Preowned - It's Killing The Industry!!!

[McCoy]

Eurogamer did an article on the breakdown of the cost of games recently.

http://www.eurogamer.net/articles/2011-01-10-where-does-my-money-go-article

That sounds about right. Most games will have around a 25% markup by the retailers. It also demonstrates why publishers foolish to embrace the digital distribution services offered by the 360 and PS3. Sell all new releases at £24.99/29.99 and you'll be able to uncut all retail competition and cut out the second hand market at the same time. Imagine the new COD being available on Live at 12.01am on it's release date at £29.99, that would be a hugely attractive proposition to most of the games target market and would be considerably more profitable for the publisher than the current model they use.

[Clipper]

Givent eh eurogamer breakdown above which is bound to be too simplistic...

If the publisher gets £12 and the platform manufacturer £8 then why via digital distributino cant they sell new releases for say £30 (allowing £1.75 for marketing and a £3.25 for bandwidth and £65 for vat ish etc).

Why are they atill same price as retail?

one answer same as all the other answers...

[user removed]

I'm not sure we do that at all. I believe that most of us are in agreement that actually the second hand market exists as a direct result of publishers decisions, be it pricing games too highly, not making games worth keeping or not adopting digital distribution.

There are very few people in this thread who don't view the publishers as turkeys voting for Christmas with the decisions that they continue to make.

Sorry, I'm not making a direct reference to this thread, the majority of people here are obviously going to be pro second hand market. There is common push from most aspects of the industry to try and make second sales either redundant or illegal, disappointingly a lot of people do seem to take the stance that it's this that's damaging to dev houses.

[moosegrinder]

I've got Moosegrinders back here. I worked for 8 years in the games retail business and the figure he's quoting is pretty much spot on. I remember back in the day when we had to charge more for Driver 3 because the cost price Atari wanted per unit was more than we sold any other new release for back then.

There's a pittence in new games and hardware sales, the money is made in preowned and accesories.

If you went into a shop today and bought and Wii console and an addition Wireless controller the shop makes considerably more profit on the extra controller than the hardware. That's why whenever a new release come out they badger you with the would you like a Strategy Guide/Play and Charge Kit/Branded Headset/T-Shirt/Mouse Mat/Memory Unit to go with that sir. That's where they make the money nowadays, it's not so much an add-on sale, but the whole purpose of the sale itself.

All true. It's like the 3DS, Nintendo did the cuntiest thing they could and laid the price at the doors of the retailer. Never mind it costs £173 before VAT, so marking it at £229.99 makes you 9% profit. Anyone, and I do mean ANYONE, who has run a business looks at that profit margin and shits out their colon laughing.

[Padlocked]

But it's an argument for publishers to have with their retail channels, not with the public.

It's an issue that's been built around Game/Gamestation (in particular, but more jumping on now) pushing /slightly/ discounted copies of newly released titles over and above the new copies. And they've done this by a) creating lower stock levels of one over the other in their stores and b) driving mahoosive trade in offers on something that's a week old.

The issue here isn't one that should be discussed between the consumer and the publisher, it should be discussed between the publisher and the retail channel. It's just that the publishers don't have the balls to tell these big chains to fuck off, have dragged their feet on digitial distribution models and are now straddled between two worlds of pain.

I mean, the people saying "reduce the price!" are missing the point. Reduce "This Weeks Release 55" to £19.99 and do you know what'll happen? Game will sell it second hand at £16.99. The model still exists regardless of the pricepoint, and the retailer is still there, maximising their profit.

What you and I want to do with our titles isn't the publishers issue - it's the way the retailer is selling them that is.

It's not a sustainable model for any of them.

EDIT: to no-one inparticular, btw. Personally, I think the major chains have forgotten how to do business, and the publishers need to learn to make games efficiently.

[Down by Law]

That sounds about right. Most games will have around a 25% markup by the retailers.

