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Analyst: Used Game Market 'Significant' Drain On Software Sales
Analyst: Used Game Market 'Significant' Drain On Software Sales
June 25, 2010 | By Leigh Alexander

June 25, 2010 | By Leigh Alexander
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    49 comments
More: Console/PC



Although it's hard to pin down exactly to what extent used game sales cannibalize sales of new software, a significant share of the blame for weak sales this cycle can be pegged on the second-hand market, says one analyst.

"In our view, GameStop has exploited the negligible difference between the value propositions of new and used games to capture a significant portion of the video game value chain," says Cowen Group analyst Doug Creutz.

The biggest drain on industry revenues this cycle has been a decline in sales of PlayStation 3 and Xbox 360 software, says Creutz. Recent years' high console price points take part of the blame, but the "dramatic" growth of used games sales is a "significant" factor, he adds.

But numerous publishers are exploring value-add "$10 wall" tactic -- Electronic Arts with its "Online Pass," and THQ by charging to play UFC online, for example. These initiatives offer key features only with new copies of a game, and require used players to pay additional money to unlock them.

Such approaches are a "critical step in allowing publishers to re-capture value from the used market," says the analyst, who says that fully leveraging these initiatives could drive industry software margins higher in the next 18-24 months.

In fact, there's room for publishers to be more aggressive, he suggests, in "cordoning off" more game experiences from used players. And there's little GameStop can do to prevent it, he adds.

However, GameStop has publicly embraced initiatives like EA's, praising opportunities for its retail stores to be included in the sale of digital content. The company has said it sees little impact on its business from the shift, and in fact it expects to benefit positively from these moves toward "extending the life of titles and broadening the base of players."

And the alternative, a "more aggressive" shift to digital distribution, would be even worse for the retailer, says Creutz.

How will gamers respond? "We believe that consumers are likely to grudgingly accept a revised and evolving pricing strategy that reflects the value they receive outside of and in addition to the traditional single-player offline experience," predicts Creutz.

"Against a backdrop of our expectation for improving growth in videogame software sales through the remainder of 2010, we believe that the evolution of these new pricing strategies give investors additional reason to become more constructive on the third party video game publishers," he concludes.


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Comments


Adam Miller
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Publishers have taken some flack for the $10 wall, but it seems entirely fair to me (provided they make the code redemption process clear). You really don't/shouldn't have a ton of rights when reselling a used digital product -- it's really not so different from scalping a ticket to a live event.

Jonathan Woodard
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What other industries besides "soft goods" like software/music/movies have the gall to complain about a used market? Furniture stores aren't attempting to gouge me or craigslist for the used coffee table I bought. Subaru isn't going to come running with a bill if I sell my car.



I mean, honestly.

Jonathan Woodard
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@Adam: I shouldn't be able to sell a ticket to a live event that I've bought, that I can't make it to? Scalping implies that the price has been jacked up to take advantage of the inevitable shortage at the gate. Comparing what GameStop does to scalping would really only makes sense if they'd been selling a used Wii for $500 during the early shortages.

Todd Boyd
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@Jonathan: Damn straight, brother. This just seems like the complaints of money-grubbing suits who aren't able to bleed every last penny out of their target audience, regardless of the implications.

E Zachary Knight
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@Adam,



And people say the used car comparison is a really bad one. Scalping a ticket as Jonathan said is more akin to what happened to the Wii in the first couple of years. Normal selling of a used game is nothing like scalping a ticket.

Andy Lundell
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Then here's a better comparison :



Used book stores have existed for centuries.

Alan Rimkeit
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I would buy more games new if they did not cost $50-$60. Seriously. That is no joke. If games in the store were a standard $30-$40 then 100% of my gaming cash would go to the companies. As it stands $50-$60 is just to much money for most people to support these days. :(

J Smith
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It's bizarre to me how quickly people jump to defend the "money-grubbing suits" at gamestop while lambasting the ones at publishers. Is it really worth the $5 it saves you? Either way your money is going to some giant corporation. At least if you buy new some of that money will be reinvested in making more games, which presumably if you care enough to have an opinion on the issue you probably want to see more games made...

J Smith
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In any case digital distribution services have essentially solved this problem. People who don't want to pay $60 for a game can buy games that came out last year for a much lower price, but the money still goes to developers/publishers. Everybody can be happy with that, right?

Russell Watson
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@Andy



That is still a poor comparison. A book, like a car, suffers wear and tear that may directly effect the content/experience. Pages may have spillages on them or may be missing entirely etc, its the risk you take when purchasing second hand items. These things can impair your enjoyment of the product and it is an accepted factor in the second hand market.



This does not exist in the used games market. Manuals are largely irrelevant these days, a broken box or missing manual typically will not effect your enjoy of the game. The experience is the still the same.



The closest comparison you could make on a more equal footing is the DVD (for films) market. Yet I dont recall seeing HMV/WHS Smiths/Virgin shop having a pre-owned DVD section. But then again I havent been in any of those for some time. You have to ask why? Perhaps its the price point.

E Zachary Knight
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@J Smith,



I am not here defending any "money-grubbing suit" I am hear defending a 100 year old law that says that consumers have the right to sell the stuff they have bought without having to deal with the producer of the stuff.



To be quite frank, I will never buy a game used or new that has this kind of system.

Andy Lundell
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@Russel : You must go to a pretty grubby used book store. Most used books are in perfectly readable condition. The content is entirely accessible.



I'm not defending GameStop, I'm defending the consumers' right to do with his purchases as he pleases. Including reselling them, or lending or gifting them to friends.

E Zachary Knight
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@Russel,



Gamestop sells used DVDs. A large number of game stores sell used DVDs. There is a store in the Midwest called Hastings. They sell new and used Books, Movies, Games and CDs.



We also have Vintage Stock that sells new and used Comics, Movies, Music, Games and Other Merchandise.



The used book, movie and music scene is just as big and profitable as the used game scene, it is just that those industries have learned to ignore it.

Russell Watson
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@Andy



"most" :). The second hand nature of the fact is that you dont know until you've read the book. In most cases. But the point I was getting at is that those things are poor comparisons because value is often attached to an items ability to perform it's intended function. Most item's ability to perform it's function are impaired with use/time.







@Ephriam



I wouldnt know about that, im not from the US. I've never seen a used DVD or music CD for sale in a shop in the UK before. Especially not a large retailer chain.

J Smith
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So let's take used games to their logical conclusion in a digital world.

I set up a game-sharing service called "Gamester" where you pay me $5/month for access to the service. Members of the service can instantly "check out" any game they want to play, and it automatically "checks in" when they are done playing. I buy a number of legitimate copies of every game that comes out equal to the maximum number of simultaneous players I expect to see playing that game.



I have now created a fantastic customer experience, and am probably making a ton of money to boot. Customers win big and I win big. In the short term. Unfortunately I've also ended the business of making games for profit, as I've cut the number of copies sold by several orders of magnitude (down to a tenth, maybe a hundredth?).

E Zachary Knight
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@J Smith,



Sounds like you are talking about a digital rental service.



Rental of games and movies is nothing new. While we have not had much of a "digital rental" service as found with movies, it is possible.



