PSP Go

[Shifty Geezer]

You can cite lots of stores selling products with a smaller markup. However, game stores are built around a more profitable product lineup. It's not that these stores can't take profits per item, but that they'll take less profit for stocking PSPGo than stocking PSP and its associated game sales (unless you want to look at low PSP game sales and say they don't sell them either ). Wouldn'y you rather stock the produxts with the higher profit margins? Especially used games, used-game bundles, etc.?

 

[DrJay24]

but that they'll take less profit for stocking PSPGo than stocking PSP and its associated game sales

So you don't stock the Go and people come in to buy it, now they go to your competitor and buy everything. The answer is stock both, maybe just push the PSP-3000 if you want UMD sales.

 

[Shifty Geezer]

Well, if your forecasts for PSPGo are low enough, you may feel it's not a loss worth worrying about.

 

[Brad Grenz]

The real problem is that the profit margin on console hardware is ~$5. Since this thing is specifically designed to eliminate software entirely, why would anyone sell it? If retailers could make a 20% margin on it, might be a different story.

Normally that's the case, but one of the reasons the PSP Go is as expensive as it is, is because it has a much higher profit margin than most console hardware. That's a concession Sony has made to retailers. They'll make a good bit of profit on the system to make up for less potential sales in software. Otherwise it would probably be closer to $200.

 

[Rolf N]

You can cite lots of stores selling products with a smaller markup. However, game stores are built around a more profitable product lineup.

Then this type of store is going to die out and its space in the market will be filled by the general retailers that have more realistic business models. I have no sympathy for a Gamestop or whatever wiggling and screaming a bit now. There was a niche they operated within that's going to close as technology allows it to close. They are not entitled to indefinite artificial support. They aren't entitled to anything at all.

It's not that these stores can't take profits per item, but that they'll take less profit for stocking PSPGo than stocking PSP and its associated game sales (unless you want to look at low PSP game sales and say they don't sell them either ). Wouldn'y you rather stock the produxts with the higher profit margins? Especially used games, used-game bundles, etc.?

Rational business behaviour is to take what you can get, whatever that may be. Boycotting product lines out of spite doesn't help your bottom line at all.

 

[obonicus]

Is this factual or speculation?

Well, no one has real numbers, but it's what Sony has said. I don't think retailers have denied that the margins are higher, but rather argued that the margins aren't high enough.

Given that PSP Go!'s model is such a threat to the current model of games retail, I think most retailer complaints are hyperbole.

 

[obonicus]

Interesting considering how Circuit City is no longer in business here in the US and how Best Buys earnings are down (though revenue was up) even including this statement in their IR: "Comparable store sales gains in notebook computers, mobile phones and flat-panel TVs were more than offset by decreases in gaming, digital cameras, music and movies." Amazon took a similar hit and also mentioned gaming as a significant cause. Hyperbole, maybe, but I don't believe it is coming from the retailers...

No, I mean that if you read what the retailers mention as the system problems usually sounds the same and is essentially a listing of forum complaints (high price, smaller screen, no umd option), which are always hyperbolic in nature. There's a conflict of interests there, it's in the best interest of game retailers to keep the 'gamestop' used model going for as long as possible, which a move to DD will hurt. Hell, didn't Best Buy, Toys 'r' Us and Amazon just join the bandwagon?

On the other hand, publishers are convinced that used game sales hurt their bottom line (an assertion that's as hard to quantize as the 'piracy hurts game sales' assertion) so they like to appear publically like they appreciate the system. I think that the sudden surge of support for the PSP (outside of Japan), especially for big franchises, is in part because of that.

Personally, I'm suspect that not only is this the last generation in which we have consoles as loss-leaders, it's the last generation in which consoles will be sold at minute margins.

And for the record, though I think a DD-focused future might mean cheaper games for me if no IP barriers are implemented (and I never sell my games) I think rest of you will be screwed over by it. And the PSP Go! is pretty sweet, but since I lost my PSP recently, I'll probably just buy another Slim.

 

[Phil]

MediaMarkt is a lot bigger, but even that might not be a problem for the PSP Go. I don't know what it's like in the rest of the world, but if I look at the amount of different retailers that sell games and consoles in my area. I should still be able to easily buy a PSP Go, even if most of the major retailers stop selling them. And the ones that keep selling them might see a sales increase because there are fewer competing retailers.

You're right. Though I'm fairly certain that game stores would have even less incentive to sell a device that requires their customers to buy online, depriving them on their main income. At least, a large store like MediaMarkt has enough other products to be worried about the small impact of a single handheld device, which is why I thought them not intending to sell the PSPgo is a bit surprising.

