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Retail

Store retail has "abused" games industry - Castle

Wed 14 Apr 2010 7:00am GMT / 3:00am EDT / 12:00am PDT
RetailOnline

InstantAction CEO blasts 'parasitic' bricks-and-mortar shops for "killing" the golden goose

InstantAction CEO Louis Castle has launced a stinging broadside on the bricks-and-mortar retail sector, branding it as a "parasite" that's "abused the industry horribly" by pursuing the second hand game sales and rental route.

And Castle - who co-founded EA's former Westwood studio and whose current project is aimed at revolutionising the discovery and sharability of videogames online - believes that physical retailers have threatened the very existence of the games business by such activity.

When asked if InstantAction would be the thing that killed bricks-and-mortar, he replied: "I hope so. I have no love at all for the Wal-Marts and GameStops of the world - they've abused the industry horribly with selling used games, and rentals.

"There's no love lost there at all. They're all desperately trying to figure out where to go next too, but at the end of the day they've killed the distribution method.

"They've put our entire industry in jeopardy by taking all of the money out of the system - between them and the pirates it's really a tough way to go."

He stopped short of predicting a timeline for the demise of physical retail, however.

"Oh, I'm not going to put the pennies on the eyes of traditional retail - those guys are going to be around for a long time, and it's going to take a while," he said.

"We're not going to be the only technology out there, but every one of them will be another brick in the wall, another step in the right direction to saving our industry from partners that became parasites. They're really no longer partners - they're killing the goose that lays the golden egg."

Read the full interview with Castle now, in which he also talks more in-depth about the thinking behind InstantAction.

26 Comments

Ashley Tarver
Indie

41 1 0.0
He's not wrong.

'When' retail loses it's grip on selling boxed games it'll be interesting to see how the increased revenue will be spent. Will it go to shareholders or used to increase capabilities? Or even to reduce prices to increase sales?

Posted:4 years ago

#1

Paul Cardy
Programmer

16 0 0.0
I've been in stores where the sell used copies for a pound or two less than full price, In those instances I've told them that I'll pay the extra and buy the new copy - but I doubt the average customer would.

That said, most new games are very expensive, and without being able to easily sell your finished games I wonder how many people would still be able to afford new games as they're launched. Particularity when shops offer incentives to use the money from the sale of old games on new games (albeit also possibly used).

I don't think our industry is devoid of responsibility in this matter.

Posted:4 years ago

#2

Michael Abraham
game designer

37 0 0.0
i don't like the way this is coming from personally.

"they've put our entire industry in jeopardy"
- if this really is such a crippling thing to an entertainment industry, then why haven't the board games industrys, music industrys and the film industrys gone bust yet? (in terms of the latter two i'm referring to lost revenue through 2nd-hand and rentals, and not lost revenue through piracy.)

if anything, it makes it sound like it's the consumers who are the guilty party for being willing to buy games second-hand or to rent them. if it hadn't been 2nd hand buying through the retail market, it'd have happened via other means, such as e-bay. either way i'm sure there'd be whistleblowers regardless, and it's really the wrong kind of attitude to consider the consumers as the enemy.
actually, this rings loudly of the sound of trying to claw up as many pennys as possible. yes it's a shame that revenue is lost from this, but really, are you trying to imply that games companies are on the verge of collapse because of this? are things so tight that, for several years, companies have been going under primarily due to the 2nd-hand and rental markets?
instead of trying to ban/prevent this practise, wouldn't it more sense to make a deal with retail to gain a percentage of the earnings made through 2nd hand and rental of your IP? instead of trying to crush the perceived problem, turn it into an asset, and something you can have a modicum of control over by being involved in it.

the question really to ask here is this: are you trying to create something new and wonderful to share with people and bring them entertainment, or are you just interested in grabbing as much money as you can?
- the former may sound whimsical and unrealistic, but of course it's important to apply some common sense here. if you make something people like, you should be rewarded, and given the opportunity to do so again in the future.
- however on the other side, if your just focusing on the money as your primary motivation within a creative industry, i'd say you're probably in the wrong industry.

of course everything i've said here is in regards to the interactions/relationship between developers and retailers. piracy is a whole other barrel of fish, and needs to be looked at in a completely different way. (in simplest terms: anything to do with piracy is bad/wrong and insulting to developers).

