Pachter: "UK games retail market is a joke"

"Retailers pricing below cost to drive traffic," says analyst

Wedbush Securities analyst Michael Pachter has called the UK games retail market "a joke," with prices pushed so low that the market has become unsustainable - forcing companies like HMV, Blockbuster and Game into administration.

Speaking to Digital Spy, Pachter poured scorn on the pricing policies of the country's highstreet chains, also claiming that the problem has been exacerbated by a dearth of opportunities for customers to sell on second hand games, limiting their funds to spend on new games.

As well as blaming these policies for the decline of existing shops, Pachter believes that it's this situation which has prevented the arrival of overseas chains on Britain's streets.

"Retail needs to make money to exist, and games retail in the UK doesn't make money."

Michael Pachter, Wedbush Securities.

"The UK games retail market is a joke, with retailers pricing below cost to drive traffic," he said in the comment to Digital Spy. "That's great for consumers, but retailers can't make any money on games, hence the bankruptcies of Game, HMV and Blockbuster, and the refusal of GameStop to expand into the market.

"If all retailers go broke, or if games are dominated by mass merchants like Dixons, gamers are ultimately going to get fewer selections. The absence of GameStop and the demise of GAME limits the ability of consumers to trade in used games, depriving many of credits that can be used to purchase new games. Retail needs to make money to exist, and games retail in the UK doesn't make money."

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Latest comments (28)

Adam Campbell Product Manager, Azoomee9 years ago
I may be mistaken, but I thought the issue was more along the lines of off-line retailers pricing themselves out the market, in part due to their nature of being off-line and all the baggage and cost that comes with it.

Companies like GAME, Blcokbuster and HMV can charge maximum RRP for titles and still not survive, unless we're suggesting they should sell games for £60 or even £65 to make more money.

He's the analyst but I have a feeling those companies have/had many issues.

As for used games, well, there are other companies that specilise in that area, so its not all a loss.
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Rick Lopez Illustrator, Graphic Designer 9 years ago
I just think games are 2 expensive and should be priced lower like Anarchy reigns and The Walking dead. $30 dollers makes it easier to purchase games, versus $120+tax for 2 games. Most games drop in price. Hitman Absolution is already at $30. Why couldnt it be sold at $30 from the get go?
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Darren Stewart Videogame investor 9 years ago
The UK retail market for video games has been decimated by the supermarkets who use the category as a loss-leader to drive footfall to their highly profitable grocery business. No other territory has four dominant, highly competitive supermarket chains willing to cut each other's throats on any retail category that can drive footfall to the profitable parts of their business. Specialist high street chains don't stand a chance in that environment.

I was going to write more but I think that's it. - investing in video games
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Show all comments (28)
Patrick Williams Medicine and Research 9 years ago
A broken clock is right twice a day.
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Tristram Defries9 years ago
Why couldnt it be sold at $30 from the get go?
Because some people are willing to pay $49.99.
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Matt Walker Production Coordinator, Capcom9 years ago
I think the main reason for the high prices is that we as consumers will always want to go cheaper. If a title is going to drop in price anyways, why not start off higher to make more money off of the 'need it day 1' crowd?

iOS releases are considered expensive at 5 dollars. If $30 became the new $60, we'd soon be insisting on lowering again to 10.
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Khash Firestorm Senior Programmer, MuHa Games9 years ago
If you buy few games and they are all crap with not working services day 1 as a bonus, with so many bugs and bearly competitive to indie and/or mobile games. Noone want to spend another 60$ in the shop if they can sped 5$ and have as much fun. What more why even go to shop if you can have game in 20 min without leaving home? Its developers who made their games locked to first owner with so many accounts and protections so let them fall apart* why whould we bother? Locked games have no additional value in box unles you really really love that game.

How many of you go hunting those days? None? Maybe one, and I''m sure it's not all you get for feeding your family. Stone age passed and same will be with so-expensive overadvertised games and boxes.

