Fair Trade: The Simple Economics of Why Game Developers Should Shut Up About Used Games, Part 1
7/15/2009 8:40 AM | 48 Comments | Page 1 of 2
Attention game developers:
You may not like it, but I am going to trade in my used games for new games. There's nothing you can do to stop me and I am going to laugh all the way to the bank.
I am sorry that you feel that I am ripping you off, robbing you of the fruits of your labors, and kicking you in your creative loins. It makes me sad that it makes you sad. But you've got to admit that paying $30 for
Gears of War 2 sure beats paying $60!
Maybe it doesn't seem fair to you that GameStop brought in over $2 billion selling used games last year while you are watching your game scores tank at Metacritic. But man, I gotta make my gaming dollar go as far as it can in this economy. Money doesn't grow on trees! So, used games it is.
It's not that I don't care. It's something else and I think we need to talk. There's something you need to hear. So let's start at the beginning.
Why buy those full-priced games when you can clip coupons for used games, just like Mom?
Remember back in school, when you were designing D&D modules during economics class? Well, I was paying attention. And when you sprinkle a little Econ 101 on the subject of used games, you'll find out that used-game sales are good for the industry and, in the long run, good for you.
That's right, used games are good for me and good for you. Heck, used games are good for the entire videogame industry.
I know, I know. But just calm down and listen. If you don't agree when I am done explaining my side of things, then I'll listen to you. I care, I really do care.
So take a deep breath and hear me out. My story, like so many, starts with supply and demand...
Making our demands clear: the price of fun
Here's something you don't need to go to business school to figure out:
The reason the game industry exists is because gamers want to play games.
It seems kind of obvious. But it's the key to understanding the entire game market.
Now, as rabid as game fans can be, they aren't, by and large, stupid. So your average game fan would just as soon pay as little as possible for a game. If you want to play
Rock Band, for example, and your friend is, let's say, heading off to jail, and he offers to give you his rig while he's doing three to 15 years of hard time, then you say "OK." You want to play
Rock Band and maybe you'd be willing to pay up to $200 for the chance in any other circumstance. But here you are -- someone will give you the game for free. Why pay more? Even though it's worth $200 to you to own the game, getting it for free means that's $200 more dollars you can spend on something else.
See, it's not science. It's just common sense.
The logic of this flier is baffling. But Mario is cute!
Game makers may make games for the love of it. But the game business exists solely because gamers are willing to pay more than zero for games. And under normal circumstances, where convicted felons are not offering their cool games for free to their friends, gamers optimize by spending as little as necessary to get what they want. Or, to put it into more pop-cultural terms, you can always get what you want; it's just a matter of negotiating the best price possible.
And price happens to be the most wonderful Mexican standoff known to the free market. A game developer tries to charge as much as they can for their precious product, and the game buyer tries to spend as little as possible. In practice this is as poetic as a John Woo gun battle.
Here's how it works.
In the
Rock Band example, you want to play the game so bad that you would be willing to pay $200 for the opportunity. The game, however, is $179 in the store and your friend will give it to you for free. What's the game worth? Zero? $179? $200? Something else?
Of course, it depends.
We can guess that EA, as the publisher, sets the price of
Rock Band at $179 for one of two main reasons:
1. It knows that there are a range of prices that it could charge. Some players would probably pay $300 or more. Others are cheap and won't buy the game for more than $100. EA crunches the math and figures that it will make the most money by splitting the difference, and comes up with $179. It doesn't know how much an individual gamer will pay -- because what any one person will pay depends on a lot of things, like how much money they need each month for rent or porn, or if they will just use their parents' money and don't care how much it costs. Gamers, it turns out, are a diverse bunch. So the game publisher more or less guesses the highest amount that the most people are willing to pay.
2. The game costs less than $179 to manufacture and sell. In most cases, it probably costs a lot less than this to make the plastic and put the box on a truck to your local Target.
So they put a sticker on it that reads $179 and everyone figures this is what is worth, even though it's just an educated guess about what people are willing to pay.
