DVD Empire exits, slams game biz

Online retailer clearing out stock as it closes its game division, says gaming industry full of "greed," "only cares about mass merchandisers."

Online retailer DVDEmpire.com is no longer selling games, the company revealed. The site, which specializes in selling DVDs over the Internet, is now clearing out its inventory of games by selling titles for 20 percent off.

However, it isn't so much the fact that the company is getting out of the business as much as why it is getting out. On its Web site, the retailer lists the reasons it is exiting the game-selling business, and it doesn't paint a pretty picture for smaller retailers.

Believing that the game industry "only cares about mass merchandisers" and "completely ignore[s] the needs and wants of the medium to small game retailers," DVD Empire says offering games to customers actually ends up costing them money.

"Here is an example of the video gaming industry greed: they set the retail price at just $5 above the product cost (buy it for $54.99, sell it for $59.99). When we sell a game we make on average 8.3% gross margin. That does not take into account any of the cost to store the video game or labor to receive/ship an item," the site says.

"Take a $400 console; we only make $5 on the sale--that is a .01% gross margin (note the decimal point). The game companies make their profit selling to us. We make no profit selling to you."

DVD Empire also says that games that don't sell simply get stuck on their store shelves, whereas bigger stores like Wal-Mart and Toys "R" Us can return their stock. "Of course, if the video game industry produced quality games, we wouldn't have this issue."

While DVD Empire claims that smaller retailers are struggling in the business, the bigger fish in the pond aren't. In the last nine weeks of 2006, GameStop, which also owns EB Games, said that it took in a record $1.7 billion in sales.

213 Comments

  • funky_muzic

    Posted Feb 5, 2007 12:08 pm PT

    If that low profit-margin is true, then I see how EB Games/Game Stop really makes their money off selling used games. They'll give you next to nothing for most used games, but sell them for $10 less than the new version of the game. I'm sure that they gross between $10 - $20 per used game that they sell (as long as it's not really old) compared to the $5 they make on the new games.

  • Chief_Kuuni

    Posted Feb 5, 2007 11:50 am PT

    well that's really good for us then, at least we know we're not getting marked up in price

  • theKSMM

    Posted Feb 4, 2007 10:30 pm PT

    Being a small player in any industry with behemoth heavyweights lumbering around is difficult. I'd sell my own soda pop if somebody would just take care of Coca-Cola and Pepsi.

  • serialnumber201

    Posted Feb 4, 2007 7:59 pm PT

    "if the video game industry produced quality games, we wouldn't have this issue." i agree fully. developers dont have the balls anymore to make games with substance, besides the periodically released, hyped-up, epic. just like hollywood, it's easier to put together superficial, polished-to-a-chrome-like-shine, crap.

  • Humorguy_basic

    Posted Feb 4, 2007 6:11 pm PT

    The fact is that small retailers are ignored just like smaller publishers/developers are ignored. It's the reason we get fewer and fewer genres and more and more cookie-cutter games. What the games industry doesn't understand is that the two similar businesses to gaming, books and movies, have survived for as long as they have because of the wide range of products they offer. As gaming slowly moves toward every game being the same as every other, because nobody in games publishing wants to take a risk any more, and as it becomes just another 'rackware' item in large department stores, it will be the end of the hobby as we've known it.

    Publishers think this hobby will be around forever, because books and movies have been around for decades (or centuries!), but look at how they have survived - through innovation, constant change and by having a diverse range of product! It is all the exact opposite of what the games industry does!

  • ldonyo

    Posted Feb 4, 2007 12:27 pm PT

    Looking at the game titles they were carrying, I can see a big part of why they were not successful selling games. Whomever decided on the titles to carry had absolutely no idea what would sell and what wouldn't. From the titles left in inventory, I'd be very surprised if they sold all of them without further lowering their prices. Most of their game prices are still higher than EBGames even after 20% off.

    I would also guess that they over-ordered on many titles that didn't sell well at the original MSRP, which caused a problem for DVDEmpire when the MSRP was reduced to a figure lower than their original cost. This may be due to an overly optimistic view of how well a title would sell or buying from a distributor that required a minimum purchase on a per-title basis.

