As Recession Deepens, Used Games Get More Painful

[Gamasutra goes in-depth with analysts and developers alike on the used game controversy, with stats on top resale genres and Frontier's David Braben weighing in on why the resale market keeps game prices "artificially high".]

Was there ever a time when the video games industry and the resale market weren't at odds? Only now, with the economy circling the drain, developers and publishers are expressing their annoyance a little more loudly, a little more frequently. After all, as sales dip, it's painful to watch your brand new $60 game sell for just 50 bucks used one week after its release.

But that's the business model retailers like GameStop depend on. According to Michael Pachter, GameStop -- which, he says, holds about 90% of the used-game market in the U.S. -- took in approximately $2 billion on pre-owned games this year, which is about a third of its $6 billion revenue on games altogether. Pachter is senior VP, research, at LA-based Wedbush Morgan Securities.

Indeed, those numbers on resales are bound to head upward, says Nick Williams, as gamers -- like everyone else -- look to save a few bucks during the deepening recession.

According to his survey of 2,000 gamers earlier this year, one in four buyers who hadn't bought any used games in the past year says they plan to buy a pre-owned game in the next 12 months. Williams is director of entertainment and media insights at OTX Research in Los Angeles.

The survey went on to say that 49 million gamers bought at least one used game in the last year and 26 million sold at least one game -- with 61% of the buyers having done their shopping at GameStop.

However, the OTX survey was released in March, prior to the economic plunge, which means that actual 2009 numbers could go significantly higher as bargain hunters find the lower prices of used games more suitable to their budget-minded tastes. 

In a typical used-game transaction, says Pachter, a gamer will pay $60 for a new game, finish it in three weeks, and sell it back to a retailer like GameStop for $30 which then repackages it and puts it up for sale for $50.

"I remember when the first Grand Theft Auto came out," recalls Pachter. "You couldn't find a used copy for over a year. People were so amazed by the game, they played it forever. But now that cycle has accelerated and every game is available used after just a couple of weeks."

"You go into a GameStop intending to buy a new copy for $60 and the clerks are happy to tell you they can save you 10 bucks by selling you a used copy for $50. That's hard to resist. I mean, it's not like you're getting something that's dog-eared and unplayable. It's clean, looks the same, and has an instruction booklet."

If there's any doubt that the new-to-used cycle is now almost instantaneous, adds Pachter, "You ought to try it yourself. Call GameStop and ask them how much they're charging for Gears of War 2. They'll say $60."

"Then ask them if they have any used copies. I'll bet you anything they already have at least one. [Even if] the game's only been out for a week... You don't think that kind of thing gets the publishers pissed?"

Especially since the number and size of retailers in the user-game market are expanding. HMV recently announced that it is entering the used-game business in the UK, Dawdle.com is a new player, and a source within GameStop listed eBay, Amazon.com, and Play N Trade as its top competitors.