Fair Trade: The Simple Economics of Why Game Developers Should Shut Up About Used Games, Part 2

Comments

• 
  seanflyon

  7/22/2009 2:48:16 PM

  @DavidThomas:
  
  Publishers like money. If a publisher can make x dollars on a game they will try to buy it for as low a price as possible up to x dollars. If publishers can buy games for significantly less than x, then new publisher will enter the market because they too like money. This IS covered in econ 101.
  
  You keep saying that used games help the market as a whole, but you have admitted that they hurt the new games market in the process.
  
  "That means more money [for used games and less for new games], more games [except there will be fewer games because new game sales drive game production], more players, more distribution options [because this is where the majority of money from used sales goes], more innovation [except that new game sales drive innovation] and, perhaps sadly, more opportunity for games to fail."
  
  
  "What do you want? Sony, Nintedo and Microsoft controlling the market and making sure every developer gets a regular paycheck? Or do you want the creative and financial wild west we have today." WTF are you talking about? No one is talking about cutting out the free market. I want publishers to sell non-transferable licenses which would result in more money spent on new games which would result in more money to developers which would result in more games and more innovation.
  
  

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  CG-Prophet

  7/22/2009 1:49:12 AM

  @jerryku:
  
  I mentioned this already, but Stardock is working on just such a system that allows users to sell their digitally distributed games to each other. It's called GOO.
  

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• 
  Nikoli_Volkoff

  7/22/2009 1:30:07 AM

  @seanflyon:
  
  they went out of business because nobody was buying their games. Now they may have had a good game or two, Viewtifal Joe was not a game i would call great, good but not great. your right they dont live in a dream world paved in gold, but they still cant stay in business if they dont make games that people are willing to pay 50+ dollars for. I would NEVER pay that for either of the games you mentioned, then again i wouldnt pay that for "tears of war 3" either when it comes out. used games have and always will be around, as the article says it is all figured into the cost when you buy it.
  
  The only real problem i have with the game industry is the "licensing" scheame they have going. Steam is the biggest perpetuator of this . I pay full price for a game and not only can i NOT trade or sell it i cant even PLAY the damn game unless i have an internet connection and can talk to the steam network. So what happens when my internet goes out and i want to play one of my single player games? i get to go to the PS3 because i dont ahve to worry aobut that crap there.

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  DavidThomas

  7/22/2009 12:52:43 AM

  @seanflyon:
  
  OK. I'll take the bait;)
  
  "Because the market value of the video games the developers are selling to publishers would be higher. This is covered in the first week of econ 101."
  
  Not necessarily. Margins might be higher. BioWare might be paid more to make the same games theyt make now. A few developers on the investment margin might get thrown a bone. But these are speculative bets that the industry already makes. So, a few more devs would get a few dollars. But, if the market doesn't increase, then this is a short term gain. In other words, over time, we end up right where we are, but a smaller market (which equals fewer games, less diversity, something resembling pro sports, I think).
  
  And, no, this is not econ 101. Business finance maybe!
  
  In the analysis provided in the article, used game shelp expand the game market. That means more money, more games, more players, more distribution options, more innovation and, perhaps sadly, more opportunity for games to fail.
  
  What do you want? Sony, Nintedo and Microsoft controlling the market and making sure every developer gets a regular paycheck? Or do you want the creative and financial wild west we have today.
  
  Remember, no one makes you open a game studio. EA has jobs if you want to work in the business.

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• 
  jerryku

  7/21/2009 11:12:36 PM

  I absolutely hate digitally distributed games, as they force me to keep the game forever. I've bought a few items over digital distribution and have regretted each purchase.
  
  If I could "sell" my digital game back to the publisher, or another online user, after I was done with it, then I'd be happy. It'd be great if Steam let you trade Steam games with other Steam users, for cash/games/chickens/whatever.
  Until then, digital distribution sucks ass.
  

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• 
  seanflyon

  7/21/2009 7:37:20 PM

  @DavidThomas:
  
  "And if publishers had more money, why would they give it to companies that they don't want to give it to now?" Because the market value of the video games the developers are selling to publishers would be higher. This is covered in the first week of econ 101.
  
  "Would publishers share more of the money with developers. YES."
  So you understand this simple concept, which makes your first statement disingenuous.
  
  "But would the game market continue to expand at the rate it has been. PROBABLY NOT."
  
  So used sales do reduce the amount of money spent on new games (thus driving some developers out of business) but they also increase the amount of money spent on games overall which means there is a bigger pie. I think that an industry with fewer developers and more GameStops would actually be worse ever if we gained twice as many dollars worth of GS as we lost developers. The pie would be bigger, but it would have too much crust (distribution) and not enough filling (quality games).

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  DavidThomas

  7/21/2009 6:39:12 PM

  @seanflyon:
  
  Interesting thought--would game developers be less likely to belly up if there was not a rental or used market?
  
