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FEATURE: Can we stop 'suicidal' games prices?

Dominic Sacco
FEATURE: Can we stop 'suicidal' games prices?

“There's no margin to be made on new releases anymore.” MCV hears this more and more from specialist stores every week.

Once upon a time boxed games would be sold very close to their RRP on release day. But this hasn’t been the trend for years.

Earlier this month we revealed the average cost of a boxed game drops by 23.5 per cent after one month on sale, 30.8 per cent after two, and 39 per cent after three. On day one the average cost to the consumer can be lower than the trade price. 

Online retailers and supermarkets are the drivers here. This has put extra pressure on the traditional High Street specialists who can’t compete.

Konami’s UK general manager Pete Stone explains: “Discounting by UK retailers has been ferocious during the past few years. Major retailers justified their discounting by using phrases such as ‘driving volume’ but the reality has been the opposite: it has been a downward spiral. 

“In the long-term we are moving towards a new era in gaming, but UK pricing has probably devalued the perception of boxed games and is leading to retailers no longer finding the category profitable.”

Major chains like GAME and HMV had a very difficult trading period last year, as well as indies who are feeling the pinch more than ever. This is due in no small part to the lack of margin on new titles.

“The discounting is serious and suicidal,” says a leading indie, who wishes to remain anonymous. “The £37.49 average launch price for FIFA 12 was already £5.71 below our cost price.

“I wonder what will happen to publishers when the retailers stop funding the discounted prices for them. Surely at some point the goodwill will run out, and would the consumer really pay £54.99 for FIFA 13? Or £24.99 for a new Blu-ray?”

It’s now such a problem, says HMV, that consumers and retailers could miss out in the long-term as price-cutting distorts the market. 

“Such a high level of RRP discounting is not likely to be in the best long-term interests of the market or even the consumer, who may find it will ultimately result in reduced choice,” the retailer’s head of communications Gennaro Castaldo tells MCV.

“But when you have supermarkets and internet giants using content to drive traffic and share as part of a wider business agenda, it’s hard to stand back if you want to remain competitive.”

Some online retailers have reacted to maintain profit. ShopTo says it ‘sells closer to the RRP than ever’.

“ShopTo has changed its strategy over the past six months,” says purchasing director James Rowson. “We no longer want to be involved in the price war to chase orders at a loss.”

Gameseek’s MD Stephen Staley adds: “We stock new releases to drum up interest in our site but we’re not bothered if we sell any. There’s no point having a big market share on something that makes you a loss.”

There are ways for specialist retailers to make decent money on new goods.

“I have been encouraging indies to diversify into other lines and products, like mobile phone accessories, and hi-tech toys and gadgets,” says The Game Guide’s Chris Ratcliff. “Of course, it isn’t commercial suicide if you can subsidise the losses on new games sales with a healthy pre-owned business model, but even that has been ‘invaded’ by the nationals.”

Online indie Xbite believes a change at the supplier level would help solve the problem. 

MD Nick Whitehead tells MCV: “If the publishers under supplied the market just by five per cent, it would actually ensure a more stable retail price point in the market.”

ShopTo says the answer is not so simple.

“If all games prices go up then the publishers will see a drop in units and may struggle to cover their ever-growing development costs, so the whole strategy needs a review,” Rowson adds.

But with such a competitive UK retail market, there’ll always be those who go low on new releases. The outlets willing to diversify could be the ones which really prosper.

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Tags: Retail , games , high street , video , prices , discounting

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6 comments

This just further highlights the gradual move away from the highstreet.

The supermarkets will always be in competition with each other, as will the online traders, and consumers are more than ever always after a bargain, so those praying for a return to higher prices have a long wait ahead of them.

From a publishers perspective I think a digital only future will break the back of silly discounting, but even then they would have to be careful not to overcharge customers.

As for retail? I think that horse has long bolted.

Joseph Brown

Joseph Brown INDUSTRY
Feb 24th 2012 at 12:03PM

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In a word you can't stop the supermarkets now they're too far under the table to do anything about it! They can loss lead on games knowing they have thousands of products which they can recoup the losses on, for every game they sell, Agnes 84 from The Wirral pays something along the lines of 20p for it despite the fact she's never played a game in her life!

