More on the Future of Gaming
Here are some additional comments on yesterday’s “future of gaming business” column.First off, I didn’t mention used games. I think the industry finds itself in an awkward position when the largest game retailer in the country (when the Gamestop/EB merger is complete) would rather sell used games than new ones. Ouch.
There’s absolutely no question that selling a used game makes a retailer far, far more profit than selling a new one. Gamestop and EB are basically sustaining their companies through the sale of used games. So here’s the question: is anyone beyond the gaming specialty stores going to adopt this model? That would be the gaming industry’s worst nightmare, if someone like Best Buy starting to sell used games. I know, it seems impossible, but remember, when someone is making easy money, everyone else is going to want in on the deal, and selling used games is easy, easy money compared to selling new ones. The margins are HUGE—there is a ridiculous amount of room to offer more money for used games than EB/Gamestop and still make a tremendous profit.
I don’t know who’s going to go after that, but I promise you someone will.
What does this do? It forces both console and PC game publishers to move to digital distribution. Here’s why digital distribution is heaven for publishers: it kills the used game market. Even without the other efficiencies of digital distribution, that’s a staggering benefit. It will take more than five years for this to all play out, but again, there is too much money to be made for game publishers to ignore. There are all kinds of issues with storage capacity, Internet access, blah blah blah. Lots of issues. But there’s one compelling reason those issues will be resolved: money.
I also didn’t mention Nintendo. In any discussion of the business of gaming, they belong in there somewhere. It’s hard to figure out where with any degree of precision simply because they are, well, strange. In a business sense, however, in spite of their public image as the whacked out wizards of the magic mushroom, I think they’ve done more to commoditize their business model than anyone else in the industry. They understand that the gaming market is highly, highly price sensitive, and instead of trying to drag the market’s price tolerance up, they’ve instead scaled back the development model to be profitable. Yes, I think Nintendo wants to be innovative in a creative sense, but far more importantly, they want to make money, and they are very, very good at knowing how make money. Just look at the original Gameboy as the textbook example of that.
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