Why preorder a game?

Recently a avid reader and loyal fan of my blog asked me to do a post on video game preorders and why they are such a big deal. This was such a great idea because preordering video games is one of the biggest topics in video game business at the moment.

Preordering a video game essentially guarantees you a copy of that game when it comes out on whatever day it is supposed to arrive. You go into a store and ask to preorder Splinter Cell Conviction for example and then give your name and phone number in order for the store to contact you when the game comes out. The most important thing however is you have to put a deposit down on the game, typically a minimum of $5. You can put any amount you want but you have to put something down. It won't end up costing you anything extra either so for example if you put $5 down today and Splinter Cell comes out on April 14th you will just pay the rest when you pick up the game. Pretty simple.

So why do companies do it? Well there are a few reasons but the most obvious is they want to get you to buy the game and when you commit some money down on it you are giving the company a good idea of your intention. This allows them to monitor sales weeks or months in advance which helps them to know how many games to ship to each store on release days. It also helps the publishers know how well their game will sell and if their marketing is working and how they can improve upon it. While thats important, there is a much more interesting motive behind why they push preorders so much.

Lets use Call of Duty: Modern Warfare 2 as an example. In its first week of sales it brought in $550 million. Now of course they were not all preorders, however we can assume that at least half were, which is not perfect but a pretty safe estimate for our example. At ~$60 for each game we can kind of round the numbers to say roughly 9 million games were sold. If we wanted to assume half were preorders you're looking at about 4.5 million. Now if the deposit is at least $5 you are looking at about $22.5 million in the video game retailers bank accounts BEFORE the game is even released. Now lets consider that MANY people put much more than $5 down on their preorders and some even pay them off completely. Also many, many people put their preorder deposit down many, many months in advance. So the incredibly rough estimate of $22.5 million in just preorder dollars could have in fact been much higher as many people would be putting down more than $5. Now the OTHER factor that makes preorders so lucrative to companies is interest. If a massive video game retailer has even a slight portion of that worldwide $22.5 million pie then that money is in their gigantic preorder bank account making even more money for them and they have done literally nothing whatsoever.

So why should I, as a customer, preorder? Well in order to get people to give up their money months in advance a lot of retailers and publishers offer gifts. They might include in game things you can unlock only by preordering at specific retailers. Another reason is sometimes retailers simply can't keep popular games in stock so if you preorder you WILL get the game so if you need to play the game right away preordering really doesn't have many downsides except you might be out $5 for a few weeks.