What do company's "gain" when you preorder?

There has been a lot of buzz going around about not “pre-ordering halo 5 if you love halo” or “pre-ordering will ensure Halo 5 is a bad game”.

My question is, what logical reasoning and proof backs up these claims? I dont have an extensive knowledge in the world of business and economics concerning video games. But it seems pretty reasonable to say that…

Pre-order =/= A game being sold

Infact, unless a person goes to the retailler of their choice and pays in full by the day of release (or sometimes during a time period of 48 hrs after release) they don’t actually get the game. (Granted, I don’t know what happens to the $5 that is put as a down-payment for in-store retailers)

And the claim that pre-ordering games encourages the developer to become “lazy or laxed”, as if they already have received boat loads of money seems to hold no water at all because there is absolutely no substantial proof. Pre-ordering isn’t like a crowd funding campaign.

Anyone care to explain in detail as to why pre-ordering Halo 5 is actually a “bad” thing?

It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.

It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.

A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.

> 2533274800772611;2:
> It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.
>
> It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.
>
> A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.

The amount of preorders vs the “final” amount sold is radically different. Pre-ordering Halo 5 as opposed to buying it used a month later will probably have little to no effect on the development of the game.

I understand that this is an argument that a lot of people hold about pre-ordering a game, but unless someone from the industry backs this claim, it doesn’t seem sound.

It quite literally does nothing toward the company producing the game. I’m a manager at GameStop. Allow me to demonstrate the process…

  • Developers create game.- Developers are paid by publisher who then takes the game and puts it out on various release platforms, both digital and physical.- Retail outlets contact publishers and order in an estimated number of physical copies to sell.- To get this estimated number, they take note of various data, such as sales of previous titles in a series, popularity of the genre, rough marketing costs being put out to advertise the product, and most importantly- Pre-Order numbers.- Retail outlets then sign a contract with the publisher, ordering in their needed number of units to their warehouses, which are then distributed out to individual stores based on demand and need. The need is determined based of individual store and district pre-order numbers, as well as overall sale numbers for the genre (example: some districts show higher sales of FPS titles than others, while other regions may sell more RPGs).- Each store gets their needed number of games and sells through their initial stock. After a couple weeks, corporate will take note of left over inventory, and order a recall on a number of units back to their warehouse if necessary. It is important to note that the retail profit on new games is only around $8 per new game.- From here, the retail chain usually has a contract with the publisher that they are permitted to return a certain percentage of unsold units. However, the retail chain is still out the cost of shipping the materials.
    In this instance, the publisher takes the bullet, but it’s really not that big of a deal. They’ve made most of their initial sales, and the cost of production isn’t necessarily high. The publisher will then keep a stock of leftover units for retail re-orders.

All preordering does is just simply allow retail outlets to allocate where their games should be distributed to benefit sales. The publisher does not get the pre-order money. You can cancel your preorder at any time. The preorder comes off the cost of the game. You also get bonus content for preorder. There is nothing wrong with preordering.

> 2717573882290912;3:
> > 2533274800772611;2:
> > It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.
> >
> > It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.
> >
> > A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.
>
>
> The amount of preorders vs the “final” amount sold is radically different. Pre-ordering Halo 5 as opposed to buying it used a month later will probably have little to no effect on the development of the game.
>
> I understand that this is an argument that a lot of people hold about pre-ordering a game, but unless someone from the industry backs this claim, it doesn’t seem sound.

If Microsoft has to make the decision to release the game now, in a broken state, instead of waiting and releasing a working game and they already know that they are going to make a profit then why wouldn’t they? It’s not about pre-orders vs. final number, obviously a game that is well received will sell a lot on the back end. It’s about them not having to worry about losing money because they already know that they are going to make a profit on a game, regardless of its condition when launched. If they went in blind there is no way that they would have released the MCC in the state it launched in. They would have lost so much money.

You say that pre-ordering instead of buying at launch has little to no effect on the development, I don’t see how you could possibly believe that. The only reason the MCC launched in the broken state it was in is because they already knew they were going to make money on it due to pre-orders.

We can not say for sure, but all I know is:

  • Gaming is going down the toilet

  • Pre-ordering is escalating

  • Games with high amounts of preorders tend to be over hyped

  • Over hyped games were released unfinished and broken

  • Devs and publishers still amassed major profits

  • Devs and publishers works on sequel

  • Sequel is overhyped

  • Sequel gathers a large amount of preorders

  • Sequel is broken and unfinished

See where I’m coming from?

