regarding: "Lately big game publishers have been moving towards hollywood release model. Hype before release, release with big bang on high price tag and fade out quickly before fallout lands from users "
There is a pretty bad side effect of this policy affecting country distributors which is not so widely known.
Let say new game is put on the UK market with 35 GBP SRP. Then as a result of the retail price war, big stores drop the price very fast to 24.99-26.99 GBP. Then let say, they feel overstocked cause publisher push hard day one shipment and the game is not selling very fast (common problem;). Managers in retail chains quickly get into panic mode and start to sell their stock in all possible ways just to get rid out the problem. So UK whosellers, two-three weeks after release start to have their prices at the 12-16 GPB (they rebuy goods from big chains at their price level or even below if the panic mode is in the full operation;)
At the same time, before the release, big publishers put huge pressure on local, country distributors to buy certain amount of their games without the right of the return (full risk on the distributor side), at the their export price, let say 16-18GBP.
So what happen. Local distributor buy let say 1000 units, invest and risks its own money into the stock and often in PR&Marketing. Persuade local chains and whosellers to buy it in the price equivalent to 16-18GPB + its margin. If the game is good, it sells within first 2-3 weeks in 30-50% of the total amount (if it bad, sell through can be as bad as 2-5%).
And then what happen. After two weeks from the release smaller local companies (direct mailings, small whosellers) import discounted product from UK (free trade is their basic right, nobody have a right to tell them to stop it) in the price of 12-16 GBP. And the local market starts to be flooded by units cheaper than officially distributed. Of course publisher is not interested in solving this problem, actually is busy with persuading to buy next release;) Local chains demand discount to new market price point or they threat that the goods will be returned to distributor (all chains requite so called “right of full return”). Local distributor has to discount the goods, and starts to loose money which continue to the end of the stock – let say on 50-70% of the whole day one stock. Sometimes situation continues that way, that after next 2-3 weeks price drops even more to 8-12 GPBs (panic mode full ON;)
Basically, in most cases, the whole risk and investment is on local distributor side. And local distributor has very little power of negotiations because it can be always replaced by other local distributor.
This situation is not something specific for Poland. As far as I know in Russia and India there is similar situation (with reps of those two countries I spoke recently). Basically on 10 releases profit is made maybe on 2-3 titles, and hardly cover costs of company operation and losses on all other games.
So that give us another reason not to be happy from the current state of the market.
Fortunately there are companies which understand that this kind of policy has really short legs. Recently we were very positively surprised that MS (we distribute Xbox hard&software here) and Disney (we started distributing their DVD&Blue Ray films) have very fair policies in terms of cooperation with their distributors. Thank God:-)
Post edited January 27, 2010 by Mikee