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Media Create Sales: Week 32, 2012 (Aug 06 - Aug 12)

Download cards should not be a threat to retail, they're sold in retail. But they won't sell if they're perceived as a rip off. I think the numbers confirm that (unless download cards were not included in the Wall Street numbers).

Question: shouldn't download cards offer a higher margin to retailers with such that price (i.e. the same as the physical copy)? Those cards are surely cheaper to produce, and even though they share shipping and storing costs with boxed counterparts, they could allow for better earnings. Is this true?
 

Dalthien

Member
Question: shouldn't download cards offer a higher margin to retailers with such that price (i.e. the same as the physical copy)? Those cards are surely cheaper to produce, and even though they share shipping and storing costs with boxed counterparts, they could allow for better earnings. Is this true?

Yeah, I'm not sure how the wholesale pricing would work on the download cards, but I can't imagine the wholesale price being any higher than the wholesale price for retail games. So in that case, the retailer would have the exact same leeway to price the games as they do with retail product. It would be up to the retailer to offer a discount and cut into their margin or not, the same as any other game that they sell.
 

donny2112

Member
I can't imagine the wholesale price being any higher than the wholesale price for retail games.

Iwata's comments about lack of inventory concerns for download cards vs. retail software and that that would be taken into account with Nintendo's pricing led me to believe that the wholesale price (which isn't charged until the card is activated, remember) would be higher than for normal retail games. Wasn't said specifically, but that was how I interpreted those comments.
 

extralite

Member
As I explained before, it's a balancing act that the Big 3 are trying to work their way through. As I said before, the point of DD right now is to offer it as an option for people who want it. It's for people who prefer shopping digitally, or for people who have to get the game right now this very instant and don't mind paying a small premium for that instant gratification.
If these people exist they should be so few in numbers that it doesn't warrant launching DD for them. People buy digital (both MP3s and games) because they can save money. I can't think of any online store I'm buying from where prices are on par or even higher than the actual prices for physical copies at retail stores.

People who want to save a few bucks can grab it from retail.
That is backwards as historically speaking it was the other way round.

I'm not seeing all the countless disadvantages that you are in this case.
Storage media gets full, you need to manage your SD card, buy a larger/spare one, redownload games you deleted to make space for new ones. Paying more is a disadvantage, both when you buy the games and when you need to buy new storage media. You don't get a printed manual (although these are quite reduced in page count nowadays, it still is something).

DD pricing vs. retail pricing isn't an issue for DD point cards that parents buy for their children. Parents buy a set amount on the card and the kid uses it up buying games at his/her own leisure. Most of the time, the parent won't even have any idea exactly how much the child is spending on each DD game vs. the retail cost.

And if the parent is just buying a DD card from a retail outlet for a single game, then they could just as easily buy the cartridge from that same retailer at a discount. The kid is still getting the same game. I'm not seeing the problem here.
The problem is that either nothing is gained by DD or you even openly suggest they should just buy retail. Again, the few instant gratification people don't sell overpriced DD versions at mass market. If you buy the download card in store this element is lost also.

If download cards were cheaper than physical copies a parent might consider buying two games instead of one. If the kid is going to a store they will have saved up enough money for the next game faster also resulting in more sales. These are lost opportunities for higher sales.
Nintendo and Microsoft have both chosen to offer digital options and pricing that largely doesn't undercut the same retail software. Sony seems to be taking a more aggressive approach with their DD offerings vs. retail pricing.
Sony's prices are not lower than actual retail prices thus they simply compensate for price reductions common in the retail space. I already pointed that out. Sony isn't undercutting retail. Nintendo is anti-advertising retail DD.
For what it's worth (which isn't much because there are many other more prominent factors at play), Sony's two systems where they have really made a strong push into DD vs. retail has been met with pretty abysmal results (and substandard retailer support) thus far. The PSP Go was just an abomination, and Vita isn't looking like any model of success either. Is the DD approach the reason for the shitty sales - of course not. But it may play a factor in retailers being less than enthused to push the system if they feel that Sony is undercutting their retail software on the system.
Again, why would they push it in the first place? That's not their job to risk money on something that might never sell in the long run. Sony needs to take the risks.

