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Sony Profits Conundrum
Alice, over at the Wonderland blog, has an interesting post wondering about the state of Sony's finances when put in contrast with their view on second-hand game sales, and new title prices. From the article: "Yet it turns out that discounting new releases also results in higher sales. MCV continues: 'BVG's The Chronicles of Narnia jumped ten places up the ChartTrack top 40 last week, thanks to a 16 per cent sales increase, following its slashing to £19.99 at most High Street retailers.' My question: what the hell are they complaining about? Why curtail the perfectly reasonable and legal second-hand market if they're making money hand-over-fist with the current situation?"
Because they could make a little MORE money if there was no second hand market!
My user ID is a palindrome!
"Why curtail the perfectly reasonable and legal second-hand market if they're making money hand-over-fist with the current situation?"
When have you *ever* heard a company say "Eh, thats fine. No thanks. I think we're plenty good..." on the subject of profits?
Han shot first.
It's a bit like the scene in Fight Club when the narrator explains how his company issues recalls. If the court settlements are less than the cost of a recall, they aren't going to fix those cars.
You don't need to be a bargain basement Colonel Sanders to know that someone at Sony apparently wants to keep a tight rein on distribution/selling of their games. They're a part of the same industry that insists on region coding for DVDs.
Discounting new releases means higher sales? No, really? /sarcasm
Gamers have asked for new releases to come down in price sooner, rather than waiting for the company to think 'well gee, sales and hype have hit rock bottom lets try discounting games now that everyone already bought second-hand copies and hope we make some more sales.'
Simply because a corporation seeks to maximize profits doesn't mean it shouldn't keep the customer's interest in mind. It's in Sony's interest to keep the secondary game market alive so that PS2 console owners remain happy and come back for the PS3. But yes, this also obviously hurts the primary game market. There's an obvious tradeoff here, which makes a console maker's decision whether or not to support or squash a secondary game market an interesting decision. Simply calling it "greed" marginalizes the whole conversation because it's obvious and insufficient at the same time.
o Your PS3 dies (they do) and when you bring your new one home none of your games play on it.
o End of the game and PS3 rental market (unless you can keep each game with each PS3. This will not help PS3 penetration at all.
o Although you keep you PS3 locked up when you're not playing it, you little brother grabs you new game and takes it to a friend's house to play before you get a chance to play it yourself.
o Overall glitches that plague any new technological protection measure may only impact a few percent of the players, but that's still many thousands of now angry gamers.
With Doctrine of First Sale allowing you to do what you want with it otherwise, Sony better just learn to live with used games that they are not going to be able to collect even more money from.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
I've just realized: Sony is right! Second-hand markets is a horrible, horrible idea. I mean, if other people aside from the original purchaser are able to make use out of an item after the original purchaser no longer wants it, then it will drastically hurt sales.
And not just in gaming! No, my friends, Sony is thinking too small. We need to extend this War Against Reuse (WAR).
Let's bring on folks like Certa (Serta?), Ikea, and Nike. Lots of people sell their used mattresses, furniture, and shoes at garage sales- think of the profit loss! This needs to stop. In fact, let's take a page out of the RIAA Playbook and create laws banning garage sales altogether. It's too hard to visit every garage sale, and pick out those items which were not originally created by those owning the so-called "garage", and there's a much higher percentage of second-hand goods being sold at these things, so closing them for good will solve most of the problem.
But, before that, there are more evil companies out there- yes, I'm talking about Goodwill and Salvation Army. These companies, posing as places to sell moderate-condition items at a low low price and hiring those who might not otherwise get a job, are stealing hundereds of thousands, if not millions, of dollars from legitamite, multi-billion dollar companies. These large profit companies have people to feed, too! Will no one think of their children?
We need to pick up this WAR and fight those diabolical enough to sell us used goods as a fraction of the new price. This is just horrible. I'm so glad I had this epiph-
Oh, wait, that was just gas and hot air.
Continue about your day.
So yeah... They could afford to give it away at an almost free price as long as it above $1. If a new game was sold at $1, I'd bet everyone who owned a PS3 would buy one.
Not really. Distribution cost of a game is negligible in the grand scheme. It's the cost of developing the game, marketing the game, etc, that are expensive. Now you might think, well at $1 they don't need marketing, but then that only works for that one game, otherwise all the games start competing with eachother at the $1 mark, and you now need a marketing budget again.
A good developer is going to cost between $100-150K per year, give or take. So how many developers does the game require? How many graphics people, etc? Suddenly you're getting into quite a bit of money. How long does it take to develop the game. A year? Two? Five? Multiple that times the salaries and you see how this goes.
Now, keep in mind that for every game they release that sells well there are a few others they make that don't. So in order to remain profitable they have to charge more for games to make up for the duds they lose money on.
So a couple years of development with a group of developers plus marketing costs, packaging, and distribution it costs quite a bit to make just one game. If that one game fails, then you have to make up that cost on other games. If you've noticed, the cost of games has been pretty consistent over time. There's been a steady increase as inflation is incurred and game complexity increases, but overall what I pay for Half Life 2 is on par with what I once paid for pac man (and arguably cheaper).
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