy the hardware)
If you immediately discount your title (2-3 weeks) after release based on the reviews, then who's going to buy the game opening day? Sure, die hard fans might, but everyone else is going to wait until the reviews are done so they can get it cheaper. If the game reviews well, are you proposing they also up the price? That might solve that problem, but it would be a pretty odd system.
Whenever you question the current system, any system, just think about the money. We're a capitalist society, that's what drives it all. In addition, if you make games with a price point of $30-$40, you're going to have overall worse games. I've worked on budget titles. The amount of money spent on a game and it's quality are not a direct one to one.
Also, as John Osborne points out, it's in Gamestop's interest to sell used games. If the publisher or developer asked Gamestop for less money to buy their game, Gamestop could simply NOT pass that savings onto the buyer, and then pocket even MORE money on initial sale, then short change people AGAIN on used game sales.
Dunno, just a lot of problems with this article.
Even putting that aside for a moment, the argument being made here is flawed. Price discounting won't change the fact that the margins are likely better on used games for the retailer *regardless of price*. Heavily discounting a game will in turn have them discount the buy and sell price for the used title.
e.g. AAA Game new goes for $60, gets bought back for $25, gets sold for $55; $30 or ~55% margin;
or
B title gets discounted to $45, gets bought back for $16, gets sold for $38 used; $22 or ~58% margin;
(*some rounding on these numbers, which I pulled off a site listing used game prices; the second title is the game used in the above post).
So, regardless of price, the retailer will continue to find a business in used games if (a) the consumer believes the difference is negligible, and (b) the profit on the sale doesn't need to be shared with developer/publisher.
The above post drifts from the used game issue to an altogether different topic - that of over-priced poor quality games. Agreed, this is a problem, but it's distinctly different than the used game issue.
Buy game for 55, sell for 25. Only a 30 USD loss, or in reality a sort of 50% of discount on the new game price.
Super Platformer EX is released at $60. The company plans on lowering the price to $40 after two months, and then lowering it to $20 after three months. Now in order for Gamestop to be willing to buy the game back from consumers, they have to make an important decision - can we sell this game back to another consumer before the price drops?
If Gamestop buys the game from the consumer at $30, and plans on selling it used for $55, then their profit is $25. If, however, they can't sell it in that two-month window (probably less since the consumer isn't selling the game to Gamestop the day of release), their profit drops to $10. If they can't sell it in the three-month window, they've now lost $10. This makes Gamestop's used game business extremely risky. So the key to cutting into it may simply be to reduce prices at intervals that make the used game business too risky.
I don't know enough about game retail to know if this specific example would work, but the actual dates and prices in that example are somewhat arbitrary so you can adjust them as necessary to make the numbers fit the real retail world better.
And if they buy a smaller number of copies from consumers, that's a good thing. That's pretty much exactly what I want to see happen.
Look at it from their point of view, do they care about the reasons why prices are prefixed, legitimate or not? Or which company gets what percentage of which sales? Or how one company's contract affect another? No, they absolutely do not. And when they pay $60 for a new game or $30 for a used copy which turns out to be low quality junk, who do you think they blame? The retailer who sold it to them? The "system?" No, they blame the developer, the publisher or both.
One very basic rule of business is: don't turn your problem into the customer's problem. So collectively, the industry needs to deal with their internal problems instead of continually shifting the blame and burden onto others. Because nothing is forever and eventually something new will come along that will threaten the market. Companies who built brand loyalty will have a chance to survive. Companies with nothing to offer but excuses will not, regardless of how deep their pockets are.
But it'll happen. As this or the next generation grow up with such products, with expectations to match, both sides will start to improve. It'll still take a while, though - these things happen at their own pace.
This lead to 15% more revenue at the sale price (75% off) than at the full price. The theory being that as you make the price more accessible, you will see a bigger payout in the way of quantity of units sold rather than "quality" (price point) of units sold.
I, for one, am convinced. My personal buying habits include hawking Amazon's Deal of the Day religiously to look for a good deal. It's like a potential Steam Holiday Sale every day, in that I've bought about half a dozen titles that came up on sale that I haven't even played yet. Some of them I've had for about a year now... (Doh)
Before I came into the industry I used to buy used games from Gamestop. The way I saw it, if the disc isn't super scratched and I can save at least $5, why not? Games are already cost prohibitive, so every little bit helps.
The sad thing is, there are a lot of games I was pretty pumped about coming out that I still haven't picked up simply because they're so expensive. When you are one of three titles coming out in the month, all at $60, I can't afford all of them. I have to pick and choose, and as a result, I still haven't played Castlevania: Lords of Shadow to this day. =/
Although my example might be extreme, the games are too expensive these days. Would I buy a new game for 49.99? Maybe. For 39.99, more than likely. I realize that the price of production these days are on par with and sometimes exceed even movies, but there has to be a better way.
Arguing for lower priced games is ok, if you are willing to sacrifice quality to get it. Metacritic and the bloggerati demonstrate time and again there is no appetite for these types of console games. So in effect you are asking for less quantity of games at retail . If you want lower retail prices, then the model will have to shift towards DLC which calls into question the quantity of content being offered. Many retailers will resist this for a few more years in order to preserve profits and gamers will still complain they are getting gyped. It's a tough business.
We can all agree to disagree but one thing is clear, the pricing structure has to change in the very near future. If it doesn't the industry is setting the market up for disruption. My hope is all involved will wake up to the urgency of the problem and begin to deal with it internally.
Very few games publishers seem interested in doing this. Why they aren't baffles me, but I imagine it has to do with the longer shelf life of most games. While it's true that successful games tend to sell for years, those publishers are likely losing out on a lot of money by waiting so long to lower prices, because by the time you can actually get something for what you're willing to pay, there's probably another game to hold your interest. I find it very difficult to buy a game for more than $20-30 these days, simply because I'm so used to buying them cheap, and have a very limited budget... I'll likely never play Call of Duty: Black Ops, Pokemon Black/White, and others, simply because publishers would rather not have my money.
And to add to what you said about having different avenues to access games, I know many people that enjoy their subscriptions to Gamefly. I only recently found out that Gamefly allows people to purchase the games that they rent for a reduced price. So if Fallout just came out and is 59.99, and you rent it and like it from Gamefly, they would allow you to purchase it for 45.00 in which they just send you the case and manual for it.