Edit: DD is hurting the Vita but simply by driving up the already high price of the hardware. Having to manage storage media is bad enough but when the available ones are so expensive it eats up the savings for the single games again. I appreciate that the Vita cards are pirate and hacking secure (so far) but they're also expensive and slow. That hurts the Vita more than anything regarding DD.

Question: shouldn't download cards offer a higher margin to retailers with such that price (i.e. the same as the physical copy)? Those cards are surely cheaper to produce, and even though they share shipping and storing costs with boxed counterparts, they could allow for better earnings. Is this true?
That would depend on what price they buy them from Nintendo. But since the MSRP is the same, Nintendo doesn't seem to intend to pass on the savings to the customer. Question is, do they pass them on to the retailers.

Iwata's comments about lack of inventory concerns for download cards vs. retail software and that that would be taken into account with Nintendo's pricing led me to believe that the wholesale price (which isn't charged until the card is activated, remember) would be higher than for normal retail games. Wasn't said specifically, but that was how I interpreted those comments.

Wow f true. They really want to keep this part of their business irrelevant.
 

Dalthien

Member
If these people exist they should be so few in numbers that it doesn't warrant launching DD for them. People buy digital (both MP3s and games) because they can save money. I can't think of any online store I'm buying from where prices are on par or even higher than the actual prices for physical copies at retail stores.

That is backwards as historically speaking it was the other way round.

Ha ha - you seem to be arguing strongly for something where we largely agree. I'm used to arguments where I'm actually on the other side of the person I'm debating. :) Maybe your words are just coming across differently than you intend them to...

But yeah - the number of people buying DD on impulse or convenience right now is pretty small. The number was between 5-20% for the two titles they just launched, and many of those people would have still picked the game up at retail anyway if that was their only option.

But digital transactions are becoming more and more common, and it's an option that the Big 3 are going to have to provide as we move forward - so Nintendo/MS/Sony need to get the infrastructure and systems design in place regardless. And considering that Nintendo just sold those 5-20% of sales at a pricepoint considerably higher than wholesale - I'm sure the option was worthwhile for those sales from Nitnendo's standpoint - even with the small numbers involved.

As for DD pricing vs. retail - I've seen numerous instances where you can get something cheaper at retail than DD, but you have to be willing to look around for various sales, 2-for-1 deals, rebates, etc. But generally speaking, yeah, DD is often comparable/cheaper in price than the regular retail price.

But that is the point that you seem to keep glossing over. The dedicated gaming device is a very different business ecosystem than mp3s/mpegs/PC games/etc. The same rules don't apply. Music/movie publishers don't need to sell the hardware to establish their product. There are a gazillion different devices by a trillion different manufacturers that will play their digital content. Steam/iOS/Android game publishers don't need retail to sell their games, because people buy those devices for a million different reasons and uses.

Gaming dedicated devices need strong retail partnerships to sell the hardware. Unless/until Sony/MS/Nintendo change the requirement for a dedicated piece of specific hardware (which would be a radical overhaul of the entire ecosystem that exists for dedicated gaming devices), they need retail to be a very important partner in the process.

I'm not disagreeing with your points. I think the current strategy that MS/Nintendo are using with the DD/Retail comparisons leaves little to be desired by the consumer who would prefer to buy their retail games digitally. I'm just trying to explain why Nintendo/MS have chosen this course of action at this point. They need to find a way to offer the digital option for the ever-growing audience that wants that choice, but they can't do so in a way that leaves retail feeling disadvantaged by the DD options. Retail WILL just pack up and bolt from the dedicated gaming business if its not a worthwhile place for them to be. They pulled right out of gaming altogether back in the early/mid 80s when there was no money in it, and they'll do the same in a heartbeat today if there's no money in it for them. Retail only bothers with the hardware because the software makes it worthwhile. If the software is no longer worthwhile - retail is gone, and there goes the entire distribution network for selling tens of millions of pieces of hardware every year for every platform.

If you have an idea for replacing retail from the distribution side of gaming, and hardware in particular (although as I mentioned before, I still don't see any viable means of replacing the massive retail software sales that come from the holiday season every year for the dedicated gaming system business either), then by all means let's hear it. That would go a long way towards solving this issue, and towards giving the Big 3 more leverage to really be aggressive with their DD offerings.