  I doubt it. Developers that don't get publishing money when they need it seems to me to be the leading cause. And if publishers had more money, why would they give it to companies that they don't want to give it to now?
  
  @blondie:: Thanks for the link. That's a pretty interesting point, and a strong argument for downloadable content. Guess what the next big wave in game publishing is? :0
  
  @MobyMedic:: Rentals really net out like used game sales--someone is making money off that initial sale that does not flow back to the publisher.
  
  And for everyone else--just to recap the basic argument here--if you could stop used game sales today, would publishers make more money. YES. Would publishers share more of the money with developers. YES. But would the game market continue to expand at the rate it has been. PROBABLY NOT. So why should everyone support used game sales? Because a bigger game pie is better for the industry as a whole.
  

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• 
  seanflyon

  7/21/2009 3:50:25 PM

  @Nikoli_Volkoff:
  
  I think you are confused. GM made poorly designed and uncompetitive products for decades, went bankrupt and was given large sums of money to stay in business. Game studios like Clover made great products (Okami, Viewtiful Joe 2...) and still went out of business.
  
  Game developers don't live in a magical world paved with gold.

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• 
  Nikoli_Volkoff

  7/21/2009 2:01:06 PM

  When ever i hear about some game company complaining about used game sales, I just think to myself "STFU and be HAPPY you are not GM."

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• 
  blondie

  7/21/2009 9:36:59 AM

  Hey, a Fallout dev responded to your article with an interesting point about downloadable content sales:
  
  "One more note to add: our downloadable content sales come from both new and used versions of Fallout 3. It is quite possible that a single copy of Fallout 3 has netted us multiple sales of our DLC -- once when it was purchased new by one person; then when someone else buys it used, they also will buy DLC."
  
  
  http://www.ashleycheng.com/2009/07/dlc-loves-all-copies-of-fallout-3-new.html

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• 
  J2xC

  7/21/2009 4:24:22 AM

  as you pointed out at the end of your article, when given the choice between a new and used game, a buyer that could afford the new one will still generally buy the used cheaper game, because it costs less. And if they only have so much time to play games, they will not buy any other games. I am in this exact situation. Time for games is my limit, not budget.
  I buy new because there was a time I wanted to develop games professionally. I gave up on that and decided to work in more "normal" software because I don't have to deal with low pay, poor work conditions, and long work hours associated with being a game developer(as opposed to the management at publishers/retailers). These conditions are necessary to keep down the costs to absorb the damage from used game buyers who would have bought new, but bought used because it was available.
  
  A model that removes used games from the market means making games that can't be completed. And I like the satisfaction of finishing games, so I don't want this to become a necessary step.
  
  As to the wanting to avoid duds argument that justifies buying used games for less risk... Many games out there offer free playable demos and it is indeed the developer/publishers loss if they do not.

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• 
  seanflyon

  7/20/2009 4:43:31 PM

  @MobyMedic:
  
  "If the NES used that model I couldn't play duck hunt right now" Last I checked, Nintendo is still in business. Even if they did go out of business, in all likelihood, you could still play the game, but there is a risk. I think that risk is lesser than the risk of your physical media still working (assuming you can find it 40 years from now). DVDs don't last forever. You can be certain that your grandkids won't be able to play your plastic media games.
  
  "want to go play with a friend? Your out of luck" with Steam you can log into your account on your friends computer and install the game. If you want to play 2 copies simultaniously then you have to buy 2 copies.
  
  " If I have a choice I'll buy a physical copy of my game. So I can play it 20 years from now or sell it tomorrow." I completely agree with the second part of this statement. A transferable license is strictly superior to a non-transferable license so if all else is equal chose the transferable one every time. I still would choose the Steam version for convince, but it annoys me to spend the same amount of money on an inferior product (and it doesn't really matter to me because I like to keep all my old games).
  

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• 
  wicket

  7/18/2009 2:55:18 PM

  "But I have to admit one last thing before I go. Used games are good in general, but they might be bad for you."
  
  Doesn't this somehow invalidate your whole article? The reason game developers won't shut up about used games is - now image this - that it is indeed bad for them.
  
  And the funny thing is, it can be rather bad for you too. That is, if you actually like quality games. The reason is, all the money you give to Gamestop instead of to the developers, will not be used to make new games. Simple as that. But you get to eat pizza now and then, that's true.
  
  Really annoying seeing people complaining about corporate greed, shifting all the blame on the developers, and go on like "Well just do it like Blizzard, durr", while so many developers are actually struggling quite hard to stay alive.
  
  We customers help to shape the landscape of the gaming market, and if our behaviour leads to the fact that only big companies can make money by selling low standard casual games, then the blame is eventually on us.
  
