Developers and publishers have spent a lot of time trying to find out how to get more money from gamers. They worry about piracy and second-hand sales, even if they cannot accurately pin down the true effect of each. One analyst believes that the weak software sales of this fiscal cycle can be pegged solely on the second-hand market.
"In our view, GameStop has exploited the negligible difference between the value propositions of new and used games to capture a significant portion of the video game value chain," says Doug Creutz, analyst at the Cowen Group.
The cycle has seen a big drop-off in sales of Xbox 360 and PlayStation3 software says Creutz. He contends that high console prices may have contributed, but that the “dramatic” rise on used games sales is a large factor. A few publishers have tried various methods to stem the tide, like EA's Online Pass system, THQ's online code for UFC, and Sony's PSN registration for SOCOM PSP, but GameStop remains unfazed by all initiatives.
Creutz says that such strategies are a “critical step in allowing publishers to re-capture value from the used market.” He believes that they could dramatically drive software margins higher in the next two years. Ultimately, Creutz says a “more aggressive” shift to digital distribution could knock GameStop down for the count.
"We believe that consumers are likely to grudgingly accept a revised and evolving pricing strategy that reflects the value they receive outside of and in addition to the traditional single-player offline experience,” says Creutz about the possible consumer backlash.
"Against a backdrop of our expectation for improving growth in videogame software sales through the remainder of 2010, we believe that the evolution of these new pricing strategies give investors additional reason to become more constructive on the third party video game publishers.”
7 Comments
June 26, 2010
This cycle the consoles have priced themselves out of the mass market with software prices. Now the consoles are at the 299 price point, and it is STILL DOWN. So it is not just the price of consoles. The last few generations $49 was high enough to create a robust used games market. Then this generation brought us 59$ games (on a regular bases), this has run even people that make 70k a year to the used market. And some of the old used game consumers out of the hobby because $44 for a used game is too high. What publishers need to do is realize the high price is not the answer, it's the problem.
A lower price will bring back impulse buying, and will absolutely kill the used game market. Testing with a few decent games does not count. If you trade in a 1-2 year old game for $2 that cost $59 new, how much sooner will it be $2 if it started at $39? Most people feel ripped off when the trade in value drops below $7. One the higher end look at Japan, FF, and dragon quest games have created big resale markets because they are too expensive. Even though people are disparate to play those games there. Going up will only create a situation like Japan where people RACE to finish the game, and trade it in for $50 after paying $79 for it. We need to think about giving MASS market pricing a try! $60 is NOT mass market pricing not just because of the economy but the economy makes it even worse.
I think greed makes them brush what I'm saying aside, they can't be open to the idea of a lower price. How many people have thought about buying Halo or Uncharted for the first time. But they have not because a year after the release they are still $44 USED, and $59 new? Now how many would try it at $39 new? I'm guessing twice as much! instead of around a 40% attach for Halo you would have 80%. And with Uncharted it would have a even bigger amount of head room because it is not at 40%.
Some people have told me games are too expensive now. That tells me publishers have priced themselves out of the many peoples entertainment market, no Wand or Kinect will change that, games are too expensive.
June 26, 2010
I have 23 360 games and about 12 of them are used. i usually trade in my games to buy new ones because gaming is an expensive hobby. I think used games are needed but new is preferred if there is a five dollar difference between a New and Used game i'd buy new. The only thing i dont like about gamespot is that when i buy a new game the case is open and they pull the game out of a drawer and put it in the case. Is this legal? i have always found that strange.
June 26, 2010
I completely agree with indy. I've been saying something similar for a while now. Not only does it increase impulse buys but it also helps your fellow developers because instead of me sticking to one $60 purchase for a game a month or perhaps $120 for two games i'd likely pick up 2-3 games. The $40 price point is more accessible to people's minds and I know it would've increased my the amount of game purchases I made. Instead another game comes out and another and before you know it a couple of games have gone into the wait for the bargain bin price ($20 and below).
June 27, 2010
@Blaiyan good point about helping fellow developers. I think that would especially help small developers/publishers that don't have strong marketing but has good word of mouth.
@Jon Rob I think they do that because of kids stealing games out of the box, that is the reason given.
But I have also had them tell me (plus I over heard them saying) as employees one of the benefits of working there is they get a chance to take new games home, and play them.
Is it legal? Very good question, I thought it was not. But taking it home, and 'testing' it in my book makes it 'used', because it has just been used. So how can they sale it as new?
At any rate it increases the chance of it getting scratched, which I think is one of your concerns.
June 28, 2010
@indysurfn I think your assertion is spot on. I said pretty much the same thing last week in my industry blog (article here: http://www.concepticate.com/used-games-are-not-the-problem.html) This is a time to expand the gaming market through lower prices, not to try to hold onto to margins by gouging hardcore gamers with $60 games. The path we're on right now will lead to 'franchise consolidation' with fewer large-scale games sold at full price as publishers cut back on development because that's all the market will support--the number of people who can support buying at a $60 price is shrinking every year in the current economic climate.
June 28, 2010
The problem is great, epic games just cost too much. Gamer expectations for these games are sky high.
When you spend 80 million to great a AAA game, you need to recoup and make $$$ or you go Chapter 11.
I would love to pay $49 for a AAA game, but the only way to do this is buying used.
July 3, 2010
I have pretty much wrote off the current cycle because of how expensive the games are. All the games I own from it either were $39.99 (mostly Wii titles), used, or gifted to me. So I agree with above arguments.
Espeically now that I have an iPhone, those $0.99 games fit in much easier with both my pocketbook and my schedule (which doesn't have a lot of time for gaming - making it even harder to skin $50+ for a game that I know I won't have much time to play), so I find more and more these days, I'm getting my game content digitally.