The issue of First Sale is that the owner of a single copy is free to rent, lend, sell, or gift their copy of a copyrighted good as long as they are not making additional copies. So I cannot buy a game, make copies and "rent" them.



It can quite easily be argued with you digital rental service that even if you are only "renting" a number of games out that does not exceed the legally purchased copies, you are still in essence creating copies without permission and thus violating copyright law. That is the big difference between renting physical copies and digital copies.



In order to protect yourself from lawsuits, you would first need to get permission from the copyright holder to make such copies in order to succeed in your business plan.



The more I think of it, this service sounds a lot like Onlive.



I know that the difference between a physical good and a digital good is hard to grasp, but I assure you that I quite understand that difference.

Fábio Bernardon
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@J Smith



And if this person (because he is providing a service) gives part of this "renting" money (because what you described is no different than any renting service) to the publishers?



Don't confuse these situations: Used game marketing is not renting, as the people who has just re-sold the game will no longer be able to play it, unless it buys the game (used or new) again.



But I liked your idea, and publishers could do it themselves: instead of selling the game once (because that is what they do) have a $5 subscription to a service that would allow users to access the entire catalog of the publisher (both new releases and old games). But I doubt they are willing to do it themselves. OnLive may do it by its own.

Mark Morrison
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1- 3rd party publishers/developers are required to not only work closely with retail during pre-release, but also deliver highly customized (often speculative and expensive) programs, and in many cases adhere to retail desires or requests for certain mechanics and/or features to be in-game.

2- Publishers have to pay an up-front royalty per disc to first party, with no recoup. or charge off to help their bottom line or offset costs.

3- Used game retailers know that the rental and subsequent used game margin model usually negates any rev. share to other parties.

4- Used game retail buys a $3-$10 PS3 game and sells it for $20-$40. That's 600% > mark up for the retailer who has no costs but overhead.



Whatever other business comparisons people choose to make is fine, albeit often out of context. The reality is that this article presents a lot of accuracy in current cycle negatives IMO. Retail knows they have the upper hand and exploits this loophole to the potential detriment of new product, and thus potentially stifling certain innovation or development advances.



Most of the complainers here might be developers who dispute the affect used console game market has on the overall new product market place???? If so, please don’t hate on the publisher when they cannot give you the same work for hire deal they could in 2006/7. I think their margins are smaller for production, in some ways based on the shrinking margins due to used games. I’m not saying publishers are the good guys, but they certainly do not receive any upside in the used game space. It’s a free market, but I sure hope that retail and game makers can work better to find more equitable used sales models moving forward. The DL and subscription models seem to be headed in the right direction IMO.

Nathan Hill
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I as a consumer have no right to resell any PC game ever, especially with stuff like Steam integrated in the retail package, why should consoles be any different? That's a similar argument to justifying real money trading of virtual goods in an online space, second hand items that can be sold for a profit margin without consultation or consent of the primary creator but I'm pretty sure most would frown on that.



A book, a car etc. is different, it's a physical good, a piece of art that degrades over time and its production is finite. Scalping a ticket is selling a physical 1 time experience, you sell that ticket ultimately only 1 person will be using it - that doesn't happen with games.



In the mass consumer world of art if the demand is high and the product trundles into the second hand market the primary producer makes a new batch and the original creators get paid again and again through recurring royalties - its how writers/musicians make a living. You can scalp a book but you can't infinitely reproduce that book without degradation, unlike digital media where one copy can be used infinitely. The used game market is exactly like piracy, you aren't paying the people who made the product but getting the full experience all the same. Piracy is simply not paying the retailer that used markup, the digital equivalent of the used game market.

Michael Joseph
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The anonymous "analyst" quoted in this article needs to go fly a kite.



Well hell, for the next 24 hours consider me an analyst and I say that the previous analyst doesn't know what he's talking about!



See, we can all be analysts. It's easy!



Seriously, this is a non issue. A corporation will always work to find more ways to get a piece of the action at every level (vertical integration). Used game market is just another level they want a piece of. Well cry me a river...



edit: Somehow I totally missed the part where it says "says Cowen Group analyst Doug Creutz." So not anonymous... my bad.

E Zachary Knight
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@Nathan,



"I as a consumer have no right to resell any PC game ever"



Wrong. As long as it is a physical copy of a PC game that you bought, you can resell it. Just because Gamestop does not sell used games, does not mean that you cannot sell them as a person to person transaction. There may be complications that prevent or at least make such transactions difficult. These can be things like registration codes etc, but you still have that right.



A recent court ruling against Autodesk makes that point clear. A purchaser of software still has the right of First Sale.



"A book, a car etc. is different, it's a physical good, a piece of art that degrades over time and its production is finite. Scalping a ticket is selling a physical 1 time experience, you sell that ticket ultimately only 1 person will be using it - that doesn't happen with games."



Game disks degrade with use. Disks get dropped, scratched, cracked etc all the time. So I fail to understand this whole argument that games don't degrade. The more a game is handled the more it degrades. Just because the 1's and 0's don't degrade does not mean that the ability to read those 1's and 0's don't degrade.



Now if you are talking about pure digital games, that is another story and fraught with other perils. According to court rulings on first sale, you are only allowed to sell a pure digital item, if you are selling the original media it was downloaded to, such as the hard drive of the computer.



"In the mass consumer world of art if the demand is high and the product trundles into the second hand market the primary producer makes a new batch and the original creators get paid again and again through recurring royalties - its how writers/musicians make a living. You can scalp a book but you can't infinitely reproduce that book without degradation, unlike digital media where one copy can be used infinitely."



I don't understand this section at all. Can you please explain what you mean here?



"The used game market is exactly like piracy, you aren't paying the people who made the product but getting the full experience all the same. Piracy is simply not paying the retailer that used markup, the digital equivalent of the used game market. "



Wrong. Piracy is the creating and distributing of copies of a copyrighted work without the permission of the copyright holder. Piracy has nothing to do with retailers. The used game market does not create additional copies. Do you see the difference?

Adam Bishop
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The interesting thing to me is that the analyst cited here provides absolutely zero evidence to back up his claim, as is typically the case in discussions like this. Therefore his comment may or may not be true, but we have absolutely no way to know and so it's entirely worthless.

Joshua McDonald
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Much of what drives the increase in used sales is the fact that the modern game is not designed for long-term play (way too much focus on story and cinematics). Often, the reason people will buy one of these games in the first place is because they know that they can get half of their money back when they sell it.



I buy mostly new and some used, and if publishers managed to kill the used market, what they would do more than anything is stop me from being willing to take risks on their new games. Many of my new game purchases were made because I knew that I could get a lot of my money back (most of it if I use Ebay) if the game was disappointing or too short.



Essentially, I think that that's the greatest benefit of the used game market: It makes it harder for a game to be successful based solely on hype because everybody will start dumping their copies. A game with real substance behind the hype doesn't get resold very often, so people need to buy new. In fact, I think that really good games actually make more money because of the used market. People will buy it because they have the option of getting part of their money back if they're disappointed, then keep the game because of its quality.

J Smith
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@Ephriam, the difference between rental and purchase is semantic in a digital environment. You could position the service as a "club" where members sell or trade games to each other with the same net effect.



@Fábio, you are correct, this business model could work quite well for publishers. An even better one might be for an aggregator like steam to offer this customer payment model, and then turn around and pay developers/publishers a monthly fee in order to have the game on their service. Kind of like Cable TV works.