  So if you see some kind of game you wish they would keep making, go and freaking SUPPORT IT.
  
  Thanks.

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• 
  MobyMedic

  7/18/2009 11:19:25 AM

  So after reading this and many other articles like it where does renting games come into play? Why buy a game new or used when I can rent it beat it take it back all for around 10 bucks. Now maybe I'm wrong but doesn't blockbuster go and buy the game at 60 bucks and rents it to me at 6 bucks a week after 10 customers its paid. Sure game company "A" made 60 bucks off one sale but 10 people go rent instead of buy they just lost 600 in sales.
  
  As far as buying used I cant imagine that gamestop makes a huge profit off of new games by selling used it allows them to make enough money to be viable. Walmart Bestbuy can afford to make a small profit they sell just about anything. I would rather go to a small store where I know everybody and they know the games. Go to walmart and ask the 65 year old guy at the electronics counter whats better halo or killzone. He'll look at you like your a nut.
  
  As far as this whole digital distribution I have bought a few games off psn live and even steam. Now what happens when they go out of business or you want to go play with a friend? Your out of luck. If the NES used that model I couldn't play duck hunt right now. When my grandkids pull my old ps3 out will they be able to play it? if they have a disc based game yeah or if my hard drive still works. And I didn't delete my downloaded games.
  
  In short I will support used games and gamestop. If I have a ch

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• 
  MobyMedic

  7/18/2009 11:19:24 AM

  So after reading this and many other articles like it where does renting games come into play? Why buy a game new or used when I can rent it beat it take it back all for around 10 bucks. Now maybe I'm wrong but doesn't blockbuster go and buy the game at 60 bucks and rents it to me at 6 bucks a week after 10 customers its paid. Sure game company "A" made 60 bucks off one sale but 10 people go rent instead of buy they just lost 600 in sales.
  
  As far as buying used I cant imagine that gamestop makes a huge profit off of new games by selling used it allows them to make enough money to be viable. Walmart Bestbuy can afford to make a small profit they sell just about anything. I would rather go to a small store where I know everybody and they know the games. Go to walmart and ask the 65 year old guy at the electronics counter whats better halo or killzone. He'll look at you like your a nut.
  
  As far as this whole digital distribution I have bought a few games off psn live and even steam. Now what happens when they go out of business or you want to go play with a friend? Your out of luck. If the NES used that model I couldn't play duck hunt right now. When my grandkids pull my old ps3 out will they be able to play it? if they have a disc based game yeah or if my hard drive still works. And I didn't delete my downloaded games.
  
  In short I will support used games and gamestop. If I have a choice I'll buy a physical copy of my game. So I can play it 20 years from now or sell it tomorrow.

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• 
  shponglefan

  7/18/2009 12:45:31 AM

  Just FYI for all the GameStop hate, per their most recent 10-K filing (2009) they derive about 42% of their revenue from new game sales versus only 23% from used games. And based on their comparatives, new game revenue has actually increased (from 39% of total revenue in 2007) versus used game revenue which has remained relatively flat (it was ~25% back in 2007).
  
  Granted, their profit margins are much higher on used games, but based on some of the rhetoric posted here I would have thought their used game revenue would have been much higher.

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  DavidThomas

  7/17/2009 8:43:00 PM

  @Xin42:
  
  When I write something, there are terms. Sometime the terms are "I own this and can do whatever I want with it." Others say, "I can use this once then it is yours."
  
  It's up to me to decide if what they are paying is worth what they are doing with the article.
  
  If someone steals it, then I would be a little annoyed. But, then again, I think that game publishers and devs have a legitimate gripe against pirates.
  
  What I don't do is whine if I sell an article to a Website who turns around and sells it again to someone else without paying me again, if that was the agreement in the first place.
  
  My argument has been--when you sell a game for $60 on a disc, that price includes whatever value you think I can get for reselling it. If I resell it, you can't complain that I stole from you. Nope. That resale right was a part of the original price. If you didn't price it right, well then, that's a business issue!

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• 
  Drizol

  7/17/2009 5:26:55 PM

  @Dlwarner:
  
  I can think of two reasons why publishers don't open their own stores and buy/resell used games.
  
  First, building games and operating a retail store require different skills and it doesn't fit their business model. Why would you get into a retail business that will be replaced with digital delivery in the near future? It's a waste of money.
  
  Second, with such a large market share Gamestop would retaliate against any publisher who opened their own store. Maybe if Activision, EA, and THQ got together on this they could outmuscle Gamestop but I can't see them cooperating on anything. Sony and MS wouldn't touch it since they sell HW also.

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  CG-Prophet

  7/17/2009 5:11:06 PM

  @Dlwarner:
  
  That's an interesting point. If EA doesn't like that GameStop makes all the profits, they should have their own buy-back program, or strike a deal with a retail chain.

