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Retail

The Nuclear Option on Used Games

The Nuclear Option on Used Games

Tue 03 Apr 2012 9:08pm GMT / 5:08pm EDT / 2:08pm PDT
BusinessRetail

If console makers actually cut out pre-owned what would the impact be?

Used games have been a a whipping boy for the industry for a number of years now. I'm not quite sure exactly when it became the oft-cited subject it is today, but I believe it started during this current console cycle, when the cost to develop AAA titles geometrically increased again over the previous generation while the number of top-flight developers and publishers noticeably shrank. With the pre-owned boom coinciding with a significant global economic downturn, it's no wonder that people in the industry are looking at ways revenue is being denied them and lashing out.

I find it ironic on a certain level since the industry has had something of a love/hate relationship with GameStop. While it's the top dedicated video game retailer in the US, and often supported with exclusive pre-order bonuses for games both large and small, it is also the main cog in the used game sale machine. It's hard not to talk about used games and GameStop in the same sentence since their size and logistical advantages mean they generate $1.2 billion in revenue from used games.

1

There's been a lingering tension between the industry and used game sales for some time that has manifested in different ways. This cold war with used games has been going for some time now - with things like day one DLC and online passes seeking to undermine or at least capitalize with some revenue from those used game buyers. Despite this tension, I always figured it would be something that the industry would just have to live with, but there are indications this war will be turning red hot very soon with console makers exercising the "nuclear" option.

"Any anti-used game measure will limit access younger gamers have to newer games, perhaps driving said players more towards cheaper and free-to-play options, more so than they already are doing"

Rumors recently started coming out that the next Xbox will not be backwards compatible, won't allow used games to be played and might not even have an optical disc drive. More recently and notably, however, an insider source said that the next PlayStation (nicknamed Orbis) will not offer backwards compatibility and will tie retail copies to particular PSN accounts, leaving used copies in limbo.

It's worth noting that the lack of backwards compatibility will also undercut used games to a degree, since it means in order to play games from previous generations on the Orbis, you'll have to buy them on PSN.

If things unfold as they are rumored, it could be argued that mandatory DRM is coming to every game on the Orbis. Some have labeled consoles as DRM in and of themselves - being closed systems that are heavily controlled by their manufacturers - but this would be a much more obvious and intrusive measure than consumers are used to dealing with.

Having to enter a code and register every new title smacks of the sort of things that PC players have had to endure for years. Retail copies of PC titles have long since had registration codes, necessary to install and play them. Recent years have seen more invasive forms of DRM, from ones that install firmware on your computer, to others that require a constant Internet connection while playing and still others that limit the number of installs for every copy of the game.

I bring up the PC retail market as a reminder of the fact that all of these security measures have simply not worked. Even games like Witcher 2, which is a PC title first and released by a developer that considers DRM abhorrent, are pirated quite heavily and in any given month PC retail sales comprise only about 5 percent of the total retail market. DRM has not saved core PC game sales at retail; it could in fact be argued that they hastened its general demise to secondary place in most retail stores, shunted off to some small corner.

Perhaps I'm more sensitive about this than most because I remember my own past. A decade ago I was a poor college student, and bought many games used because I got more bang for the buck. While my purchases are almost exclusively new now, I'm worried that any anti-used game measure will limit access younger gamers have to newer games, perhaps driving said players more towards cheaper and free-to-play options, more so than they already are doing.

2

The question I've always wondered when developers speak of piracy and used games in the same breath is: how do consumers feel about this subject? I'm a firm believer in the fact that gaming is a service industry, living at the benefit of what consumers are willing to pay. This anti-used games measure rings of something decidedly anti-consumer, benefiting the powers that be in the industry but saddling consumers with the reality that whatever game they buy, no matter how much they may end up disliking it, will be theirs in-perpetuity with no recourse.

