Topic: What your 60$ really buys.

src: http://kotaku.com/5479698/what-your-60-really-buys

I read this and thought it was interesting enough to pass on. Retailers is seeing some really nice profit per sold game, people keep telling me how hard it is to be competitive in games retailing because on how low the marigins for profit is, if this chart holds any resemblance of truth that's just total BS then..

Also:

$15 is terrible margin for a retailer. Really, really terrible margin.

A good margin for a retailer is 40%. Not 25%. That 25% has to also cover the shop's rent, employee wages, promotional activities and so on.

The margin on second-hand games is much higher, which is why games retailers are much more interested in the sale of second hand games.

Games retailers really aren't operating on good margins.

lol, it's not unexplained extra costs. Shipping and warehousing inventory is expensive in Australia because the smaller market size means smaller numbers of units enter the country, so the cost of shipping them has to be absorbed in fewer sales. Then there's the margin that the local distributor will also take to pay its own expenses, and then the retail environment in Australia means retailers need even more margin just to survive. I would expect retailer margin in Australia to be around 30%.

Yes, Australia is more expensive than other regions, but no, it's not because publishers and retailers are squeezing Australians. It's simply a more expensive place to do business. That applys to all technology in Australia.

If you REALLY want expensive, go to Japan and try and buy a mango. Sure you can buy games for half the cost they are here, but I can promise you, your choices for fresh fruit are pretty limited. Every country in the world has its more and less expensive things.

But I know it's easier to pretend the extra costs come out of nowhere.

In my honest opinion.
Games are over priced.
I feel they should cut the price down to about $40/30 Euro.

I know the developers need the money but then again,some of us just don't have it.

And soon thereafter you wouldn't have any games to play because the industry would collapse.

If these companies are raking in so much money from their horribly overpriced games then why is it that so many publishers are slashing staff, closing development studios, or, in the unfortunate case of Midway, disappearing completely?

I'll say it again - games are priced at a point where the industry can sustain itself. There really isn't many other options - but you will see game prices go down as the industry transitions to a download model.

I'm not so sure about that. Sure, PS3 and 360 may suffer because they're more expensive to develop for, but more focus would be on indie developers and their games.

Ok, the industry would step back 30 years to the NES days.

It's not about the hardware, it's about the publishers and industry itself. It's the distribution model where the expense comes into games. If you removed retailers and the distribution, you'd be cutting $20 out of the cost of the game.

The developer's part of the pie comes from the publisher's $27 - the publisher essentially "buys" the game from the developer (or, more accurately, commissions it), and then promotes it and organises its distribution. The typical developer is hopeless at that kind of thing. Just like how it's possible to self publish a book or movie, but distributing either of those really needs relevent publishers.

So no, the cost of developing a game is irrelevant. The cost is in getting the game to the consumer.

Let's do it.

I didn't mean in terms of the quality of the games, I meant in terms of the maturity of the industry

They've robbed banks?

It's largely been "attempt to steal a non-Pikachu Pokemon so the boss can use it as a hairbrush" nowadays, though. You know, making a proper graph could be fun.

Elf, just a slight correction, the margin is 33%. The store pays 45 bucks for one of these hypothetical units, and makes 15. I think you did your calcs bases on a 60 cost to the store.

33% is not all that bad when you consider that retail margins are factored per foot of shelf space. Game cases don't take all that much room when arranged spines-out.

Oh yes, stupid me. _

Still, 33% is very much on the low end of what a retailer wants to be making. As you said, foot space is taken into account with margins, but it isn't the only factor. Number of feet through the door into a retailer is a consideration (games retailers don't have the same commodity business a supermarket does, so margins need to be higher, as is inventory levels). The leaner the inventory level, the lower a retailer can afford on margin. However, I suspect that a games retailer would need a fair sized inventory (size in terms of value, not space), to account for expected demand - the games retail business doesn't really work with people placing orders and waiting for a new shipment - customers don't have the patience for that kind of thing.

Ideally, a games retailer would want to make 40-50% margin to be genuinely profitable. I say this on assessment of the second-hand games market, where the retailer has far greater control over margin - generally markup on those sits around 50%.

Either way, there is no way a games retailer could exist on a margin of less than 25%, so the claims that games are overpriced at retail is still very unreasonable, at best, a retailer that had no plans on making a profit or having money in reserve for poor sales periods could give you a $5 saving on games.

Don't forget the accessories, too. Tons of margin there. And of course the secondary market items like used controllers, etc., and the used games which you point out.

Good stuff, Elf.

And good find, Firks.

What makes me mad is when the developers make a bad game and they charge 50-60 $ for it. That's just robbery.

I thought the extra cost for Australia was a tax for having the nicest beaches?

This explains why peripherals are so expensive. Microsoft for example (since they seem to gouge the most) probably have a high margin for the store in lieu of the low margin made on games. And those garbage 3rd party controllers that EB/Gamestop sell probably make a killing.

Pokemon FTW!!!

@Adamant Don't blame me, I didn't make it.