But that's the thing mate, the retailers don't have a 25% markup. The only way they would get that is if they stuck them out at the RRP (which is still £49.99 for a 360 game, BTW) and we all know that would be commercial suicide. So really, at £39.99, 20% out of that 25% is gone and in reality it's more like 2-3%.

Those figures in the Eurogamer article are a bit off TBH. Just like the reviews

[moosegrinder]

That sounds about right. Most games will have around a 25% markup by the retailers.

I'd missed this. EA games cost £32 before VAT. That's a fact, you can take that to the fucking bank. I'll let you figure out the rest of the maths.

[MrHendo]

I mean, the people saying "reduce the price!" are missing the point. Reduce "This Weeks Release 55" to £19.99 and do you know what'll happen? Game will sell it second hand at £16.99. The model still exists regardless of the pricepoint, and the retailer is still there, maximising their profit.

Absolutely. The second-hand model exists for the same reasons as in every other industry - someone is always after a used item for cheaper than they get it new. The only way of destroying the second-hand market is to go digital-only.

Also missing from Clipper's argument before is that publishers are not lying about games being more expensive to make. You only have to look at a credits screen in a modern game to see how more expensive they must be.

(I would like to point out I don't work in the industry, have no position either way but let's be fair about it)

[McCoy]

I'd missed this. EA games cost £32 before VAT. That's a fact, you can take that to the fucking bank. I'll let you figure out the rest of the maths.

I've no reason to doubt what you say as I don't work in the industry and only have the online prices as a guide but could I ask where you are getting these figures from? Simply put I suspect that the cost of EA Games varies considerably depending on if they are selling to Tesco or to the local independent down the street.

[Clipper]

I mean, the people saying "reduce the price!" are missing the point. Reduce "This Weeks Release 55" to £19.99 and do you know what'll happen? Game will sell it second hand at £16.99. The model still exists regardless of the pricepoint, and the retailer is still there, maximising their profit.

No because to enable the model to continue working it has to be worth trading in the game for 2nd hand.. if noone trades in then there none to sell.

Say games cost £20 ... it would decimate the high street/supermarket 2nd hand trade in market.. because not as many people would want to trade in...

Example time ... lets assume markup on preowned is 100% (I know it varies alot)...

I buy a game for £40 , I complete it and next week I trade it in... Game can sell it for £36 so they offer me £18 for it. I use that money to buy another £40 new game. All in all I have paid £62 in cash £40 for 1 and £22 for the other.

I buy a game for £20 , I complete it and next week I trade it in... Game can sell it for £16 so they offer me £8 (If I am lucky because now games are half price they will make a much smaller profit.. £8 instead of £16)... If I accept the trade the new game costs me £12 and intotal I have spent £32.

However the second model is not as sustainable because

1) The consumer is far less likely to bother trading in on high street for a measly £8.. I know some will but alot wont.. which leads to 2

2) The retailer gets smaller profits from 2nd hand and their stocks of 2nd hand are vastly reduced due to 1 so it peters out.

Now you might say ... No you are wrong people are penny pinching scum and will trade it in regardless in vast numbers.

If that is the case why has there never been a major 2nd hand high street/mainstream DVD preowned market.. When they started out they were £20 a pop. But did HMV do preowned? nope...

ditto Bluray .

Game/Gamestation etc sold/sell a scant few dvds and blurays buts it is nowhere near as ubiquitous as games and the biggies like HMV/ASDA/TESCO getting into games preowned is a big sign that something is wrong!

Main problem is that the retail market is so heavily invested in this sector now that a pricedrop may not work as well now.. and its all down to the publishers wanting that big high price buyin from the early adopter.

[moosegrinder]

The delivery note we get when the games delivered. We're an indie but people who worked at Game when they still had delivery notes said it was the same cost (they stopped putting costs on delivery notes at Game and Gamestation because it was taken out of the employees hands, it was all automated). I'd give you a link but there's been so many of these threads about the cost of games I'd not know where to begin to look for the post. I think it was Angel or DJ Satan's Fury or someone similar.