The initial reaction to this rumor has been largely negative, with gamers lashing out on gaming forums and even analysts criticizing the move. On GameFAQs.com (and granted this is not a scientific poll in the least) over 70 percent of gamers indicated that they would not be able to live without having used games as an option - a number that shoots to well over 80 percent when accounting for PS3 backwards compatibility as well. If the goal of a business is to do right by your customers, the industry should know that their most loyal and dedicated followers are downright peeved at this news.

Since this is still all at the theoretical stage, it could be argued that this measure will lower prices on new games, given the reverse argument that used games have been driving up game prices. That would certainly be a boon for consumers but considering how next-gen games are expected to be at least a couple times more expensive than games from this generation, I have serious doubts that publishers would want to eliminate the $60 premium price point, not to mention the $80 and more that collector's editions cost.

"It'd be ironic if the oft predicted death of consoles were actually precipitated by the manufacturers themselves"

Cutting out used games seems to be another step towards the obsolescence of retail sales while pushing things more into the digital realm, though I must confess I have little trust in console manufacturers to control pricing of their own games. Many current-gen games are increasingly being offered via PSN/Xbox Live and they tend to be very slow to drop in price. Valve has done a good job of offering sales on Steam, and this tends to drive prices aggressively down across the whole PC gaming market. If used games are to be eliminated or at least discouraged, then it would seem that the console market might have to follow that sort of pricing scheme, though I wonder if games going for $10 six months after they shipped is really any better than having some games sold used...

It's ultimately difficult to predict what market factors will help suss things out in the end, but this move against used games poses many questions to which there are no immediate answers. For instance, what does this mean for the physical rental market? What if someone wants to take their game over to a friends house - is that no longer an option unless I log into my PSN account? Will things work smoothly if their system breaks and they need to get a replacement?

Maybe I'm overestimating the significance of this moment. Maybe most game purchases are one-offs and consumers won't mind. Maybe there will be a significant benefit like being able to download a copy of any game you register to your account that will outweigh any disadvantages. Maybe the fee for activating a used game will be small and everyone will be happy. Still, things are already rocky from a PR standpoint and Sony hasn't even officially announced the existence of the next PlayStation.

The powers that be better hope this plan goes well and that gamers won't do something drastic like rebel en masse and mod all of their consoles to spite them or simply take their dollars elsewhere. It'd be ironic if the oft predicted death of consoles were actually precipitated by the manufacturers themselves, and as a big fan of playing games on consoles, I certainly hope they don't screw it all up.

19 Comments

Robert Mac-Donald Game Designer, Lethe Games

82 117 1.4
Now that new GPUs are not yearly enforced on PC gamers anymore, as it was a few years ago, I'm starting to see consoles bringing very little to the table if these rumors are true.

I had a lot of friends that over the past years made the switch to a current gen console because playing on their PCs became expensive. But that is not so much the case anymore, and probably even more so by the time the next gen arrives.

Since you can do "anything" on the PC, even mimic a console by plugging 4 gamepads and playing on your couch and TV, while getting extras like mods and good keyboard+mouse interaction, consoles are about their ease of use, compatibility and whatever exclusive peripherals/games they develop, and not so much about saving money on hardware anymore.

And if the next gen tries to slow or halt the used games market without making huge sales like Steam, they will now make consumers lose a LOT of money during the lifecycle of the console, when compared to someone buying the same games for the PC.

Making people switch 100% to consoles was largely because of the PC costs and ease of use. And if the PC becomes cheaper, and the console starts enforcing a lot of steps before getting to play the game, what prevents a vast number of people from migrating back to the PC? Or even becoming a PC gamer for the first time?

I guess its boiling down to the exclusives argument. But buying consoles for their exclusives is a vicious cycle, since the exclusives are not developed for the PC or other platforms because people buy the consoles. If one of the consoles cease to exist, we would probably see their exclusive IPs being target to other platforms.

