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Retail

GameStop: Used sales benefit the whole industry

Tue 23 Aug 2011 9:24am GMT / 5:24am EDT / 2:24am PDT
Retail

VP Michael Mauler says second hand drives new sales

GameStop's executive vice president Michael Mauler believes that second hand sales benefit not only retailers such as his own company, but publishers and developers as well, driving sales and keeping customers engaged with yearly franchises.

Speaking to Edge, Mauler explained that without the opportunity to cash in on older titles, many gamers wouldn't be buying as many new ones.

"I can understand the feelings [but] we've sat down with developers and publishers and really gone through the data," Mauler told the magazine's website. "I personally think there's a lot of benefit to the publisher. "A great example is sequels, where there's a large percentage of people who are just not going to spend $60 every single year without being able to do something. They'll look at their shelf and see ten FIFAs, Pro Evos or Maddens.

"Being able to take the older one and do something with it in order to buy the next version is really important to consumers. That drives new sales quite a bit."

According to Mauler, getting new customers involved with a series which they may not have invested in at full price also pushes sales of DLC, but initiatives such as EA's Online Pass, which encourage direct payments to the publisher in return for access to online modes and features, aren't particularly effective.

"Our data says that used customers play a lot less online than new customers. The number's very low - like 15, 20 per cent."

The reason for that, Mauler feels, is the diminishing attractiveness of online offerings as time goes on and the users become more core, increasing the experience gulf for new adopters. Instead, he says, second-hand users will invest in DLC, extending their game experience.

Mauler's thoughts are unlikely to coincide too closely with those of publishers, given the vested interest he represents. However, he also makes a point about scheduling which may find more sympathy amongst industry figures, despite its stronger phrasing.

"We the industry have done it to ourselves," Mauler says of the second hand market. "We take all the great releases and put them all in a two-month period.

"If you're an FPS fan, you look at all the games that are coming out this fall, and you'd have to be pretty wealthy to buy all of them. There are going to be people who buy Battlefield 3, and they're not going to have €60 for at least another month or two...they're all coming out so close together."

28 Comments

Jason Lee Ried
Director

1 0 0.0
Freeing up money for new games sales is one thing. Releasing a second hand version almost to the day of launch is another - all this does is give 97% of the profit to the retailer while the Publisher/Developer receives nothing.

I would listen to his opinion on data more closely if there was a window where second hand games couldn't be sold. That then gives new games enough time to make money before being pushed to the back. But that will never happen...

Posted:3 years ago

#1

Joe Bognar
PR Account Executive / Journalist

99 2 0.0
It could potentially benefit the industry, yes. But it's not up to the publisher, nor the retailer. It's up to the consumer, who will decide whether the second hand version is worth the money or not. It usually is priced quite reasonably, so in that case, the industry is suffering from second hand sales.



So the bottom line is: Retailers encourage second hand purchases with no intention whatsoever of helping the industry. It's now something that they try to present from a different angle. Sad but true.

Posted:3 years ago

#2
I guess its too optimistic to request for a peek at this data then - just a sum total number would help (although a month by month trending would be really interesting)

Posted:3 years ago

#3

James Steele
Senior Software Engineer

15 17 1.1
It's not the older titles being sold second hand that are the real issue here.

It's the price gouging that that the retailers are doing by selling a second hand copy of a new title in its first few months of release. If Mr Mauler were serious about helping to drive sales new games sales which lead to increased profits for the industry as a whole, he would first commit to stopping the price gouging activities which take money away from the publisher , developers and platform holders.

Posted:3 years ago

#4
I'm sick of pre-owned being 'forced' on me when I buy a something at gamestation. Typical transaction:
*Hands over new title*

Me: "I'm ok cheers, I'll take the new one"
SA: "You sure? It's basically new and it's a lot cheaper"
Me: "Honestly I'm fine"
SA: "OK....as long as you're sure"

Also if you trade in a game at Asda, you can spend the credit on groceries. I can't see how this benefits the industry.

