Pachter Predicts Problems for Best Buy Pricing Program

[Monshroud]

I'm not sure what the GameStop's are like in your area, but where I live most used games that are on their racks a few days to a week after a new game comes out are at most $5 off. I've seen as little as $2. Considering that Best Buy purchases titles in huge bulk, they can probably afford this, since their bulk pricing gives them more profit margin to play in.

The other thing you are forgetting is that Best Buy is also hoping when you come in to buy that new video game at a used game price, you might also pick up a CD or DVD, maybe an accessory, heck even some candy or a soda, then they make more money. You came in ready to spend $50 - $60 (with tax included) and you droped $75 - $100. They are willing to lose a little money on one side and hope they profit on the other.

 

[cleverlymadeup]

this won't end well. i don't think bestbuy will really have enough to last doing this. the difference between bestbuy and gamestop/gamecrazy is that gs/gc only deal with video games and they've been doing for a lot longer than bb has and still will be doing it for a long time. i think bb will give up on the used game market at one point

 

[The Shade]

Pachter sounds like he's right on this one, but my goodness that man's opinionated, in't he?

 

[Talendra]

Well I don't know about Gamestop, but I have heard EB Games in Aus is the same company. The other day I bought Zelda phantom hourglass from the gametraders, after first checking out EB (something I rarely do as I consider them the devil). I paid the same for anew copy as they wanted used.
I think this will work well for them, and us. They make less per game, but they will also have more sales to make up for this. Also Gamestop will be forced to lower their used prices if they want to compete, seems pretty win win to me.

 

[GamerPhate]

I'd be down with it. But again, it isn't going to help their bottom line. But see people, what you don't know is, they don't make money on the CDs. Videos, Games and stuff like that. I use to work there, and could buy anything at 15% above cost. All media was at cost if not a dollar over or under. They don't really have those products there to make money. They are like the big toys playgrounds mc donalds has to convince people to come in and stay for a while. The thing that best buy makes money on is home and ESPECIALLY car audio! That stuff is marked up 2 to 3 times cost somtimes, if not more! If you buy a new CD, or DVD, you might want to buy that new big arse TV too, at least they hope you will. And evidently the model works well enough for them to have survived this long in the market. The other competitors haven't done so well..

But I do agree, they will really be losing alot of money doing this, but you know all the gamers would be hanging at Best Buy

 

[Don't taze me bro]

It won't be the first time a company sells certain things at a loss to entice customers into their store. I worked in a large retail chain before going to University. I saw two examples; one was selling top 40 CD singles and Albums below cost price (due to competition between this retail chain, and a specialty store in the same complex), and providing 1 hour photo developing, which operated at a loss.

1 hour photo developing ensures that the customer has to either browse, or return within that period. Selling CD singles / Albums at a small loss got people in the door. If the customer came to you instead of the competition, their was also a chance they may also buy something else while they were in the store. If this happens, then the retailer has scored.

It is only 1 Best Buy store. Yes, they may lose money on each game they sell (or at least their margins will be shot), but if they can wrest a few customers away from Gamestop, and also get their other business (game guides, controllers, peripherals) etc, it may work out for them.

 

[Markness]

[They aren't sold for massive profit. The price of any game needs to be split between three parties minimum. We have the Developer, the Publisher and the Retailer. Throw in the cost of development and you can see why games are so damned expensive.

I call "BS". We've already seen that people can build up a substantial economy based around selling games for $5 a pop, and the things they were apparently building with that profit seem perfectly in keeping with a game's development budget.

I don't know enough about the gaming industry to argue with the rest of your points, but pirates have no costs. Have much money does it take to download a game and stick it on a disk? They don't have to pay the people who made the game. Im not sure what you mean by the sentence I have bolded, could you explain it?

 

[Frizzle]

I think BB might be trying to just get more people in their stores in general. There is always the strategy to get people in with cheap prices, so they buy other things as well. So maybe they only make 5 bucks on a video game sale. Who cares? If they aren't making money anyway, why not just cut a couple more bucks out of the equation and get people to buy other things while they're in there?

Restaurants do the same thing with their food and beverages. Do they make a ton of money off your $20 steak? No. But you want the steak, and you're gonna want other things with it. So they can afford to make a tiny profit off the meat, while compensating for it with other products. Glass of soda? you pay $1-2. It costs them MAX .03 per glass. That's insane profit margine, especially since you need to have a drink with your dinner.

I hope BB does well with this. Could benefit everyone in the end.

Except Gamestop. But I don't really care about them to begin with.

 

[SirSchmoopy]

Best buy would have to work with publishes for this to work and to be honest, publishers should adjust.

Gamestop is selling your game for 40 bucks? The new price of it should be 40 as well. Keeping a "New" game at 60 when best buy will sell used for 40 just costs you money.