    In any case, it wasn't the game industry that did in DVDEmpire's game sales, it was DVDEmpire's inexperience/ineptitude/bad luck in the game selling marketplace that did in their game sales.

  • internationaal

    Posted Feb 4, 2007 10:56 am PT

    @Dragonkain:
    Usually online stores are cheaper because they don't need to have a shop and staff for it. But if you're not making money on something, how can you lower the price?!?

    If you look at music, usually online retailers have lower prices. Because they can!

    On top of that, it may even be that the big retailers pay less for the games because they buy in bigger quantities.

    So if you still believe it's DVDempire's fault... you're basically saying apart from Walmart, EB Games and the other big groups nobody should sell games, as they won't be able to compete with the big ones!

  • hector1313

    Posted Feb 3, 2007 8:36 am PT

    the video game industry dont make any good games any more.

    they concentrate too much on making it look good, rather than making the game good.

  • jknight5422

    Posted Feb 2, 2007 11:33 pm PT

    Meh. Nothing there of interest...

  • jknight5422

    Posted Feb 2, 2007 11:30 pm PT

    Wow. Check out their website. They really have a tirade
    under the games category.

  • jknight5422

    Posted Feb 2, 2007 11:29 pm PT

    Well I can certainly see how they can have trouble
    selling games. I see lot's of stores with full inventories.
    They can't move them fast enough. Plus, no way to
    return product, that's pretty serious.

    Oh well, time to go look at their stock & take what
    I need.. hehe.

  • MikeHumphreys

    Posted Feb 2, 2007 5:04 pm PT

    ""Of course, if the video game industry produced quality games, we wouldn't have this issue."

    Go you...way to lose custom.

  • lulu52

    Posted Feb 2, 2007 3:07 pm PT

    those asswipes didn't have to say it like that, though.

  • ldisc66

    Posted Feb 2, 2007 12:41 pm PT

    DVDEmpire is being truthful when they say they make zilch on games. I used to work for a small videogame store and we only sold new stock to draw customers in the door. The store only survived because we sold USED games and accessories like joysticks and racing wheels. I image that's how retailers like GameStop make their money.

  • NinjaSpunk

    Posted Feb 2, 2007 12:00 pm PT

    DVD Empire has free shipping on 3 or more items. Try visiting the site before you start pulling figures out of... well, you know.

  • vanhalendlrband

    Posted Feb 2, 2007 11:57 am PT

    For something thats named "empire" i sure have never heard of it till today. Thats pretty weak if they only make 5 bucks a system though for real. You go into the store thinkin your makin this big purchase to this store but really they're only getting 5 bucks of that big chunk of change?? wow.

  • Dragonkain

    Posted Feb 2, 2007 9:59 am PT

    This is their own fault. If you are going to sell products online you have to factor in that people will have to pay shipping. If they offer a game at the same price that I can get it at a local shop, being Wal-mart, or Nerdstop, or even a local guy, why would I pay an extra $10 for shipping and have to wait to get it. It is just a bad business plan on their part.

  • icym

    Posted Feb 2, 2007 9:39 am PT

    Smart business owners there. If its not working, let it go. If you really want it, figure a better way later, but don't be losing money while you're figuring it out

  • blancobo

    Posted Feb 1, 2007 8:11 pm PT

    After reading their statement I can only congratulate them on their withdrawal. A company that looses money on such an inmense market is not well fit for it. Let the other companies do the selling then. MSRP's are a good thing and they protect the customer from market monopolies.

  • TryMe01

    Posted Feb 1, 2007 7:43 pm PT

    he does have a point mind you, but it is hiis business and his decision like it or lump it...

  • spy_hellscream

    Posted Feb 1, 2007 7:24 pm PT

    "Online retailer DVDEmpire.com is no longer selling games, the company revealed. The site, which specializes in selling DVDs over the Internet, is now clearing out its inventory of games by selling titles for 20 percent off"..............ok so wait, the site which specializes in selling DVD's over the internet....is clearing out its inventory of games? and how about this, gamestop and ebgames are known for selling games....dvd empire is known for selling dvd's, maybe they should've made a sister company who sells only games.

  • lilmp89

    Posted Feb 1, 2007 7:11 pm PT

    The decision seems quite justified. The profit just isn't worth the trouble to do it. Even if I did buy games from that site(which I don't, but still...) I would respect him for that decision, not scorn him like some customers may do. I hope his site really gets better with this.