Nintendo doesn't want to be stuck with an inflated DD strategy. They would love to ditch all of their cartridge/disc manufacturing, eliminate all of their shipping/inventory/overhead costs and pass some of those savings on to their customers. But they can't just piss off their retail partners in the process. That's the balancing act that I keep referring to. This is all still pretty new territory for all 3 companies, and their strategies will keep evolving and changing over time as they try to find the right balance.


Sony's prices are not lower than actual retail prices thus they simply compensate for price reductions common in the retail space. I already pointed that out. Sony isn't undercutting retail. Nintendo is anti-advertising retail DD.

The wholesale prices that retailers pay are based off of MSRP pricing. So yeah - if Sony has lowered the MSRP of the DD offering without lowering the MSRP of the retail offering - then yeah, they are undercutting retail. The difference between the wholesale and MSRP pricing is the retailers' margin. If you drop the MSRP without dropping the wholesale price, then you've cut right into their margin (and they use that margin to compete with sales discounts, etc. - once you've slashed the margin between MSRP and wholesale, you've slashed their ability to compete on price). It's a game that Sony seems willing to play with their retailers - and I don't doubt that it is leaving retailers far less interested in carrying/promoting those products where Sony is playing this game. But that is a risk that Sony seems willing to take, whereas Nintendo/MS haven't wanted to risk pushing their retail partners that far.


Iwata's comments about lack of inventory concerns for download cards vs. retail software and that that would be taken into account with Nintendo's pricing led me to believe that the wholesale price (which isn't charged until the card is activated, remember) would be higher than for normal retail games. Wasn't said specifically, but that was how I interpreted those comments.

Yeah, I don't know the specifics of the wholesale model with the DD cards. But if it is structured as you just said, you can be sure that it was at the request of the retailers themselves.
 
Iwata said:
"Something that [Nintendo of America president] Reggie [Fils-Aime] said at E3 was that the Nintendo 3DS hardware was selling more or faster than the DS, and I think that's something that a lot of people are aware of. But something that Reggie also said is that the 3DS software sales were exceeding DS software sales."

"As of last week, 3DS sales in Japan reached seven million, and that's the 77th week post-launch. If we look at DS and DS Lite which people were saying, ‘oh my gosh this thing is selling like hotcakes, it's crazy!' it reached the seven million mark at week 72. And for the Nintendo DS that was two Christmases. For the 3DS it's only been one Christmas. And we also had a large earthquake in Japan. And of course now there's a smartphone boom in Japan, we're right in the middle of it."
http://kotaku.com/5936557/unintimid...-world-still-needs-dedicated-gaming-handhelds

Nothing really new.
 

donny2112

Member
Original quote, for reference.

http://www.nintendo.co.jp/ir/en/library/events/120427qa/index.html

When it comes to the concrete terms and conditions, such as the wholesale price ratio of the suggested retail price, the company has not publicly disclosed this information in the past, and I have to refrain from discussing any such information. If I may add one thing, however, I picked up an example of the POSA system during my presentation today. If the retailers can sell our software without having to shoulder the inventory risks, it is natural in fair business transactions that there will be changes in their margins, for which the inventory risks are taken into consideration.

It says that the margins (i.e. wholesale price per unit) will be different for digital vs. packaged goods, and with the retailers not having to worry about an inventory "risk," I took that to mean that the difference would go in Nintendo's favor (i.e. higher wholesale price per unit for digital download cards).
 

Dalthien

Member
It says that the margins (i.e. wholesale price per unit) will be different for digital vs. packaged goods, and with the retailers not having to worry about an inventory "risk," I took that to mean that the difference would go in Nintendo's favor (i.e. higher wholesale price per unit for digital download cards).

Yeah - I remember that quote once you mentioned it - and it makes sense since the retailers aren't taking any risk whatsoever that it gets priced into their margins if they want to sell the DD cards. Nice find on the quote though!

But I read more into your comment than you actually said - and I meant that the retailers very definitely had a say (request) that the MSRP for digital games should be the same as the MSRP for retail games, thus resulting in smaller margins for the DD card even though the full-cost pricing is the same.
 

Bruno MB

Member
New Super Mario Bros. 2 and Oni Training should have a sizable increase.

01./02. [3DS] New Super Mario Bros. 2 (Nintendo) - 146,684 / 790,732 (-31%)

We will likely have another million-selling title, at least according to Famitsu.
 

