What caused the UK games crisis?

Michael French
What caused the UK games crisis?

They said it was the summer of games – but only thanks to the Olympics. If you’re a games retailer, it has been a miserable few months, with the market at times selling fewer games than ever as the release schedule dried up.

What’s caused the decline? Two weeks ago we published comments from Koch Media boss Klemens Kundratitz where he asked: “We’re trying to understand the mindset of English retailers.

“Everyone in Europe is looking to the UK, but scratching their heads and asking why are they not managing to make money? I appreciate that the market is in a mega-trench, but the crux of the matter is, for many years, UK retail hasn’t managed as an entity to make video games work for them. Why is that?”

Turns out, a lot of MCV readers plus the MCVuk.com audience have an explanation as to why – especially retailers themselves, who contacted us with their comments or posted them on the site. Here are highlights from all the feedback we’ve had.

RETAILER VIEW: “No store can survive on the popularity of two games released each christmas”

We have customers who call themselves hardcore gamers, but they only buy two games a year, FIFA and Call of Duty.
No retailer can survive on the popularity of two games and since supermarkets will go for loss leaders and devalue these titles, people will go where the price is lowest.
There is too much focus on Q4 and no one can buy every release that comes out at Christmas. Retailers are left to die every summer. The bills still keep coming but there’s no new products for two months sometimes longer.
Everyone knows you can’t live off £2 profit selling a new game bought at £32.33 plus VAT. The same title is probably £34.99 new if you find it in a supermarket.
Maybe the problem is this generation being around too long. People want something new to look forward to.
Lee Johnson
via MCVuk.com

“Younger gamers play FIFA – you hardly need a specialist for that”

Could it be that the PlayStation generation grew up? I am now mid-thirties, I grew up in the golden age of gaming, SNES, Mega Drive, PSone with new IP, something to get excited about. Gaming now seems to be all about the yearly recycle of the same ideas, forcing DLC down your throat. PS3 and especially Xbox 360 have run out of steam. Younger gamers play Call of Duty and FIFA, you hardly need a specialist retailer for that.
Tony Durham
via MCVuk.com

 “Online codes for second-hand games was a big blow"

I think it’s a combination of over saturation, the recession’s going on a lot longer and games are a luxury item – although it’s not because it is also quite mainstream now.
And availability on the internet is just so cheap.
Second-hand games lose their value so much and part of that is because of these online codes now. That took out a massive chunk. That was a big blow to our business.
It means the publishers are now getting their money out of the second-hand market and taking it away from us. Fair play to them, they’re doing what they’ve got to do to survive. It’s a hole they’ve been wanting to plug for a long time and they’ve found a way of doing it.
It’s just generally a tighter squeeze on everything, from every angle. There’s a lack of releases now because publishers are being tighter, they’re not just releasing games willy-nilly because they know they’re not going to get bought and it’s just going to waste money, so they’re more cautious with what they’re actually releasing.
John Chambers
FLB Enterprise

RETAILER VIEW: “Don't blame us again"

These latest concerns just seem to be blaming the situation on us retailers. Again. 
UK retail, as with all retail, has had a tough few years. But for the independent retailers out there it’s a good time to be in business looking at what we’re doing in comparison to the market. There’s a lot of independents out there that are growing in these times. 
We’ve gone from one store in 2010, to three and this year we’ve opened out Folkestone store, and just re-launched our website and we’re also now searching for a site for our fourth store. So there is growth out there. But my belief is that the drop in UK games retail is simply the week two sales of new releases have dried up. With more consumers knowing that publishers will drop the prices on new releases within weeks to stimulate the market, it’s having the reverse effect and slowing total UK games sales.
Independent retailers have said for years that the second-hand market fuels the new market, but publishers’ persistence to include DLC and more shockingly the release day DLC. This is moving sales from pre-owned to new, yes, but it’s also causing a £39.99 release to drop to a £19.99 release much quicker than it would have.
Not a bad thing for consumers, but the perception to consumers is that they can now wait a week and purchase the title that much lower.
That said, independent retailers can budget their day one stock levels around it and take a hit on relevant releases to move the stock through. It’s the big chains that will suffer with X number of stores each holding X number of copies. Unless they have a good sale/return policy with suppliers then fingers will get burnt again this Christmas.
Just my thought when I saw the blame again landing on retail’s door step.
Chris Muckell

"Reliance on supermarkets came at a cost for games"