    *On a slightly off-topic note: This article even gives some information (at least to me) concerning that 'shipped' vs 'sold' thing. Even if a company (I'm not saying which...) ships their consoles, they do have to sell it to the retailers since the can't just get it for free (which is what I was assuming).

  • OmegaDark

    Posted Feb 1, 2007 6:34 pm PT

    I agree....in this day and age this country loves to stomp on small businesses.

  • VengenceZero

    Posted Feb 1, 2007 6:31 pm PT

    he's right, I wouldnt buy games neither. Your still losing money regardless, Best Buy, Circuit CIty, EB Games, or ever still losing money. The Industry is a joke. Buy it 54.99 and sell it for 5 dollars more? WTF!!!

  • mall69

    Posted Feb 1, 2007 6:11 pm PT

    no. the problem is that 90% of the time, the small guy doesn't have the buying leverage that the larger retailers do, which, if you've followed commerce news over the past few years, is why stores like Wal-Mart often get villified in smaller communities because they completely skew the economics and put 'the mom and pop' shops out of business.... sorta creates a capitalist vacum where one doesn't belong in a free trade economy. also...did it occur to you that dvdempire was forced to keep the price higher because of the small investment return, as with most smaller retailers. i'm sure it did, they held out as long as they could and finally...oops... gotta go. they take a chance, try to create a little business for themselves, get run over and you blast them for it. hey, maybe your happy sitting on the couch, or shopping at only one giant store. i think it kinda sucks. if you ever try to get a little for yourself, and get swallowed whole.... remember what you said here.

  • wild_world_girl

    Posted Feb 1, 2007 6:01 pm PT

    maxmoss :

    Don't go down that road. This guy *is* a jackass. He *did* fail, and proceeded to *then* blame others.

    I own zero pirated games. And yes, I am calling him a crybaby.

  • wild_world_girl

    Posted Feb 1, 2007 5:59 pm PT

    What a bitter, whining baby. Your business model fails so you blame an entire industry of creative professionals?

    Ass.

  • AzureLivesOn

    Posted Feb 1, 2007 5:52 pm PT

    As with most, if not all, small-name retailers or websites, they'll be quick to jump to the profit margin defense. The problem? 90% of the time they're too clueless to actually compete.

    Let's use an example from their own site: Ghost Recon Advanced Warfighter for Xbox 360
    http://www.dvdempire.com/Exec/v4_item.asp?userid=99365305602499&item_id=765554&searchID=
    DVD Empire's MSRP: $59.99
    DVD Empire's "WAAAH THE INDUSTRY HATES US" Sale Price: $47.99

    http://www.gamestop.com/product.asp?product%5Fid=200116
    http://www.ebgames.com/product.asp?product%5Fid=200116
    GameStop/EBX's MSRP: $39.99
    GameStop/EBX's Used MSRP: $29.99

    http://www.amazon.com/Clancys-Ghost-Recon-Advanced-Warfighter/dp/B000A0EFJW/sr=8-1/qid=1170380657/ref=pd_bbs_sr_1/002-7998865-1256809?ie=UTF8&s=videogames
    Amazon.com's MSRP: $34.99 (List Price from Ubisoft: $39.99)
    Amazon.com's Used Starting MSRP: $17.99

    http://www.walmart.com/catalog/product.do?product_id=4003369
    Wal-Mart's MSRP: $39.82

    I could go on and on citing that Target, Best Buy, Circuit City, and yes even Ubisoft's own merchandise store are also retailing GRAW for $39.99 or less. The problem isn't the gaming industry screwing the little man, it's the little man failing to remotely compete. The reason the big shark succeeds in eating the weak guppy is because the shark makes a valid effort to actually catch its prey. In this case, DVD Empire, a small-time venture, tried its hand in the big kids pool and drowned. In their bitterness to see such failure, they lashed out at whoever they could.

    This isn't an isolated title either. This checks out across almost every game and even their DVD selection as well. They buy at the high dollar and expect to sell back at the high dollar. It doesn't work that way, especially nearly a year after a game's release that has an anticipated sequel well on the way. Chances are if the site was still peddling Nintendo 64 games, it'd wonder why no one's fronting $59.99 for Majora's Mask.