> 2533274822366750;6:
> We can not say for sure, but all I know is:
>
> - Gaming is going down the toilet
>
> - Pre-ordering is escalating
>
> - Games with high amounts of preorders tend to be over hyped
>
> - Over hyped games were released unfinished and broken
>
> - Devs and publishers still amassed major profits
>
> - Devs and publishers works on sequel
>
> - Sequel is overhyped
>
> - Sequel gathers a large amount of preorders
>
> - Sequel is broken and unfinished
>
> See where I’m coming from?

343 has been working very hard for 3 years, m’kay. They won’t let me down. I have complete faith in them… Don’t mention the MCC, because it was in collaboration with several studios. 343 is going to really buckle down for Halo 5.

> 2533274828579555;1:
> There has been a lot of buzz going around about not “pre-ordering halo 5 if you love halo” or “pre-ordering will ensure Halo 5 is a bad game”.

I don’t think i’ve seen a single person assert that “pre-ordering will ensure Halo 5 is a bad game”

The way I see it, preorders as they are in this age are basically equivalent to day one purchase. The argument against preordering is essentially the same for day one purchases. That is, you are buying a game without the full knowledge of its actual quality.

It’s not just about Halo either. There have been quite a few botched titles and borderline insulting launches in the AAA echelon, which has led to much uncertainty and distrust towards games and developers we were once loyal to.

Not preordering and hence not buying the game on day one is just a message saying you have relinquished your trust in the developer and will withhold purchase until the game’s true quality can be assessed.

Also, if you don’t think preorders can guarantee sales to a degree, you obviously miss the entire marketing point of a limited edition.

> 2533274800772611;2:
> It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.
>
> It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.
>
> A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.

This is the middle school argument that has been refuted time and time again but still gets spammed on the forums thanks to YouTube propaganda.

SHADOWSTRIKE1’s post is an excellent and far more accurate description of what preorders actually mean–they are one metric, of many, that mainly help publishers determine sell-in numbers and estimate sell-through numbers. This isn’t to say preorder numbers don’t matter, because they do, but “LOL PREORDERS = PROFIT = BROKEN GAMES” is a terrible and naive argument.

> You say that pre-ordering instead of buying at launch has little to no effect on the development, I don’t see how you could possibly believe that. The only reason the MCC launched in the broken state it was in is because they already knew they were going to make money on it due to pre-orders.

Lmao how can you make that statement? Honestly tell me how? You have NO EVIDENCE to back that up. At all.

> 2533274860199253;4:
> It quite literally does nothing toward the company producing the game. I’m a manager at GameStop. Allow me to demonstrate the process…
>
> - Developers create game.
> - Developers are paid by publisher who then takes the game and puts it out on various release platforms, both digital and physical.
> - Retail outlets contact publishers and order in an estimated number of physical copies to sell.
> - To get this estimated number, they take note of various data, such as sales of previous titles in a series, popularity of the genre, rough marketing costs being put out to advertise the product, and most importantly- Pre-Order numbers.
> - Retail outlets then sign a contract with the publisher, ordering in their needed number of units to their warehouses, which are then distributed out to individual stores based on demand and need. The need is determined based of individual store and district pre-order numbers, as well as overall sale numbers for the genre (example: some districts show higher sales of FPS titles than others, while other regions may sell more RPGs).
> - Each store gets their needed number of games and sells through their initial stock. After a couple weeks, corporate will take note of left over inventory, and order a recall on a number of units back to their warehouse if necessary. It is important to note that the retail profit on new games is only around $8 per new game.
> - From here, the retail chain usually has a contract with the publisher that they are permitted to return a certain percentage of unsold units. However, the retail chain is still out the cost of shipping the materials.
> In this instance, the publisher takes the bullet, but it’s really not that big of a deal. They’ve made most of their initial sales, and the cost of production isn’t necessarily high. The publisher will then keep a stock of leftover units for retail re-orders.
>
> All preordering does is just simply allow retail outlets to allocate where their games should be distributed to benefit sales. The publisher does not get the pre-order money. You can cancel your preorder at any time. The preorder comes off the cost of the game. You also get bonus content for preorder. There is nothing wrong with preordering.