Posted:3 years ago

#5

Catherine Goode
Technical Designer

7 5 0.7
Benefit the whole industry?

"Report: 34% Of Brits Buy Second-Hand Only"

http://www.thesixthaxis.com/2011/08/18/r...

Posted:3 years ago

#6

Klaus Preisinger
Freelance Writing

1,072 1,007 0.9
The Gamestop argument makes no economic sense. GameStop does nothing to increase the amount of money people spend on games. They do not add value to the economic cycle, they simply provide a tool (used sales) to increase the circulation speed within the games economy. Since GameStop profits off each transactions, it is their best interest to keep circulation speeds high.



Gamestop does not help sell more games, they rather take a fee from customers for providing the service of smartly redistributing copies which are no longer used. Craig's List Corporation if you want to call it that way.

Each time somebody trades a new game from publisher X to buy a new copy from publisher Y, the same is happening the other way around. Since GameStops profits off every transaction, publishers will end up with less money in the end, because even if the effect cancels itself out, the profit margin of Gamestop will always be paid and now it is paid more often.

Edited 1 times. Last edit by Klaus Preisinger on 23rd August 2011 2:52pm

Posted:3 years ago

#7


If this was evened out somehow (if Game / Gamestop etc actually sold the new copies at a price point that would make a decent retail margin and were not so fixated with pre owned margins) then the pre owned market could serve the useful purpose of fueling sales rather than eating into the publishers revenue on new game sales.

Posted:3 years ago

#8

Andrew Goodchild
Studying development

1,235 396 0.3
I bet a good deal of people trade in titles to spend that on more second hand titles. It's hit a point this generation where if you want to buy a six month old console game new that doesn't feature Halo, CoD, GTA or Mario, the only place you can do this is online, killing the platinum /catalog/classics titles you got even last generation, and citing value to customer seems misleading, as these catalog titles disappeared, second hand prices seem to have crept up to the price catalog titles were sold at.

Of course, it seems the industry helped dig the hole, giving large chain retailers far more favourable treatment when the independent retailers were still a tangable presence, and now they have destroyed the competition, they now hold all the power.

Edited 1 times. Last edit by Andrew Goodchild on 23rd August 2011 3:35pm

Posted:3 years ago

#9
Well, it's all going to be moot in the coming years, so we can analyze this all day long, but it doesn't matter. I agree with the comments about being offered used, when you walked into the store to buy new... that's where Gamestop's arguments fall down. Take that sales pitch out of the equation, and they'll gain some ground with me.

Posted:3 years ago

#10

Brynley Gibson
Executive Producer

1 0 0.0
I believe (this may now have changed) the film industry model provides far greater protection and improved sales.

It is to not allowed for you to sell second hand films in a place that retails full price films. Second hand films can be bought from a rental establishments only. Rental is another beast to handle. Rental copies of movies are a special version, a license that cost the rental companies a great deal. Rental games on the other hand are just normal retail copies.

If anyone a bit more legally minded can let me know if this is correct I would appreciate it.

Posted:3 years ago

#11

Ryan Duffin
Animator

8 0 0.0
Is it going to be a headline every time Gamestop repeats this? Because I feel like I've seen this article several times already.

Posted:3 years ago

#12

Mike Kennedy
Founder | CEO

20 2 0.1
[link url=http://www.PostalGamer.com:]http://www.PostalGamer.com:[/link] Used sales benefit the whole industry

Posted:3 years ago

#13

Andres Del Valle
President

4 0 0.0
Although we share the feelings with those who criticize second hand sales (trust me we DO); we have come to the conclusion that it is consumer response (to alternatives such as second hand sales) what determines the market. Business strategies (in game publishing) need to take these market realities into account and come up with creative alternatives to their current and fading business models.
Publishers must consider/coordinate/implement new strategies, but game studios need to pitch in as well by understanding the changing environment and adapt to it as well; games should reflect the needs/traits of the wide variety of gamers; after all, games are a product and the gamers are the clients.

