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Game Retailers Make Money On The Margins

Posted by Zonk on from the sell-those-cartridges dept.

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?"

8 of 91 comments (clear)

  1. I'm pretty sure... by Bin_jammin · · Score: 4, Insightful

    it's the publishers that demand such high prices. Same with cds and dvds.

  2. Misplaced sarcasm in the story header? by Rakarra · · Score: 2, Insightful
    Article quote:

    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?"

    ... Huh? Since when has that been conventional wisdom? Seems the prevailing view is that margins in retail, such as game stores, are pretty thin in general, and competition keeps it that way. Only by growing unbelievably large (like Wal-Mart share) can you have a lot of power in that sector.

    1. Re:Misplaced sarcasm in the story header? by MBraynard · · Score: 2, Insightful
      It's not the nature of capitalism so much as the nature of economies of scale.

      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).

  3. Overheads? by Jeff+DeMaagd · · Score: 4, Insightful

    Given that many of the EB and such stores are in high rent districts, I can imagine that once the new product is sold, all of the margin from their cost to sell price goes to overhead, be it taxes, rent, payroll, utilities and so on. With used games, for reasonably new games, they seem to buy from the individual at less than 25% of the original price and turn around to label it at 75% original list or more, making the actual profit on the used game possibly higher than the new, with less invested.

    In terms of costs, it doesn't help that most of these game stores seem to be very poorly managed.

  4. Pre-orders don't work for me. by DPJohnny+Canuck · · Score: 2, Insightful

    Having been burned with online pre-ordered games, my son and I buy our games at either EBGames or Future Shop (in Canada). If it's not in one store, I go to the other(s). The guys that pre-ordered their games online get their copy a week later and pay shipping to boot. I also purchase older games as well, i.e. just picked up a new copy of Civ3 for $10 last week at EBGames. Expecting the clerks to have expert knowledge of 'Latest Game III' is unreasonable IMHO, as they probably get paid squat, and probably don't get much time at work for training/education. I do my research in advance at sites such as Gamespot or Wargamers, etc.

  5. Fascinating Article, godawful website by EvilMagnus · · Score: 3, Insightful

    Really - pretty pages to look at, but someone needs to tell their webmonkies that the web is not print. It took me forever to find the 'next page' button, and I don't like reading web content in three column layout. Even the IHT learned this lesson, and there are many other print-to-web publications out there that show how you can do this without compromising aesthetics.

    --
    -EvilMagnus
    1. Re:Fascinating Article, godawful website by Jerf · · Score: 2, Insightful

      Try turning on Firefox's "Minimum Font Size" feature.

      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.

  6. Re:Buying games at the store? by Anonymous Coward · · Score: 1, Insightful

    You're the game publishers' ideal customer. You drop their cost to produce the game (no physical media), you increase their margin (no middle man) and you can't resell what you downloaded when you're not going to play it anymore. You're basically paying full retail price for an intangible that you have no real rights to, only a "license" that can be terminated on a whime. How do you make out on that deal?