Gamestop’s Faux-Promotion

As a gamer in the U.S., it’s almost inevitable that I’m on the Gamestop email list and have a PowerUp Rewards account. Usually, I never take advantage of these two facts; in fact, I typically spurn them. And three days ago, Gamestop just gave me a reason to despise them.

You may have heard on various gaming websites that Gamestop is offering a $50 credit to trade in Xbox 360 games for the Xbox One equivalents, as Gamespot, Joystiq, and others have blindly proclaimed. Their unquestioned regurgitation of the retailer’s announcement obscures what’s actually being done here, and it’s sickening.

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First off, Gamestop is encouraging you to spend $70 for a $60 game. Think about that for a moment. A retailer is telling you that you can spend more than is strictly necessary on a hobby that is already relatively expensive and is claiming that to be a good thing.

facepalmGamestop can make the argument that these games are being released before the Xbox One launch, and thus they’re generously allowing gamers to buy it Day 1 without consequences to their new console library. But that’s hardly a definite. Neither Microsoft nor Sony has announced anything beyond the hazy ‘November 2013’ window.

That’s when almost all triple-A games are released anyway. This is hardly a ‘benefit.’

AAA games are released in either late October (e.g. Assassin’s Creed 3) or November (CoD, Halo 4, etc.) In other words, they’ll be released within 1-2 weeks of the new consoles. If the rumors about the Xbox One’s November 5 release are true, then the console will actually beat a couple of these games to market.

If someone has such a burning need that they can’t bear to wait (i.e. Madden and FIFA), then sure, they ‘benefit’ from Gamestop’s promotion, ignoring the fact that they could resell the games for $45-55 anyway, given the short time-frame. In the fine print, it’s stated that a consumer must trade in for the Xbox One version by December 31 – well within 2 months of release for the non-sports games.

Gamestop merely institutionalizes a fact of used game sales in order to boost its own publicity: that within 60 days of a game’s launch, it’s used price is only $5-$10 below that of a new copy. And it uses that fact to gain free publicity with faux-generosity.

The net result? Consumers pay more, and Gamestop gets a used copy it can sell at a high profit margin.

Initially, it might seem as if Gamestop is taking a financial hit for giving $50 credits, effectively selling games for $10, well below what they pay the publisher. But Gamestop is almost certainly being reimbursed and/or receiving a kickback from Microsoft and publishers. Note how the press release only mentioned the Xbox One version of games? It means that Microsoft is bankrolling Gamestop’s promotion, either to make it exclusive for the Xbox One, or to deny Sony the ability to match their offer. Gamestop would’ve offered around $40 anyway. The $10 bump is easy for Microsoft to cover.

For any consumers on the fence about the One/PS4 divide, or 360 owners who are irate at Microsoft for their used games DRM stunt back in May, this promotion is a meaningful short-term incentive to stick with Microsoft in the next generation. Moreover, Microsoft gets to announce high software sales to investors once the holiday season is over, hopefully trumping Sony in the opening salvo of the 8th console generation.

Yes, the sales numbers will be highly inflated, but who is going to care?

Microsoft gets paid a royalty on every game copy printed, so having consumers purchase two copies of the same game at different times is a moneymaker. Moreover, publishers can benefit from ridiculous sales numbers for investor calls and for charting on the monthly NPD reports. Since the offer is limited to 5 games among 3 publishers (Activision, EA, Ubisoft), those 3 must also be bankrolling the promotion. The holiday period is incredibly crowded. Because Gamestop will advertise the 360/One promotion, those three publishers get free shelf space, floor space, advertising on Gamestop’s in-store tv channel, and more. Consumers will have to go to Gamestop to be eligible for the promotion, meaning that Gamestop can increase its already-monolithic retail market share. Everyone benefits.

successThe execs at Gamestop should (rightfully) be patting themselves on the back. Free publicity, kickbacks/reimbursements, and even stronger relations with Microsoft and some of gaming’s biggest publishers? Yeah, that’s a reason to be joyful.

For 360 owners who really value having their games on next-gen consoles and who are uncertain about which console they’re going to grab come November, Gamestop is offering a good deal. Certainly there are gamers with a high enough risk premium that this promotion is a godsend. But please, gaming journalists: are you really so beholden to the industry you’re supposed to report on that you can’t even call a marketing stunt or a “promotion” scam when you see one?

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