    Quit your whining, accept that you failed at something, use it as a life lesson and move on. But don't try to burn bridges because you're bitter. Just makes you look even more like the little guppy.

  • thomasonfa

    Posted Feb 1, 2007 5:14 pm PT

    I'm sure they are telling the true. It would be nice if they could make a larger profit.

  • stziggy

    Posted Feb 1, 2007 4:49 pm PT

    I'm a firm believer in "economic evolution." The strongest survive. That's a good thing. That's what drives invention, revenue, and demand. I'm sorry the little guys like DVD Empire can't compete against the Wal-Marts of the world, but the consequences of trying to protect these smaller fish is far more severe than the closure of a few small fish shops.

  • GrimBee

    Posted Feb 1, 2007 2:43 pm PT

    Thats how it goes - surely anyone with business acumen knows this.

    Big stores like Walmart will constantly stamp out competition, the bigger they are, the harder they can fall onto others - and smash them to pieces.

    For example - Nintendo - They sell their consoles out of factories to the warehouses, this stock is then bought by companies from all over the world.
    But at what cost?

    All Walmart needs to do is contact the warehouse where all the wii's are kept, and they say "look, we will take 1 million Wii consoles from you, for this price".
    It works out then, in bulk, that each console can generate a large profit.
    When these large companies have so much cash to buy bulk loads of stock, they can officially keep the manufacturers in business by buying loads in one chunk, or at least a contract for the purchase.

    Then, off goes the trucks to those warehouses, they pick up the masses of stock and distribute it to their very own distribution centres.

    When all this is going on, and one little store says to the big warehouse "we need 1000 wii consoles"... because the big stores offer so much up front, for SO many consoles, the price has to be upped, because the prices from the big companies is so competetive.

    You then have this situation -

    Because the big companies bought out the stock for a lot less when buying in bulk, this then lets then be able to sell it cheaper than anywhere else, because they simply bought so many, the bulk price knocked down the singular price of one single console.

    This then forces the smaller companies to sell their stock at a loss because consumers want CHEAPER goods.

    It's all down to the bigger stores. In the UK, all that is happening now is that the big stores are moving in, all over the place. Especially in rural areas.
    These big companies literally smash the smaller stores prices to pieces.
    It is all about consumer demand, clever product allocation and buying in bulk. When you want to start a business, you need to make these decisions.

    If DVDEMPIRE was serious about its games, then it would invest BIG BUCKS into buying loads of games in bulk.
    PLAY.COM can sell these things at a much lower price than most stores, even the big stores like ASDA (uk walmart) and Tesco, because they just own one warehouse. No brick and mortar stores to be seen, everything is done online.

    If dvdempire wanted to sell games seriously, not casually, they should of invested in games. This is what every other company has to do. Its not the fact that the game manufacturers etc charge too much, games have always cost this much. Its just that big companies front the better offers. Its business.

    If you were a game manufacturer, and you have DVDEMPIRE phoning you up to purchase 1000 copies of splintercell for $45,000... it sounds like a nice deal... however when you have massive companies (who distribute the masses of stock all over the country to their own warehouses) phoning the manufacturers up saying "we want 20,000 copies and will give you $80,000 for them"...

    Even though the big companies would be paying $5 less per game, the point is that the more companies buy, the more it keeps manufacturers in business.

  • comthitnuong

    Posted Feb 1, 2007 2:42 pm PT

    so the gaming industry is greedy huh.....

  • aldrenar47

    Posted Feb 1, 2007 2:40 pm PT

    "How many pirated copies of games do YOU have on YOUR computer?"

    Zero?

  • maxmoss

    Posted Feb 1, 2007 2:07 pm PT

    All of these "sniff sniff" and "whaaa" commentaries make me wonder about something:

    How many pirated copies of games do YOU have on YOUR computer?

  • vaejas

    Posted Feb 1, 2007 1:42 pm PT

    Sniff sniff... blame Atari and the NES if it makes you feel better.
    And how do you account for games like Jaws selling well vs. Psychonauts? Quality is not the issue, marketing is.

  • DiscGuru101

    Posted Feb 1, 2007 1:17 pm PT

    We can only buy and play so many games per year ya know?