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• 
  seanflyon

  7/17/2009 5:06:34 PM

  @roblimo
  
  "Why is anyone surprised that there is a substantial market for used games"? I don't think anyone is surprised. No one here has expressed any surprise about it.
  
  GameStop, I don't link them. I don't patronize them and I encourage others not to patronize them either. I think you don't quite understand the nature of this discussion. We are not talking about strapping bombs to our chests and blowing up a GameStop, we are talking about weather or not GS used sales practices are bad for the industry. Since as I already explained, GS used sales ARE bad for the industry, I don't like it. Thats all I'm saying.
  
  You are right that books have a similar used market. There are a few thins that limit its negative effect on the book industry. First and foremost people like to have books on their shelves even if they have already read them (and won't read them again). The book market can bear lost sales because books are so darn cheap to produce:
  
  A full length novel take a few man-years to create. A full AA game takes a few hundred man-years to produce. $60 / 300 man-years = 20 cents per man-year. When your new book that takes you three years to write sells for 60 cents per copy, then you can complain.

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• 
  Drizol

  7/17/2009 4:51:27 PM

  I don't know of any developers who are upset with consumers for buying used games. It's perfectly understandable that people would like to get the best deal possible on a game.
  
  Developers are pissed at Gamestop and the used game market in general. Here are a few details that weren't mentioned in the original article.
  
  1. Gamestop takes far fewer orders for new games than competitors because they make more money on selling used games than new. They want as small an inventory as possible of new games and this hurts developers. Preorders and week one sales are so critical for projects that marketing budgets and sales efforts can and are slashed if there aren't enough products ordered.
  
  2. Online game components cost money to run. Developers run these services for free because they increase longevity of games, can make games more fun, and help sell more copies. They count on retail sales to pay for it. Every used game sold costs the developer real money and not just the possibility of a lost sale of a new game.
  
  3. Games used to drop in price relatively quickly after initial release. Now prices are being held longer in part to make up for lost revenue to used games.
  
  4. Digital distribution and online games will make the whole issue moot in less than a decade.
  
  You can try to rationalize what they're doing all you want but if at the end of the day Gamestop is responsible for developers losing money and taking on less risky projects then we all lose as customers.

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• 
  Dlwarner

  7/17/2009 4:15:55 PM

  If game publishers have such a problem with used game sales why don't they start their own collective store, and buyback and resell used games. They would then profit from the sales and be able to guarantee the quality of the used product.

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  evohollywood

  7/17/2009 4:12:03 PM

  "What if sites reposted your work, charged money for it, and didn't send you any cut? You'd be annoyed, yes? And they sold it cheaper than you can and still cover costs, so you lose a great deal of your readership/ad revenue. Then what?"
  
  I believe that's called "blogging". And we're fine with it, it spreads the Crispy gospel and drives traffic and brand awareness back to the site.
  
  You're right about digital distribution. It will eventually make this particular argument moot. GameStop is aggressively exploiting used game sales because it is an ephemeral market, they're getting some while the getting is good.

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• 
  Xin42

  7/17/2009 3:33:50 PM

  @DavidThomas:
  
  I think most of us are taking the long view, overall. I pointed out that in the long run, with new distribution, Gamestop's model of reaping 100% profits on used sales will disappear. There will be a novelty market for old games that they can sell, but they can't repackage bits on my hard drive.
  
  I haven't ever blamed the consumer for this problem. It's entirely on GameStop. It was one thing when used games were a small part of their business. When they got aggressive, when they started offering used over new, that's when they really screwed up. It will not work out well for them in the long term, so it's hard to care too much at this point. However, for now, it DOES affect developers' bottom lines.
  
  I think it would simply be best if you thought a little closer to home before making the argument. What if sites reposted your work, charged money for it, and didn't send you any cut? You'd be annoyed, yes? And they sold it cheaper than you can and still cover costs, so you lose a great deal of your readership/ad revenue. Then what?
  
  My point was simply that we're not driving Lamborghinis to work whining because we have to wait a month to put in a shark tank. We make average salaries, and our ability to provide for our families is directly impacted (to varying degrees) by a shift in sales from new to used. Your assertion that we're just greedily whining deserves a bit of a rethink, in my opinion.

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• 
  Xin42

  7/17/2009 3:23:36 PM

  @evohollywood:
  
  You can't properly cater to the used game market. The publisher never sees money from that. That's a non-argument. The general publisher way of dealing with this is quickly becoming to simply back digital distribution, which I think is a great response.
  
  @CG-Prophet
  
  Simple, it means that 2-3x the number of people who bought the game new bought the game used. So while the game (in theory, of course) had a market of 3-4N people who would buy it, it only sold N that we can actually get paid for. Gamestop takes 100% of the rest.