Edited 3 times. Last edit by Robert Mac-Donald on 4th April 2012 12:02am

Posted:2 years ago

#1

Christopher Bowen Editor in Chief, Gaming Bus

459 738 1.6
"The question I've always wondered when developers speak of piracy and used games in the same breath is: how do consumers feel about this subject?"

You talk like the consumer actually matters in this instance. They don't. In fact, in these discussions, the only time the consumer broaches the lips of whoever is speaking is when they are saying that the consumer is stealing from them by buying used. We're not customers, we're a market force to be manipulated.

Posted:2 years ago

#2

Private Industry

1,176 182 0.2
The consumer isnt the problem it's the retailers that sell used games for 2 bucks less and keep the full profits while buying used games from people for a very small amount. They dont even tell customers that an online pass is required. I was buying so many times games and got told that for a few euro less I can get it pre owned but there was never any mention that I need to buy online pass extra online to play online.

The problem I see with a system that would block partialy used games is that the shop you buy would never mention that and screw over customers the way they do it already. PC killed used games off ages ago so it would be hardly anything new.

So far its only a rumor for the next xbox and ps so just wait and see. I think its just going to be more a push towards digital to combat the used market rather than some complicated systems to limit used games further than what online pass does or fully block them.

Posted:2 years ago

#3

Tony Johns

520 12 0.0
I felt like clapping at your comments about your poorer college years.

I am at university and I can only buy the games that I want and I had to save up big for them.

When I was in school, I had to work for my dad just to get games from only one console per generation because I could not afford getting two consoles.

I missed out on so many PlayStation 1 and 2 games because I could only afford just one console and I only got Nintendo Consoles like the N64 and Gamecube.

Even though I missed out on so many PlayStation Games back in those days, I never regret anything because this gen I have got PlayStation 3 and XBox360 as well as a Wii. as well as a PSP and Nintendo DS.

the only thing I did regret was not having the chance to play Final Fantasy 7.

But that was the only regret I have, I think I have got loads of Japanese RPGs I have got this generation on my systems have helped cover for that.


I agree though my experience that if publishers tried to ban used games on their consoles, the younger gamers would be the ones who suffer because nowdays with used games being cheeper than the games I had to buy from retail back hardware generations ago I could only say that they are lucky this gen, but next gen they may not be as lucky.

Posted:2 years ago

#4

Peter Dwyer Games Designer/Developer

482 293 0.6
I had a PC engine back in the day. the machine was imported and cost me 300 quid from a mate. The software cost me 40 - 70 quid at the time and I ended up with a library of about 4 games. I never purchased anything without thorough research into it.

If used games go. Then that mentality has to return. People will buy far less games because they can't recoup on the ones they no longer want or need.

I thought I was alone in pointing out that the market will kill itself if used games get removed. We will not simply all go digital. We will loose awareness of what games are out there (something already demonstrated by game's woes) and we will seek other hobbies. We will not, as the EA's and Activisions of the world seem to think, somehow simply find more money down the back of the sofa every month to feed them.

Edited 2 times. Last edit by Peter Dwyer on 4th April 2012 8:37am

Posted:2 years ago

#5

James Sharman Technical Director, Climax Group

2 2 1.0
I agree with Werner, I never really saw what all the fuss what was about until I went into a well known store to buy a game and had do dig past the pre-owned ones to find a new copy. I was then recommended that I should get the pre-owned one a total of 3 additional times before I made it out of the store. I don't have any fundamental objection to the idea of second hand sales, but I do feel those kinds of practices are detrimental to the industry as a whole.

Posted:2 years ago

#6

Morville O'Driscoll Blogger & Critic

1,611 1,473 0.9
@ Christopher

Absolutely. To see how the consumer is treated, you only have to look at the farrago that is PC DRM. The fact that the consumer is literally the last to know what form of DRM is being used, and what restrictions are being placed on the product they're paying for, is shocking. But then, publisher's just don't seem to care about how their product is consumed, only that it is consumed legitimately.