When you have products which you know are going to sell regardless of cost (bread, milk, potatoes - think along the lines of kitchen staples here) then you can essentially put 1-2p on each of those knowing that you will sell them. Say a 2L bottle of milk, i'm guessing the average store will easily sell 1000 of those in a week, same sort of figures with 1KG of spuds, a loaf of medium sliced white. This has all happened because back in the day supermarkets were allowed to expand unchecked into non food items, HMV were too busy trying to shut down Virgin/Zavvi, Fopp, Music Zone et all and allowed it to happen. Finally there's basic sensibility, Game have 600 outlets in the UK, HMV under 400 - Tesco have nearly 3000 locations in the UK, each with necessities inside it driving footfall, HMV, Game please, that's nothing compared with the ability to have YOUR product in prime retail location in even 2000 stores!

The digital future might be good for the publishers, however as we saw last year it's by no means secure and that puts customers off - i'm sure Sony will attest to the nightmare of trying to PR over a fairly high profile breach! There's also the high RRP - £54.99, when was the last time a customer genuinely paid that for a bog standard game? They simply don't accept that sort of pricing structure, the product while vastly improved in recent years simply is NOT worth that in the majority of cases to customers - looks pretty, plays nice, but in 6 weeks time the chances are you've completed the campaign mode & there's something else out there to take you away.

Allan Mounce

Allan Mounce ELITE GAMER
Feb 24th 2012 at 12:35PM

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I would like to offer a different perspective to this article.

Perhaps the selling price of New releases is actually about right. Maybe it is correct that FIFA 12 launches at £37.49.

Could it not be that the RRP's are simply over inflated in an attempt to justify a ridiculous cost price.

stuart milton

stuart milton INDUSTRY
Feb 24th 2012 at 12:41PM

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It's quite clear that the RRP is to blame, not the selling price. People will not pay more than £40 in most cases and even that is seen as too expensive. They could certainly try getting away with selling at £59.99 and see unit sales absolutely evaporate, or it's time to talk to the publishers about why they think they can get away with charging so much.

Though I certainly question how badly mismanaged Game is that they can sell the same game maybe 20-30 times per unit as preowned and they're still struggling financially. Perhaps stop handing out big bonuses and free games to managers who don't do any of the work? (I say this as a former employee)

Mark Darkhart

Mark Darkhart STUDENT
Feb 24th 2012 at 4:14PM

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All of Distribution pitches its Trade Price based on the RRP the Publishers pluck out of the air.

Then the publishers do deals with Supermarkets and online traders because they take so much stock.

In 2009 my business stocked 70% from Official Distribution and 30% from Online and Supermarket for new games.

In 2011 my business stocked 5% from Official Distribution and 95% from Online and Supermarkets for new stock.

This was because the online retailers and Supermarkets were far cheaper than Centresoft, GEM and even Grey distribution.

The problem in the UK will not go away online retailers from Luxembourg (VAT loophole we can't shut) and Supermarkets will kill the games industry the same way as it has with DVD's and Music.

4 years ago every Indie in the UK told Distribution that if the Supermarkets were allowed to grow their Games Market share the Industry will implode, and now it is.

There are no answers apart from one DO NOT LET SUPERMARKETS SELL GAMES. when Red dead redemption was first released ASDA could not sell it. Because of this we sold 100 more copies for this release on day one and day two whereas we would normally have sold 20. Multiply that over all the Indies in the UK. We also sold the game at £39.99 far more than the supermarket would have but joe public did not have a problem at that price.

My point is that if a game is good enough the Buyers will pay whatever it is worth by discounting a new release the buyer assumes it should have been that price in the first place.

Simon Gough

Simon Gough INDUSTRY
Feb 26th 2012 at 11:02AM

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Simon Gough - "Supermarkets will kill the games industry the same way as it has with DVD's and Music."

WIth all do respect the last time I looked DVD's, Bluray, CD's and even vinyl were still redily available.

Also, more music, film and video games are being produced than ever before

Really guys, stop with all this "The world is going to end if the high street dies!" crap. Because that is exactly what it is - crap.

Joseph Brown

Joseph Brown INDUSTRY
Feb 26th 2012 at 8:01PM

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