The important thing is that as much of the money people pay to play games as possible goes to people who make games. That's in the interest of both players and developers. Only middle-men lose.

Nathan Hill
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Back @ Ephriam.



I'm not American, I'm Australian we don't have Gamestop, and no retailer will touch a used PC game ever, I have no right to resale for a PC game, short of selling it under the table which is not a socially accepted practice. You can return the PC game (and the retailer will probably take a loss for it) but resale is a big no. Basically registration codes now being one time use and non-transferable and the high boom of piracy have whipped used PC trade out. Game disks may degrade but you can infinitely recopy them and users do have the right to make backups for exactly that purpose so the media is essentially inexhaustible with a home dvd burner or a hard drive.



A digital copy, that's a mess I don't fully understand the legalities of. If you buy a Steam game through retail it's still a digital copy bound to a digital account, it has a one time use, has all the qualities of a digital copy, it is in fact a digital copy to my understanding. Stuff like the Total War franchise, MW2 PC you can buy retail but as soon as you enter that key (which you have to to get the game working) it is immediately transferred into a digital format and has no retail resale value because the key is spent. A digital copy holds exactly the same content as a retail game, yet doesn't have this first law of resale and I don't fully understand why. It's the exact same thing, it just cuts out the retailer. I don't think you can have it both ways. You don't own the content you bought, you subscribed to purchase a single home user license for a single copy for a single user, an agreement you sign upon installation and there a specific limitations of how you the user can use that software.



Even video stores have licenses for the material to rent to you. They pay annual fees to publisher and distributors, so profits channel back over the decades, they don't dry up in 6 months and video stores don't create an excess of billions of dollars without having to payback the creators. A musician, a DJ, a broadcaster, a filmmaker can buy a copy of any game/song/branded product, but if they want to use it in a wider context, to incorporate that content into their own artistic practice and then share it in public domain they have to legally seek permission and pay heavy royalties for fractional usage on every piece of content that is not their own. Just because they bought a single copy does not give them permission to infinitely share out that copy to a wider community free of charge or for their own profit without kicking some back to the original creator.



As to mass consumer art - consider a faberge egg. The egg is very pretty and very costly because of the specialised knowledge required to create such a thing requiring such a huge expenditure of combined energy the cost to develop a single egg is enormous - it a timeless piece of art available to a very select audience to experience. Come the industrial revolution and modernity the gap between rich and poor shrunk and it became possible to replicate images of the original piece of art, copies very quickly through production-line style assembly. Art began to be created for the masses (think pulp fiction boom), not just the elite and we get pop culture, art reproduced very cheaply on a large scale at low cost, distributed over a larger population base. Through the mass reproduction of art the price of every individual unit goes down because there are more of them, created quickly and at a lower quality standard, thus the copies quickly lose value because of supply. Because of degredation the primary product in its fresh form is still valuable because it provides a higher quality of experience. Supplies are still finite because they are physically bound to the limitations of external production - a balance between supply and demand can be controlled keeping the manufacturer and the original artist in business because the consumer still has to purchase the item even as the product trickles down the used market is creating a primary stimulus resulting in reprint's, remasteries, new editions that keep the primary price point up and production ongoing. Eventually an artist dies and their work increases in value because supply becomes limited because there is physically less of it now. Then we get into the notion of public domain where the art becomes the property of the masses and the value changes again completely. Now the point is the games industry is different, it's a mass pop cultural form designed to be created and sold cheaply over vast numbers, but its also designed to be consumed in a disposable fashion and that's the problem with the used industry - it canibalises the primary producers income in a fashion unparalleled by any other used industry because it has no real limitations of physical form that influence the resale beyond what the reseller sets, and the margins are so high its damaging the primary producers and not paying them back. Just because you can exploit slaves in mines to keep your end costs down by exploiting their free labor without consent and for minimal standards doesn't mean its morally justifiable to do so. If the industry wants to be treated as art then treat its creators as artists and a good artist should be formally acknowledged and paid for their services in creating the great template of that faberge egg in the first place. You buying a reproduction is your way of chipping it back to the folks who made the thing in the first place.



My understanding of the used market is that if you genuinely like the product, the 4th hand book and film you take home, if it's that good that it inspires you, a lot of people given the chance (meaning economic circumstances, beggars can't be choosers after all) the second time around will try and buy 'new' - triggering a new model, or a new round of publishing stimulating the primary producer. A good used car or book sale experience generates a larger market share for the primary producer over time. The games industry doesn't work like that because the quality of experience is exactly the same no matter how many times it changes hands (provided its still in working order). Therefore with the cutthroat used markup at 90%+ of the original the average consumer grumbles about the high cost and attempts to cut corners to save money, no matter how short and the shortest route is the used games market. The used games market has been ratified into a distribution network that has been formally accepted and controlled with almost no depreciation because the profit margin is so high at 90% of original. The end result is creators aren't getting paid enough because they aren't circulating enough units, so the cost of individual units go up, meaning the cost of the used game correspondingly goes up and the losers of this cold-war economic style are the creators and the consumers while the middle man of retail profits extensively. Ideally more units sold by the primary would lower their expenses and decrease cost for the end consumer.



Piracy is exactly the same as the used market. When you buy used you are the end of the chain of unauthorised distribution, attaining the same experience as a paying customer without the consent of the copyright holder. They sure as hell wouldn't want you playing their piece of work they slaved over without you giving them money, but that's what piracy does, that's what the used industry does. It freely rewards the end consumer with a lower cost experience without providing ANY compensation for the copyright holder. The difference is while piracy is a counter-cultural rejection of the consumerist model spiraling out of social control, a rejection of the financial imperative of money, and a re-evaluation of the social valueings of art (What is the value of pop cultural art? What the consumer is prepared to pay, not what the retail market tells them they should pay), the used market is the opposite. The used market dictates pricing of the market as a whole purely to extract maximum profit versus almost non existent risk at the cost of everyone else.

Jeremy Reaban
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Digital Distribution is not the answer for anyone but the publishers. You don't want to pay full price for a game? Be prepared to wait years in some cases.



Because there is no inventory that needs to be cleared, there's no incentive to lower costs.



Look at PSN. There are year old+ PSP games still going for $40. There are launch titles still selling for close to $20, and 4 year old games for over $20.



Even Sony's "budget" line of older games for only $9.99 is hardly a bargain when you consider you could have gotten most of them new in stores for that price or less for years (until the inventory was finally sold out) (and used for cheaper).



You see sales of stuff on PC because it's an open platform that has multiple vendors. But on consoles it would be completely closed. And even the PC deals aren't that great - the best deals on Steam require you buy dozens of games at once as part of megadeals. If you don't have a lot of $$$ (or room on your credit card) you can't take advantage of them.

Kevin Reilly
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Here is the model pricing I think the game industry will take based on airline industry:



Old model: Ticket Price = Seat + Meal + Pillow/Blanket + Bags + Movie + Bag o Nuts



New Model: Ticket Price + Optional ($10 Meal +$4 Pillow Blanket + $25/bag +$5 movie) = Seat + Bag o Nuts



You can complain all you like about Project $10, but the reality is that publishers are going to start charging for online play regardless of used/new condition of game. Bobby Kotick confirmed this in his recent talk re: COD MMO with monthly subscription fee. Players will soon be paying $60 + monthly online fee. EA and THQ are just paving the way.