Posted:3 years ago

#14

Dave Knudson
Sr. Technology Manager

42 7 0.2
I sort of wonder how much Gamestop's used success might be overstated. I'm not an analyst, but I believe the accounting they are allowed to use for used sales might make things appear a little more rosy than they actually are. From a used games inventory perspective they could sell the last unit in (presumably always the cheapest for them to buy), which would make their margins look very good. At some point they would have to write down the older more expensive inventory, but I presume they have some control over when they choose to do that. I don't think this method can be used in a lot of countries, and even in the US it can't be used for tax purposes.

Again I am not an expert in this field, but it seems like accounting and inventory management would create some opportunities for Gamestop to overstate the success of their used business a bit.

Posted:3 years ago

#15

Bernard Parker
Studying game design

23 4 0.2
Someone send this story to all of the studios that closed down last year....oh yeah they closed down last year because of people kept buying there games used and not new.

Posted:3 years ago

#16

Adam Boisvert
Studying Philosophy

1 0 0.0
I buy a fair number of games each year, yet I almost never set foot in a game store. Between Steam and gog and eBay and Amazon, there's really no need. Retail storefronts have got to be hurting, and it's only going to get worse for them. If you think that actual physical game stores are a good thing for the industry (and I do, despite that I almost never use them), then anything they can do to pay their lease and keep the lights turned on is a good thing.

Posted:3 years ago

#17

James Ingrams
Writer

215 85 0.4
If this EA thing takes off (and they have the money to push it!) and people are asked to pay $10 to the publisher to play a secondhand game, I expect the market to shrink by 30-40 percent, basically, there would not be a games industry with the exception of three or four of the very biggest players in the market. Oh, wait a minute - that includes EA!

I predict DOOM! Doom for the industry and more and more gamers playing games from the Doom era of gaming!

Posted:3 years ago

#18
This is the same argument illegal music downloaders made/make right?

Posted:3 years ago

#19
"[link url=http://www.PostalGamer.com:]http://www.PostalGamer.com:[/link] Used sales benefit the whole industry"

Thanks for sharing Mike, and I wish you and your team luck since you seem to be sincere enthusiasts. However, I think that used sales can be molded to benefit the industry -- consumers, retailers, and developers/publishers alike -- but that they currently (Gamestop model) are abused in a way that undeniably benefits executives at Gamestop far more than they deserve while eating into potential profits that developers need to stop getting laid off so often in this industry. There are a lot of things that need to happen to make this industry healthy and ethical, but used game sales strategies and lack of regulations/norms that protect IP creators have allowed Gamestop to swoop in and profit significantly off of our work.

To others saying the consumer gets to decide: If we really let the consumer decide what price point they wanted to pay, then everyone would just pirate games. Maybe you think this is ok, maybe not -- just throwing out there what extremes can occur when free market justification is followed unwaveringly.

Posted:3 years ago

#20

Curt Sampson
Sofware Developer

596 360 0.6
I think that part of the issue is just that developers and publishers have been very slow to adopt appropriate strategies for extracting the maximum amount of income from the market given the nature of their product. Games have an extremely low marginal cost, very nearly zero for ones sold on-line, yet some publishers seem to be unaware of the idea of time-based price discrimination, continuing to sell titles at or near the original price for months or even years after their release. Being a lot more aggressive about how things are priced would almost certainly let publishers capture a chunk of the market currently catered to by those who buy and sell used games. If publishers decide that, if they can't get $30 in revenue, they'd rather have $0 than $10, they haven't much right to complain, really.

Posted:3 years ago

#21

Andrew Ihegbu
Studying Bsc Commercial Music

440 146 0.3


And curt is spot on. If you don't like having to pay distributors to sell your product, then don't. Cut your online prices so everyone buys digital and can't sell back to the stores when they have finished the game.

The funniest thing is I still don't understand why the industry is complaining so much about this. sure games get resold at the profit of the game store, but Blockbuster has resold movies for decades and WHSmith has resold books for nearly a century.