I actually remember a sales person telling me (not Mediamarkt) that this boycott effort is quite widespread among [game] retailers. Not that it really worries me though - people who will want a PSPgo, will surely find a place to get one, as will I. :smile:

 

[Prophecy2k]

You're right. Though I'm fairly certain that game stores would have even less incentive to sell a device that requires their customers to buy online, depriving them on their main income. At least, a large store like MediaMarkt has enough other products to be worried about the small impact of a single handheld device, which is why I thought them not intending to sell the PSPgo is a bit surprising.

I actually remember a sales person telling me (not Mediamarkt) that this boycott effort is quite widespread among [game] retailers. Not that it really worries me though - people who will want a PSPgo, will surely find a place to get one, as will I. :smile:

I think the biggest problem for retailers is that regardless if game stores boycott a product like the PSP Go, more general stores like WallMart and Tescos (here in the UK) will have no problems selling a handheld like that.

The games stores will not gain anything from not stocking or selling the Go, and those retailers that do will sell a good solid healthy chunk of them.

At the end of the day the consumer will end up getting their PSP Go and buy all their games via DD. As far as I can see ultimately it's the retailers that will have to change sooner than later, as selling the PSP Go at small margins along with accesories and PSN cards are much better than allowing general retail chains take your HW profits and inevitably cut you out of the loop on games anyway.

As long as the more general purpose stores exist, games retailers won't really have a leg to stand on to be fair...

 

[Rolf N]

I do not view the not stocking something model as completely irrational for outlets that only sell new products. If you consider the gaming space finite, you are asking companies to now stock a product that is not replacing its predecessor, this is not a new iPod launch where the stock has dwindled and can be replaced with the new model, or in keeping with Sony, where you allowed your PS3 stock to fall to levels where upon refresh you will have the new slimmer model. No, the PSP will still be refreshed and now as a retailer you need to find additional space for the Go as well and its associated game cards and accessories. To Shifty, while cards do take up less space when it comes to marketing they may still be placed in game cases to draw eyes since a stack of game code cards does nothing to help sell a game.

I don't see the relevance of the PSP Go's relation to the UMD models for a retailer. It's a box with size and weight X and margin Y. If that gives a ratio that's competitive with the other items you carry, you should sell it. That's the day-to-day business.

Of course there's the other side where you might wish you had some influence on what products are getting made at all, but we're well past that stage. The PSP Go is announced and will come out, no matter what the retailers say. All a retailer can choose now is whether or not to carry it.

 

[wco81]

Food staples like milk and eggs may carry low margins but they have much higher volumes.

Media stores depend on higher software margins whereas Wal Mart might use media as loss leaders to bring people to the stores.

Is Gamestop carrying the PSPGo? They can't sell new or used games (where they really make the margins) for it.

Plus the architecture is old and the success of the iPhone may be resetting expectations for portable/mobile gaming. Instead of an attempt to shrink down deep console games into a handheld format, it may be that the only reason to have games on a portable device is for short bursts of gaming during the day. All the better when such small-scale games costs as little as 99 cents.

If portable gaming becomes disposable -- 99 cents games, you just play it and delete it, don't resell it, don't trade it -- no need for dedicated portable gaming devices either.

 

[Prophecy2k]

If portable gaming becomes disposable -- 99 cents games, you just play it and delete it, don't resell it, don't trade it -- no need for dedicated portable gaming devices either.

I don't think that'll ever happen though. If the PSP and Nintendo DS/DSi have shown anything, it's that there is a very strong market for dedicated portable gaming devices. A market that wants much more than just the "fun for 5 mins" throw-away experiences that a mobile phone or iphone would give.

While I personally think that quite alot of PSP's "PS2-size" games on a handheld have proven a bit too much for a portable gaming device, I think a lot of other smaller than console titles (yet with much more substance than an iphone game) are the most ideal for the PSP/DS wielding market.

With Sony introducing the new Minis initiative with PSP, the PSP as a dedicated gaming device garners a much broader appeal as it can now serve the "fun-for-5-mins" iphone audience, as well as those who require more substance in their portable games. For that reason I see this kind of thing being the future of portable gaming and not necessarily the iphone.

 

[Rolf N]

I don't think that'll ever happen though. If the PSP and Nintendo DS/DSi have shown anything, it's that there is a very strong market for dedicated portable gaming devices. A market that wants much more than just the "fun for 5 mins" throw-away experiences that a mobile phone or iphone would give.

It goes hand in hand with the control schemes. Interfaces limit the kinds of interactions you can put in your game. If you want a more complex interaction you're going to need a wider interface.

Case in point: press and forumites have repeatedly expressed wishes for a second analog stick on the various PSP iterations.

 

[Prophecy2k]

It goes hand in hand with the control schemes. Interfaces limit the kinds of interactions you can put in your game. If you want a more complex interaction you're going to need a wider interface.

Case in point: press and forumites have repeatedly expressed wishes for a second analog stick on the various PSP iterations.