* - together with retail many old-school developers die unless they start changing.
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Adam Jordan Community Management/Moderation 9 years ago
I must be looking at things wrong...we are in a recession, millions of people are unemployed, there's a fight going on between digital and retail, causing a shift in which places people shop and this guy is blaming low prices?

Watch out steam your daily deals and holiday sales are going to screw you according to this joke of an analyst

NEWSFLASH: Not everyone has £35-£65 for newly released games, I know I don't since I am unemployed and gain £71 a week to live on...that's to live on, not to spend as I would like for luxuries. People are smartening up and waiting for sales or reduced offers, they don't mind getting a preowned copy either especially when they are 2 or 3 for £10.

Also if "low prices" are destroying the retail market and making it a joke then please explain to me why "Sports Direct", a sports clothing and equipment retailer that literally has 60%-90% sales EVERYDAY ON EVERYTHING and has done for the last 10 years has been in circulation within the UK for the last 10 or so years?

Furthermore, gaming retailers have been hit from all sides and even by other retail stores.

1 - Rivalry and the "price match" - As a rival, you want to stand out, what better way than poaching and undermining your competition with cheaper prices? the price match guarantee is the best way of doing it "You find a price cheaper than ours any where else, we will lower it just for you"

2 - Love Film and gaming rentals - Why buy a £35 game when you can rent it for £2 or with your monthly's like why buy a music album when you can find it on spotify?

3 - Digital - DVD made VHS tapes obsolete, it's getting to the point that digital is doing the same. It won't fully do it for several more years but it has made an impact at least.

4 - Removal and prevention of second hand/used games - Yup that;s right, our very own industry has made an impact on gaming retailers. Of course not a major one but by messing with second hand games in order to turn over more profit from first hand sales, developers and publishers have pretty much squeezed the middle man out.

I think Pachter needs to talk less and research more, I also think we should refer to gaming retailers as "middle men" because that is pretty much what they are and what has happened. The middle men are being shoved out the way to create a more direct sale from the developer/publisher straight to the customer and that's what digital allows..

Edited 3 times. Last edit by Adam Jordan on 11th February 2013 7:26pm

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Sandy Lobban Founder, Noise Me Up9 years ago
Any software sold at retail should be of the gift voucher type these days. Music is sold in this way. Cant see any reason why games cant be as well. I tunes vouchers are readily available in the same shops and do exactly the same thing, without the loss leading price problems.
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Being in the business on and off over 25 years, I can honestly say the margin for new game sales has never been good. Used games sales has been the saving grace for game retailers these last 20 years. Games have not gone up in price in 25 years. There were 69.99 dollar games in 1990. With inflation taking into account, the top price point has been constantly being lowered in real dollar/pounds/euros for 25 years or more. I suspect as go used game sales so goes the video game brick and mortar retailer.
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Jed Ashforth Senior Game Designer, Immersive Technology Group, Sony Computer Entertainment Europe9 years ago
I don't often see significant cut-throat pricing except on the biggest name titles a couple times a year. I'm not sure this situation is any worse than it's ever been?
Who exactly are these High Street retailers Pachter is talking about? He mentions the Dixons group - any time I've been in Dixons their prices are ridiculously expensive.
I don't get it.
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John Bye Lead Designer, Freejam9 years ago
The problem with retail is that people increasingly aren't willing to pay £50 for a game, apart from a handful of big blockbuster games like Call of Duty, FIFA and Madden, some of which they will then play all year round. The market for mid-range retail games has almost entirely collapsed over the last few years. I can't help feeling that most games, particularly new IPs and lower budget games, would make more money at a lower initial price point, either at retail or digitally.

Most publishers, apart from Nintendo, focus all their marketing and PR activities around the build up to a game's launch. And most specialist retailers these days dedicate at least half their store space to used games, so the amount of shelf space available for new product beyond this week's new releases, the top ten chart and a handful of perennial sellers and special promotions is often pretty limited, with the rest of the games jumbled up in rough alphabetical order on a couple of shelving units per platform (if you're lucky), hidden somewhere at the back of the store. Even if you venture back there and find a game you want, when you take it to the checkout they'll probably ask you if you want a used copy for a couple of pounds / dollars less.

