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[this is a repost from my blog gameranting]
The second hand game market is thorn in the thigh of every developer. Various solutions have been offered to fight this phenomenon, like better game play, deeper stories or online distribution. But all these solutions avoid the big elephant sitting in the room: games are expensive.
The average retail price is 60 € for a brand new game. Too put it in perspective: this represents 4 % of the average net income. Yet for a kid with a monthly allowance of 30 €, buying a new game means saving two months. So who would not buy second hand games (usually priced between 30€ to 40€) in such a situation? And what better way is there then to fund the purchase of the latest game by selling the previous game you bought.
The second hand game market blooms because demand of games has no impact on the price. The current market model for the game industry is that of a monopoly: 3 console manufactures dominate the market (Nintendo, Microsoft and Sony). Since their game disks are not compatible they can impose their prices on the market.
Another reason why the second hand market blooms is the huge profits retailers can make out of selling second hand games. A retailer has about 30 % margin on a new game. second hand games are taken back at low prices (5 € or less) and in return sold back at a whopping 80 to 90 % margin! Furthermore, players who resell their games, usually are refunded in vouchers only valid with that retailer. So second hand games present double benefits for a retailer: high profits and return customers.
Is there a real solution to stop the second hand game market: yes, but since the game industry is a monopoly only the console manufacturers can really influence that market, either by cutting prices or by taking over that market altogether.
But not until the manufacturers experience any impact from second hand games themselves, will they react to this phenomenon.
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It seems to me that this is one way the developers can compete with the used game market. By reducing prices on new titles to be comparable with used games, they can get in on the action, at a vastly reduced profit.
On countries with second hand and piracy markets ranpant, like Brazil, 60 euro is 100% of the average net income... On some places it is even worse, some countries each person get a salary like 40 euro/month.
What exactly is the elephant in the room? That consumers like new games cause they're cheaper? I think that's pretty widely accepted.
I'm not sure how having one console would make the market LESS of a monopoly. Right now any one of the console makers has the option of lowering the prices of their games - indeed if this were economically viable they would do it in order to compete.
Here's a thought: maybe if the companies that made the game got a larger share of the profits rather than having them leeched off by the used-games retailers, they could afford to drop the price of new games.
The real problem is, when I walked into GameStation in Dundee yesterday, on the main 360 rack, they had side-by-side new copies of Prototype for £39.99 and (one, maybe two) preowned copies for £37.99. I'm not exaggerating, that genuinely was the setup - I'll take a photo tomorrow lunchtime if they're still there.
Retailers should not be allowed to re-sell preowned titles for more than 50% of the original RRP. End of story.
Maybe if console games came with a key they got linked to xbox live, Sony or Nintendo account where once used the games could not be used on those accounts it would cut down on the people willing to buy second hand games? Especially where you could burn a new disc or backup the game as an image so you did not have to worry about the disc's wearing out or getting scratched.
In the end this would slow down the increase in game prices overall, because publishers can add that into their forecast model. I think 70-80% margins on media is absolutely ridiculous. That's why I'm all about Half.com.
If the resell business is so profitable, could at least some of the larger developers offer to buy back used games (shipping on the developer's expense for added incentive)? Then the used games can be repackaged to include ads for some of the developer's newer releases.