I have been out of the games market for many years now, but I was formerly national accounts manager for a games publisher. I was charged with introducing our products into the big supermarkets. I had my reservations, but no one took much heed – there was, after all, profit to be made.
Now don’t get me wrong, I am all for free trade and a competitive marketplace. But these days I stand in my local supermarket and stare at the racks of product, all while many independents have gone out of business.
There is no one to ask what the differences are going to be between the 2013 version of a game and the 2012 version.
From the publishers’ standpoint in the years to come, I wonder if they will be treated like the farmers are by the supermarkets? ‘Our customers only want button mushrooms that aren’t open, the carrots have to be orange and straight, and as we own the market share we will tell you how much discount we get.’
By putting all our eggs into one trolley, there would be no need for a sales or marketing team. And because all the little boxes all look just the same we can get rid of the design team as well. We won’t need to look for new markets, as they will be unable to compete. The guys that actually program the software will be the only ones that are safe, with a job for life programming yet another version of the same game year after year after year on a never-ending production line of misery. Because costs are so great in producing new boxed titles, software houses will only be as good as the last software house they swallowed up.
You ask about the crisis within the games industry. The problem is boredom. Where are the new and exciting games, the ones with a different slant and new perspective, or does it, as I suspect, come down to money? In the past you could knock something up in your back bedroom, slap it on a disc. Now it takes years to produce anything half-decent, and more importantly the money men who control the purse strings are in control of everything.
So, the solution? Take a backwards step, get out of the food nationals, and always look to the little acorns. If we don’t we become just another button mushroom, one more product on the ever expanding shop floor of the food multi-nationals. It’s not that I am against the people who work for the supermarket chains, but rather the all-grinding power of the black holes they have become.
Neil Wilson
Former Electronic Arts National Account Manager

“Single player games lasting four to five hours is a joke”

Consumers these days will wait for reviews from other buyers after a game is released before parting with their money. It’s pointless relying on the main review sites. And with single-player games lasting four to five hours,  publishers are having a joke – this is where the second-hand market comes into play.
Kevin Ward
via MCVuk.com

“Some people can’t splash out on games like they used to”

Is this pattern not affecting every part of retail and not just video games? With constant increases in travel costs whether it be, rail, car, bus and other aspects of life increasing in price some people just can’t afford to splash out on games like they used to. I know personally I don’t buy half as many games as I used to, mainly because I am done with them in an evening, so I stick to buying RPGs or games I know I’m gonna get a good 20+ hours out of at the very least. Online multiplayer no longer interests me either unless it’s private with friends, so the likes of Call of Duty no longer appeals to me in the slightest.
I usually also have to trade-in my old games to buy new ones, but with me buying less I have less to trade-in. And in my eyes ‘not buying as many games’ will still look over indulged to a casual or non gamer.
So, yeah, I only have six or seven definite buys out of the 20 or so ‘games that will save Xmas’ MCV wrote about.
via MCVuk.com

“Why would anyone in their right mind buy a game on release day?”

The problem is simple. Games prices are depreciating too quickly. Take Binary Domain as an example released on February 24th in the EU. I got it for £9.91 new from Tesco Homeplus on August 11th, less than six months later. Why would anyone in their right mind buy a game on release day when a short wait can save you a lot of money?
Paul Nolan
via MCVuk.com

RETAILER VIEW: “I won’t order large numbers of triple-A hits and instead make sure my regulars are looked after”

The reasons the industry is imploding are several which are connecting together. When I started out six years ago the bank gave credit as did the suppliers, which enabled a good standard of stocking. Customers wouldn’t consider paying any more than £39.99 for a game, and expected to trade in against a new purchase.
Due to growth I was able to absorb this, until the bank and then a few weeks later suppliers withdrew credit and from then on it was cash up front. This wasn’t just the industry’s fault, I was told it was the decisions of credit insurers and underwriters to withdraw across the retail sector. How many retail businesses can survive without credit for stock?
The ridiculous release dates now are a hinderance, during the summer drought I have no end of customers wanting a new FIFA, Battlefield, Modern Warfare or GTA. But cinemas tend to have a big release each month, they don’t have nine months of drivel and then six blockbusters in four weeks. And a cash up front model with the suppliers makes that even worse. I need my stock on Thursday for Friday release, so I pay for it on Thursday, customer comes in Friday morning and pays by debit card… and my bank give me that money the following Wednesday. Any releases that are on a Tuesday have to be ditched and now many releases have to be ditched because of cash flow. Customers are turning away in droves – not just from me, because I am trying to hold my prices down – but other big chains, and I cannot capitalise because I am caught in the cash flow trap.
Customers are trading in games, but the industry doesn’t want that and yet the customer won’t pay the price demanded, and won’t do digital once they try it and find out they have no resale value. Either the price of new releases needs to come down with a 30 per cent margin or the retailers will start having to charge RRP to cope.
Xbox Live and PSN top-ups should be available to retailers via trade hubs, or via EPOS, rather than buying cards cash up front with little margin, this mirrors previous practice in mobile phone shops where top up vouchers used to have to be bought in advance, whereas now you can have a linked terminal. I have these in two of my shops so could use these to provide the service.
I can guarantee that I will not be ordering large numbers of Call of Duty, FIFA, Assassin’s Creed and will be concentrating instead on making sure my regular customers are looked after.
Change is needed and fast.
The Old Man
via MCVuk.com


Tags: Retail , uk , games , video games , crisis

Follow us on

  • RSS