In that climate, if your game releases at £50 and doesn't chart straight away, you're pretty much dead, and it's too late to drop the price as you've already lost all visibility in store, your marketing budget is spent, and your press coverage has all been and gone.

Obviously though if your game is a AAA blockbuster and/or part of an established series or franchise, with a big marketing push behind it, and you believe you can get a large volume of sales at £50, then why wouldn't you. Prices generally drop over time in line with demand, so for those of us who aren't that desperate to get the game on day one, most titles are on sale for under £20 within a few months anyway, from online retailers if not on the high street, giving your title a longer tail.

Edited 1 times. Last edit by John Bye on 11th February 2013 5:52pm

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Andrew Jakobs Lead Programmer 9 years ago
what nonsense, I guess Pachter has forgotten games are luxury products and in time of crisis is one of the first things that get's left at the counter.. Also people tend to buy games/products through the internet instead of retailshops which also has a hit on those retailmarkets.

Pachter doesn't know anything about the UK market, all he can do is throw another bone into the media and have his next 15 minutes of fame...
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Adam Campbell Product Manager, Azoomee9 years ago
lol! Guess I wasn't going crazy then.

I agree in thinking games are high as they are, but especially in the mentioned retailers. Pricing any higher wouldn't have made the situation better when people are looking for cheaper products.
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James Verity9 years ago
if the UK market is getting games too cheap... then the USA and Japan markets must be getting them for practically nothing, because they get them even more discounted than we do...
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Alex Bunch Proof Reader, ZiCorp Studios9 years ago
What he's moaning about is that US firms are scared of investing in the UK, hence his Gamestop remark.

'if games are dominated by mass merchants like Dixons' shows his er unique insight.
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Andreia Quinta Photographer 9 years ago
The UK games retail market is "a joke", yes. But not because prices are too low (ridiculous statement by the way), it's a "joke" because retailers offer nothing that a consumer can't have better or matched from Amazon or Steam.

The experience of going to a shop expecting something exciting is extinct. Long gone are the days where shops cared about showing off and display/sell 'cool stuff', the retail focus today is sales, and Amazon/Steam do that job a lot better.

Edited 1 times. Last edit by Andreia Quinta on 11th February 2013 9:33pm

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Bruce Everiss Marketing Consultant 9 years ago
To be so incisive Pachter has obviously spent a lot of time in the UK and has visited a representative cross section of stores around the country.

The real problem in the UK is that several big specialists failed to give customers a reason to visit them and to spend money.
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Anthony Wade ICT Technician 9 years ago
The reason Uk retail is knackered is because its run by greedy people that are interested in making money and not investing back in the companies. Game is a good example of this they made a fortune in the golden years and were did all that money go ? pachter is an overpaid dick !

Edited 1 times. Last edit by Anthony Wade on 12th February 2013 3:11am

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Andrzej Wroblewski Localization Generalist, Albion Localisations9 years ago
The problem is overgrown marketing / management with too much influence over the creative process. Customers already see this and they won't buy games developed without passion. In fact, our industry needs to get rid of characters like this Patcher. Unless you can help the industry create an object of worship like System Shock 2 -- go make your money elsewhere, you useless leech!
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Lee Walton Co-Founder & Art Director, No More Pie9 years ago
Hilarious article. Amazon and eBay have replaced the buy/sell scenario this old guy thinks still has a chance. Welcome to the 21st century...
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Adam Coate CEO & Founder, Coate Games9 years ago
I thought I heard someone in the UK complaining that the original Black Ops was sold for something like £80. Which of course equates to even higher prices with the conversion rate. The history of piracy in the UK goes back farther than in the rest of the world, and that was with games that sold for £10 or less. I would imagine many alienated Brits decided to 'stick it to' the publishers, deciding to pirate or do without instead.

Also, as many already know, Pachter doesn't deserve a position as an analyst.
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Peter Dwyer Games Designer/Developer 9 years ago
Patcher has never been very accurate in his predictions. Heck most posters on these forums know more about how the games industry actually works than he does.

