Secondhand games, worse than piracy?

Secondhand games, worse than piracy?

October 8th, 2008 — Opinion


As an essential part of keeping in touch with the realities of the industry I frequently go and have a look round specialist video game stores. And there are always a number of significant trends to keep an eye on in this fast moving industry, such as the demise of PC and PSP games. However the biggest trend over the last couple of years has been the amount of space and emphasis given to secondhand games. They have gone from being just one small rack to being nearly half the store. And I bet they are making more profit for the store owners than the new games.

So what is happening here? Basically any business needs a USP and game stores once had this as they were the only place to buy games. Gradually this has eroded away, firstly with online retailers like Amazon and then with supermarkets, both of whom can beat the specialist on price.

Initially the specialists were cushioned from this price competition. Firstly because the specialist has a bigger range of stock, secondly because he has more knowledge and thirdly because of people’s buying habits. But now video games have become a commodity and those advantages have evaporated. In fact the supermarkets and mail order companies have the better business model now because they can buy in bulk and thus cheaper, they have far lower overheads as a percentage of sales and they can and do use games as loss leaders to generate traffic. It has reached the point where an independent specialist game retailer can buy his stock more cheaply at the local supermarket than he can from his trade distributor.

So specialist retailers needed a new business model that gave them a USP. And secondhand is it. With secondhand they are in an area where online and supermarkets would have difficulty following because of the very large number of buying transactions the retailer has to make. Secondhand runs at a far higher price mark up, which is very nice when new games are selling on price alone and so have decreasing mark ups.

This is very nice for the consumer. When a game first comes out he can go and buy it cheaply at the supermarket or online for mail order delivery. Or he can wait a couple of weeks and buy it even cheaper from his local video game store.

Now, of course, there is the precedent that you can also buy books, CDs and DVDs secondhand. But the scale of this is relatively low and happens on eBay, in flea markets and in back street shops. With games secondhand is big business on the high street. And there is a reason for this. Quite simply games are a lot more expensive to buy than music albums, DVD films or books. This is because they cost more to make for the number of customers. So there is a vastly higher cost per customer in the game industry than in the other main entertainment media.

The big losers in this massive growth in the secondhand market are the video game publishers. A specialist retailer can now sell the same game several times and make a profit on it every time. The publisher, who took the risk and made a massive investment, only gets a profit on the first sale. So from a publisher’s perspective secondhand games have exactly the same effect as piracy. Multiple customers get to play the game but in return the publisher only gets the profit back from one sale. And the customer who buys a secondhand game is making zero contribution to the cost of it being made.

Of course this in intellectually wrong as well as morally wrong. When you buy a game you are not buying the plastic and cardboard, you are buying the right to personally enjoy the IP embedded on it. But most customers don’t see it that way.

But the publishers are going to have the last laugh here. High street game retailers may be making record profits now but they are inevitably doomed. The whole business is in mid transition from delivering content on cardboard and plastic to delivering it online. And online needs no retailers. And there is no secondhand online.

 

this thread is poetry =)

 

Relax, he's banned.

 

Technically hes not banned, just shunned outside in the cold, like an old eskimo.

 

Removed the shameless and frankly embarrassing defence of the Brucemeister

 

hrrrm. waking up, I had a vague memory of writing something somewhere. No more drinks for me.

this was stupid.... double ouch...

my apologies!

 

On that note, I have thought for a few years it would only be fair to have an industry recognized symbol for retail boxes that indicates that the game (or software) may not be transferable. Good luck getting marketing to put that on the box however. ;-)

 

Also illegal in more than a few countries. Since once a customer has bought it, they are well within their rights to re-sell it.

 

On the dev side, I have no problem with them reselling the "box" as much as they want to. ;-)

Personally though, it's when the game in the box has a serial number that was at one point was attached to a credit card of mine, etc I get a bit ... twitchy about the box getting accidentally resold.

Anyway.

 

For me the answer to second-hand games is simple.

If you want to sell a second-hand car (at least in Ireland), you need to be a licensed dealer, which costs annual fees.

So.

If GameStop had to pay some form of annual fee, (proportionally based on the number of re-sales) to a body like TIGA/IGDA/PEGI, and that money gets fed back up the food chain to the publisher, developers, and so forth.

I do not like the idea of digital downloads as the sole point of sales, as well, I hate the "service" concept.

Why?

If I buy a product, I am legally entitled, as a consumer to a refund, repair, or replacement.

If I "subscribe to a service" how can I return a game perhaps bought for me as a present or that I simply do not want?

Another personal thing for me is that I still dig out my SNES around the December holidays, and run through Donkey Kong Country (way to go RARE!) with my nephews. 15 YEARS after I bought the game, I'm still enjoying it. I still have the box, the manual, and the T-shirt.

If my Xbox hard drive dies? If a game is no longer available on whatever online service (PSN, iTunes, etc.) what happens?

Again, not trying to wind anyone up, I'm just still into a tangible product.

Oh. And how does this relate to the thread? Well, I've finally found time to play Deus Ex, about 8 years after it came out, and the only way to get it was second hand. I'm sorry the developers did not get a cut, but my idea above may help that.

