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GameStop investors spooked by Sony patent that could lock out used games
GameStop investors spooked by Sony patent that could lock out used games
January 3, 2013 | By Frank Cifaldi

Investors in video game retailer GameStop have been bailing out today after a widespread report alleged that Sony's next home console may not play used games, the store's bread and butter.

The patent application, which was filed by Sony Computer Entertainment Japan last September, is for a system that would tag individual RFID numbers to each game disc manufactured. That tag could then be read by the console it is being played on and tied to a user's account information to determine, as the patent says, "whether a combination of the disk ID and the player ID conveyed from the reproduction device fulfills the terms of use or not."

While the potential usage of this patent is not clear (and Sony is, of course, not commenting), several news outlets have speculated that this could mean that the company's next home console will prevent players from playing games that were originally purchased by someone else, dramatically cutting into the used games market that accounted for around 46 percent of GameStop's profits in its last fiscal year.

In reaction to the reports, share prices dropped by as low as 7 percent during trading hours today, though some investors think there's no reason to panic.

"We think the reaction is overblown," Wedbush analyst Michael Pachter said in a note sent to Gamasutra.

According to Pachter, blocking used game sales wouldn't do much for Sony's bottom line, given that only 10% of its console game's sales are published by Sony itself. Such a move, he says, would open the floodgates for Microsoft to be the good guy and offer the next-gen console with more options, something Sony can't afford to let happen.

So what other use case could this patent support? It could combat counterfeit games or, as Pachter speculates, it could indeed lock out used game sales: not from Sony, but from any publishers "foolhardy enough" to "risk the wrath of its customers."

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Uh yeah Microsoft comes out the good guy, when they hinted countless times about wanting the samething.

GameViewPoint Developer
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That's what I was thinking. As has been said above it doesn't look like it's something worth these companies doing, but I won't be surprised if the next gen consoles drop the axe on the 2nd hand games market. It's going to happen anyway in regards to games being downloaded direct to the console.

Jesse Tucker
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"According to Pachter, blocking used game sales wouldn't do much for Sony's bottom line, given that only 10% of its console game's sales are published by Sony itself."
As far as I know, console makers charge a fee for every game that's sold on that console. This means that Sony misses out on a sum of money every time a game is resold for one of their consoles.

Joe McGinn
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You are correct Jesse. You'd think Pachter could at least get such a basic fact right, about how the console business works, and has worked for decades, at every manufacturer not just Sony.

And I can't imagine Microsoft is not looking at something similar. Or just selling digitally and cut out the leeches altogether. They aren't going to be willing to continue to GUVE AWAY 46% of their gaming revenue for a minor marketing hit of "being the good guy".

Everytime I think Michael Pachter can't get more clueless, he manages to surprise me.

TC Weidner
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this also would put an end to gamefly and other game rental places.

John McMahon
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Not exactly, more likely the RFID chip will be set in such a way as to prevent it from being seen as the player "owning" the game and set to some state that allows transfer from one player to another.

But until Sony details what it intends to do with it, we can only guess. I would hope they would be smart enough to allow the game discs to have at least 3 states, own, rental, and not sold.

However, if they do implement functionality to allow rental games to be transferred than most likely that will be where most people will start looking to find a way to change the chip's setting.

The only problem that exist with rentals is that a player may not return a game and thus the rental company charges them full price and they own that rental version and thus the ability to transfer the game to other player accounts. Which means they could sell it and the used sales market lives on.

It will be interesting to see how Sony implements this technology.

TC Weidner
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@ John
I doubt they will allow renting by third parties anymore. What this technology will allow is for Sony to rent games themselves via digital download, the download will simply expire after the allotted time just like movie rentals. This is about Sony getting paid, and likely Microsoft will follow. ( why should they allow for a secondary and rental market where they and their developers make nothing)

I think what Sony and the entire industry is moving towards is pretty obvious.

John McMahon
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@TC Weidner, I was more specifically thinking about rental companies like GameFly, Blockbuster, RedBox, etc. Sure they will still be able to rent the titles for this generation, but it's a safer bet Sony and/or MS will want to limit any loopholes someone has to circumvent this.

So glad Mass Effect wrapped up during this generation, the way things sound I'm not going to like the next-generation and that's a first for me.

I just really hope a case concerning ownership of software like games goes to court or the laws get updated. The power companies have over your access to games you buy is reaching too far in my opinion.

Curtis Turner - IceIYIaN
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Perhaps a CD-Key to redownload the game.
Perhaps limits the game on other systems/PSN ID's.
Perhaps ads advertisements to other systems/PSN ID's.