UK retail is doomed but, it really is down to places like Amazon and Steam. For instance I looked on playstation store and dead space 3 is 59 pounds. Not dollars! Pounds! At today's exchange rate that equates to Sony trying to charge the uk consumer 92.38 dollars for a digital copy of dead space 3.

From this I'll make my Patcher style prediction. The next generation is going to crash and burn if this is in any way representative of digital pricing model Sony will be pursuing and others will undoubtedly try to copy. Now I fully expwect you all to have forgotten this prediction if it happens not to come true ;)
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Klaus Preisinger Freelance Writing 9 years ago
The headline should read:
Paragon of capitalist way of life shocked about textbook results of companies actually competing.

In a desperate attempt to save share holder interest from market forces, renowned analyst Michael Pachter expressed his deep concern over a series of UK based retailers actually competing for customers by adjusting prices. Shocked about a market situation in which both providers and consumers of digital entertainment content express little need for a man in the middle earning money by merely forwarding the product, Pachter tried his best to argue for retailers to create new schemes to add perceived value to the products of other companies. Various sources report Pachter not saying "by god I want people to buy games the same way my grandfather bought his top hat" before leaving the scene in a brand new Morris Marina Pachter recently got for trading in his Bently at a newly established American used car franchise in Hillbillyshire.
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John Bye Lead Designer, Freejam9 years ago
Most games launch at full RRP on the PSN store, which is completely unrealistic in the UK at least, given you can usually get a physical copy for £10 or £20 less if you shop around.

But digital pricing is set by the publishers, not Sony, and some discount faster than others. Sony's own first party games are often fairly reasonable, particularly for back catalogue, and I've picked up a few old games from the PSN store for around £15-20 each, including titles from Squenix / Eidos and (sadly) THQ. Some of Ubisoft and even EA's older titles are priced quite attractively too. Some publishers and some titles keep their digital pricing unreasonably high for months or even years after release though, making them completely uncompetitive with online retail.

Launch pricing for digital definitely needs to come down though, particularly for smaller titles. I'm not sure if publishers are just being greedy, or if they're launching games at full RRP to placate retailers, but either way, as the balance shifts more towards digital they're going to have to reduce those prices if they want anyone to actually buy their games.

It's also worth noting that Microsoft has a stated policy of only releasing digital versions of retail Xbox 360 games at full RRP three months after the retail release. For example, Borderlands 2 was released simultaneously at retail and digital on PS3, but on Xbox 360 it only appeared on Games On Demand in mid December. Both services (AFAIK) are still charging $60 for it.

Microsoft need to change that policy for the next generation. Simultaneous digital and retail releases are becoming the norm, on PC, console and handheld, and Microsoft have a lot of catching up to do in this area compared to Sony and even Nintendo now, let alone Steam.

Edited 1 times. Last edit by John Bye on 12th February 2013 10:51am

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Bruce Everiss Marketing Consultant 9 years ago
In 2009 Pachter said: “Downloads will become 20 percent of the market within five years, and probably peak at around 50 percent of the overall market in 10 years.”

How I laughed.
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Paul Shirley Programmers 9 years ago
Long ago I gave up wasting time in game shops after walking away empty handed too often. Amazon&co killed the high street by offering choice and stock to back it up more than with price. If you're not looking for this weeks AAA big PR budget release, physical stores are a waste of time and if that's what you want you'll get fleeced for the same amount at all retailers, on or off line.
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Ben Campbell Graphic Designer / Freelance Games Journalist 9 years ago
Rick Lopez - I just think games are 2 expensive and should be priced lower like Anarchy reigns and The Walking dead. $30 dollers makes it easier to purchase games, versus $120+tax for 2 games. Most games drop in price. Hitman Absolution is already at $30. Why couldnt it be sold at $30 from the get go?
Because Bobby Kotick wouldn't be able to say stuff like "Modern Warfare made like $2 billion!"
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