Kevin Patterson
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I completely agree with Alan's statement above, that $59.99 for a new game is too costly, especially for a new franchise without much in the way of marketing.

(The whole $59.99 console price vs $49.99 PC price is also completely stupid)



So many great games are priced as high as the big franchises, and people either rent, ignore them, or buy used. If Publishers prices some new franchises a bit less, lets say $29.99 to $39.99, people would be willing to take more chances, more money would be in publishers hands.



I tend to rent with my gamefly account, buy a few new specific titles, and buy used or majorly marked down new titles. So far this year, I have purchased 4 new titles, rented 6, and purchased 4 used.

The new titles tend to be titles I know that are going to have alot of DLC for them, are long games or have significant multiplayer. Shorter games that don't much much DLC are going to be rentals.

If the price for these new games were cheaper, i would take a chance on a new game, but im not taking a chance on a title for $59.99, it would have to be a proven entity.



Publishers should also realize that many people trade in their used games towards the price of a new title. If you deprive gamers, especially younger gamers without the cash flow, the chance to trade up, then they will buy less games, and the publishers loses money anyway.



XBLA, and especially iphone games are a good example of this. When a game is released that seems like a good game, but the consumer has their doubts, they are much more apt to buy it at $.99c to $2.99 on the itunes app store, or 400 to 800 points for an XBLA game.



Beyond good and evil on the xbox had little marketing behind it, was a fantastic game, and sold poorl, due to the big titles out at that time. Everyone I know who has played and loves the game, didnt buy it new. They bought it for $19.99 when it was heavily discounted, and now eagerly await the sequel, which i know they will want to buy new. That should be a hint to someone.

Doug Poston
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I think Digital Distribution could answer a lot of problems *if* it is done right.



Look at Steam. First run games are roughly the same price as the physical version when first released, because they are in demand. When the demand goes down, the price normally does too.



There is direct feedback between the user, the publisher, and the developer (I think) still gets their cut.



Everyone wins except the food court at the Mall. ;)

Christopher Shell
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@Nathan



You have a horribly flawed perception of what the sale of used games is in a comparative context with piracy.



Piracy is the unauthorized reproduction and distribution of copyrighted works. In the context of games, it is a form of theft in that game content is obtained without the legal acquisition of a user license for that content.



That is NOT what the sale of used games is. If it was, Gamestop would have been shut down by the government a LONG time ago. As Ephriam has pointed out multiple times, it is legal for the owner of a game (or should I say, license) to sell it. With the sale, the owner transfers his/her user license to the purchaser. That is a legal transaction and is not "unauthorized". A publisher not particularly liking it != "unauthorized". With that logic, there are "unauthorized" purchases books, music and movies EVERYWHERE. Heck, the used car dealership down the street is a completely "unauthorized" business! Oh why are they being allowed to continue?!? Somebody stop them!!!



You seem to be trying to argue against used markets on the same ethical basis as piracy. I'm sorry, but that is just wrong. One is within the bounds of the law, the other is NOT. And no matter how much you want to advocate for game publishers, you must never forget, as has already been pointing out, literary publishers, film production companies, record labels, furniture manufacturers, automobile manufacturers, and computer manufacturers ALL deal with used markets. This is NOTHING new. Used markets have been around for years and will continue to exist. It seriously seems me that, again like has already been said, those industries have learned to accept that reality and not whine about it nearly as much.



If you want to argue that everything needs to go digital to eliminate it, fine. Maybe thats what will happen. But I believe the core problem (as least what I believe to be the core problem) will not only persist but will be more severe. That is the price tag of new games will remain too darn high. And despite what some may believe, I don't think price drops will be nearly as reliable. Just compare prices of digital versions of PSP games on PSN to physical ones at retail. $60 is not a trivial piece of a pocket change for me and for many people I know.

Alan Rimkeit
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@Nathan Hill - Ever hear of a magic place called Ebay? I know, it is a crazy idea. But really. You can buy and sell any and all used PC games on Ebay with NO issues at all. Registration? Who gives a frack. As long as the Key Code comes with the game for instillation it is all gravy. I just sold Neverwinter Nights 2 Gold Edition along with Storm of Zehir. Some luck guy got is all for 15 bucks! Not so lucky for me but that is EBay for yah! It is a working game and has all the codes. Does this not work in Australia? o.O

Nathan Hill
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Ebay used PC stuff doesn't really work for used PC games in Australia unless its an old retro classic out of production and has very poor copy protection or its still in the packaging. Ebay is used for buying new games at a discount price because the consumer wants to be assured they will have a working license. Ebay is dominated by an army of on-line retailers that have forced the used market out because of their ruthless cost undercutting because they aren't paying retail markup which accounts for nearly 2/3's of the end consumers cost.



As to the difference between piracy being illegal and used being legal therefore different that's not the greatest moral argument in the greater scheme of things. Smoking is legalised, not because it's good for the consumer but because there is a market demand and the government gets paid to look the other way and ignore the moral and social implications in the face of the enormous tax revenue they receive. Killing is illegal yet war is justified when the economic imperative justifies the expenditure to kill. Over time however the government has actually decided that smoking is indeed immoral and have stepped up taxation in order to curb the issue by basically bankrupting the price of the vice at a 25% tax increase per pack making the government billions and forcing consumers out of the market because they simply can't afford to smoke as a sustainable vice of consumption anymore. The run on effect is as the tax increases so too does the black market upsurge which is completely illegal. The net result is consumers don't care where they get their vice, they will cut corners to get it any price and the movement just goes underground to cut costs.



The used game trade and piracy is exactly the same thing. The commercial used trade is legitimised only because the vast wealth the trade has brought in has allowed them to basically buy themselves into a position of legal authority because they can kick the wealth further up the chain through taxation and control the short term distribution market. If the used trade stopped overnight and was declared illegal, if the government declared smoking illegal overnight there would be riots on the streets because the short term losers would be the lowest common denominator - the average consumer now forced to stop think and change their way of doing things which makes people rather angry.



Piracy is illegal because it doesn't generate revenue therefore the industry and the government doesn't want to encourage that. The used industry is legal because it fills a niche for consumers and generates taxable revenue for the government but starves the industry of its cut. Morally the industry isn't getting paid in either case so its ethically wrong to steal income from hardworking artists but it's economically okay as long enough money is being kicked up the chain to the right places. Laws have nothing to do with what's right and what's wrong, its about maintaining control, legitimating succession of power and extracting as much surplus wealth as possible from those under you while sustainably keeping those lower tiers producing. If you go to the movies you buy a ticket for one, that ticket doesn't entitle you to go infinite times, to bring infinite people in with you, no its a ticket for one performance and one viewing. You buy a dvd, that's not an infinite license to share it out to wide audiences like pub's clubs, or making your own underground cinema - no its for home usage, specifically your home meaning the run on effect is limited to your own social circle which isn't that large in the grander scheme of things. The used trade in the non industrialised commercial sense has a very short life span changing hands once maybe twice after an extended period so the revenue loss isn't that great.



