Thursday, November 13, 2008
Another Nail In the Coffin For Brick & Mortar Game Distribution
Bruce On Games, often controversial in his approach to the games business, weighs in on reports in the UK trade press that retailers are ditching non-AAA titles in the economic downturn, depriving customers of choice in hopes of moving more quantities of fewer titles.
Game Retailers On a Suicide Mission
Now, I kinda disagree with him concerning used games. While it's definitely a short-term impact on the publishers, the ease of selling used games is of benefit to the consumers and helps give them some peace of mind (especially those pre-ordering folks who don't wait for reviews) and keeps the market moving. That's to the long-term health of the games business.
However, I do agree that major retailers making used game sales their preferred source of revenue sets them up as a competitor to the very industry they are dependent upon. That doesn't sound like a healthy way to run a business.
But as for dropping inventory to focus on AAA titles even more than they already are? Well, it probably makes sense in the short-term. But that sounds like eating your planting seed to me. I won't say the beginning of the end, as that's already started. But definitely an accelerator. And it's a bigger suck for the consumer. There's a reason you can't find anything but sequels and clones on store shelves, and it's not because game designers are lazy.
(Incidentally - I'm gonna be offline until late at night for the next three days, so I apologize if my emails 'n replies 'n stuff end up being a little slow.)
Labels: Biz
- posted by The Rampant Coyote @ 7:00 AM (Permalink)
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There's shops in the UK that sell non-AAA games? Where? More seriously, when looking for PC games in shops I struggle to find anything outside the top 10, AAA or otherwise. And when the top 10 is usually 5 sims expansions 4 MMOs and 1 FPS...
Though bizarrely, the last time I went into a games shop I found the above plus Sins of a Solar Empire.
Though bizarrely, the last time I went into a games shop I found the above plus Sins of a Solar Empire.
# posted by 
: November 15, 2008 6:34 AM
: November 15, 2008 6:34 AM
Bah, you must be lying! After all, NOBODY wants to play that game anymore! Haven't you read your marketing reports. And without ultra-draconian DRM, it would only sell a single copy before everybody in the universe had a pirated version on their hard drives - that's only common sense! ;)
However, I do agree that major retailers making used game sales their preferred source of revenue sets them up as a competitor to the very industry they are dependent upon. That doesn't sound like a healthy way to run a business.
Ah, yes. Because used booksellers have driven the publishing industry out of business.
And the local Salvation Army reselling furniture is obviously driving IKEA out of business.
And when car dealerships sell used cars, they're clearly setting themselves up in competition with the very industry they're dependent on.
And yada yada yada.
The idea that resale is economic folly is, frankly, absurd. It is, in fact, a demonstrable boon to the industry.
Imagine that you've got someone who can't afford to buy a game for $60. The only way they can afford to buy games is to buy them used at $20. (There are many people like that.)
Now, the gut reaction of a publisher may be, "I don't care. I'm never seeing that $20 either way."
But that's not true: Because when the second guy buys a game for $20, a chunk of that money flows back to the guy who buys games for $60 and then resells them... allowing the first guy to buy even more games.
(To simplify the math, cut-out the middleman of the games store who skims a profit off the transaction. The $60 guy buys 1 game a month and resells it for $20. If he can't resell, he'll buy 3 new games every 3 months. If he cant resell (and reinvest the money into more games), he can be 4 new games every 3 months.)
That's a simplistic example, but you can also look at the used games market as a place to drive up interest in your next release in a series. People who bought used copies of HALO and loved it are more likely to buy new copies of HALO 2 (because they want it ASAP, rather than waiting for used copies to trickle back into the stores).
There is simply no evidence in any industry that allowing the sale of used items is detrimental to the industry. In fact, quite the opposite is true.
Ah, yes. Because used booksellers have driven the publishing industry out of business.
And the local Salvation Army reselling furniture is obviously driving IKEA out of business.
And when car dealerships sell used cars, they're clearly setting themselves up in competition with the very industry they're dependent on.
And yada yada yada.
The idea that resale is economic folly is, frankly, absurd. It is, in fact, a demonstrable boon to the industry.
Imagine that you've got someone who can't afford to buy a game for $60. The only way they can afford to buy games is to buy them used at $20. (There are many people like that.)
Now, the gut reaction of a publisher may be, "I don't care. I'm never seeing that $20 either way."
But that's not true: Because when the second guy buys a game for $20, a chunk of that money flows back to the guy who buys games for $60 and then resells them... allowing the first guy to buy even more games.
(To simplify the math, cut-out the middleman of the games store who skims a profit off the transaction. The $60 guy buys 1 game a month and resells it for $20. If he can't resell, he'll buy 3 new games every 3 months. If he cant resell (and reinvest the money into more games), he can be 4 new games every 3 months.)
That's a simplistic example, but you can also look at the used games market as a place to drive up interest in your next release in a series. People who bought used copies of HALO and loved it are more likely to buy new copies of HALO 2 (because they want it ASAP, rather than waiting for used copies to trickle back into the stores).
There is simply no evidence in any industry that allowing the sale of used items is detrimental to the industry. In fact, quite the opposite is true.
@justin: I agree with you there - thus my statement that used game sales are "to the long-term health of the games business." I think it's silly from a publisher's perspective to get their panties in a bunch over the used games market.
The problem isn't for the industry - the problem is for the retailers themselves, shooting themselves in the foot. Right now, if you go to a particular retailer and you are looking for a new copy of a game and they have a used copy available, they will try to sell you the used copy in preference to the new one.
Not a huge deal, but what that ultimately means is that you are selling fewer copies of new product - potentially - and marginalizing yourself in the eyes of your upstream providers.
Let's say you are a publisher and you are considering online distribution. The retailers - particularly the ones who sell all the used games - are decidedly AGAINST this, as it cuts them out of the loop. As long as they are making you a ton of cash, you'll listen to their complaints and cater to their desires. But when they've basically set themselves up as your competition and are busily cutting THEMSELVES out of the loop, are you going to be concerned about their complaints? Not if it isn't hurting your bottom line. Will you pay the steep costs for endcap advertising in this case? Maybe not.
THAT is what I'm talking about when I refer to the risks the retailers are taking when they do this. They are setting themselves up to be marginalized out of the profit chain. They are hastening their own demise, and the industry will move along regardless.
Not that this worries me much. I'm more of a "fewer middlemen" kinda guy.
So does that help?
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The problem isn't for the industry - the problem is for the retailers themselves, shooting themselves in the foot. Right now, if you go to a particular retailer and you are looking for a new copy of a game and they have a used copy available, they will try to sell you the used copy in preference to the new one.
Not a huge deal, but what that ultimately means is that you are selling fewer copies of new product - potentially - and marginalizing yourself in the eyes of your upstream providers.
Let's say you are a publisher and you are considering online distribution. The retailers - particularly the ones who sell all the used games - are decidedly AGAINST this, as it cuts them out of the loop. As long as they are making you a ton of cash, you'll listen to their complaints and cater to their desires. But when they've basically set themselves up as your competition and are busily cutting THEMSELVES out of the loop, are you going to be concerned about their complaints? Not if it isn't hurting your bottom line. Will you pay the steep costs for endcap advertising in this case? Maybe not.
THAT is what I'm talking about when I refer to the risks the retailers are taking when they do this. They are setting themselves up to be marginalized out of the profit chain. They are hastening their own demise, and the industry will move along regardless.
Not that this worries me much. I'm more of a "fewer middlemen" kinda guy.
So does that help?
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