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Why the industry needs to change the used games market. Not kill it.
Posted on February 16, 2012 by Steve

 

The last few weeks have seen rumours that the next generation of Xbox will disable the ability to play second hand games. This started me thinking about the ethics and economics of the used game market and how the industry would change if it disappeared. Every publisher is only too eager to reveal how much money they are losing to the used game market and at first glance it does make alarming reading but the figures alone do not paint the full picture.

The Future

An Investment in the Future

I’ve reached the ripe old age of 36 and nowadays money, or lack of, is not the issue it was when I moved out from my parents’ house more than 15 years ago. In those days I was struggling to pay the rent, bills and get a hot meal in my belly. Gaming was very much part of my life but keeping up with new releases was impossible. If I was lucky I could treat myself to one or two new titles in a year, all my other games were obtained through swapping with friends or the blossoming used game market. I really wasn’t contributing a great deal to the balance sheet of Activision or EA and, truth be told, if I’d stopped buying those couple of titles my money would not have been missed. However, the ability to trade and swap did keep me interested in my favourite hobby to the point where once I was earning enough money to have some free cash, I am now purchasing, on average, 2 brand new titles every month. I’m not arrogant enough to assume that my circa £1,000 a year habit is going to make or break a multi billion industry, but I am realistic enough to assume that my rags to riches story is not isolated. Infact, I’m willing to stick my neck out and say that most people will struggle financially in their early days of independence and that my experience is that of Average Joe, with my current custom being probably a little higher than the norm. I cannot say whether I’d have given up gaming all together without having access to relatively inexpensive used games but I can only assume that I’d have to have found a cheaper way to spend my free time, maybe my money would have been lost to the industry forever.

Fanbase

A Way to Expand a Franchise Fan Base

When the original Dead Space was released in 2008 it was considered a commercial failure (circa 2 million units to date) upon the first few months of sale and it was pretty much assumed that, no matter the quality of the title, we would never see Isaac and the Ishimura again. However thanks to word of mouth and the ability for potential fans to sample the IP at a much lower cost, the fanbase for the Dead Space franchise was increased massively. In 2011 Visceral and EA released Dead Space 2 and reportedly sold over 2 million units in the first week alone. The franchise is now established and rumours of a 3rd title in the works have fans foaming at the mouth in expectation. I believe that without the existence of a used games market the franchise would never have been revisited after the original, depriving gamers of one of the best survival horror games in years and costing EA millions in lost profit.

Philosopher

A Self Fuelling Philosophy

I very rarely buy my titles used but, apart from the odd few titles that I keep revisiting, I tend to trade in my games towards a purchase of a new title. I’ve asked around some of my friends and, anecdotally only, it would appear that this is a trend amongst gamers who make multiple purchases throughout the year. A case in point for me would be the recent release of Forza Motorsport 4.  After spending so much time with the previous 3 I was completely prepared to miss out on the fourth instalment until the price dropped substantially. I did however have a few completed games which meant I could pick up the game for an outlay of £15 and a couple of trades. The full trade value of those older games was kept in the industry coffers and I have hours of tyre squealing fun.

A Way Forward?

The used game market is a very profitable place to be trading. The real issue facing publishers and developers are not the customer but the middle man. How many of us have gone to Game or Gamestation with a few games to trade and laughed as we’ve been offered a trade value of £7 on a game that you can see being sold on the shelves at almost full retail value (say £32). That would mean that even if I was trading a game to get the next big Valve title then a mere £7 would be kept in-house with the retailer pocketing a massive £25 profit before taxes. I personally use a friend’s independent store for trading as his rule of thumb is that if he offers you £15 for a trade in then he will only ask for £20 on the re-sale. The cash stays in the industry and the retailer makes a modest profit which is how his model has worked for the last 20 years. I understand that to use a model like that work in an international retail outfit like Game would be unworkable but it does prove that the profits they are making currently are completely out of proportion to the risk they take on. Added to the unfair slice of the pie that these companies make, it seems absolutely ludicrous to me that industry insiders are not only routinely offering exclusive content to customers by pre-ordering their titles through Game and Gamestation but also artificially inflate the prices on their console digital distribution services. This only strengthens the grip of these retailers and their borked used game model.

There is certainly a place for a second hand market and if Microsoft were to go it alone in closing off the ability to play used games with their next Xbox then they might as well concede defeat to Sony now.  Whenever Soccer Mum goes into Game (there’s that name again) and asks about which console to get little Johnny for Christmas does anyone seriously think they will try to sell them the system that is actively trying to kill off their main revenue stream?  I have no problem with "Project 10 Dollar" and initiatives like them, as long as they are handled properly but there will be no winners if the second hand market disappears completely. The answer must surely lie in the publishers coming to an arrangement with larger retailers to receive a bigger slice of the pie.  The relationship between the two is already established and without one side the other will surely suffer.

Steve - Staff Writer steve (@) www.original-gamer.com | all author's articles

Is crowd funding the way of the future?

Absolutely. It gives power to the gamers by letting them pay for the games they want to see.
Nope. Crowd sourcing will be fine for a year or two until too many developers do not follow through with their games and waste our money.
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