(Certain publishers - Valve and CDPR, say - excepted)

"Will things work smoothly if their system breaks and they need to get a replacement?"

One very simple way around this - tie the game to an email account. Whatever else you may say against Valve/Steam, the fact is that you can upgrade your PC multiple times, and every single game you bought on Steam will still run fine on whatever new hardware you've got, because the game is tied to an email, not a particular hardware set-up. (Tages DRM games on Steam being an exception, though even they can be run, it just requires jumping through hoops)

"Valve has done a good job of offering sales on Steam, and this tends to drive prices aggressively down across the whole PC gaming market. If used games are to be eliminated or at least discouraged, then it would seem that the console market might have to follow that sort of pricing scheme, though I wonder if games going for $10 six months after they shipped is really any better than having some games sold used."

Re: your bolded point. Of course it's better. A game sold for $10 dollars on Steam benefits 1) the publisher and 2) the developers, since both get money from a sale. A second-hand sale benefits neither.

Also, let's not forget that publishers control how much games retail for on Steam. Every single Steam sale has the full backing of the publisher, and the publisher determines how much of a discount is applied. If games end up being devalued due to Steam sales, there's only one group to blame.

But then, the fact is that Steam shows that tiered pricing is the way to go, and if it takes the destruction of the second-hand market to force tiered pricing on consoles, then it's all good.

Edited 1 times. Last edit by Morville O'Driscoll on 4th April 2012 2:17pm

Posted:2 years ago

#7

Joshua Rose Executive Producer / Lead Designer, Storm Eagle Studios

191 81 0.4
There really are two alternatives here.

A:

Publishers do not prohibit used game sales. Instead they form an alliance and strong arm GameStop into providing revenue share from used game sales. 1.2 billion dollars in used games, is 1.2 billion dollars the publishers do NOT see. However, I do not see this happening, as GameStop is pretty much the immovable object in this equation. Current distribution contracts with publishers most likely prohibit them from becoming the unstoppable force needed to go against GameStop.... so on to plan B (no not the birth control)

B:

Next gen consoles should still have backwards compatibility in my opinion, however these next gen consoles should have some sort of DRM method that ties a game to an account. At this point, they have bypassed GameStop distribution completely, and have the upper hand in negotiations. Then they can give codes to GameStop to sell with used games. The box is already open when it's used, so printing out a product key and inserting it into the box at POS is not that much of a problem. Hell, GameStop already takes the disc out of games when they put the box on the shelf anyways. They have to put the disc in the box when it's purchased. Then Gamestop has to pay for each product key used. (can be done at the end of the month reporting to publishers like anything else)

And if GameStop disagrees, then they don't make the money from new AND used sales. I know I'm horribly oversimplifying it, but who honestly thinks GameStop would willingly give up revenue share (of a 1.2 billion dollar a year market). So the next step is putting them between a rock and a hard place, and charging them for a pick axe.

Posted:2 years ago

#8

James Berg Games User Researcher, EA Canada

184 238 1.3
@Peter "We will loose awareness of what games are out there (something already demonstrated by game's woes) and we will seek other hobbies."

I don't think that's true in any way. People buying games find the vast majority of information online, not by walking into a retail store. There have been plenty of marketing studies pointing this out.

And.. seek other hobbies? That strikes me as very unlikely. Gamers are more likely to go to mobile or F2P games if console prices are too high, but they're not going to just stop playing games. And keep in mind that being a "gamer" these days is almost meaningless, when such a large percentage of the population is a gamer.

"We will not, as the EA's and Activisions of the world seem to think, somehow simply find more money down the back of the sofa every month to feed them."

This is the decision of console makers, not developers/publishers.

One thing that has continued to confuse me in discussions like these (and we're retreading years-old ground here) is that people assume the console makers have the same mindset and financial goals as the publishers/developers of games do. That's simply not true. MS/Sony are going to do what they feel is best for -their- business, and it'll be the job of the rest of us to react accordingly. While there'll certainly be input from our end (if we're not happy with their platform, we may not develop on it), it's not our decision to make.