 

[iamnotincompliance]

*snip*

Far better worded than I would have put it, so I'll go with that, but I have more to add. Gamestop and Game Crazy have, I assume, just games and game accessories, if you'll forgive the Hank Hill tone of that statement. Meanwhile, Best Buy, which would likely lose money on game sales, will still be making money on their washers, driers, refrigerators, televisions, stereos, music, DVDs, Blu-ray, computers, cameras, wires, cables, etc, etc, and, of course, the Geek Squad. Whether that's enough to balance the scales is one of the big questions, the other being what it'll do to the other players in their little game.

My plan to sit back and see what happens.

 

[randommaster]

Most people here seem to overlook the fact that it's only one BB doing this offer, including Pachter himself. Of course it won't last that long, it's a trial taking place somewhere where the sales volume is low enough that if BB loses money on this, it won't be a whole lot. BB isn't going to be looking at profit from the games, they're going to be looking for an increase in games sold. If they sell enough, BB will probably expand the trial to more stores to make sure that this wasn't an anomaly.

Also, GS/GC won't have used copies of games for sale until at least a few days after release. That means that BB won't have to offer a discount on new games until the immediate rush is over, which is where most of the money comes from. Additionally, if this program becomes widespread, BB could probably purchase games cheaper than GS/GC by being able to tell publishers that they aren't in the used game business, so theey will be ordering more games.

Best buy would have to work with publishes for this to work and to be honest, publishers should adjust.

Gamestop is selling your game for 40 bucks? The new price of it should be 40 as well. Keeping a "New" game at 60 when best buy will sell used for 40 just costs you money.

The thing is that used games are where GS gets a large portion of their money. They probably order less games than BB because they plan on making up for a smaller profit margin with used game sales. If they cut those profits, it will hurt GS more than BB. Additionally, the used game policies at GS are crap and many people would probably want something that is guaranteed to work instead of something that they have to go home and test.

Pachter sounds like he's right on this one, but my goodness that man's opinionated, isn't he?

Pachter is just a troll who goes around in the morning reading forums, then yells things at the games industry every now and then to get a response. He doesn't look at research or data, he looks at forums, like this one, and uses that to predict what the market will do. That is why he predicted the Wii would come in last, and that is why he claimed that the PS3 would be first if the price dropped, BECAUSE HE READ IT ON THE INTERNET.

 

[SirSchmoopy]

The thing is that used games are where GS gets a large portion of their money. They probably order less games than BB because they plan on making up for a smaller profit margin with used game sales. If they cut those profits, it will hurt GS more than BB. Additionally, the used game policies at GS are crap and many people would probably want something that is guaranteed to work instead of something that they have to go home and test.

Reread what I said because you missed the point or didn't understand it. The people who buy used games do not care if it's new because it's 5/10 dollars cheaper. If Best Buy worked with the distributors to cut down the price of games with a "match" Gamestop program then everyone wins but gamestop. When Game Stop sells a used game game stop gets 100% of the profits because it's USED. If best buy sells a NEW GAME those profits are split among best buy and the publishers/developers of the game.

Game developers get ZERO, ZIP, NADDA from used game sales. This is why were seeing platforms like Steam on the rise and downloadable content becoming a new focus point for game developers. It combats an industry where the retailer is getting far too greedy for there own good. While I'm not sure how Best Buy is approaching this, I hope they succeed because the used game market is hurting the industry. Game developers should add Online Play and Downloadable content if they feel it's good for the game, not make it mandatory to attack the used game market.

 

[randommaster]

The thing is that used games are where GS gets a large portion of their money. They probably order less games than BB because they plan on making up for a smaller profit margin with used game sales. If they cut those profits, it will hurt GS more than BB. Additionally, the used game policies at GS are crap and many people would probably want something that is guaranteed to work instead of something that they have to go home and test.

Reread what I said because you missed the point or didn't understand it. The people who buy used games do not care if it's new because it's 5/10 dollars cheaper. If Best Buy worked with the distributors to cut down the price of games with a "match" Gamestop program then everyone wins but gamestop. When Game Stop sells a used game game stop gets 100% of the profits because it's USED. If best buy sells a NEW GAME those profits are split among best buy and the publishers/developers of the game.

Game developers get ZERO, ZIP, NADDA from used game sales. This is why were seeing platforms like Steam on the rise and downloadable content becoming a new focus point for game developers. It combats an industry where the retailer is getting far too greedy for there own good. While I'm not sure how Best Buy is approaching this, I hope they succeed because the used game market is hurting the industry. Game developers should add Online Play and Downloadable content if they feel it's good for the game, not make it mandatory to attack the used game market.

Yeah, you're right, I guess I misread your post or something. Looking forward to today's episode.