August 30, 2011
Reposted from phlume.blogspot.com
GameStop stopping growth?
Recently in an interview with Edge Magazine, Executive Vice President of GameStop International Mike Mauler revealed that GameStop, as a company, has "sat down with developers and publishers and really gone through the data." What data you ask? The data that claims that selling used games benefits the publishers as well as the developers. I know as a consumer I will search for the best deal I can, and if I can scoop up a Modern Warefare 2 for $19.99 as opposed to $49.99, I'm going to do it.
I can see how the data may help the execs at GameStop sleep at night, but perhaps there is more to the story; and more that they could do. The higher ups at GS say that by reselling the games used they help bolster the sales of the new titles in series. They offer up the titles again to a new audience and that "hooks" the player into buying into the series. Perhaps this works, but why not take a direct approach to support the industry that feeds them?
Don't read me wrong. I am not saying GameStop should stop selling games used...but rather share in the wealth. After all, this could easily be a win-win-win situation if everyone approached the idea objectively. Though it is a hard concept to imagine; let's take capitalism out of the equation for a moment. If GameStop stands behind their position that the reselling of used games feeds the market with older titles and helps fuel the purchase of newer releases, why can't they also put an effort in to insure that the used buyers do purchase the newer titles?
Speaking from personal experience...
I bought my PS3 this past spring and when I purchased the system I bought it new with the Move/Sports Champion bundle. I also bought 2 additional titles to play; Assassin's Creed II and Modern Warfare 2. Both of those titles I bought used for nearly a 50% savings at GameStop.
I signed up for the company's "Power Up" rewards program and the purchases counted as points toward future purchases. Which is great for me because now I can get $5.00 off of a used title, or $10 off of a used title in the future by redeeming my points. This is the capitalism part I mentioned come into play.
I'm not sure of the "formula" that GameStop follows in buying and reselling games, but I assure you that it is enough to build a business on. My guess is if I brought a new title to them (lets say LA Noire) they would give me $25 - $30 bucks for it. They would then turn around and sell it for $50 - $55. A $25 profit for allowing it to sit on the shelves just long enough to change hands. Even if a consumer redeems enough points to earn a $10 off voucher, the company still makes $15 on the sale. Rockstar games, however, only sees the original $60 I spent, but none of the used purchase.
Here is my proposal: GameStop continues to offer the awesome used deals and rewards programs to the consumer as is. No changes. With a little bit of data tracking, GameStop issues reseller's fees to all the developers and producers of games which they resell. A 20-25% fee should be returned to the original maker of the game. Lets follow the formula again, with the added fee:
I buy LA Noire for $60. I bring it back to GameStop a few months later and sell it to them for $30. They turn around and resell it for $55. Using the 20% model, $11 should go to Rockstar for the reseller's fee, and GameStop pockets $14 in profits.
Still not a bad take for not really doing anything... However, Rockstar is now cut into the circle. extrapolate this formula across 100,000 titles nation wide and you have yourself a fresh $1.1 million in revenue for Rockstar... Additional income above the original totals for the sale of the games originally.
Now certainly the model isn't perfect. but in theory the idea would prove to be a great marketing strategy for GameStop. Why would I go to BestBuy or FYE when I can go to GameStop and get the awesome deals and know money is going back to the creators to support their hard efforts. I can see it now... "GameStop. Power to the players; Powering the industry"
I don't know... I may be wrong, but don't you think it would be in the best interest of GameStop to do everything they can to support the gaming industry and not piss them off? What do you think? I know GS would never go for a kick back to the publishers.. but what else could the company do to stay a positive "middleman" and not make either side upset?
Chad is an Adjunct Faculty member teaching video game design in Boston, MA. His school web site is http://www.phlume.com/EDU. He can be reached for comment there.