Finally, the 'price-gouging' that is going on nearly-new games is an issue, but whats even more of an issue is that somebody out there is selling all these games back ot he store 2 hours after release. i mean, ahd they not been doing so, then Gamestop/station etc wouldn't have used copies.

Edited 1 times. Last edit by Andrew Ihegbu on 24th August 2011 2:03am

Posted:3 years ago

#22

Brad McGraw
QA Tester

3 0 0.0
Where do people, and publishers, get the idea that they deserve money from used sales? Because they made the game and all of a sudden that means they deserve money in perpetuity? When was the last time you heard Ford or Honda whining they are losing money on used car sales and that used car lots are stealing their profits? What about Samsung or Sony complaining that people selling TVs in garage sales are no better than pirates? Oh yeah they're not.

Why is it that after more than 30 years of making video games, publishers are only now crying about used sales? The idea that its killing the industry is rather silly since used sales have been around since the beginning of video games, and since the video game industry is bloody huge and making in the billions every year their arguments are rather weak.

I can't tell you how many times I've bought a used game and then gone on to buy the next version new. I started Civilization that way and have bought every version, and expansion pack (sometimes multiple times) new, over the years. So while Gamestop's argument in this case is self serving, they are making a valid point. The thing about a brand new game being offered used so quickly after its released is that someone had to have bought it new, brought it in to Gamestop, taken either cash or store credit (which gives you more back), and if they are taking store credit there is a very good chance they are buying another new, just released title. Is Gamestop making profit? Yes they are. When is that a crime?

The next time you buy a used car, send a few thousand to the manufacturer for all the hard work, design, prototypes and manufacturing they had to go through to put that product out. Sometimes years in development. Do you feel that is fair? Because they can use the exact same argument as game publishers are using. It doesn't matter that the scale is different, the argument is the same.

I am sure someone would mention the, 'but you're just 'licencing' a video game, you don't own it' argument. If video game companies really believed this, why didn't they crack down on used sales 30 years ago? Why did it take lower profits for them to start making that argument? This is a money grab by publishers nothing more. Lower profits hit, not because of piracy or used sales, but because of a massive recession. If we ever get out of the recession then we'll see people with more disposable income and buying more games.

Posted:3 years ago

#23

Keldon Alleyne
Handheld Developer

434 406 0.9
If used sales, trading and borrowing didn't exist would the consumers <strong>really</strong> spend more money on games overall, or would the fact that the games are now a higher involvement purchase result in more caution taken and less titles purchased due to the higher perceived and general cost?

I'd most certainly have thought twice about buying certain games that only lasted for 15 hours (with no replay value) if I couldn't trade them and had to be stuck with them forever. Gamers would really have to think carefully about their game choices, and don't get me started on annually updated games like FIFA and WWE.

By the way, it's the trading in that fuels purchases, i.e. John trades in FIFA 2010 in march to buy F1 2010 at a reduced price, which he then trades in to purchase FIFA 2011 at a reduced price. The used sale allows the trading in, and without it John would be reluctant to purchase all of those games barring the choice to trade. It's basic economics, mess with them and we will greatly affect the types of games that consumers are willing to spend money on.

Scarcity is rife enough, why increase it?

As for the case of used titles being offered to purchasers of new titles near launch, I'm curious as to how many used titles there actually are in circulation near launch, and would those consumers who traded in those titles have really bought it if they couldn't trade them? Were they just trying out the game? Either way, how much money has really been lost at all then? Without trading it's unlikely that all of those consumers would have purchased, not least the ones who traded them in. Think about it logically: bucket loads bought the game to play it for 1, 2, or 5 days - I highly doubt the absence of trading would suddenly increase the expenditure of games consumers, no sir!