I realize it has nothing to do with the actual producing of the game. The game will get made no matter what. It influences the state of the game when it is released and if it will get delayed if it is broken. You said yourself that Retailers order a certain amount of games, largely based on pre-orders. If that number was lower, and retailers didn’t buy as many are you telling me that the publishers wouldn’t worry that they might not make a profit and perhaps delay that game to make sure that it is in good shape when released so that on the back end they will make their money? If they don’t have as many pre-orders they would have to depend on the state of the game to sell itself. If the MCC didn’t get as many pre-orders as it did then there is no way that Microsoft would have risked releasing the game in the state that they did. Same goes for Assassins Creed Unity and Battlefield 4. Those games were only allowed to be sold when they were because the pre-order numbers, something that you, yourself, a gamestop manager, were high enough to ensure that they make a profit.

> 2533274882999606;7:
> > 2533274822366750;6:
> >
>
>
> 343 has been working very hard for 3 years, m’kay. They won’t let me down. I have complete faith in them… Don’t mention the MCC, because it was in collaboration with several studios. 343 is going to really buckle down for Halo 5.

I don’t care how long or how hard they working, I just care that the final product is satisfactory and working. And I do have to mention MCC, if they can’t handle the task, then they shouldn’t do it. End of story. My previous comment also does not just refer to 343.

> 2533274800197828;9:
> > 2533274800772611;2:
> > It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.
> >
> > It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.
> >
> > A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.
>
>
> This is the middle school argument that has been refuted time and time again but still gets spammed on the forums thanks to YouTube propaganda.
>
> SHADOWSTRIKE1’s post is an excellent and far more accurate description of what preorders actually mean–they are one metric, of many, that mainly help publishers determine sell-in numbers and estimate sell-through numbers. This isn’t to say preorder numbers don’t matter, because they do, but “LOL PREORDERS = PROFIT = BROKEN GAMES” is a terrible and naive argument.

It is obviously not direct. But if someone goes to GameStop 3 months before a game launches, pays full price for a game they cannot possibly know the state of, and then receives a broken product when it comes out is very much decided by the pre-order numbers. You site SHADOWSTRIKE1 as being informed. He, himself, said that the amount of games a store receives are heavily influenced by the pre-order numbers. Assuming that 90% of the people that pre-ordered the game will actually take it home (I got this number from a pal of mine that works at a Best Buy) you can clearly see that those are almost guaranteed sales.

If people don’t pre-order, that number of guaranteed sales is lower. That requires the quality of the product to sell itself.

> 2533274800197828;9:
> > 2533274800772611;2:
> > It’s a sale they already made. If they get enough they can make a profit on the game before it is finished, allowing them to release a broken game for Christmas instead of delaying it. If there were no pre-orders, and people didn’t pay for a game before they got it then the game would have to be finished when it was released or else no one would buy it.
> >
> > It allows publishers to push an unfinished game because they already know they are going to make a profit on it. On top of that, pre-orders used to be for guaranteeing you a copy of a game, back when it was possible that you couldn’t get one. With gaming being so popular, and the introduction of digital sales, that reason is gone.
> >
> > A consumer should never pay for something before they get the thing that they pay for. It allows big companies to screw up and have significantly less risk.
>
>
>
> This is the middle school argument that has been refuted time and time again but still gets spammed on the forums thanks to YouTube propaganda.
>
> SHADOWSTRIKE1’s post is an excellent and far more accurate description of what preorders actually mean–they are one metric, of many, that mainly help publishers determine sell-in numbers and estimate sell-through numbers. This isn’t to say preorder numbers don’t matter, because they do, but “LOL PREORDERS = PROFIT = BROKEN GAMES” is a terrible and naive argument.
>
>
>
> > You say that pre-ordering instead of buying at launch has little to no effect on the development, I don’t see how you could possibly believe that. The only reason the MCC launched in the broken state it was in is because they already knew they were going to make money on it due to pre-orders.
>
>
> Lmao how can you make that statement? Honestly tell me how? You have NO EVIDENCE to back that up. At all.

It’s obvious. If they didn’t have the sales numbers of people that already payed for the game and they relied on the product itself there is no way it would have made them a profit.

We have one thing we can do to show that we don’t like what large corporations are doing and that is not buy what they are selling. Giving them our money before we get the product in our hands is us literally giving away the only thing that we can do to stop the corporation from doing that. Microsoft would release a game like the MCC every year if they could. It cost them very little to make, and the state of the game means nothing because people like you will allow them to keep doing it. The only way that we can stop them from doing that is to speak with our wallets.

> almost guaranteed sales.

This is not what you said earlier, when you said it was a sale they already made. You then fall back to “guaranteed sales” in the next sentence, which isn’t the case.

