| specialk said: I'm no retail expert, but can't retailers return unsold merchandise? Not saying that's what is happening here, but I thought in most cases, retailers could send stuff back to manufacturers. |
I'm no expert either, but some while ago I was interested in this topic and searching for the answers thru internet. And the answer is No, but not a direct No. Big retailers could make a deal with the publisher after some time to get discounted price so they could sell the game at lower price. But for small retailers, they got no bargaining power at all, what's coming to their store, if not sold it will end up forever there.
There are even articles & discussion saying that big retailers like Gamestop or Target even dumping old stock (which means they aren't sending stock back to the publisher)
http://www.ign.com/articles/2014/03/05/inside-the-secret-world-of-gamestop-dumpster-diving
https://www.reddit.com/r/gamecollecting/comments/189y9q/question_where_do_unsold_games_go/
So, basically SE got almost fixed profit margins - up to 80+% of the retail price (note that this is gross profit). So if the game was sold $60 in retailers, then the retailers will pay SE $48+ for each unit sold. After some time (or to boost sales during holidays), retailers could deal a discounted retail price with SE, say for $40 - in this case, for every unit sold during that discount period, SE will get $32. So retailers only pay SE for every units sold (consignment). But retailers & SE both know that it will benefit both not to go through the hassle of sending unsold stock back, they both will find ways to clear up every units shipped, like discounting the price.
And, if the argument about product based on intellectual property is true, then I can confirm this since I already wrote some books and the publisher indeed got healthy margins from retailer price, for some big publishers they can even manage to get 90+% of the retail price. Therefore, 10 million copies for FFXV to break even is just absurd. It was only Tabata team personal target. Let's say that the average profit margin is $40, then it means FFXV need $400m to break even - no game has production cost pass $150m mark afaik (that already includes marketing costs). And SE already had two amazing financial years prior to 2016 (even when they were burdened by the production costs of FFXV & FFVII Remake). SE management would already smiling ear to ear if FFXV sell through the 5m initial shipment (since it would already gross them more than $200m in revenue).
