Tesco : Games retail is Unsustainable

[EvilBoris]

The current games retail model is not working, says Tesco’s entertainment chief.

Mass market retailers have told MCV they are finding it hard to justify giving shelf space to games because they are high-risk and low margin products.

But Tesco’s Rob Salter says that this situation can be changed if publishers and retailers work together on a new, sustainable strategy.

“I think there is little doubt that the current commercial model for games as packaged goods is unsustainable,” he said.

“In determining how resources are allocated, space for example, a retailer looks at key factors like market growth, margin, cost to serve and ease of operation, shrink risk, returns and exit protection, and broader traffic and spend driving properties.

“Video games currently scores poorly on every one, and that cannot be good for anyone involved in the games business and for it’s long term future.

“We can address many of these issues, but it requires a collective will to do so between both publishers and retailers.

“Digital does and will play a key part in the future of the video games business. However, as others have learnt to their cost, having an ambition without a clear plan of transition that retail partners and customers buy into, is even more risky than the business we are already in.”

What solution do you think there is to this problem facing our beloved industry?
1 Use codes to discourage used games purchase?
Increases in New Price?

Or just that everything must be cheaper and the industry can get ****ed?

Personally I think EA has the right idea, every time.

['Press Start']

How about shops stop trade ins and codes with new games are dropped. Then if you wish to sell it on you must do it privately. Also, games stop coming down crazy prices 1 month after release.

Maybe part of this is the gamers fault perhaps? maybe there is a large portion of gamers who just buy games because they are cheap or have dropped in price. These gamers already have too much to play and they end up not playing the cheaper games they purchased therefore they trade them in, only to be bought by more gamers who only play the first couple of stages then trade or let it gather dust on the shelf.

Perhaps if games did not become so cheap so quickly in such abundance these hoarding gamers might be more savvy with their purchases and buy more selectively with less pre-owned games so readily available? Crazy trade in promotions from retailers don't really help matters either.

The above is just a passing thought from my tired mind. Although I can't remember any other gaming generations where so many games were available so cheaply, so quickly.

[FelixofMars]

Yep, not going to drag this all up again but too many, too many sales and not enough reason to actually hold onto games in general. It seems to be getting worse as well. So much choice but so little I care about to put down my money on. I think I have missed out on games I would have paid full price for or almost full price for because there was too much else to play at the time and I knew the price would bottom out within a month. One game that springs to mind is Bulletstorm, I thought it was great but I waited until it was on a deal because I wasn't willing to pay full price at the time.

[rmoxon]

Well, it's piracy's fault isn't it?

[FelixofMars]

I blame EA

[Family Fry]

Ban rEAquest!

[Decider-VT]

Stopping trade-ins sounds like a good idea, but once shops have had a taste of 100% profit on a used games sale it's very hard for them to tear themselves away from it again. I'd like to see someone like GAME try it as part of their restructuring, if only to see if the perceived value of games rises again and they become regarded as more than throwaway entertainment.

It's a bit ridiculous when you think about it- I can pick up something that has had a team of hundreds working on it for three years for less than ?20, yet I was quite happy to hand over ?70 for SNES Sim City years ago.

I blame EA

Ban request.

Edit: beaten!

[Brad]

The answer is digital downloads. Yes, quite the turnaround on my part but it solves every single problem yet only introduces one (bandwidth issues).
I look back fondly at the days of buying snes carts. For ?60. But by being on a cartridge those games basically came with their own drm. They couldn't be copied and put on a torrent site. You could lend to your mates but ultimately the game remained yours and if it was good your mates bought their own copy.

Games cost less to make back then but the market was smaller and no one was saying the used market was killing gaming even though game shops sold used games as well as new.

[Dogg Thang]

Are the margins on games that much lower than any product? Genuine question - anyone know how margins compare among entertainment products and beyond? Any figures?

[smouty]

Perhaps supermarkets are the problem here.

[Sketcz]

I don't believe this.

There is nothing wrong with anything, the problem is corporate greed, Tesco's greed and publisher greed. The industry is huge, growing and making more than anything else, they all just want more money.

We should not be putting up with bull**** stories like this. **** Tesco. I don't want to give up my physical copies or my CAPITALIST RIGHT TO RESELL, just because some corporate pricks have given too high a growth estimate for that year and some foie gras swilling shareholder is sitting in his ivory mansion demanding better stock percentiles.

**** all of these people and their idiotic pursuit of perpetual growth.

Someone read this:

http://www.cinemablend.com/games/Top-Misconceptions-About-Gaming-Industry-40569.html

MISCONCEPTIONS

1) Corporate PR Always Tell The Truth

This is probably one of the most common misconceptions about any industry, but oftentimes you have people quoting a PR response from a representative as if it marks the complete and absolute truth regarding a matter. The reality is that a PR response is just to "Protect Resources" and not necessarily for public relations or to be friendly and helpful.

Oftentimes PR responses are used for the ubiquitous term, "damage control", which once again ties into "Protecting Resources". It's more about the public image of a company and saying whatever needs to be said or doing whatever needs to be done to keep that image from being tarnished or blemished from a leak, a lie, a mistake or a blatant attempt at gouging consumers.

The only time you'll ever get the straight truth from a PR rep regarding a damaging or potentially unflattering business situation is when the company is small and they have a good rapport with their close-knit community or niche audience. Never expect this kind of treatment from a multi-billion dollar corporation.

