What is the discount rate is for distributors of video games? (1 Viewer)

[Joe Spratley]

Just curious what the discount rate is for distributors of video games? For example if a game is 49.99 what does EBgames pay for it?

 

[BrianB]

The "trade price" for a videogame priced at $49.99 is usually around $35, of course with discounts off that for bulk buys by the large retailers.

 

[Jay Mitchosky]

Joe, please do not use teasers for your thread titles. If you want to people to respond use something descriptive to attract attention. Thanks.

 

[JamesH]

I have also heard $30-$35 for $49.99 games.

 

[Sean Moon]

Its about 38-41 for most games. I worked a mom and pop and having people in the know at distributers to get this info.

 

[Jeremy Little]

Its about 38-41 for most games. I worked a mom and pop and having people in the know at distributers to get this info.

This pricing is reflective of the smaller purchase numbers of a mom and pop store. I guarantee you that big retailers like EB, Best Buy, and the like pay nowhere near that much.

 

[Joe Spratley]

I thought it would be lower like around $25 especially since the value drops so rapidly. Seems like stores could get caught with a lot of stock that is selling for less than they paid for it.

 

[Peter Manojlovich]

It depends heavily whether you can buy directly from the publisher or if you're a small guy and you have to buy from a wholesaler. Also shipping and handling costs can be very heavy for the mom and pop operations. Let's put it this way, even outfits like EB with their bulk buying power make a hell of a lot more selling previously viewed games than they do from new titles.

 

[Sean Moon]

I can honestly tell you from knowing enough people in places like major retailers that buy in massive bulk, they still pay close to $40 per title. There are no revenue sharing agreements on video games like there are on rental movies. That is why usually you dont see many places have games on discount first week unless its something HUGE, becasue even at 39.99, some of these places are losing a dollar or so, but it gets you into the store.

 

[Peter Loan]

I concur with what Sean posted. Major retailers still pay close to $40 a game. With a 20% markup on software and a 2.5% markup on game systems, it's an extremely tough business. They do make a decent profit on accessories such as cables, controllers, and those extended warranties. Without the used game market, game-only retailers would be in a lot of trouble.

 

[Sean Moon]

Good rule of thumb, go into the mom and pop stores and look at their prices on games, usually they mark up about ten dollars. That is the consensus I got from knowing MANY people that own their own stores.

And yes, most places do make their money on the accessories and whatnot. Systems, usually people dont make a thing on them, maybe a dollar or two. Again, from the mom and pop days and from old jobs, I know that a PS2 that sold for $299, the store had to pay $297 to get it in the first place. That is why usually at system launch that places force you to buy bundles, otherwise they get nothing.

 

[JamesH]

If retailers are paying $40 for games, then explain the Amazon/TRU buy 2 get 1 free sales. They'd be losing $20 on each set of 3 sold, and it's certainly not much of a loss leader since most people just grab the games and go. Plus, it's offered on their website, and I think there are ways to get people to look at a website without losing $20. If TRU took huge losses on this deal, it wouldn't have run for 3 straight years, leading me to think that the prices on games have to be closer to $30 than $40.

I think the lesser amount of games put on sale for $39.99 right at release is mostly reflective of gamers. The retailers probably learned that the hottest games would sell rather or not they discounted the game.

 

[Joe Spratley]

It seems like games only stay at their release value for 2 or 3 months and then drop over the course of the year till they reach $20-$25. I bought a number of games over the past year and haven't had a chance to play a large portion of them. I started thinking that if I just wait a few months to buy new releases then I could save a lot of money. Many of the games I have are on the $19.99 list that I paid $49.99 for.

 

[Lance R]

$40-44 is about the normal cost for a Mom and Pop operation. The Greatest Hits/Platinum Hits/Gamers Choice titles come in at $16-$17. Most of the Mom and Pop stores I go to don't mark them up $10. Stores around here mark up the $50 titles only $3 to $5 (selling for $44.99 to $47.99. The used market is what saves the Mom and Pop stores. They'll pay $20 and charge $30 for the newest games. Of course so many games coming out drives down the prices in a hurry (as most won't be hits). Best Buy and EB must have to write off a lot for these stinkers (how else can they stock 40 or 50 copies of games like Enter the Matrix or Hulk which come out at $50 but drop to $30 or $20 in a hurry). Think about all of the sudden Greatest Hits/Platinum Hits/Gamers Choice titles. They certainly don't give the stores much insight as to what is dropping. Instead, most stores get "stuck" with titles they pay $40 something for and then must sell for $19.99. Look at the Best Buy ads every week. They are usually selling something at a loss (of course the video games companies usually put up some of the advertising $$$).

 

[BrianB]

If retailers are paying $40 for games, then explain the Amazon/TRU buy 2 get 1 free sales.

As has been said right from the beginning of this thread, the major retailers do not pay anything close to what small "Mom & pop" stores pay - their massive bulk buys earn them discounts. The baseline price for a new $49.99 game from a publisher is around $35. Mom & pop stores pay more as they usually go through distributors on top of that. Best Buy et al pay less because of their bulk buys.

I'd be very suprised if TRU were making anything out of that sale. Instead, it got them noticed for selling games & it got folk in the store (a big deal), and I'm sure it also helps clear out old stock just in time for the Christmas onslaught - note the timing of it, right at the start of the big releases, not the middle.