The Gamestop model marginally undercuts the primary producer for an enormous cost for no kick back reward, Gamestop then in turn dictates the primary retail price by saying we will by X many units for Y dollars and you will supply that because we are your distribution network. Gamestop then continues to pump the retail resale over and over again selling that same unit they paid the producer for once (or maybe not at all if it came from a different retailer) for enormous markup over and over. If Gamestop re-sales the exact same game 3 times, they paid the producer once and kept the rest as profit. The piracy equivalent is if I go and buy a game, then infinitely copy it and sell 3 units every time keep keeping the enormous profit margin. That is completely illegal because it minimises the labor of so many down to an individual for no cost and all gain but that is just one step further down the road from Gamestops business model which is legitimated because they simply do so much of it they have ingrained themselves into the social web.



Digital distribution is ideally the way forward but its implimentation is still flawed because of the upsurge of the used retail market holding it back. Producers get paid a cut for every unit Steam sells, its also a bigger cut because of the removal of the retail markup of having to pay for rent for floor space and the cheeky youth behind the counter selling it to you. However Steam is still limited because they can't transfer that saving onto the consumer. If Steam kept exactly the same markup as Gamestop and gave the publisher exactly the same cut prices would tumble to almost a third of the current cost for a new release because while the cost per unit goes down the distribution spreads far more rapidly over a large surface area. Right now Steam costs me more as an Australian for a new release purely to satisfy the demands of the declining retail business. They are selling the exact same product, the internet will cost me more time and money to download (because Australian internet sucks) because publishers can actively, regionally dictate digital markup. Any Sega, EA, 2K or Activision product will double on Steam compared to the US because publishers want to maintain their retail monopoly where games cost $100 plus and have a much longer AAA retail shelf life. I am paying for exactly the same product experience as an American but I have to pay twice as much, wait longer and get less service because I come from a different region which is colonially being exploited in retail. Who wins in this situation? Not the consumer and not the artists who made the thing, but it is an entirely legitimated process because enough money is being kicked upwards. Legal morality is entirely relative to wealth not ethics.



Ideally digital distribution should be regulated not by publishers, not by the retail market but by a third party whose function is to balance the cost of product with the rate of sale. Not selling enough? Cost goes down, selling a lot and costs may have to go up for a bit until the market evens off, thus regulating a sustainable market demand for infinitely reproducable consumer based content.

Christopher Shell
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Intellectual Property laws indeed exist to allow owners of their properties to profit from them. Copyright grants the holder the exclusive right to produce copies of the work and distribute those copies. This allows them to profit from that work in that they can then distribute those copies for a price. However, copyright, in this context, also grants the holder OWNERSHIP of the original content. Ownership of the original content is not transferred to a retailer when they buy a game from the publisher, it is not transferred to a customer when they buy a copy from that retailer, and it is not transferred when that customer sells that copy to someone else. What is transferred is ownership of a license use that content by the terms of the of license. The copyright holder's content is not replicated in an illegal way, and the license was obtained with the purchase of a copy from that holder.



Piracy circumvents this in that it is quite the opposite. The game content is replicated without permission and distributed without a license. You're taking someone else's property and doing as you please with it both without their permission, and with no rights to do so granted by law. You are, in essence, stealing and abusing their property. That is also why it is illegal. I strongly disagree that piracy and used game sales should be argued against on the same moral principles.



You seem to be trying to argue so in the context of profits generated to the producer, that used game sales hinders profits to the copyright holders (or licensees thereof) in exactly the way. To convince me that piracy and used games are exactly the same in this way, you have to convince of a number of things including (but not limited to):



- All copies of games that happen to be used, like pirated copies, are not originally obtained via sale from the producer, therefore, no profit could have ever been made from them.



- No "Profits" obtained from the sale of used games ever go towards the purchase of new games. (I place "Profits" in quotes because you cannot assume all secondhand sales are at a profit).



- The purchase of a used game could never incite interest in a sequel, or other games like it that would prompt buying them new. Is is not possible that sleeper hits become established this way? Sequels exist that FAR outperform their predecessors.



- Every sale of a new game equates to a generated profit for the producer. Does a retailer order replacement stock every single time it sells a new copy of game?



- Can a publisher not monetize the use of a license on a used game? (I seem to recall something called "Project Ten Dollar")



Again, you bring up digital distribution, but I again argue that it does not address (what I believe to be) the true problem. Whether the games be being sold physically at retail on digitally, you're still asking a high price that I believe many people, including myself, are not comfortable with.

Nathan Hill
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Mr Shell: My interest as a consumer is that content is readily accessible in form and at a price I can afford as a part of a broader consumable industry. My interest as a creative practitioner is to make content I enjoy, to make a sustainable existence and if my creation is really good and sells a lot then I'd ideally like a portion of that to trickle back to me, the source.



At the moment the industry is rapidly becoming too expensive for consumers to justify frequent spending, so as a consumer I will cut any corner I can to save money. The used industry is a very small corner for me the consumer to save on and increasingly more and more people are taking it because they know there is ultimately no difference in their end experience between a new and a used a copy. End result is primary sales are stagnating, development costs are going up if you're not in the top 10 bestsellers its very very hard to make a profit. But who is making profit? The used industry by sustaining a second, a third, even a fourth tier of consumers by selling them product at a grossly inflated price.



So as a consumer why are games so expensive? If you buy used you are not supporting the people who created it (like piracy) you are consuming a single license over and over in a way that was not intended. Sure someone buys the game the first time and the producer gets a fraction of that retail sale, but they get nothing on the resale. They both get the same experience, they both bought a copy but the producer is only getting paid once when they should be getting paid for each sale.



The idea of profits from used sales going towards the purchase of new software is a very very messy slope and very short term thinking. If you the consumer can buy a game new for $100, play it for a week, finish it then resell it to the retailer for $45, the retailer who then resales the game for another $90, and repeats the process every week for a month the producer isn't getting paid, and has lost 3/4 sales. The consumer is essentially paying $55 for a game right? But if the consumer couldn't resale the game back, the average price of the game would have to come down because the consumer could no longer afford $100 games. The game is now $50 to accomadate that demographic of primary buyers with the elimination of the resale value and suddenly the game is a lot more accessible to all those other consumers who would have bought a used copy. The producers has suddenly vastly increased revenue, which can be used to make more games or future games better, raise working conditions for its employees and all those other wonderful things. The consumer and producer are getting a much better deal, the real loser here is the retailer whose only profit model is parasitic resale. They can still make profit on primary sales and hardware, they will just be restrained by physical limitations.



Used games promoting sequels again that's a messy one but that has more to do with word of mouth or profits from the first strengthening the second. If you aren't top tier and can't afford enormous marketing, though make an excellent game, word of mouth may indeed strengthen your rep for a second game, but that assumes you actually make the money back on your first game and aren't driven into bankruptcy from the very limited return you gain due to resale cannabilising your profits. If the game is actually that good then people should be paid for creating it.



Does a retailer order new stock every time they make a sale to replace inventory? Sure they do, but they don't order the same product, nor the same numbers next time because of the used market. Resale retailers order enough primary sales to account for indicated first wave interest, then buy back from that first wave and resell it onwards. The biggest promotional aspect of buying a new game from a specialty retailer is 'come trade it in' specifically to keep it in retail circulation to maximise profit by not having to order as many new replacements yet still having the same inventory.