Posted:2 years ago

#9

Christopher Garratty European Counsel, Electronic Arts

86 109 1.3
"when the price of AAA titles geometrically increased again over the previous generation"

Since the price to the end consumer of videogames has in relative terms decreased hugely over time (http://arstechnica.com/gaming/news/2010/10/an-inconvenient-truth-game-prices-have-come-down-with-time.ars) I can only assume you mean that it was since the "cost to develop AAA titles geometrically increased again over the previous generation".

Posted:2 years ago

#10

Peter Broughton Recruitment Consultant, Aardvark Swift

6 2 0.3
I have to echo Werner's comments about pre-owned being great for retail and not so great for the consumer. I own a Vita. Vita games are all pretty much still full price and naturally I don't have many games yet. With this in mind, I'm looking for a cheaper option just for now to bulk my collection.

I'll take a game I own. Reality Fighters. List price & PSN network price 25.00. Price in my local Video Games store new 22.50. Price in their store Pre-owned 20.00. This game has a code you need to play online (which from the PSN store is 7.00 just for the code). They don't tell you that you need one if you buy it Pre-Owned. Price I paid, from the internet on release day new 17.99. I think the Pre-owned market is quite over-rated. I use it, but often it is only like 2 or 3 cheaper and doesn't allow online play. You're often better waiting for a decent online price or just buying online in the first place and not looking in a shop. After all, I have two jobs, can only shop one or two days a week. If I want a game on Monday. I can't go to the shop till Saturday or Sunday. It's quicker buying online. I'll have it by Wednesday or Thursday.

I fully expect the next gen consoles not to accept Pre-Owned games or to require a DRM code / license to use them. A DRM which when added to the Pre-Owned cost will make the game cheaper if you bought a new one. But the cheapest option at the moment (and probably for the next gen too) will be a physical copy bought online. I'm not afraid of DRM as a consumer. But neither option really benefit me. They benefit the retailer or the distributor.

Posted:2 years ago

#11

James Brightman Editor in Chief, GamesIndustry.biz

259 457 1.8
@ Christopher Garratty, yes that's what David meant. Phrasing was a little off - I'll edit it. Thanks.

Posted:2 years ago

#12

Stephane Belanger Master Area Developer, Playntrade Canada

2 0 0.0
Ultimately, it is a consumer market and it is the consumers who are going to decide...Remember the result when Sony tried to push the PSPGo down its cuntomer's throat? IF your local specialized store doesn't give you enough dough for your used game, don't trade it. If they sell used copies at a price that doesn't match what you are willing to pay for, don't buy it. It's not like consumers have no options today. My prediction, is that if Sony or Microsoft are trying again to push something down the throat of their customers that taste funny, it's going to come back at them again in an undesirable way to say the least. Just from the top of my head, I can't remember of a company in history going successfully against it's client base and survive for very long...
BTW, being in retail myself, I can tell you (for the ones who didn't know that already) that the margin on new consoles is 0% and our margins on new releases is around 10%-12% at best. No Trade, no used, no specialized retailers....and ultimately that's also the customers who will let us know if that's what they want.

Posted:2 years ago

#13

Stephane Belanger Master Area Developer, Playntrade Canada

2 0 0.0
...Oh and I forgot...don't have the exact stats in front of me but for every 10 CAD MW3 that we sold in our stores, over 5 of them were sold over a transfer of used games to help the customer pay for his new game...And this happens for pretty much every single new releases...not sure that publishers would be so trilled to see whatever drop that means in revenue for them over new games. Totally agree with James Berg (EA) above, that there are many moving pieces on this issue and many different agendas. As the underdog we work hard to provide our customers with solutions to all of their gaming needs. They are deciding. Always.