  • umbracascade

    Posted Feb 1, 2007 1:16 pm PT

    The solution: buy used games and resell for profit, that's how small gaming stores deal with this crap from the big guys, oh and if it helps to charge no tax.

  • danteone

    Posted Feb 1, 2007 12:42 pm PT

    so how many of you have heard of this place because i never have thare new to me

  • christopherneal

    Posted Feb 1, 2007 12:30 pm PT

    Waaah! Life in the Big City.

  • edjimene

    Posted Feb 1, 2007 11:56 am PT

    No surprise there...

  • Pumper

    Posted Feb 1, 2007 11:28 am PT

    Another small business bites the dust. Oh, you younger ones who know squat about the industry with answers like "who cares", Too bad us older folk won't be around to witness you all being controlled by big cooperations popping out game sequels to 50 Cent, and having GPS trackers planted in your butts.

  • chineolee

    Posted Feb 1, 2007 11:16 am PT

    Smaller retailers are definately getting a raw deal, no question. But I don't think the way DVD Empire have handled their problem is particularly professional. Just because they're a smaller retailer, doesn't mean they shouldn't have standards for the way they communicate with customers.


    Constructive criticism is one thing, but they are risking alienating their customers. Its amusing to see that they have added further clarification at the bottom of their original statement in an attempt to re-focus the attention on their customers, as if they care. They're in it for money too, lets not forget.


    Perhaps they should have been a bit more creative - why couldn't they have branched out in to second hand systems and games? Perhaps they're too hell-bent on becoming an "Empire" to be bothered with that.

  • mmduggans

    Posted Feb 1, 2007 10:56 am PT

    I agree that it must be tough to deal with such volatile products, but many companies have come up with innovative ways to market and sell games used and new and include themselves in the profits of the gaming industry. I think they are slamming the gaming industry as they're obviously lacking any creative ways to share in the profits. They should stick to DVD's I guess even though their prices are high for those as well. Maybe they will slam the movie industry next and have a big sale to move product and then start selling tickle me elmo's or something.

  • the_real_VIP

    Posted Feb 1, 2007 10:49 am PT

    Wow, some of you still don't understand what's going on. I was explaining some of the Economics terms around 24 hours ago, and here are some who REALLY don't understand the article. In sum, DVDEmpire is right.

  • Get_Shorty

    Posted Feb 1, 2007 10:41 am PT

    Well sell them for more then

  • Israels_Son

    Posted Feb 1, 2007 10:20 am PT

    That's great. I've never heard of these people before, anyway.

  • eddiex

    Posted Feb 1, 2007 10:10 am PT

    To make a better profit and stick it to the game biz they need to sell used games like Billionaire at GS/EB.

  • FrankieLA

    Posted Feb 1, 2007 9:45 am PT

    Wrong and Wrong. Gamestop.com/EB Games took in most of their profits from re-selling used games. They are consuming any competitors that sell used games, flipping them around and adding a EB logo and wallah, a few more $$$ to add to the margin. Plain and Simple.

  • ablanton

    Posted Feb 1, 2007 9:39 am PT

    "... GameStop, which also owns EB Games, said that it took in a record $1.7 billion in sales."

    Of course that does not take into account that 1.7 billion in sales != 1.7 billion in profits. The industry is still getting a large cut of profits in this equation. But to the articles point, there is no real possibility of small retails sellers to make it worth their while ...

  • mattnrob

    Posted Feb 1, 2007 9:19 am PT

    i would have to agree that selling them on the internets probably isn't a good idea. I happen to run a small video game store...2 in fact. while yes there is very little profit in new games that is why we trade and sell used games where the profit margins are in the 50% range and up. Ebgames knows this and that is where the REAL money is at, the used games not the new ones. Think about it. Joe Blow wants Halo 3 Legendary edition...it costs 100 bucks. ebgames gets it for about 85. Joe doesnt want to pay 100 bucks so he trades in a bunch of his old xbox games and 360 games which retails for about $500. ebgames (or me) makes a MINIMUM $415 off the deal IF no one trades and just pays cash. but if the games Joe traded in are traded for even more games, guess what? The POTENTIAL profit is limitless. Tell me you don't see where the money is being made?

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