2.) Publishers Don't Make Enough Money

A very simple misconception. Yes, many publishers do make enough money, whether it's for new games, small games, big games, ugly games or pretty games. To put this into perspective, Electronic Arts' Battlefield 3, in 2011 alone, topped 10 million in sales [via USA Today]. While the specifics of limited editions, collector editions and special editions weren't enumerated, using the base $60 entry fee for the game, you could technically reproduce Gears of War from the ground up sixty-times over. Yes, Battlefield 3 made that much money, alone.

To give you further perspective, Electronic Arts estimates 2012's year-end revenue to top $4.2 billion [via Seeking Alpha]. And just for further reference, Activision's 2011 performance yielded them $4.76 billion, up from the previous year's $4.45 billion [via Variety]. Zynga, the casual games company, posted more than $1 billion in profits throughout 2011. Nexon also recorded $1 billion in revenue throughout 2011 with an estimated company worth of $7 billion US dollars [via MSUpdate]. Publishers don't make enough money? Right.

3.) The Industry Is Dying

This is a weird misconception about the gaming industry. I'm not really sure where this stems from but every once in a while people will comment about the gaming industry dying if gamers don't support X game from Y publisher. The truth of the matter is that while the gaming industry has its financial quarterly faults and fumbles, the industry as a whole continues to grow exponentially each year, especially in the online and casual markets.

The retail market in North America alone is still booming, making more than the music and movie industry combined. There's also the estimates that gaming overall will be worth close to $100 billion dollars by 2014. The PC gaming market alone has exceeded $18.6 billion in 2011, showing that the industry is doing anything but dying.

Also take note that most studios that go into Administration, file bankruptcy and close down either mismanaged poorly (i.e., Realtime Worlds) or have usually been attached to larger publishing studios who are either trying to cut operating costs or make up for a game that may have under-performed, but it has nothing to do with the "industry dying". In fact, the indie market is growing quite expediently and the free-to-play, casual and online sectors are bringing in millions of new gamers each month.

4.) Used Game Sales Hurt The Developers

This is a common misconception spread around to incite fear into gamers to only buy new and not used. The truth of the matter is that buying used or new doesn't affect developers directly as much as gamers are led to believe. That's right, buying new doesn't help a developer anymore than buying used. A good example of this is Blur, where even more than a million unit sales didn't stop Activision from shutting down Bizzare Creations. More than half a billion in revenue in Q3 2011 [via Venture Beat] also didn't stop Blizzard from recently laying off 600 employees, and that last example had nothing to do with used game sales.

Take note that buying a game used hurts a publisher more than a developer but buying new always helps the publisher because when new copies sellout retailers will have to order more copies, thus increasing recorded sales figures for the publisher, and sometimes resulting in developer royalties. The other reason publishers want gamers to buy new has more to do with strengthening their portfolio, since new sales help with both post-launch marketing and annual profit margins, and used sales don't. However, there are programs from some used game outlets that help send money from used game sales directly to developers, such as Switch Games. So it's not as evil as most industry folk would lead you to believe.

Nevertheless, the real issue stems from publishers simply wanting more from the used market, in result the community is fed the misconception that buying used hurts developers. Hence, the reason why there are online passes and the rising trend of disc-locked content. This only seems to be an issue with publishing video games because movie, music and book publishers have yet to implement an equivalent to disc-locked content or DRM for second hand sales.

[charlesr]

I was about to say the same thing smouty.
This particular problem for Tesco is due to... Tesco.
Cheap TVs, toasters, irons, etc. all do well at Tesco because people know they can go to Tesco to buy cheaply.
But you don't think "Tesco do cheap games - I'll buy there". The game isle is always dead whenever I go to Tesco (rarely admittedly).

It's a niche, expensive hobby, where even though the top sellers are zumba fitness etc., there's a very long tail. And a supermarket can't hope to catch much of the tail, so they are really relying on impulse purchases of "casual" games.

The only reason there are games in there in the first place is to try and attract people to the food that would not otherwise buy in Tesco, but it's just not sustainable unless they run the games at cost, because otherwise, who on earth would bother trekking to Tesco, walking half a mile across a car park (gamers generally don't like walking), encountering a rubbish selection of games, maybe finding one they want at an average price and then tramping towards the horizon of a vast store (more walking!), only to be greeted by self checkout tills that don't work, and then back across the car park again.

[charlesr]

However this is good news. The sooner Tesco et al drop games, the quicker we get back to game shops with a decent selection that only have to compete against online sales and not against supermarkets as well.

[Adrock]

It's a niche, expensive hobby, where even though the top sellers are zumba fitness etc., there's a very long tail. And a supermarket can't hope to catch much of the tail, so they are really relying on impulse purchases of "casual" games.

Gaming isn't a niche expensive hobby anymore. What you mean is we are all people who play the types of games that are niche. Basically, its much like the movie industry, for big blockbuster releases there is a guarantee there will be tons of sales and supermarkets can guarantee stock will shift. For everything else its hit and miss.

So basically you need a specialist retailer selling all this crap we play and then the supermarkets can look at the blockbuster titles and decide to sell those. Much like HMV and the dvd market is/was.

[Team Andromeda]

Gaming isn't a niche expensive hobby anymore.

Sorry but it is . Getting the Hardware isn't expensive buying the games is and I think the trouble retail faces with games is that it's cheaper to buy them on-line from the likes of Shopto, Amazone ect rather than go to Highstreet