Aostia

El Capitan Todd
Level 5 delayed the release of Little Battlers 2.

http://andriasang.com/con2bd/danbol_senki_w_delay/


They should delay it another 2 or 3 months and release a 3DS version alongside the other two.

I think that October is still too early to jump abord the 3ds version, but we'll see.

New Super Mario Bros. 2 and Oni Training should have a sizable increase.

01./02. [3DS] New Super Mario Bros. 2 (Nintendo) - 146,684 / 790,732 (-31%)

We will likely have another million-selling title, at least according to Famitsu.

Could be, if Obon helped it in keeping good legs with a low % drop compared to the previous week.
 
Iwata's comments about lack of inventory concerns for download cards vs. retail software and that that would be taken into account with Nintendo's pricing led me to believe that the wholesale price (which isn't charged until the card is activated, remember) would be higher than for normal retail games. Wasn't said specifically, but that was how I interpreted those comments.

That'd totally be against their strategy to offer the digital option, wouldn't it?
I mean, you have the same price of physical counterparts on the eShop. Download cards cost the same as well, and if what're you saying is true, their price cannot be adjusted down so retailers are somewhat forced to keep the price of retail software. Am I right?
 

Erethian

Member
That'd totally be against their strategy to offer the digital option, wouldn't it?
I mean, you have the same price of physical counterparts on the eShop. Download cards cost the same as well, and if what're you saying is true, their price cannot be adjusted down so retailers are somewhat forced to keep the price of retail software. Am I right?

What he's suggesting is that because there's no inventory risk (which is a cost imposition on retailers) then Nintendo might increase the wholesale price and reduce the margin.

On the other hand Iwata said during the financial results briefing that they're using the decreased inventory risk of digital cards to encourage stores to stock games for longer. Which wouldn't make any sense if they're just increasing wholesale prices because of the reduced inventory risk. So it seems like they'll treat the wholesale price of a digital card vs a boxed copy on a case by case basis.
 
What he's suggesting is that because there's no inventory risk (which is a cost imposition on retailers) then Nintendo might increase the wholesale price and reduce the margin.

On the other hand Iwata said during the financial results briefing that they're using the decreased inventory risk of digital cards to encourage stores to stock games for longer. Which wouldn't make any sense if they're just increasing wholesale prices because of the reduced inventory risk. So it seems like they'll treat the wholesale price of a digital card vs a boxed copy on a case by case basis.

Why shouldn't there be any inventory risk? Just asking, I'm really into this stuffs but I don't know so much.
 

Erethian

Member
Why shouldn't there be any inventory risk? Just asking, I'm really into this stuffs but I don't know so much.

You can use stuff like POSA (point of sales activation) so that the cards don't actually work/do anything until you buy them. Or you take the card up to the register and make your purchase and they obtain the code electronically and give it to you.

Which essentially means you can maintain minimal stock and don't have to worry about boxed copies sitting in warehouses costing you money. Or taking up a lot of retail space.

Edit: The other benefit of systems like this is the store doesn't pay for the product either until the card is activated. Except for whatever minimal costs were involved in obtaining the cards.
 
You can use stuff like POSA (point of sales activation) so that the cards don't actually work/do anything until you buy them. Or you take the card up to the register and make your purchase and they obtain the code electronically and give it to you.

Which essentially means you can maintain minimal stock and don't have to worry about boxed copies sitting in warehouses costing you money. Or taking up a lot of retail space.

Edit: The other benefit of systems like this is the store doesn't pay for the product either until the card is activated. Except for whatever minimal costs were involved in obtaining the cards.

Got it. Potentially this means that Nintendo could push on digital without worrying retailers. Potentially. Could.
 

Aostia

El Capitan Todd
But...low increases :(
At least, Nintendo Top 10 is BACK!

But if it was YOU that posted all the previous OBON charts from 2006 until 2011...it was clear that, especially considering that the last two/three weeks saw the debut of the 3DSLL/Mario/DQX sw and hw bundle, this week would have shown very slight increase.

If the previous were normal weeks, we would have seen bigger increase, but Obon is not the Golden week.
 

Mpl90

Two copies sold? That's not a bomb guys, stop trolling!!!
But if it was YOU that posted all the previous OBON charts from 2006 until 2011...it was clear that, especially considering that the last two/three weeks saw the debut of the 3DSLL/Mario/DQX sw and hw bundle, this week would have shown very slight increase.