Can a publisher monetise a license on a used product, project $10? Absolutely! I think its a great idea as it promotes new sales or at worst extracts some money from the resale market. The PC industry has been doing more extreme measures for years. A lot of people seem to feel this a violation of their rights though because it is changing the established value of the resale industry.



On the fundamental problem of games costing too much for the consumer, I agree but I think quashing or at least controlling the rampant profiteering of the used industry is the key to lowering consumer costs and increasing primary production resources in the long term.

Maurício Gomes
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Please... I WANT GAMESTOP!!! SOMEONE SEND GAMESTOP OVER HERE!!! HELL YEEAAAAH!



Seriously, I don't buy a SINGLE new game if the price is above 30 USD... Because if the game suck, here there are no stuff like Gamestop to help...





Yeah, think with me: Let's say that I buy a really shitty game that is really short... Lets say, Modern Warfare 2 (I am talking about single player here...), I buy it for 60 USD...



If there was a gamestop here, I would be able to buy it for 55 USD (and 5 USD is FUCKING A LOT to me...), then I would sell it back to gamestop for 15 USD.. in the end, I would have bought only 30 USD for the game! YAY! 50% discount!!!



Seriously, publishers are not getting it: Their sell their games for ridicously high prices, ALL their games, don't matter how good or bad it is, also they don't offer demos anymore (or demos are like for "gold subscribers" or "premidum subscribers" or "pre-orderers" or anything crap like that...), I am NO WAY going to blindly spend 60 USD on a STUPID GAME.



Yeah, I make games, I have a living of making games, and I buy lots of games, but a game is still a STUPID GAME. It is a LUXURY. I would no way spend 60 USD on a game, for 60 USD I can buy a better chair that I am needing for my back... For 60 USD I can buy meals for a week, for 60 USD I can visit the cinema 10 times (or 20, if I take along my student id). Why I would pay 60 USD on a game with lackluster gameplay and 4 hours of content?



Gamestop solves the problem! If Gamestop existed here (it don't, sadly...) I would keep buying used games and selling them back to Gamestop, I would get lots of games for the price I want (30 USD, considering both buying used and selling back).





I have a blog post, here in Gamasutra, about that issue (and piracy too) http://www.gamasutra.com/blogs/MaurcioGomes/20100520/862/First_Da
y_Used_Games_and_Piracy_issues.php

Alan Rimkeit
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Nathan Hill you have one crazy view on the used games market IMHO. I do not know there you got it, but there it is. To me your views sound like they were taken from some corporate shill who just wants the used games market and Gamestop to be gone.



I also feel really sorry for Aussies if all you say is true. They are getting RIPPED OFF. What a sad situation.

Christopher Shell
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@Nathan:

You agree that the producer profits from the initial sale. That alone makes it not exactly like piracy. A leaked image of a game splattered all over the internet generates no profit from the producer whatsoever.



You seem to agree the money obtained from the sale of a used game could put towards the purchase of a new game. Yes, selling the game to a second hand retailer like Gamestop can lead to a recycling of that license, but that does not stop the sale of new games. You want to argue that used game sales hurt the producers in exactly the same way as piracy. John Doe gamer sells his $100 game back to retailer for $45 then uses that money to supplement the next $100 game purchase. What I'm trying to tell you is that purchase MUST and DOES happen. A legal used game copy HAS to be bought new at some point in time. A pirated copy does NOT. If the sale of a new always equates to profit for the producer, then a legal used game copy must have done so at some point in time. You cannot say the same thing about pirated copy. It is not exactly the same.



I should bring up that ALL of this is assuming either of two things:



1. John Doe gamer sells the game to someone or a retailer that would actually contribute to the recycling of the license



2. The purchaser of the used game would have bought the game "new" if unable to do so used. That is, you're assuming the game would have ever been affordable for the purchaser if it wasn't available used. Only if you can say that can you guarantee that the sale hurt the producer. I bring this up because of a view I will share in a bit....





I agree word of mouth can go a long way with increasing recognition for your product, but I remain unconvinced that second-hand sales don't contribute in a nontrivial way.



Are you absolutely sure that if I drove to the Best Buy near my house right now and bought a new copy of game X, I would be directly triggering management to buy a replacement stock for the single void I just left on the shelf? If you can't guarantee that, then you can't guarantee if I drove to the local Gamestop instead and bought game X used, it would have any different effect.



If a publisher can monetize a used game, it is not exactly the same as piracy. You'd have to explain to me how Project Ten Dollar would work with a pirated copy of Madden, or anything that requires you to connect to Xbox Live or PSN for DLC. As far as I can see, trying to monetize pirated copies would be effectively the same as charging for an end-user license. If those who pirate wished to do that, I believe they would've just done it in the first place.



I understand how you're trying to relate used game sales to piracy. However, what troubles me is your arguing that they have the exact same effect on the producers. I really disagree. I understand the idea of transferring licenses rather than everyone being forced to obtain their own, non-transferable license, but what you're trying to argue makes a lot of assumptions about the implications of those license transfers. And regardless of whether they are all true, it will not change the fact the used game market is not exactly the same as piracy, if for nothing else, the simple fact that one requires the legitimate sale of new games, the other does NOT.



Finally, and this is just my personal belief. Many may disagree with me, but my views differ from yours in that you seem to believe if the used game market was eliminated completely, that if everything had to be bought new, it would mean game prices would come down because they wouldn't "need" to be so high. I would LOVE to proven wrong on this, I really do, but I don't see it that way. If everything went digital tomorrow, I don't think there would be a significant drop in prices. I honestly think they would remain high, and that they would rarely, and mostly temporarily, ever drop. What remains a gray area for me is how consumers in general would respond to this. I don't want to make that assumption. But I will tell you this and I really mean it. Personally, if/when such time comes, it will not really matter that there no longer exists a used market. I say that because I will simply not buy nearly as many games as I do now.



For the record. The majority of the games I buy are new, but AFTER the price has dropped.

Terry Reine
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I sorta see where Nathan is coming from, but Christopher was pretty much on target in that the license is the key. Currently when you purchase a game, the license for a game it is not a limited time license. It is usually limited to one Computer or game system at a time but for as long as you own the media. If you sell the media you are transferring that license to the new owner. The publishers/creators always have the potential to change that license but most people in the the US expect the license to be permanent and would probably not purchase the product it if it were not, so it continues. Electronic distribution has broken away from this somewhat. Apple license' their product to an account as I believe Microsoft and Sony also do, as does Steam. Nintendo licenses to a machine. All three eliminate the used market. Even so the used market itself is not bad as it has existed with books, videos and audio for decades. The problem with the used video game market is compounded by the fact that

1. The longevity of video games has decreased and the end user no longer feels a need to keep games more than 1 - 2 months to finish them. If re playability were greater less used games would be available in the market and more new would be sold. Games with high online play don't make it into the used game market nearly so fast as the high cinematic story games. Unlike movies the users rarely feel the need to replay the game or relive the story.

2. Without competition Gamestop has cornered the market on used games. The pay probably 25% or less of the original value for the games and sell them for 85-90% or the original retail. If competition would enter the market place margins would drop as resellers would be paying more for the product and having to sell for less to be competitive. As it is Game stop is so dominant there is no pressure to move away from it, and it is more profitable for them to resell than it is to sell new.