Devs are always complaining about piracy/renting/used games.
Steam doesn't really have used games for the most part and you cannot rent games from them yet.

brad coleman
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So can't even borrow a game from a friend either I guess? Well hopefully playing with only newness comes with a discount but I doubt it.

Luke Quinn
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I'd love to see what would happen if GameStop/EB/anyone else that sells used games just refused to even stock consoles that feature any such measures.
Sure, consoles would still be available via other large retailers, but I imagine the potential of having your install base severely stunted by having poor distribution would have the console manufacturers stressing a little more than usual...
Personally, I think consoles as we know them are dead anyway, and aside from speciality (or niche' if you'd prefer) consoles like OUYA, people will start to see less and less reasons to spend large lumps of cash on a console when they could just jam a gamepad into their PC or iOS/Android. (the latter may take a little longer to catch on)

Erin OConnor
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2 pronged approach.

1. Eliminate piracy.
2. Eliminate the secondary market.

Assumption (by sony): Game sales will increase.

There is also a small problem with the EU. The UsedSoft GmbH vs Oricle International Corp for starters.

Kyle Redd
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I think consumers' best hope for stopping this trend of companies tearing away control of the games they've purchased probably lies in Europe, with countries like Germany that have representatives who actually care about consumer rights.

Brandon Sheffield
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not really sure how important discs are going to be for the next generation. In other news, next sony console to use discs.

Ujn Hunter
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Depends on the person I guess. I wouldn't even consider buying a console that doesn't offer retail games. Retail or bust, I have no interest in digital only rentals. That being said... I would never buy a PS4 (or any console) that blocks or charges a fee (online pass type nonsense) to play used games. After the disaster that was the PS3 however, I don't think I'd be interested in a PS4 at all.

Dimitri Del Castillo
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The hackers will crack this RFID chip before Sony even makes the first sale. Either that or they will hack the box to bypass the whole thing entirely. In any event, the Black Market will be the winner here to the detriment of GameStop.

Alan Rimkeit
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This. Nuff said.

Evan Combs
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Beyond the obvious ramifications, I can't believe that this would qualify as a patent. Use already established technology, and claim it is new technology, wow so innovative.

Alexander Symington
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It seems very unlikely that EU courts will support this kind of encroachment on consumer rights, considering a ruling last year which will apparently require even digitally distributed games to offer a means of resale. If Sony were to implement this technology without abandoning the massive chunk of the retail market that the EU represents, they would be left selling an obviously inferior product in the North American and Japanese markets. Even ignoring tagging-free competition from at least Wii U, that situation seems unsustainable to me.

Lyon Medina
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I think this is something Sony would need to say more about before I personally would liquidate my shares in GameStop. To me though there has to be a middle ground where we have to have re-sale availability on games.

I would never have hooked on the Xbox if it wasn’t for the fact that my older brother let me borrow a lot of his games before I got my own. I would have never gotten my friends hooked if they couldn’t borrow my games, and tried them out.

Sorry, but the ability to let someone have something, or borrow something, or resale something is what keeps games alive. I hate the GameStop pre-owned business model, but it is needed so that people who want to play games can afford them, or more of them.

It's a balancing act that is really just up to you how much you want to give versus how much you want people to pay.

Best analogy anyone has ever given me "This is why writers hate libraries."

I am for the anti-piracy thing completely, and for businesses getting their fair income from their works, but what more can be done? The audience needs to be educated. To play or borrow games, but eventually own the game console with the game.

My friend Hector played Gears of War at my house, and literally went to a gaming store bought a 360, borrowed my GOW, played the snot out of it, and then ending up buying his own so we could play online together. There needs to be a progression to used sales.

k s
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This patent just shows how much contempt sony has for consumers. No this wont stop piracy at all, GameStop sure but not piracy. On top of it all it will only piss off consumers.

james sadler
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I distinctly remember the same thing being said about the PS3 before it launched. It was rumored that there was going to be a key built into each disk that would attach itself to single console. People freaked out and damned Sony. That feature wasn't there on launch day though. It is a dumb idea. There's already enough stuff that downplays the issues with a secondary market like one time use codes and multiplayer passes that this kind of thing doesn't make sense to prevent a secondary market for games. More than likely it would be there for pirating.

Lets also not forget that patents are generally filed more to prevent other people from freely using the technology or method of use (you'd be surprised how many patents there are for just GUI's). They may not intend to ever use it, but that doesn't mean they want MS to, at least without paying through the nose. Now if someone wants to use the same technology or method to creation a copy protection for the next gen of media players they have to ask Sony first. Its more a power positioning nowadays than anything.

