Stranger 109

Next-Gen reported yesterday that the pre-orders for HALO 3 had finally topped one million, making it a blockbuster release before they even start to press the discs. I fully appreciate that the budget for games have exponentially increased in the past decade and that one way publishers can hedge their bets is through the pre-order system. And from a gamer’s perspective, it is nice to know that you are guaranteed a copy on the day of release. But the party that benefits the most from this system has to be retailers like GameStop. Through pre-orders they know exactly how many units to order so they don’t get stuck with unwanted back-stock, which is smart business. However, in recent years they have aggressively pursued the pre-order system to the point that you cannot walk into a GameStop in Manhattan even a day after the street date and pickup a new title. You’re immediately asked if you’ve pre-ordered and told that nothing is available until the end of the week unless you have. Shorting orders like this and turning away walk-in business would seem to be a rather counterproductive approach to maximizing profits; however, this practice creates a new revenue stream for the retailer that easily offsets any loss to those handfuls of walk-ins they turn away.

For each pre-order they take, they collect the minimum of $5 to hold. Because the upcoming HALO 3 comes in three different price points: $59.99 for the regular edition, $69.99 for the Limited Edition, and $129.99 for the Legendary Edition (pictured right), GameStop requires $5, $10, and $25 respectively to hold a pre-order. Assuming that most gamers only pre-ordered the regular edition (which is probably not the case), that would translate into 5 million dollars. But this could easily inflate to 10 million because the Legendary Edition is expected to sell out before the street date of September 25. So for just one game, GameStop will be holding anywhere from 5 to 10 million of their customer’s dollars for nothing more than the promise of supplying a game. One that could be widely available if they simply stocked it on their shelves. I am far from a financial whiz, but I know enough to know that just the savings interest alone on that amount of money becomes rather sizable over a very short period of time. Now imagine doing this for virtually every title that is coming out, and you can quickly see not only the motivation for pre-orders but why GameStop has made it a point to push nearly everything as necessary to pre-order. Pre-orders were originally for the big name titles like Madden that would surely sell big numbers, but now you cannot get through a single purchase without being implored by the clerk that you should really pre-order titles like Phoenix Wright: Trials & Tribulations, lest you want to be left on the outs.

When word came down that GTA IV was being pushed back from its October release date to Spring of 2008, the collective groan of fans of the franchise could be heard across the country. And more and more titles continue to get delayed (Lair for the PS3 and Mass Effect for the 360 are just a few). Blake Snow of GamePro wrote a feature detailing some of the many issues that cause delays of games: perfectionist designers wanting to add elements at the last minute or marketing departments avoiding a release date too close to a competitor (as some have speculated Rockstar did with GTA IV to avoid the monster release of HALO 3). Gamers, as a media purchasing demographic, tend to remain loyal despite disappointment after disappointment. Therefore, the delays for the most part do little to harm the game’s overall sale. Instead, gamer gratification gets delayed, but it’s something they can get over. What tends to get overlooked in all of this is how this ultimately impacts the pre-orders. Despite that collective groan that came at the announcement of GTA IV’s delay, you can bet that very few if anyone made the trek back to GameStop to ask for their $5. So not only do these delays keep the GameStop coffers filled with pre-order cash, they extend the lead time for acquiring new pre-orders. To ask for pre-order money at the beginning of Summer of ‘07 for a game coming out in the Spring of ‘08 would be rather silly. But now that they have that money, they can spend this holiday season making sure every purchase out the door leaves with a receipt for $5 down on GTA IV as well. Obviously there is nothing illegal about this practice, and I wouldn’t even say it is necessarily unethical. I just find it interesting as an adult who grew up with one of the most ridiculous scams in the history of retail (layaway), that we now have another practice where consumers give up their money and receive nothing until a later date. GameStop is no longer just a purveyor of gaming software, they will now keep your money safe for you for months at a time. Only you don’t see any interest on it. Thanks, guys.