The long and short is this: when it comes to new games there is no more than 8% profit in it until the deals start coming through.

[Clipper]

Also missing from Clipper's argument before is that publishers are not lying about games being more expensive to make. You only have to look at a credits screen in a modern game to see how more expensive they must be.

I never said games didnt cost more to make..

I said that the publishers lied anbout how much they had to charge to cover the costs and make a decetn profit basically.

Because lets put it this way

if a game in 1995 cost £40

and a game in 2011 costs £40

Games cost more to make and sell for less in real terms.

So at some point some fucker was lying and at some point they were/are making a shitload of cash and blaming piracy/2ndhand market/magnets for the high price of games

[Padlocked]

Also missing from Clipper's argument before is that publishers are not lying about games being more expensive to make. You only have to look at a credits screen in a modern game to see how more expensive they must be.

That doesn't mean they're doing it well, efficiently or cost effectively, though. The sheer level of absolute flops is astounding, and they're getting bigger. 4-5 year development cycles on 10 hours of game means there must be a massive amount of wastage in there somewhere.

I know, I know, it's "art" and we don't want to stifle "innovation", but so much blatantly shit-house stuff is put out that defence falls apart and there comes a point where everyone in the chain has to sit up and realise they're in business.

But, y'know, someone needs to wake up soon. The next generation - whenever it comes - will likely be driven by downloadable services and be massively less reliant upon bricks and mortar stores. Whoever wins, we lose.

[Padlocked]

No because to enable the model to continue working it has to be worth trading in the game for 2nd hand.. if noone trades in then there none to sell.

Say games cost £20 ... it would decimate the high street/supermarket 2nd hand trade in market.. because not as many people would want to trade in...

Example time ... lets assume markup on preowned is 100% (I know it varies alot)...

I buy a game for £40 , I complete it and next week I trade it in... Game can sell it for £36 so they offer me £18 for it. I use that money to buy another £40 new game. All in all I have paid £62 in cash £40 for 1 and £22 for the other.

I buy a game for £20 , I complete it and next week I trade it in... Game can sell it for £16 so they offer me £8 (If I am lucky because now games are half price they will make a much smaller profit.. £8 instead of £16)... If I accept the trade the new game costs me £12 and intotal I have spent £32.

However the second model is not as sustainable because

1) The consumer is far less likely to bother trading in on high street for a measly £8.. I know some will but alot wont.. which leads to 2

2) The retailer gets smaller profits from 2nd hand and their stocks of 2nd hand are vastly reduced due to 1 so it peters out.

Now you might say ... No you are wrong people are penny pinching scum and will trade it in regardless in vast numbers.

If that is the case why has there never been a major 2nd hand high street/mainstream DVD preowned market.. When they started out they were £20 a pop. But did HMV do preowned? nope...

ditto Bluray .

Game/Gamestation etc sold/sell a scant few dvds and blurays buts it is nowhere near as ubiquitous as games and the biggies like HMV/ASDA/TESCO getting into games preowned is a big sign that something is wrong!

Main problem is that the retail market is so heavily invested in this sector now that a pricedrop may not work as well now.. and its all down to the publishers wanting that big high price buyin from the early adopter.

I kinda see your point, but I kinda don't agree. But, hey, we're hypothesising so there's room for every alternate universe in here

[Clipper]

I kinda see your point, but I kinda don't agree. But, hey, we're hypothesising so there's room for every alternate universe in here

Actually we agree more than you think.

The tail end of my post is the kicker...

A price drop to £20 will not work as well now because the market is heavily invested and crucially has ingrained into the consumer that you "trade in old games whenever you can"

The 2nd hand market has built up so very big (I mean supermarkets as well now!!!!) because games cost £40 a pop and people either cant afford or dont want to spend that much on a game.