Riddle me this–let’s say a game has 100k preorders and is utterly broken the day before launch. By your logic, the publisher looks at 100k and says “I’m going to release tomorrow because I already made 100k sales.” However delaying the game likely isn’t going to result in a dramatic downturn in preorders, <strong>so if they’ve already made the sales, why would preorders stop them from delaying it?</strong>

They have your money, right? It’s not going anywhere, so what difference does it make if they release tomorrow or 1 month from tomorrow?

Now don’t get me wrong, that hypo ignores the fact that publishers don’t get a damn thing from preorders until the day the game comes out (meaning there is no difference between buying day one and preordering), but again, I’m trying to use your logic and understand where you’re coming from here.

If anything, H2A was released before it was ready last year because it was always slated to celebrate the 10th anniversary of H2 and was also needed to move Xbones last holiday. The preorders of MCC likely had little to do with anything because the game itself wasn’t as important as its position as a big-time exclusive coming out in the holiday window.

Microsoft advertised two 90 second H5 commercials during The Walking Dead finale. Do you know how much that cost? They also used that opportunity to announce the release date. So millions of dollars and millions of people saw “10-27-15” Sunday night, and all the marketing from now until then is going to advertise that date. That is going to be the date unless something catastrophic happens in development over the next 6 months, and whether there are 0 or 1 million preorders won’t mean a damn thing except for how much they should send to retail outlets for potential sell-through sales.

> It’s obvious. If they didn’t have the sales numbers of people that already payed for the game and they relied on the product itself there is no way it would have made them a profit.

No, it isn’t obvious. Because you don’t pay for a preorder until you pick up the game or get it shipped to you.

The single most important number for a manufacturer of any product - video game or otherwise - is post-release sales. The post-release sales reflect how the product has actually been received. If it was received well, it will continue to sell well after release (CE / 2 / 3). If it was received poorly, it will not sell well after release (Reach / 4). Products that do not sell well after release additionally portend lower numbers for the next offering.

Preorders are (by far) not the biggest component the profitability equation. In the case of H5, preorders currently number around 200k or so. That will likely climb to around a million before release (maybe more). As people play the game, word-of-mouth begins to have an effect. If the game is good (like Halo 3), they will see continuing sales totaling an addition 5M+ while preparing H6 for production. If the game disappoints (like Halo 4), they will see continuing sales in the 2 - 3M range.

That’s a swing of 3M sales or more on this product and an unknowable swing for the next product of 3M+ . . . or more than 3 times the number of games that were preordered.

Post-release sales are far more important to revenue than preorders. All preorders tell a company is how much goodwill they have earned based on past performance. It is the post-release sales that tell them how much more goodwill they’ve built . . . or pizzed away.

The theory is that companies are disincentivized to release a working game if they already have money in their pockets. Yet, I see people throwing money at people on kickstarter all the time just simply based on an idea of a game, rather than a company with a track record or a working demo.

> 2533274800197828;14:
> > almost guaranteed sales.
>
>
>
>
> This is not what you said earlier, when you said it was a sale they already made. You then fall back to “guaranteed sales” in the next sentence, which isn’t the case.
>
> Riddle me this–let’s say a game has 100k preorders and is utterly broken the day before launch. By your logic, the publisher looks at 100k and says “I’m going to release tomorrow because I already made 100k sales.” However delaying the game likely isn’t going to result in a dramatic downturn in preorders, <strong>so if they’ve already made the sales, why would preorders stop them from delaying it?</strong>
>
> They have your money, right? It’s not going anywhere, so what difference does it make if they release tomorrow or 1 month from tomorrow?
>
> Now don’t get me wrong, that hypo ignores the fact that publishers don’t get a damn thing from preorders until the day the game comes out (meaning there is no difference between buying day one and preordering), but again, I’m trying to use your logic and understand where you’re coming from here.
>
> If anything, H2A was released before it was ready last year because it was always slated to celebrate the 10th anniversary of H2 and was also needed to move Xbones last holiday. The preorders of MCC likely had little to do with anything because the game itself wasn’t as important as its position as a big-time exclusive coming out in the holiday window.
>
> Microsoft advertised two 90 second H5 commercials during The Walking Dead finale. Do you know how much that cost? They also used that opportunity to announce the release date. So millions of dollars and millions of people saw “10-27-15” Sunday night, and all the marketing from now until then is going to advertise that date. That is going to be the date unless something catastrophic happens in development over the next 6 months, and whether there are 0 or 1 million preorders won’t mean a damn thing except for how much they should send to retail outlets for potential sell-through sales.
>
>
>
> > It’s obvious. If they didn’t have the sales numbers of people that already payed for the game and they relied on the product itself there is no way it would have made them a profit.
>
>
>
>
> No, it isn’t obvious. Because you don’t pay for a preorder until you pick up the game or get it shipped to you.