3. The pricing structure of games does not currently taper off aggressively enough at this time. If they would begin discounting the new games a few months after the initial surge they would begin undercutting the overpriced used product and force lower margins on the used at the retailer giving the retailer more incentive to sell new once again. This is a more consumer friendly way of addressing the issue than the $10 charge for 2nd user down-loadable content, but does require a lot of market monitoring to determine when price drops should occur.

Robert Green
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I know I'm a bit late to the party here, but I always find that comparisons to other used markets generally neglect the reality of the situation, that there really isn't anything like the used game market in a gamestop fashion.

Imagine a big name movie retailer that did second-hand movies as well. Now imagine that they dedicate as much shelf space to used movies as they do to new ones. And that they encourage you to trade in your old movies, even within a fortnight of buying them, and that they only paid 1/4-1/2 of the new price, and, most importantly, that people accepted this. Now imagine that those used movies were put up on the shelf for >90% the price of the same title new, that the staff encouraged you to buy the used one, and again, that people accept this as normal. Also, imagine movie theatres didn't exist, thus transferring the demand for new movies from a market where second-hand sales don't exist to one where they do.

Only now are we making a valid comparison to the gamestop situation.

It really is a perfect storm, created by a market with the following conditions:

1) Consumers often finish titles within a week or two and lack the desire to ever play them again.

2) Consumers don't have many (if any) issues with second hand product - i.e. no reason to prefer new over used. Side-note: Imagine what the used car market would look like if this one applied.

3) Consumers accept that despite this, it is not unreasonable to accept a trade-in price well below half of what it'll probably sell for.

4) Consumers are so eager for the latest product, and the product is expensive enough, that they're willing to accept #3 as a way of paying for another game rather than wait for that game to get cheaper, which it always does, or until they've saved enough money to pay full price.



I can't think of any other used market where all of those are true, so I don't think it's fair to make comparisons without factoring this in.

I see no problem with project $10. If part of what you're selling is a service (and anything which includes online play or free DLC is partly a service), then there should not be any obligation to supply this service to users that have not paid you a cent. These things are not part of the physical product you're buying, so there's no 'first sale' right. The situation does get a bit cloudier when you factor in the xbox live subscription though, because that could be seen as paying for the right to play your games online, and I think EA and MS (and any other publisher trying to do this) needs to be open about exactly what that subscription does and doesn't include in this regard.

Buck Hammerstein
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the argument that the used game buyer is still using the online servers and should be hit for $10 to access this feature is wrong. the initial buyer paid that with their full retail price purchase and now that the game is no longer in their possession they are no longer a burden to the servers. so the game makers have received their money and are simply double-dipping.



bestbuy getting in the "pre-owned" market is great for us as i can now call and ask by phone what gamespot or bestbuy will give me a game i no longer play, but that someone else will enjoy.



am i supposed to just throw it out to make room? no, i would maybe ask my friends if they would like to trade or maybe give me a little cash for it... wait this sounds like what gamespot/bestbuy are offering.



so far, i have heard lots of people saying they are opting out of the new ufc 2010 because of project $10 and that developers/publishers will hopefully see that omitting extra charges will help them sell games over their competitors, not the other way around.

Alan Rimkeit
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The consumer buys an object. This can be any object. Once the consumer does not want that object anymore they should have the right to sell that object no matter what. This should include used games. That is the bottom line. That is how the market has worked for thousands of years. It is a fundamental idea of how things are in consumerism period. To argue against this concept is going against common sense and logic. I am against any and all ideas that cut this right off from the consumer. It is a fundamental part of the circle of Capitalism. I also encourage everyone to reject such ideas as well as they are bad for every one but the corporations.

Eric Feliu
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Selling a product you own and no longer want is not a problem in my eyes. Selling a game to a big company like Gamestop who will charge close to full price and yet pay you pennies on the dollar for the game is a huge problem in my eyes. Gamestop is making a mint off of people who don't have enough intelligence to realize they are being ripped off. I really don't care if people are that stupid. I do care about the game companies that are not seeing a dime of that Gamestop profit. If you are going to sell your games why not use Ebay? At least you will get more for the game and it will go to someone who wants to play it and they won't have to pay Gamestop's near full price for the game. In that scenario Gamestop gets nothing which is better than what is happening now.

Tim Johnston
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What about antiques? Should a buyer have to compensate the original manufacturer of the piece any profit they gain from reselling it at a profit? Gimme a break. This is an attempt to both regain losses from piracy and gain incremental revenue from an existing product. What if their product sucks and I want to regain some of my HARD EARNED DOLLARS from it?

Mark Harris
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Just for clarification, an antique by it's very definition has surpassed the duration of copyright registration. I don't see Nintendo going after the NES emulator and ROM providers, and for good reason. These are not products they even supply anymore, nor are they still subject to copyright law.



The issue of Gamestop selling a used game that's been out for a week for $55 is entirely different. Whether you like Gamestop or not you must agree that more often than not they aren't dealing in antiques or digital media that has surpassed copyright duration.



I'm actually a big supporter of the "online pass" and other service oriented charges. It is not an attempt to destroy the used market, and it filters some revenue back into the hands of publishers who need to support the servers for online play.



The problem I have with Gamestop is that they don't produce any games. The developers/publishers who produce games should get more benefit then the middle man, especially on newer works that haven't had adequate time to realize their product life cycle. Gamestop's rather extraordinary profit margins on used games dwarf the margins the devs and pubs receive for new sales of their own creative output.



Personally, I would rather save up for a little longer to buy new and support the game makers then selfishly buy used so I can experience their creative output while they receive no compensation. I think if we all take a step back and think to ourselves, "Would I be okay if millions of people were able to benefit from my hard work without compensating me in any way?" I think there are very narrow channels where that is acceptable (volunteer work, pro bono work, etc), but most of us would like to be compensated for the time and energy we put into our outputs.

Dave Endresak
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Umm, manuals and all other content is certainly not "irrelevant" in the used market. In fact, this is one big reason why digital versions will never overtake physical goods for many consumers.



Also, GameStop cancelled their used DVD sales of movies.



@Nathan:

I think you may need to consult an attorney about Australian law regarding secondary market sales. To my knowledge (including just completing a doctoral course on law and technology) Australian law does not state that secondary market sales are illegal. In any event, your claim that secondary market used sales are the same as piracy is completely false (except for cases of theft of software packages and subsequent sales, of course). Buying a product and selling it later as a used item is completely different from making selling illegal copies of a product. Again, check the law, as it is pretty clear about the difference in these two concepts, even in Australia.





Frankly, I think it's misleading for any analyst or anyone else in the industry, as well as consumers, to focus on GameStop. If there is truly a concern, the focus should be on auction sites such as eBay (especially due to pirated and bootlegged goods) or physical yard/garage sales. eBay is horrible because they do nothing but support piracy and bootlegging of products, and do not even enforce their own policies regarding sexually explicit materials. It isn't in their interest to do so, of course, because eBay's business model relies on sellers being charged no matter what the product may be, even illegal copies or products that are not posted according to eBay's own guidelines. eBay ignores complaints (have have dealt with them twice in an attempt to help them clean up their act but gave up when they refused to police their sellers). As an alternative, Amazon polices their various resellers much better and I have never seen a seller get away with posting pirated or bootlegged materials through Amazon.