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  roblimo

  7/17/2009 2:52:05 PM

  I'm not a game developer. I'm a writer. I've written three books and thousands of articles.
  
  Most of my articles are available free on the Internet.
  
  All three of my books are available used. And some libraries own copies, too, that they will lend you FOR FREE.
  
  I get just as much money from the "used" sales of my books as game developers get from used game sales. ($0.00)
  
  Books have been sold used -- not to mention borrowed and lent -- since they were hand-copied on papyrus scrolls.
  
  Why is anyone surprised that there is a substantial market for used games, along with used music CDs, used video DVDs, used musical instruments, used lawn mowers, used bicycles, and used books?
  
  GameStop? So what? If you don't like them, don't patronize them. There are a number of flea market vendors where I live in FL that give higher trade-ins and sell for less than GameStop. Plus ,as many others have pointed out, you have Craigsbay and eList and other Internet marketplaces.
  
  Enough of this. I need to stop by the local used book store and see if they have any science fiction titles I want to read this weekend.
  
  -30-
  
  

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• 
  Stratis

  7/17/2009 1:34:48 PM

  I believe the article is partly right and partly wrong. Instead of criticizing it in detail I will try to briefly describe my point of view:
  
  The price of a game has to be between the minimum a seller is willing to give it away (roughly the costs of producing the disk and box) and the maximum a buyer is willing to pay. The later value is different for every single consumer.
  
  Ideally a seller would like to ask every consumer for his willingness to pay and charge him that amount. Since this is not possible, publishers employ different strategies to get as much out of the consumers as possible, like selling games at a high price initially and reducing the price over time or selling expensive CE's.
  
  Now every form of shared usage, be it sharing a game between friends or trading it in, hampers these strategies, as players gain access to a game for a much lower price than they would be willing to pay if they needed to.
  
  Considering this during the initial price determination limits the effects to a certain degree, but does not offset them completely.
  
  It also does not help much that some of the saved money is spent on other games, as it costs additional money to make these games.
  
  In effect publishers make less money out of a single game than they could without a secondary market. This might sound like a good deal to players, but also reduces the financial viability of intensive single player games with high production values.
  
  Consider this analogy: High budget movie titles would be impossible to make if they could only be published on DVD. Only because the can be sold through cinemas, forcing every single moviegoer to pay for a non shareable ticket, they become financially viable.
  
  However, as long as the game sharing happens through GS, publishers could easily counter its effects by simply raising the price for Gamestop, arguing that they have a right to receive a bigger share of GS`s double turnover. If they do not, this is simply a question of their bargaining power.

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• 
  JoshMoore

  7/17/2009 2:06:15 AM

  @GusMastrapa:
  
  Yeah you're right. Gamespot also sort of has the used game market cornered. It really is the only big chain game store around (or at least in Canada). They have freedom to determine what the price of a used game is, because there is no one around to compete with them.

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  DavidThomas

  7/17/2009 1:17:49 AM

  @eightbits: and @seanflyon
  
  Actually, I agree with both of you.
  
  The difference between $55 and $60 for a game is pretty much the marginal value for the game market. That is, on average, that's about where people start to decide whether or not they are going to buy a game. A little less, they buy, a little more, they spend their money taking their sweetie to the movies.
  
  So, yeah, all these numbers are sort of made up.
  
  But, the idea that one-user licensing should reduce price--over time it probably would (either that or the quality of the product would go up).
  
  In the short term, the same crap would cost just as much, gamers would be pissed and the biggest games would make more of the market. I mean, why buy "Tears of War" to see if it is any good when you could buy "Left for Dead", which you know is.
  
  What I think will happen is that we will a broader variety of business models, with more price points--some higher and some lower--allowing more people to pay whatever it is they want to pay to play.
  
  Think about cable TV + Netflix + Hulu + the movie theater. There are tons of ways to watch screen media, at a variety of prices. The game business ought to get there sooner or later.

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  GusMastrapa

  7/17/2009 1:04:00 AM

  @JoshMoore:
  
  The reason they can do this is because there is almost never sale pricing on games. The prices are so fixed (largely, I'm assuming because the margins are so narrow for retailers) that you almost never see a game on sale as a promotion. Walk into a Best Buy on ship date and you can buy a CD, DVD or Blu-Ray for the best price you'll see for months. Do the same to buy a game and you'll pay full retail. If you're lucky they'll give you a shitty poster.

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  eightbits

  7/17/2009 12:58:26 AM

  @DavidThomas:
  
  What do you think about non-transferable licenses for physical media sales? While this is not currently a widely used license for games, it does get used in some other software markets. Usually, these are top-tier products for niche markets. But is there any reason, in your opinion, these cannot work for games?
  