If the previous were normal weeks, we would have seen bigger increase, but Obon is not the Golden week.

Yes, but the top titles didn't increase so much as other years could have made us believe ( just 3% for Mario, to say). Not that those are bad numbers, absolutely. :p
 

extralite

Member
If you have an idea for replacing retail from the distribution side of gaming, and hardware in particular (although as I mentioned before, I still don't see any viable means of replacing the massive retail software sales that come from the holiday season every year for the dedicated gaming system business either), then by all means let's hear it. That would go a long way towards solving this issue, and towards giving the Big 3 more leverage to really be aggressive with their DD offerings.

I don't want to replace retail from the distribution side of gaming. I thought download cards would have been a chance to incorporate DD in the retail distribution side. This isn't new either, it's the third time Nintendo does something like this and it never hurt retail. The only difference is that now this cost reduction results in higher prices for the consumer.

And please don't explain the importance of retail to build the hardware base a fourth time to me, I understood it the first time. I wonder why you keep ignoring this very crucial point, that download cards are an opportunity to make use of the cost reduction provided by DD and still keep the retail distribution channel.

The download cards may provide larger margins for Nintendo at least but they do nothing to increase sales, as you agree with me. If they were priced lower than retail games that would drive sales and still necessitate games being bought from retail.

We could go in circles about eShop and PSN also but let's just nail the above point first. The way Nintendo handles download cards are an insult to anyone but them, retailers, stock owners and customers. They're simply exploiting the good will of the few customers who don't care, without benefitting the retailers they're supposedly protecting or the stock owners clamoring for more modern approaches they perceive to be important because Apple is successful with them.

If DD is a threat to your business, don't further it. But don't pretend to further it when you don't even use the advantages it should have.

Selling download cards at half price would attack so many problems publishers have with the market. Any sale going to a used game is lost profit for them. The buyer of physical media who sells off their game again, how much do they effectively pay? A bit less than half as they can usually resell it at above half price (during the first few months). With download cards close to that price they can pay about what they're used to but without the need to sell the game. People who don't sell off their games can buy two. People who only buy used might consider buying one game new instead of two semi-rental used games (because that's what used games in Japan are, veiled rental, actual rental being banned there).

Price gap towards phone games would also be closed without games being devalued as they still'd cost considerably more than those. The psychological effect of a perceived bargain shouldn't be dismissed either.

Download cards are only available at retail. They sell at retail. Make them as cheap as possible to give stores and customers an alternative to used games. Is that too much to ask?

Nintendo doesn't want to be stuck with an inflated DD strategy. They would love to ditch all of their cartridge/disc manufacturing, eliminate all of their shipping/inventory/overhead costs and pass some of those savings on to their customers. But they can't just piss off their retail partners in the process. That's the balancing act that I keep referring to. This is all still pretty new territory for all 3 companies, and their strategies will keep evolving and changing over time as they try to find the right balance.

That I'm not buying. And unless you were Nintendo you shouldn't claim to know what they'd love to do. The cartridge/disc manufacturing is the nominal factor that blows up their share of the retail price for a single game. There's the licensing fee but there's also the fact that most publishers have to order the media from Nintendo who set the price for said media. So no, Nintendo has no interest in cutting those costs as they're the base for calculating their part of the pie that is the price the customer pays.

Nintendo is also less threatened by used games as they target an audience which largely ignores that market. DD and download cards are a bigger chance for third parties than for Nintendo and I think that is the main reason why they do DD the way they do.

The Famicom Disc System allowed for piracy and was likely the reason why Nintendo avoided CDs for the N64. The higher cost of cartridges also gives Nintendo shipment and price control, the high price ensuring their high share.

Even optical discs (and packages) have a base cost which is paid to Nintendo. If the download cards were priced based on cost Nintendo would really only profit on licensing fees per game. But what this selling less for more strategy proves is Nintendo games sell even at a high price as long as that price isn't perceived to be high.

Relying on cartridges broke their neck with the N64. Building DD channels is to be prepared if third parties require that to keep supporting Nintendo. Sony betting on DD is a repeat of their betting on CDs, to convince third parties to jump Nintendo ship. But with Sony down for the count their attempt basically failed. So for now, Nintendo has no reason to give up the advantages their position as the manufacturer of the game media brings them. Instead they protect the high price system at all cost.
 
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