Also, people who focus on GameStop offering a used game for $5 off SRP completely miss the point of GameStop's major business. Most people buying used games are not buying a new (used) game for $5 off SRP. Most people wait a few months or even a year or so to buy a used game at %50 or more off SRP. In addition, GameStop gains most trade-in business during their various specials where they give 50% boosts and other increases to their base used value, plus they give additional value to members of their "club" (same as many other businesses, of course, where frequent customers are offered extra value of various kinds).





By the same token, most people will wait a year or so to buy the Game of the Year or "complete" edition of a game in order to (a) save money and (b) get all expansions and patches so that they can enjoy their experience with maximum value without being used as an unpaid QA tester. Most people want to simply play the game, not deal with crashes or various compatibility issues that complex new software products almost always have. Complex products have problems that must be ironed out; that's just a consequence of complex systems, but many people want to wait until the general consumer market has tested such products. Same with new consoles, for example. Most people do not go out and buy a new console when it is first offered. They know it will be revised and the price will be lowered if they wait a while.



The same thing happens in productivity software, of course, even OSes. Or in other fields such as new designs for cars. Most people do not buy cars brand new because (a) they cannot afford to do so and (b) they do not want to test new cars to find out the problems with them.



GameStop is offering a service in much the same was as businesses that offer to sell stuff for you, even businesses that post your used stuff on eBay and other online sites. I'm not sure why some people claim that GameStop somehow pushes consumers to buy used - that's not true at any of the stores I've seen, but of course they have a lot of variation due to buying out the other software chains (Software, Etc., EB, Babbage's).



Bottom line: publishers, analysts, and even consumers who complain about used game sales having a negative impact on new sales are focusing on the wrong perspective (i.e. they are focusing on the publisher/developer rather than the consumer value question). For example, this analyst in this article claims that publishers have the right to come up with models that generate return on investment. Okay... and the consumer has the right to the same thing, you know? Most games today are priced at $50-$60 SRP (new), but the value in the games is no where near equal across the board. Some games have enormous value due to lots of things to do, stories that touch audiences, or other factors, while other products are a short diversion or even poorly produced. In addition, there are companies like Valve, Bethesda, and Firaxis that are successful and do not seem to be negatively impacted by used sales of their products. If anything, these examples and others are thriving due to used sales. There are also other examples such as free to play companies like Nexon and Zynga that are successful due to consumer value.



If anyone has a problem with used sales vis a vis new games, the focus should be on lack of consumer value for most products being offered. Obviously, value may be subjective to each individual consumer, and what is a good value for one person may be a lack of value for someone else.



Finally, it's interesting that no one points out the simple fact that the gaming industry is now a huge global market. In other words, the sheer volume of products offered means that no one can play everything they might want to play and is forced to make decisions about what to buy (or rent) and what to give up. The quantity of products makes a used market viable. Used game companies began back in the early 1990s but no one complained about them until GameStop bought up various software chains and became a big target. If you don't like GameStop, don't shop there, same as any other store. I won't use eBay for anything, for example. You have the freedom to choose, after all.



As for profits... I don't see anyone complaining about Best Buy or other chain stores and their obscene profits from new sales at the expense of the publishers and even their own employees (who are paid almost nothing, typical of retail in general).

Mark Harris
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To be fair, Dave, this article was about used sales so you won't find as many people complaining about the markup for new games from Best Buy et al. I haven't seen any numbers on the normal retail markup of new games, but if they are unusual (above 8% or so) then I'll be the first to jump on the bandwagon and give new retailers hell. ;)



I think you have some good points but where Gamestop and eBay and whatever become a problem is that they distort the market. People buying $40 used games are not part of the sales numerics/metrics for publishers, so they don't have relevant data that can tell them where their sales volumes/prices hit and miss. Right now companies are selling new at $60 because that is the expected and accepted price point. The used market distorts their sales numbers because it undercuts their normal product life cycle and distributes product at lower price points before their organic first sale price comes down. If publishers saw a massive uptick in sales for product at a $40 first sale price they might think about lowering initial prices, especially if the sales volume kicked up enough to outstrip the revenue at $60. However, Gamestop pushes games out at reduced prices much earlier than the original producer because they have almost no overhead on those games. They didn't spend a dime to produce them so they don't need to make up those costs. The only cost they need to cover is the trade in credit, which is always absurdly low. Margin's for used games are routinely at 100% or above for Gamestop, so far out of the realm of the publishers it becomes ridiculous to compare their pricing models. In most industries this isn't as big of a problem but for video games the sheer volume of used sales compared to new sales seems disproportionately high (based on anecdotal evidence, of course, i have no hard numbers) and skews market data significantly.



The lot of you complaining about the high prices of games would be better served by waiting for new sale prices to fall and then purchasing the new copy at the lower price point instead of buying used. At least then the metrics get back to the publishers and they can see if there would be any increase in revenue for sales at lower price points.



I've stated this before but it bears repeating in every thread. I don't judge anyone for their consumer choices, but it is my opinion that we are better served when at least a fraction of the money we spend on games goes to the game creators and not wholly to Gamestop or other used vendors.

David Clair
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The thing that always seems to be over looked it that in order for there to be "used" game stock, some one has bought the game and given the publisher/developer the money that they asked for then decided to sell it (to whom ever).



What it really boils down to is that the developers/publishers want a part of the 2nd/3rd etc. sales of their games.



If people felt that they were being ripped off by Gamstop, then there would be less and less people selling them their games which would mean less used game stock, which would either force people to buy new or wait for a used copy to come in (or sales etc.).



But i think its case of it being very convenient to sell their games towards the puchse of another.

Mark Harris
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No one is overlooking the original sale. Are you overlooking the fact that multiple owners are enjoying an original value product (non-degrading, different from cars, etc) when the creators have only received a portion of the sale of one copy? Does that seem right to you? Do you prefer that a middleman profits or the creators profit?



I don't begrudge anyone his/her choice, but you are making a choice nonetheless. The less revenue on the creator side the less creators there will be, the less risk and experimentation there will be, the less innovation there will be... all things lamented commonly on these boards right along side the defense of buying used games.

David Clair
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"Are you overlooking the fact that multiple owners are enjoying an original value product (non-degrading, different from cars, etc) when the creators have only received a portion of the sale of one copy?"



Actually i would argue that the value decreases.. sports games are a very easy to identify example. The the Value of the product does change dependigng on how far from it original release a "second/resale" happens.



(Obviously this is not taking into account the possible increase in value as a classic collectible down the road)



"Does that seem right to you?"

That someone originally bought the game New at retail and then decides to sell it after the fact to whom ever they desire afterwards? Yes, and it happens all of the time over a wide range of consumer goods



"Do you prefer that a middleman profits or the creators profit?"

If both are running their businesses correctly they both should be able to profit (or at least have the ability/opportunity to do so).



What gives the Developers/Publishers the right to demand a portion of a resale of a physical copy of a game that has already been paid for as new at retail prices? The original buyer has alrady paid what the industry has deemed as the MSRP.


none
 
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