Now it is so big and ingrained into the consumer's mind that it may not be "fixable".

And all due to greed At some point somewhere someone was making a mint out of £40 games and basically strangled the goose laying those golden eggs until they are all but gone ...

[DjSatansfur3h]

DJ Satan's Fury

DjSatansfury

The delivery note we get when the games delivered. We're an indie but people who worked at Game when they still had delivery notes said it was the same cost (they stopped putting costs on delivery notes at Game and Gamestation because it was taken out of the employees hands, it was all automated). I'd give you a link but there's been so many of these threads about the cost of games I'd not know where to begin to look for the post. I think it was Angel or DJ Satan's Fury or someone similar.

The long and short is this: when it comes to new games there is no more than 8% profit in it until the deals start coming through.

It'll of been Angel. But I've worked at Game since 2002, and as far as I can remember delivery notes never had prices on them.

I know Fifa used to be £32 a copy. But I dont know what the "info" came from. See problem is, you talk to Managers, Deputies etc and some of them couldnt tell the truth if their lives depended on it, or just make shit up.

[moosegrinder]

Sorry sorry. Someone mentioned it, I'm sure they did. Hmm. I really am going to have to go searching now

[moosegrinder]

Yeah it was:

I'd definitely seen delivery notes with bought-in prices on them, I remember distinctly. Stuff like Final Fantasy 10, 12 copies x @£28. Any other ex GAME folk concur?

In fact, Charles was saying exactly the same thing in that thread. We're just going round in fucking circles. Fuck's sake.

[DjSatansfur3h]

Yeah it was:

In fact, Charles was saying exactly the same thing in that thread. We're just going round in fucking circles. Fuck's sake.

I wouldnt rely on my memory

As others have said, if they somehow managed to stop pre-owned, the likes of Game et al would crumble into bits. They make the majority of their revenue on it. I dont think indies would fair much better either like.

[Monkichi 3.0]

I never said games didnt cost more to make..

I said that the publishers lied anbout how much they had to charge to cover the costs and make a decetn profit basically.

Because lets put it this way

if a game in 1995 cost £40

and a game in 2011 costs £40

Games cost more to make and sell for less in real terms.

So at some point some fucker was lying and at some point they were/are making a shitload of cash and blaming piracy/2ndhand market/magnets for the high price of games

Right, but the localisation into just one language alone today would exceed the entire budget for some games in 1995. The initial investment in equipment and infrastructure to act as a global publisher is massive. So today do game costs justify the sale price?

[Down by Law]

Gamestation 2001-2006 had cost prices on all the invoices. It's how staff discount was worked out back then. Cost price + 10% or shelf price - 25%, whichever was more expensive we had to buy it at. Around 2003 they knocked that on the head and they just went with shelf price -25%.

Looking back that was a pretty daft way of doing it.

[Clipper]

Right, but the localisation into just one language alone today would exceed the entire budget for some games in 1995. The initial investment in equipment and infrastructure to act as a global publisher is massive. So today do game costs justify the sale price?

I don't know, neither do you or anyone else here I would guess...

All we know is they lied to us then or at some point between then and now...

So now it MAY be that the price of the games does reflect the cost. Problem is their actions in the past have royally fucked their industry. They set a ridiculous price of £40 in 1995 for cd media games i.e. no massive overheads like the carts were. It was high but a proportion of the public paid it...

Now market is bigger and more gamers , some will pay it (those first day premium game buyers the publishers love) and some will wait til its 20 quid new or preowned.

I'm sure if they charged £60 a game there would still be a proportion of upfront premium payers and then another chunk at £40 and another chunk at £20 or below.. Different splits basically.

however industry seems to be wary of doing that? because they know it will mean more piracy and more 2nd hand market and less sales.

The result of this high pricing is a 2nd hand market that is profitable/worht investing in.

There is a reason that ONLY the games market has this "problem" and it is self-inflicted.