Posted:3 years ago

#24

Marco Antonio Rocha Lima
Systems Enginner - Workin as Qualit Assurance Coordinator

9 0 0.0
Drop the prices of the newer ones and we will se what happens. As a new game costs US$59,99. If you make games with excelent quality and appeal like Battlefield Bad Company 2, Modern Wafare 2, MW1, Halo 3, Halo Reach, GTAIV, Crysis 2, Mass Effect 1, Mass Effect 2 you will see even more buyers with prices like U$45,00 and investing on DLCs with afordable prices. In the other hand we can use de idea of game providers on the cloud computing point of view. I like too the idea of buying games directelly via downloads if you have lowered prices. I think there is people who play and collect games and others that just play and sell it. 85% of my games are brand new sealed media, 10% online downloading, 5% are used ones (has only single player or a bad multiplayer experience).
I think, the new era today is Big Grid of Servers and game streaming to the final user. The final user pays only for what it plays on the cloud and the companies will have the control of what is played and receive money for that.
In the other side, nowadays, in terms of solid media, on the FPS genre with a single player, cooperative e multiplayer online seens more obvious to me that a lot of people will buy new and sealed ones to play. And for the used ones there will be ideas like te EA Online Pass. I agree in part with gamestop on the potential of selling more DLCs and its advantage to the Game Industry. But i did'nt agree with all they said.

Edited 1 times. Last edit by Marco Antonio Rocha Lima on 24th August 2011 10:49pm

Posted:3 years ago

#25

Blair Hewitt
owner/operator

4 1 0.3
I am also an independant retailer, and I think Pat Forde and Andrew Goodchild bring up some good points.
When I purchase new games I pay my distributor who pays the publisher, Whether the game sells or not the publisher has been paid for my copies.Now I can see the argument that if I sell those copies and order more the publisher will keep getting paid.But here lies a major issue that Pat and Andrew touched on, I'll use Duke Nukem as an example, lets say I brought in 10 copies, my cost being around $56 with a retail of $60, a potential of $40 profit. Unfortunetly the big chains get better deals than us and drop the retail price to $40, now my 10 copies (assuming none have sold yet) become a $160 dollar loss, if I plan on being competitve keeping my customers (not to mention selling my copies while I still can).
I would love to be able to help support the game development community by sending them a portion of used sales but with these situations being a commonality these days (those funds go to paying for the loss we just had to incure in the above mentioned example), It is getting harder and harder to push new product and stay competitive. If the distribution of titles and specials wasnt so one sided I think you would see an increase in new sales across the board.
I work hard long hours not because I make tons of money doing this, because I love being able to provide games to people who in some cases would never had access to, The used market allows me to stay open. I also believe that the used market does drive new sales in some instances, a perfect example I sold a used copy of Mass Effect the other day, same customer came back 3 days later and bought a new copy of mass effect 2 and pre-ordered mass effect 3.

Posted:3 years ago

#26

Christopher Bowen
Editor in Chief

412 579 1.4
I feel that GameStop is right; I'd rather have people buying used than not at all, and all things like Project Ten Dollar are doing are driving consumers away.

But we need someone other than GameStop to make this argument. They're making this point because it's their entire business model. This is like EA or Activision telling me why first person shooters are the future of the industry; they're a biased source because their hands are in the pot. Furthermore, GameStop has singlehandedly caused the industry to shift towards the PTD business model by pushing used games like pawn shop owners at very little markdown, while putting none of that money back into the publishers, and using their industry leading position to take away shelf space from companies who offended them. In other words, any difficulties they're having adjusting to the new market are issues that they specifically caused.

Either way, in an ongoing pissing contest between online and retail, only consumers are getting wet.

Posted:3 years ago

#27

Rick Cody
PBnGames-Board Member

144 14 0.1
It's up to the publisher to develop a program that makes buying first-hand games more enticing than buying second-hand games. Gamestop offers warranties on their used products that best those offered by new products.

It's a competitive market and Gamestop is competing, the publishers are just complaining.

As a side note, I sell almost everyone of my games. I hate clutter, especially from useless old games. I'd rather trade them in and let someone else play them and get them out of my way.

Posted:3 years ago

#28

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