Posted:2 years ago

#14

Andrew Jakobs Lead Programmer

241 99 0.4
I don't think it will matter anymore with the newer consoles/pc's anyways. People are starting to (get) use(d to) digitalonly services like steam, Android market, apple iStore, etc. where secondhand isn't even an option..
Personally I never really bought a second hand game (except if the title is sooo hard to get) as mostly I can buy the games brandnew for the prices a lot of gameshops sell their secondhands (just by searching the internet)..

Posted:2 years ago

#15

Peter Stirling Software Engineer, Firelight Technologies

26 10 0.4
These writers really need to buy a clue. This article is based on pure conjecture. How many articles complain about the reselling of iOS Apps and Steam games. Oh right, they have had DRM from day one and are extremely successful platforms.

Here some important facts it fails to take into consideration:
* Current generation titles have resale value which artificially inflates the price. Games will actually be cheaper for the new generation.
* All of revenue from resale goes directly to the retailers, without a single cent going back to the development studios who actually make the game. The new system will put more money in the hands of developers allowing for more inovation.

Retailers are sucking the life blood out of the game industry with their used game black market. It's actually worse than piracy because it takes money earmarked for game purchase and diverts it away from developers. Retailers are cancer.

Posted:2 years ago

#16

Greg Wilcox Creator, Destroy All Fanboys!

2,194 1,170 0.5
One thing both Microsoft, Sony (and some commenting here) are missing (big time) is this: Whenever a new console comes out, unless the older one is killed off quickly, it will actually see a jump in sales among poorer gamers and families on budgets who don't give a shit about having the latest and "greatest" - they just want to play games at a cheap price.

And no, a dollar iOS or Android device game (minus whatever data plan and other price gouging is going on) isn't going to cut it with a family with three or four kids) who don't give a hoot about Apple or tablets or whatever else is the hot new touch-toy.

These are the folks who'll be scouring the discount bins snapping up five and ten buck PS3 and 360 titles or budget-priced collections new (that cost us five to six times that much or more) and I'd bet my entire collection that neither company is stupid enough to shut out that kind of money, even if it's not where they want it to be spent.

The PS2 was still going strong for years in a few territories after the PS3 launched thanks to huge sales and game rentals is certain markets. On the other hand, Microsoft kicked the original Xbox into the grave so quickly after the 360 launched that it was tough to get new games for it (as a number of third party titles were cancelled while still in development). I somehow can't see Sony doing this when their next console comes out and given Microsoft's emphasis on Kinect and all their 360 strategies, I can't see them abandoning all those unsold slim 360's and telling that budget-minded gamer to shell out more for less.

Then again, given their penchant to treat older stuff like a dead OS, I can see the 360 being shuffled off unceremoniously as "dead" and a few too many hundred million dollars spent on telling us all that it's the best thing since sliced air. I have the feeling Sony is leaning thataway as well, but I faintly trust them more these days for some reason...

As for Nintendo, well... they're going to do what they do and take shit from anyone who doesn't like it (as usual)...

Whatever. All I'll say is some actual common sense had better start getting into the heads that run this industry as a whole or else it's Crashtime: Autobahn Redux for games thanks to too much follow the leader and not enough original thinking...

Posted:2 years ago

#17

Luke Giddings Programmer, Supermassive Games

23 5 0.2
"Publishers do not prohibit used game sales. Instead they form an alliance and strong arm GameStop into providing revenue share from used game sales."

IANAL, and so someone slightly more knowledgeable than me might be able to answer this, but wouldn't the publishers forming an alliance be counted as a cartel and so illegal under anti-monopoly legislation?

Posted:2 years ago

#18

Neil Young Programmer, Rebellion Developments

309 398 1.3
"I wonder if games going for $10 six months after they shipped is really any better than having some games sold used"

AFAIK some firms have made very good money off such actually, so for them the answer would be a resounding "yes".

Posted:2 years ago

#19

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