You are right, the release date has a lot to do with it. I will also except that me using “guaranteed” is not the best way to type out what I was intending on saying. But you also have to admit that if MCC did not receive as many preorders as it sis then there is a good chance that it would have been delayed. You say that Halo 5 will only get delayed if something “catastrophic” happens. I think that I is clear that something on that scale happened to MCC. It didn’t work when it was released, and we can argue about how much preordering effected that games release all day, but saying that preordering had nothing to do with it is ridiculous. If MCC did not receive one preorder then there is no way that -Yoink!- would have allowed it to be released in the state it was released in. Something catastrophic did happen to that game, but it wasn’t delayed.

when it comes down to it games are made to make the people making them money. You use that 100k example, but lets look at another one. The game you were talking about gets 0 preorders. 0 “guaranteed” sales. Do they still release instead of delaying? Obviously we can’t tell, but I would put my money on that they wouldn’t release. Businesses are all about risk management. You are right about the 100k sales and that it isn’t the only factor. What that 100k does though is allow the company to look and say, "even if we don’t sell as many as intended because the game is broke, we can rely on the 100k we already have sold. It’s risk management. Those preorders help allow the company to play the risk of releasing at a more profitable time because they don’t have to worry as much if they sell bad. They already have that 100k. Pushing a game to spring takes away the massive sales a game can bring in. It is in a companies favor to release during the holidays. The 100k allows them to take that risk without having to worry about not making money.

Edit:if they are going to make the 100k no matter what, are they going to release in spring when sales are relatively weak, or during the holidays, when sales are best?

Money

Pre-ordering send a message to the publisher as to whether or not they already have a winner on their hands.
If we don’t pre-order, they wont know this until after the game launches. They will be more likely to be -Yoink!- sure the things works (if they’re smart). most sales of games happen within the initial week. Pre-ordering keeps that timeframe in the mind of the consumer. If someone doesnt pre-order, and they hear the game is broken at all, they will be less likely to buy the game, period.

its about sending a message more than it is money. As consumers, we don’t have a lot of ways to “take it to the top”. Pre-orders are one of the ways to do that.

> 2533274860199253;4:
> It quite literally does nothing toward the company producing the game. I’m a manager at GameStop. Allow me to demonstrate the process…
>
> - Developers create game.
> - Developers are paid by publisher who then takes the game and puts it out on various release platforms, both digital and physical.
> - Retail outlets contact publishers and order in an estimated number of physical copies to sell.
> - To get this estimated number, they take note of various data, such as sales of previous titles in a series, popularity of the genre, rough marketing costs being put out to advertise the product, and most importantly- Pre-Order numbers.
> - Retail outlets then sign a contract with the publisher, ordering in their needed number of units to their warehouses, which are then distributed out to individual stores based on demand and need. The need is determined based of individual store and district pre-order numbers, as well as overall sale numbers for the genre (example: some districts show higher sales of FPS titles than others, while other regions may sell more RPGs).
> - Each store gets their needed number of games and sells through their initial stock. After a couple weeks, corporate will take note of left over inventory, and order a recall on a number of units back to their warehouse if necessary. It is important to note that the retail profit on new games is only around $8 per new game.
> - From here, the retail chain usually has a contract with the publisher that they are permitted to return a certain percentage of unsold units. However, the retail chain is still out the cost of shipping the materials.
> In this instance, the publisher takes the bullet, but it’s really not that big of a deal. They’ve made most of their initial sales, and the cost of production isn’t necessarily high. The publisher will then keep a stock of leftover units for retail re-orders.
>
> All preordering does is just simply allow retail outlets to allocate where their games should be distributed to benefit sales. The publisher does not get the pre-order money. You can cancel your preorder at any time. The preorder comes off the cost of the game. You also get bonus content for preorder. There is nothing wrong with preordering.

You are completely discounting online pre-orders for digital download where you pay the whole thing up front, no refunds. Same with pre-orders that get automatically shipped from online retailers. You pay for the whole thing up front. Even if the retailer doesn’t send the money to Microsoft on the day of the pre-order, it will get sent when the game is automatically shipped. Pre-orders set up that way are unlikely to get cancelled so its pretty much a guaranteed sale.

With the world going more and more digital-only, this is becoming more of a factor.

I knew it, OP thank you…this is something I’ve been tossing around. It is false logic that people just accept.