That is my point.. it is fairly irrelevant to my points as to whether the price is fair compared to cost of producing the games.

If the cost of producing games is truly so high they have to charge £40 and eradicate 2nd hand sales or increase prices markedly which not many will pay then I would say the "epic" gaming side of things is dead

[BossSaru]

There is no reason why the likes of Game could not exist in a digital-distrubtion era. Wifi-enabled "download points" and purchasable DL codes would benefit customers who:

1. Do not have internet access at home (or limited net access with DL limits, etc)

2. Need to be able to get advice on their purchase. Laughable from Game, I know, but around Christmas I imagine a number of parents and gradparents are asking about "Muddy Warfare" and "Messy Fact"

3. Only have cash, and thus can not pay via electronic means

Shops allow these customers to purchase games in the inevitably drawn-out transfer period as digital distribution moves from being a niche method of distribution. The downside for the stores is that second hand sakles are unlikely to have a place in tis arena. The upside is that they will still be able to have a presence if they can adapt their business model to compensate.

So how can Game co-exist with publishers? A few ideas (which are probably insanely dumb, please point out the glaring errors):

1. The inevitable "Apps Store" approach to game purchasing can allow a variety of retailers to exist in parallel. Traditional retailers can thus have an online store of their own on the PSP2, for example. Retailers pay a fee to the publisher for every game they sell, out of which comes the hardware and software developers’ cuts. Because Game have high street presence, they can negotiate discounts with publishers which help them sell at a competitive rate. There will be a pressure for publishers to maintain a competitive price from the constant competition with other publishers (ie as in the competition between CoD and MoH, or FIFA and PES) so as not to lose market share. Game can do online sales which sometimes undercut the Hardware manufacturer’s own online store. Alternatively all sales can be managed through the hardware developer’s single online store, but can recognise if the software is purchased over Game’s wifi network or with a pre-purchased Game card which then gives the highstreet retailer a cut of the revenue as an agent for introducing the customer.

2. The hardware developers benefit from having a highstreet presence for their product, which is beneficial for hardware and software launches, and around the peak trading times. Imagine if only one hardware manufacturer had highstreet presence over Christmas. They would make a killing, and the manufacturers, developers, publishers, investors and retailers all know it. It would be in the manufacturers’ and retailers’ best interests to not let that happen. In addition, a highstreet presence with an on-site download facility would allow customers to compare products and prices across different formats, keeping the industry competitive on these points.

The removal of pre-owned is not a death-knell for the industry. It is a dramatic shift from an unsustainable model, hopefully towards one which benefits all parties. There will be some stakeholders who may lose out a bit, but it would allow for a more sustainable business model which would benefit all participants in the longer term.

[sprite]

I just wanted to say it's a bit naive to think games retailers don't sell at a loss, whether online or not. If they're big enough they count on repeat custom (shopto) or impulse buys (no I do not want to order a 3DS for the 18th time) to break even again.

They'd rather get the custom than let someone else (Sainsbury's etc who rely on other products) have it.

I mean, I bought Other M new for a tenner. I don't believe for a second that it cost Game say, £7.

[dumpster]

POINT PROVED!

Just bought Need For Speed Hot Pursuit, brand new at Sainsburys for £25.

[dumpster]

Should mention that my "point proved" relates to a previous post about 4 pages ago and not the current points being made.

However, after managing a Game store for 8 years I can completely agree with the poster above that managers and year office staff just make stuff up to support their arguments. There's no way that new releases are selling with 50p profit as mentioned earlier no matter what your area manager tells you.

80% of new software sales come from 20% of the stock, mainly the chart top 10.

80% of that 20% consists of the titles at numbers 1 and 2 in the chart, and that weeks new releases.

My stores overall margin was 33% and on preowned we aimed for 45%.

So the retail price of FIFA may well be 50p more than the trade price, but the retailers are definitely not paying the trade price, just as the customers are not paying the retail price. Hence my nfs for £25.