  I can see this becoming a problem in that the legitimate used game market would dry-up overnight. While I think in a free-market economy this means the used game retailers took their chances and got burned, in the courts, it might be reason for the used game industry to cry foul. If this is the case, then non-transferable licenses would be an impossibility imposed by the courts.
  
  If it is possible, however, then it could mean that the publishers could lower the price of new releases a little bit to rake in more sales from those that normally purchase from the used retail shops. But this could also generate a lot of friction with those who purchase with intent to sell to a used game retailer. This might mean that to avoid that friction, the price of a new release may have to drop from $60.00 to $40.00. That may be too much of a decrease. What do you think?
  
  As you mention, some online venues for purchasing games already offer this kind of license, but since their media is not physical, it's almost a completely separate market and difficult to compare.
  
  So, in the overall analysis, do you think there is room for a non-transferable license on physical media, or is it too risky for the potential reasons mentioned above (or any others I failed to mention?)
  
  Thanks!
  
  Eric

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• 
  seanflyon

  7/17/2009 12:33:54 AM

  @DavidThomas
  When GS sells Tears of War for $55 (thats 91.7% of the new price) the overwhelming majority who buy it would have bought the new version if no used version were available. As for those who are willing to pay $55 for the game but not $60, most of them would buy it new after the price comes down to $50 if there were no used alternative. Keep in mind that if you walk up to the counter with the new copy they will ask you "don't you want to save $5 and get a used copy?".
  
  Your right there are also lost sales because of sharing, but that does not bother me because:
  1) It is the gamer (who I like) who is reaping the benefit, not GS.
  2) It is much more likely to result in a new sale (how many times have you borrowed a game, thought it was awesome and bought a new copy vs. how many times you bought a used game, thought it was awesome and bought a new copy).
  3) Most people who are borrow the game are not willing to pay near full price for it, thus much fewer lost sales.
  4) When gamers hold onto their money by not buying used games, they are more likely to buy new games. Thats $55 - the $20 the first gamer got for it = $35 more in gamers pockets that they will probably spend on games.
  
  The services that GS offers do cost them money (rent, employees, utilities), but the only value they add to the system is providing for logistics. Thats something Steam can do at approximately zero cost.

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  DavidThomas

  7/16/2009 11:09:43 PM

  @seanflyon:
  
  Fair enough, but you are assuming that every used game customer would buy the game new if they didn't have the used game option. That seems likely in some cases, but unlikely in general.
  
  What I mean is, if you have a 1,000 potential game buyers, and each has $50 to spend on a game, then you have a potential game market of $50,000, right. So, without used games, then at $60 a pop, you would sell about 833 copies, right (50,000 / 60).
  
  Wrong.
  
  You would sell almost zero, since each person only wants to spend $50 on a game. So, while you might have a few people that would get together with a pal to share a $60 game, for the most part you wouldn't sell anything.
  
  By the way, the sharing gamers and the used game market do the same thing--they lower the price of the good to a demand price point.
  
  Also, for those that hate Gamespot for doing nothing, think about it--they offer an exchange, stocking and resale market. Plus they guarantee that you wont get ripped off. I am not defending their business practices (they didn't respond to interview requests, so I don't really know what they think), but it's not fair to say they do nothing.
  
  Whether their used model is sustainable is another question. Steam, subscription-based content, downloadable content and sites like Switchgames.com are eating away at the used market, trying to offer better alternatives.
  
  Anyway, I am sort of amazed at the intelligence of the argument in these econ threads. We gamerz r smarts.
  

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  JoshMoore

  7/16/2009 10:45:24 PM

  I don't get how at Gamestop, a new game is 60 bucks, and the used copy is 55. I refuse to shop there. They give the consumer a fraction of the money back for the trade, and then turn around and re-sell the game for nearly full price. I don't quite get the point of ever buying a used game from them when the new copy is just five dollars more. If I were in a Sears looking for matresses, and there were two that were identical but one was slept in for 2 weeks and had light brown stains, I'd expect more than a 5% markdown on the item.

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  seanflyon

  7/16/2009 10:27:52 PM

  @DavidThomas
  "used games may impact new game sales" ... and getting hit in the face with a sledge hammer "might" hurt. "new games and used games will reach a natural equilibrium" means much fewer new game sales than there would be without used game sales. There is no way around it, used sales hurt developers. You are right about one thing (other than the flippant SOB part): Developers should not blame the consumer for wanting to save money.
  
  There is one big difference between used sales and piracy: We the developers agreed you are allowed to resell the game when we sold it to you. You are not breaking the contract when you resell your game or buy a used game. Other than that, the effect on the industry is the same: lost revenue which results in fewer games being made.
  
  I hope you all support Download Services like Steam that sell non-transferable licenses (though you should expect them to cost less than a transferable license to the same game).