Very true, however I'd even go as far as to say that by widening your control interface on a portable gaming device you could also inadvertently end up "turning off" the more casual audience who prefer a more simplistic, intuitive or natural interface, e.g. a touchscreen.

I'd even bet that Sony will forgoe a second analogue nub on the PSP2 whilst adding touchscreen support. In that they'll be forcing developers to build games for a more simple and accessable control interface rather than the temptation of simply porting entire console games onto the next-gen PSP.

Personally though, I'm in the camp of those who would have loved the PSP to have simply been a conpact "SIXAXIS controller with a screen", since that would have allowed for a much greater potential for Sony's remote play function.

Just imagine streaming KZ2 over WiFi to your PSP... mmmnnnnn nom nom nom.

 

[fearsomepirate]

It comes down to unit profit * sales volume. How many PSPs can a single store expect to sell in a month? Most retailers around here barely stock any PSP games or consoles. I don't know what it looks like worldwide, as it obviously depends on the store and the region. Judging by Wal-Marts shelves (my local Wal-Mart has about 15 different PSP titles in stock at any time, less than they even have for PS2), people who do buy PSPs aren't really buying them there. So if they're selling only a few a month, and you eliminate game sales entirely, a bump in how much they make per console isn't going to translate into much revenue. That's doubtlessly what retailers are looking at (contrary to popular belief, retailers do not decide whether or not to stock a profit based on fanboy allegiance; it's whether or not they expect it to help them make money somehow).

 

[Prophecy2k]

It comes down to unit profit * sales volume. How many PSPs can a single store expect to sell in a month? Most retailers around here barely stock any PSP games or consoles. I don't know what it looks like worldwide, as it obviously depends on the store and the region. Judging by Wal-Marts shelves (my local Wal-Mart has about 15 different PSP titles in stock at any time, less than they even have for PS2), people who do buy PSPs aren't really buying them there. So if they're selling only a few a month, and you eliminate game sales entirely, a bump in how much they make per console isn't going to translate into much revenue. That's doubtlessly what retailers are looking at (contrary to popular belief, retailers do not decide whether or not to stock a profit based on fanboy allegiance; it's whether or not they expect it to help them make money somehow).

But you're missing the fact that Sony aren't removing game sales entirely... They're offering an additional SKU of the PSP which doesn't use physical media. The PSP 3000 still exists and you can still make money off that. If anything the price difference between PSP and PSP Go could allow you as a retailer to increase your PSP sales by persuading customers coming into your store for a PSPGo to get a PSP 3k instead (it's certainly not hard to point out the benefits of the earlier model.

Ultimately, not stocking the PSPGo doesn't help you make any more money.

 

[obonicus]

It comes down to unit profit * sales volume. How many PSPs can a single store expect to sell in a month? Most retailers around here barely stock any PSP games or consoles. I don't know what it looks like worldwide, as it obviously depends on the store and the region. Judging by Wal-Marts shelves (my local Wal-Mart has about 15 different PSP titles in stock at any time, less than they even have for PS2), people who do buy PSPs aren't really buying them there. So if they're selling only a few a month, and you eliminate game sales entirely, a bump in how much they make per console isn't going to translate into much revenue. That's doubtlessly what retailers are looking at (contrary to popular belief, retailers do not decide whether or not to stock a profit based on fanboy allegiance; it's whether or not they expect it to help them make money somehow).

Then why carry PSP at all, though? It's not like its software sales are great. That's the major disconnect -- the PSP Go! is a PSP that the retailers can actually make respectable margins off of, since they don't really make much that much off games to begin with. They don't because they're extremely threatened by the idea of DD (especially DD when tied to a closed system) and would like to nip it at the bud.

 

[patsu]

Accessories for PSPGo:
http://www.scei.co.jp/corporate/release/pdf/090924c_e.pdf

 

[fearsomepirate]

Then why carry PSP at all, though? It's not like its software sales are great.

No, that's not a "major disconnect." Obviously, PSP software sales are good enough to justify the 15 or so titles they keep on the shelf. They are obviously not good enough to justify having a dedicated case. Unit hardware sales are obviously not high enough, and the margin is obviously not high enough, to justify selling a $250 unit that no one will buy any packaged software for, ever. These things are obvious by simply looking at what retailers do.

They don't because they're extremely threatened by the idea of DD (especially DD when tied to a closed system) and would like to nip it at the bud.

Wal-Mart is the USA's biggest CD retailer. It also sells iPods. The difference? iPods sell by the million. The PSP sells by the thousand.

The major logical disconnects are not in what retailers are doing; they're in your head. Retailers are in general pretty smart about retail; that's why they make money doing it.

 

[Shifty Geezer]

Wal-Mart is the USA's biggest CD retailer. It also sells iPods. The difference? iPods sell by the million. The PSP sells by the thousand.

That's being a little bit melodramatic. There are 50 million PSPs in the wild, yet the way you phrase it iPod is outselling it 1000:1!