Nate Anonymous
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It's pretty easy to see how this can get rolled out and give Sony a competitive advantage, not a disadvantage.

Sony requires MFN status from its publishers, meaning that publishers may only trigger the used-game lock if they have a similar locked disc for Microsoft Xbox (PC, obviously, already has this limitation through Steam).

Sony experiments with the used-game lock for its own proprietary games, especially the most popular.

Sony uses the used-game lock as an inducement to get exclusives, at least timed exclusives, if Xbox does not roll out its own used-game lock. For example, Sony would activate the used-game lock for a game like GTA VI for six months in exchange for an exclusive for six months (part of its MFN status). After six months, the publisher would be free to publish on other platforms even if they don't have the used-game lock. The publisher would be fine with have a non-locked game released after six months because the new game sales would be down anyways. Plus, if the absence of a used game market for these exclusives hurt Sony's bottom line (because they make the console unpopular) they could also require that after the exclusive timed period is over, their discs also lose the used-game lock and can be resold. The expiration of the used-game lock can be triggered during the normal patch cycle or pre-programmed when the lock is set, depending on what is best for DRM.

Over the long run Gamestop would be toast since the newer used game market is probably the most lucrative part of their used game sales.

Pachter, you're not thinking digitally! He has a real problem with that.

Bonus points if you catch the nerd reference.

Merc Hoffner
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Not to be too cynical (and naive), but surely if Sony patents used-game-blocking than it means no one else could use it? I.E. it'd force competitors to keep their systems open? ... Perhaps not.

Joe Zachery
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Very simple just don't carry their hardware. Give them one less place to store their consoles, and they will play nice.

Thom Q
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Pretty disgusting. What won't they think of to squeeze money out of their customers?
If they wouldn't allow throw-away titles at 40$-60$ per game to be published for their consoles, maybe less people would sell their games..

Also, I can imagine they would run into some serious legal issues around the world trying to pull this off.

Lex Allen
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It's absurd. They are so out of touch with what people want and are alienating their customer base to such an extreme. Parents are going to be pissed when their kids can't play each others' games when their friends come over.

Dan the gaming Guy
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The used and retal buniness models are hurting the consumer in the long run as the creators of the game get $0 for every time their game is resold or rented.

Used games and rentals are hurting 90% of game studios bottom line. Thus in turn due to ongoing revenue drops from used and rental games, forecasts and bugets for upcoming games also drop, which then in turn impacts final product quality when you have less time and people to make the next game. This is a big part IMO of the reason why console industry is in resession, because most of the products are uninspired as developers are doing their best to match the quality of last game with less resources instead of giving users what they expect, which is a better sequel.

If you look at when console market started to dip, there is a direct correlation with the rise of used games and rentals.

Disappointing games we see today are a result of used games sales a couple of years ago. If used games and rentals keep growing, it will ultimately bankrupt the console industry. If you want to dispute this viewpoint, explain how a developer can stay in business with no revenue...

While the old way might not be the best way, its better than what we have now. If the game is good, support the developers making good games by buying their product. If the game is rubbish, dont buy it and let that developer have an honest death.

Rob B
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Are you like 10?

Im not calling your maturity in to question, I ask because the second hand market has been booming for practically the entire life time of the games industry. Most of my NES and Spectrum games were second hand and Im pretty sure quite a few of my mums Vectrex games were second hand. The second hand market _is_ the old way.

Also, kudos for the loaded question but second hand markets dont remove all revenue, they never have. Not in the history of the games industry nor in any of the many other industries with healthy second hand markets.

Dan the gaming Guy
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Guess I didnt know where to rent or buy used games before gamefly and gamestop. Whatever the amount of rentals or used sales that were going on in the "old" days, I doubt it was nearly as accessible and advertised as it is today... Maybe you just knew where to go (excluding piracy and friends)??

If it has been booming your entire life as you say, then maybe to use an analogy, a little bit of poison is digestible, enough will make you sick.

Jesse Mikolayczyk
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After reading the patent, from what I see, it doesn't specify anything about actually storing the RFID tag info or linking the game to the system (though it does mention storing the terms of use on the system, likely just for comparison purposes should the player be playing offline)

To me, it seems more likely this technology is for anti-piracy, not to prevent used game sales. I think they will use the RFID chip to confirm the game isn't a copy (how many of you have a CD burner that implants RFID chips?).

Tyrone Rodriguez
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If Pachter says, "We think the reaction is overblown," then it's time for investors to worry.