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  DavidThomas

  7/16/2009 9:04:23 PM

  @Everyone
  
  I know I can be a flippant SOB. So, arguing that developers shouldn't care about used games is like saying that kids that don't believe in Santa shouldn't care about Christmas. The fact is, one way or the other, the used game market does matter and you should care.
  
  I just don't think you should blame the consumer for wanting to save money or the retailer for wanting to make money. That seems silly and, unless you are a anarchist game developer bent on destroying the system, probably hyporcritical.
  
  I think a lot of the arguments here stem from issues related to short-term impacts versus long-term impacts.
  
  Yes, in the short run, used games may impact new game sales. In the long run, according to the logic of price theory spelled out in the article, they do now (new games and used games will reach a natural equilibrium, which is to say, you'll sell as many as both as is possible considering demand).
  
  So, I think you have to take a long view on this and stop whining about hypothetical short term losses.
  
  
  But, to quote that great economist John Maynard Keynes:
  
  "In the long run, we are all dead."
  
  

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  CG-Prophet

  7/16/2009 8:32:26 PM

  @GusMastrapa:
  
  I agree Gus. Maybe it's time that game developers got unionized?
  

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  GusMastrapa

  7/16/2009 7:20:28 PM

  There are many bad conditions out there for game developers and though I admire their work I can't help but feel that the negatives they're experiencing are conditions of their contracts as opposed to difficulties wrought upon them by outside forces (e.g. journalists and Metacritic scores and consumers with used game sales). I know unions and programming never seem to find common ground, but there's got to be a way for the people who make games -- specifically those who don't have the benefit of agents. To assure that their fair compensation isn't linked to the whims of outside forces.

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  CG-Prophet

  7/16/2009 6:46:51 PM

  @Xin42:
  
  I don't want it to seem like a pile-on but this line doesn't make any sense to me:
  
  "I've seen the XBL and PSN stats on our last round of titles, the number playing is easily 3-4x the number of sales we've been paid for."
  
  
  How can this be? How can there be more people playing a game than you've sold new copies of? Or am I not understanding what you are saying here?

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  evohollywood

  7/16/2009 6:20:43 PM

  @Xin42:
  
  So by your logic if a designer of an automobile gets paid a bonus according to the number of units of their cars that are sold, then that designer should have a beef with the used car industry? In fact, they should argue for the dissolution of the used car industry as a whole. So why is it that car companies actually tend to brag if their car has a high resale value?
  
  I think its because they've learned to profit from the resale market themselves (by selling "certified" used cars on new car lots) and also they've learned that through used car purchases they gain customers who may continue to purchase cars of their brand.
  
  Used game retailers are not stealing money from your paycheck, the company that employs you is stealing money from your paycheck by not properly catering to the used market and not recognizing the value that used games sales create.
  
  Evan
  
  P.S. - (I know the car industry is in dire straits at the moment, but their design practices and the economy are way more to blame for that than their sales and maintenance methods)

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  Xin42

  7/16/2009 5:51:19 PM

  Ok, so I'm a game developer. I work at a top tier studio, though I don't, nor does anyone I work with, have a Scrooge McDuck money pool.
  
  In fact, I earn a marginally lower salary than I could doing other kinds of programming, simply because of the industry I'm in. If you factor it over the hours I work, it's quite a bit worse. That's ok a) because I love my job and b) because I get bonuses based on the number of sales of our titles that make up the difference.
  
  Oh wait. So I used to get bonuses based on sales. With the insane uptick in used game sales lately, I haven't seen a bonus in almost a year. I've seen the XBL and PSN stats on our last round of titles, the number playing is easily 3-4x the number of sales we've been paid for. So...the used game sales have literally taken money out of my paycheck.
  
  If you want to rationalize your purchases, go right ahead. But most actual developers (not execs or figureheads who take home most of the bonus cash, but programmers, artists and designers) are in this situation, and are not rolling around in the money from their initial sales. In fact, these days, a greater portion of profits goes into funding larger budget next-gen titles or a wider array of titles than into the developer's pockets.
  
  I don't foresee this continuing to be an issue, as digital distribution takes over on the consoles, and as services like Steam, Greenhouse, and Impulse continue to take over on the PC. At that point, we'll be in a situation where new game sales make up the insanely gross majority of sales out there, and sales will actually reflect the real market.

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  CG-Prophet

  7/16/2009 4:53:54 PM

  @BigDaddyT:
  
  Exactly!
  
  This is why I don't ever resell games to GameStop. I'd rather sell it for a reasonable profit (but a fair price) to someone I know or just give it away than get raped by a trade-in/ resll program that is unfair.

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  BigDaddyT

  7/16/2009 4:35:10 PM

  Caveat - I am a game developer, so the rest of this reply is inherently biased.
  
  Surprisingly (foolishly?) though, I don't actually give a crap about the used game issue. I think there are a lot of truths in this article about how publishers/retailers/consumers are duking it out and sticking it to each other in a variety of ways. All true.
  