-Brendan.

 

I would have had a completely different take on this argument until recently. The landscape of games and how they are distributed, and the value people hold for them, has changed a lot over the last five years.

When I was a kid (of the 80s) games were a product, pure and simple. The cartridge was probably the most physical example of this. You could lend it to a friend, they'd slap it in their machine and it was theirs, but only for the time they had it. You'd pull it out of their machine at any time and it was yours again. PC games were always somewhat different, and a "lend" was a lot of the time lending your game to someone so they could install and return, still being able to play. Cartridges really showed you owned something (as did a nice coloured box) and as a kid with no money this was something you could be proud of in a way. It wasn't just "I played X game" but "I own X" game.

This has changed a lot for me now though, where my time is worth more than my money, more than what I own. I'm happy to pay someone to be able to download "a copy" of their game and experience it, especially if it's quicker and easier than going to a shop and actually buying it. I love the fact that I can get a new computer, install Steam and walalh, all my games are there, even the old copy of Half Life (yep, number 1) that I bought 8 years ago and totally forgot about, and I CAN play it if I want.

One of the big problems at the moment is that people are stuck between business models. Is this a service or a product. How do we make people pay for something they don't own as such but just get to enjoy. It's like going to see a film at a theatre versus buying a DVD, except that you pay a certain amount to see a film at a theatre versus buying the DVD because of the expenses involved, the cinema itself, the staff etc. If I'm at home and I want to watch a film with ten friends I can put a DVD on, my own building, my own equipment.

But how many times do I really want to watch that film? I'm probably going to end up lending it to a friend after a few weeks because otherwise it just sits on my shelf taking space and collecting dust. This is where the model of On-demand movies works, but only if people can really accept a new business model (the sellers). You don't want to pay $10 for a download movie. If you want to watch it you want to spend a small amount of money (less than you would to hire a film at a shop), then you don't care about ownership! Korea seems to have this down-pat.

I think I'm rambling here a bit so I'll try to tie it up.

Games a little more tricky because there are a lot of people into the nostalgia of games. They want to be able to play old games as well as new. This is why "service" providers of games need to have some kind of promise, a "lifetime" promise. If they go defunct what happens to your game? DRM? You're screwed. Some kind of obligation (legal) that if they no longer provide said games / product etc it is unlocked for your use. Otherwise you end up with what happened to, I think, some Virgin Music store where they went bust, or stopped for some reason, and people lost their DRM'd music collections a few years ago.

Now lending an experience. Think of HL2. I paid too much for that game. Here in Oz at least it cost almost $100 when it first came out. That was way too much, especially if I wasn't earning a lot of money, so selling it on would have been great as I'd then be able to spend some money on a new game. If I can buy a game for $10, $20 or $30 though I wouldn't even think about selling it on, it would just be money well spent for a good experience. I think a lot of "casual games" have this right!

If I'm paying $100 for a game I expect to be able to lend it to a friend after finishing. If I paid $20 I'll probably rave about it and tell them how much they should buy it to enjoy for themselves.

 

We're all doomed!!!

http://games.slashdot.org/article.pl?sid=09/05/19/0414246&from=rss

Suprisingly, no one seems to have mentioned this news about Walmart now doing game trade-in's...

 

We are only doomed if we follow the music industry model of refusing to adapt and hoping that if we complain loudly about how unfair life is then change won't happen. Be it ad-supported games, digital downloads, WoW subscriptions, micro payments, episodic content, or whatever, as long as we are willing to evolve and embrace new ideas we will survive.


One possible (although still unlikely) outcome of a longer console cycle this generation is broadband penetration will be great enough that the next generation of consoles could ditch physical media altogether which will completely wipeout GameStop.

 

Hmm, I don't think so. Unlikely, as you say.

Broadband penetration is still not that great, and viciously expensive, particularly in "minor" countries (like, well, mine). And a game the size of a blu-ray disk (or bigger?) is still a MIGHTY large thing to download and store on your HDD.

I daresay we will get there eventually, but I wouldn't expect any console of the next generation to come without a physical media drive, unless the console's sole focus was smaller games.

And sooner or later we'll have to deal with the archiving problem... but going digital certainly does seem to increase a game's shelf-life (they can keep selling for years, decades even) and I'm all for that.

 

Because predicting the future is fun:

• PS4 will include a BluRay drive. Xbox 720 could have a BluRay drive or maybe MS will stick with DVD. (Could be announced E3 2010 for a Xmas 2011 launch, but I think a Xmas 2012 launch is more likely)
• Most NextGen games will not require significantly more disc space than today's games do.
• All NextGen games - including full sized AAA titles - will also be available to download, released at the same time they become available in shops.
• At some point during the next generation there will be a PSFour and Xbox720 Lite that - to cut costs - ditches the disc drive and is download only. (2015?)
• An external drive maybe sold separately so you can play your old games / movies.
• PS5 / Xbox1080 will be launched without a disc drive. (2017?)
• 2025 - Shops no longer sell games or movies on discs. Physical media is relegated to backing up data only.
• EB / GameStop go out of business.