Page last updated at 23:25 GMT, Wednesday, 19 August 2009 00:25 UK

Retailers 'limit UK games market'

By Daniel Emery
Technology reporter, BBC News, Cologne

Georg Larch, marketing director for Koch Media, showcased some of his new titles in Cologne

One of Germany's largest video games publishers has said that the UK's retail chains make it difficult for publishers to break into the UK market.

Georg Larch, Koch Media's marketing director, also blamed the exchange rate and UK pricing structure for the difficulties faced by games publishers.

Industry experts say the second-hand market also stifles industry growth.

Mr Larch said at the gamescom meeting that a rise in digital distribution would make things easier in the future.

He told BBC News while the firm's turnover in Germany had risen by 18% this year, in Britain that figure was much lower.

"We're seeing companies like Amazon take a larger market share, and the growth of digital distribution, but it's going to be a long-term development as people still want to have something in their hands," he said.

Mr Larch said that other economic factors were at work against overseas publishers.

"We can see a lot of cheap imports from the UK to Europe [due to the current exchange rates]."

Ian Livingstone, president of UK-based publisher Eidos, told BBC News publishers still wanted to work with retail.

A shop makes a bigger margin on a pre-owned title... and the content creator gets no slice of the action
Ian Livingstone

"These aren't just shops, they are a marketing tool, a window into our world where software houses can display their wares," he said.

The problem that publishers have with retail, he said, was due to the growth of the second-hand games market.

"The pre-owned market is a serious problem, because there is no benefit to developers or publishers," said Mr Livingstone.

While retailers have to pay a percentage to the publishers for a sale of a new game, there is no such requirement when selling a second hand game, with the shop pocketing all the profit.

Mr Livingstone estimated that the pre-owned market made up more than a quarter of a video-game retailers turnover.

"A shop makes a bigger margin on a pre-owned title, and can sell them six or seven times, so there is no incentive for them to reorder and the content creator gets no slice of the action," he said.

Industry experts say the landscape of what makes a successful video game is changing.

While software developers could turn a profit if a game made it into the top 20, with rising development costs and more platforms to develop on, a game often needs to be listed in the top 10 for publishers to justify any investment.

This has made some developers more cautious on what they develop and has also seen retailers allocate more space to the best-selling games.

Retailers may then refuse to stock so-called "tier two" games altogether.

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