  Also - of course we can't tell people that they are not allowed to re-sell a product that they legitimately bought. It would be ridiculous to try enforce that.
  
  My beef is with the source of the used game inventory - have you seen the buy-back prices that most of these outlets are paying people for their used software?
  
  You can buy a game for $69.99, play it and take it back the next week and trade it in for what? Like a $24 credit against a new title....
  
  Immediately upon which the "retailer" cranks the price back up to $64.99 and makes a $40.99 profit for essentially doing nothing beneficial in the equation. Not to mention that they don't even really give you your $24 for the trade, as you typically need to spend it against another title to receive any benefit whatsoever.
  
  That part strikes me as a racket. Being done with a game and selling it to someone who will enjoy it again seems only logical (and environmentally friendly to boot!). Having retailers leverage this pattern to earn $40 in profit for themselves is the poison.
  

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  Palalong

  7/16/2009 3:59:35 PM

  @nekoken:
  
  I would have to say the fault lies in the business agreements then. It's not our fault that publishers allow places like gamestop to resell their used games willy nilly, so we should not be the ones that you punish for the grey areas your contracts allow.
  
  "That seems like a relatively self-centered viewpoint that only focuses on the end user."
  
  I have some bad news for you, most people are "relatively self-centered" when it comes to their money in a consumption based society, perhaps you should educate end-users on the plight of game developers if you want something to change.
  
  I work for a publisher and I can tell you that there are methods that allow you to retain users while still turning a decent profit. As much as I'd like to QQ about used game sales, I believe there is a saying that goes "don't bite the handd that feeds you"
  
  Comparing me getting a used game from my buddy to piracy is a slap in the face, try to be a bit less pedantic in the future.

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  RyanKuo

  7/16/2009 3:48:10 PM

  @nekoken:
  
  Since when does the consumer have a responsibility to anyone/thing but himself? It's buy or not buy. I guess I should feel guilty about all my used records, books and clothes.

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  illmunkeys

  7/16/2009 3:47:42 PM

  @nekoken:
  
  You're seriously comparing pirates to used game buyers? Seriously? Used game buyers may not be funneling money directly to the game companies that make the games, but indirectly they will be. If there is a sequel, the used game buyer may be apt to buy the new game. If there is DLC, he could get some of that.
  
  Used games won't kill the industry, just as used CDs didn't kill the music, used books didn't destroy the novel, and so on.

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  illmunkeys

  7/16/2009 3:41:34 PM

  @nekoken:
  
  

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  onuhwt

  7/16/2009 3:40:18 PM

  @onuhwt:
  
  Sorry very bad mistake there in the first line that contradicts my entire point I guess I should proof read. It should read:
  
  "Good point and while we're at it lets give GM 10% when you SELL YOUR CAR"
  
  

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  onuhwt

  7/16/2009 3:37:18 PM

  @nekoken:
  
  Good point and while we're at it lets give GM 10% when you buy a new car, or the construction worker 5% percentage when you sell your house. The fact is that when you purchase a new game you are also buying the rights to re-sell that game. The game company has no control on what you do with YOUR PROPERTY. If they want to capitalize on the used game crowd then like the author said downloadable content and add ons are good ways to go, but to say that buying used games is the same as game piracy is just rediculous

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  nekoken

  7/16/2009 3:24:11 PM

  This article is pure hyperbole. Your hypothetical buyer doesn't have much money so they want to get as much as they can for their money. So they buy 2 used games rather than one new game. That seems like a relatively self-centered viewpoint that only focuses on the end user.
  
  I'd like to see some sort of proof for statements like "Used games help increase aggregate demand." Where are the numbers to back that statement up? I'm unaware of any studies proving how much of a beneficial effect that has on the new game market.
  
  What percentage of new game sales do not occur because a used game sale was made instead? The number is definitely more than zero based on the tactics employed by Amazon, Game Crazy, and Gamestop.
  
  How about the alternative mechanism of used game selling companies paying a percentage fee to the publisher of the game?
  
  Everyone wants something for nothing or something as cheaply as possible. However, there are consequences to that. You may as well just pirate all of your games if you are buying them used. You are contributing just as much to the game industry in terms of funneling money back to the game companies so that they can afford to continue making games.
  
  

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  vherub

  7/16/2009 3:08:46 PM

  Game developers in the present can't take an advance from their future selves raking in the sales from the formerly freeloading gamer, now converted into a new game buyer.
  
  Nor can they easily track how many gamers played their game on the used market, and determine what the budget will be on the next game, or if there are enough people who want a sequel.
  
  And when the overall economy sours, and a person no longer has $100 for entertainment, but instead $80 or $50- well what's to stop the game buyer from regressing back into the used game freerider?

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