Your area managers are lying to you, pleading poverty to make everyone work harder.

[Unofficial Who]

Absolutely. The second-hand model exists for the same reasons as in every other industry - someone is always after a used item for cheaper than they get it new. The only way of destroying the second-hand market is to go digital-only.

Also missing from Clipper's argument before is that publishers are not lying about games being more expensive to make. You only have to look at a credits screen in a modern game to see how more expensive they must be.

(I would like to point out I don't work in the industry, have no position either way but let's be fair about it)

There's another reason why the second hand model exists like it does in all forms of IP. People don't always discover they want something when it's first published. And with digital there's less reason for this gap to occur.

Speaking from personal experience my secondhand purchases have decreased on platforms where a digital copy is available for a reasonable price.

[Karzee]

There is no reason why the likes of Game could not exist in a digital-distrubtion era. Wifi-enabled "download points" and purchasable DL codes would benefit customers who:

<snip>

Spooky!

Eurogamer:

You can now buy downloadable content and Xbox Live Arcade games from GAME shops around the UK.

A six-month trial (that begun yesterday) sees 40 GAME shops erect bays to sell 30 games and pieces of DLC to the public.

Digital content will be sold on cards that hold codes. Each bit of content is priced individually, starting as low as £2.04.

The benefits? Paying in cash and being able to trade-in old games for re-spendable Reward Card points.

What's available and how much does it cost?

* Alan Wake: The Signal - £4.76

* Alan Wake: The Writer - £4.76

* Braid - £6.80

* Castle Crashers - £10.20

* Catan - £6.80

* Comic Jumper - £10.20

* Crackdown 2: Premium Deluge Pack - £4.76

* Crackdown 2: Premium Toy Box Pack - £4.76

* Gears of War 2: All Fronts Collection - £6.80

* Halo 3: Mythic II Map Pack - £6.80

* Halo 3: Mythic Map Pack - £3.40

* Halo Reach - Noble Map Pack - £6.80

* Hydro Thunder Hurricane - £10.20

* Hydrophobia - £10.20

* Limbo - £10.20

* Monday Night Combat - £10.20

* Perfect Dark - £6.80

* Portal: Still Alive - £10.20

* Shadow Complex - £10.20

* Spolsion Man - £6.80

* Super Meat Boy - £10.20

* The Dishwasher: Dead Samurai - £6.80

* The Maw - £6.80

* Toy Soldiers - £10.20

* Trials HD - £10.20

* Worms - £3.40

* Worms 2: Armageddon - £6.80

* Forza 3: World Class Car Pack - £3.40

[dumpster]

You know, that's actually better than buying online with points. I have 720 points on my account right now because I bought an indie game. This means that buying an 800 point game requires me to spend far more than I need to because you can't buy only 80 points anywhere. Maybe it's time to forget buying points altogether and only pay for what you actually want at Game ?

You know, that's actually better than buying online with points. I have 720 points on my account right now because I bought an indie game. This means that buying an 800 point game requires me to spend far more than I need to because you can't buy only 80 points anywhere. Maybe it's time to forget buying points altogether and only pay for what you actually want at Game ?

[McCoy]

Spooky!

Eurogamer:

Interesting but it won't save them. All they are doing is promoting the fact that these releases are available, the player still has to have a console connected to the internet to download them. They will soon figure out that they can make their lives simpler by just cutting out the middle man (i.e. Game).

The trading in a pre-owned game is perhaps this schemes saving grace and should certainly encourage people like us to buy digital content from Game if we have something we want to get rid of. Of course, this in itself shoots Game in the foot as their whole business model relies on people trading in again and again. This scheme converts the money from a trade in into an item that can never be traded back to Game whereas in the past they could have had a reasonable expectation that the game they just gave someone becuase they traded in other games for it would be back at some point.

On the other hand, it might help some people greatly...