Edited 2 times. Last edit by Michael Abraham on 14th April 2010 10:18am

Posted:4 years ago

#3

Phil Elliott
Project Leader, Collective; Head of Community (Live Team)

163 29 0.2


But I wonder what message that sends out to consumers? It's confusing, to say the least.

Posted:4 years ago

#4

Sam Hogarth
Studying Computer Science with Games and Virtual Environments

1 0 0.0




Maybe there's a way to have the benefits of trading in without the profiteering of the retail sector? Why not offer digital trade-ins using the Xbox Live/PSN platform? As it's digital, the supply and demand which drives preowned prices is effectively removed, and possibly a flat-rate trade in value could be established. Worth looking into IMO.

Posted:4 years ago

#5

Jason Riley
Webiste Owner/Journalist

2 0 0.0
There are two reason why you get different prices on new and pre-owned.

1) If you buy too many new releases and are left with loads left over, you can sell them cheaper than cost price as you can then offset the price difference to there tax/vat bill at the end of the year. So they don't lose out but if they do it will be only a small percentage.

2) Unlike new games, pre-owned games don't work in the same way to offset against your tax/vat bill as you can't claim back any tax/vat on second-hand goods from individuals, so if you take a trade in game one week at a higher price and the new game price drops the next, there's not much you can do, either drop the pre-owned price and lose money or keep at the same price and hope most people don't realize.

Edited 1 times. Last edit by Jason Riley on 14th April 2010 11:01am

Posted:4 years ago

#6

Farhang Namdar
Lead Game Designer

75 47 0.6
Well the root of the problem is prices of new games being too high. If platforms owners like Nintendo, Sony and Microsoft would decrease the amount you pay for the license on each copy sold, games would be more affordable. That would stop people from buying second hand games.

Posted:4 years ago

#7

Rob Stevens
Senior Developer/Designer

7 0 0.0




Posted:4 years ago

#8

Cobey Jones
Studying Game development

20 0 0.0
Farhang is right. The reason a second market even exist is due to the fact that new game prices are way too high. Decreased licensing from console makers are at the core of this. I'd wager that if retail outlets, console makers, distributors and developers made some concessions, they'd probably be more profitable due to higher sales.

Edited 1 times. Last edit by Cobey Jones on 14th April 2010 1:49pm

Posted:4 years ago

#9

Chris Hunter-Brown
IT / Games specialist

52 15 0.3
I've repeatedly said the problem with this debate is that it always get's polarised between the publishers and the retailers with the consumer in the middle.

I think most reasonable publishers realise that consumers trading in a game and using that to fund the purchase of a new game is a good thing. They are rubbish at making this stance clear to people but I'm sure they get it.



That scenario is optimal for only one party and it's no surprise to see defensive moves from the industry in return. As a developer I would despair to walk in to a retail outlet at release time after crunching for god knows how long to see virtually no space to sell my game and consumers constantly tempted with pre-owned copies.

I thought with the pre-owned sector getting more competitive, trade-in prices would go up. I was dead wrong, the last time I traded in something at GameStation I came out of there feeling like I was mugged. Now I sell anything I'm done with on eBay. Despite the admin and fees involved, I'm no worse off.

Posted:4 years ago

#10

Aitor Roda
Game Designer

6 0 0.0
Is so damn funny how the industry claim they are "dying" when year after year the profits on the industry are higher.
It's even more ridiculous after seeing games like Modern Warfare 2 doing $1.5billion revenue.
If companies would care a little more about the people who feeds them (aka the customers) instead of trying to rip them off all the time with games at the 60-70$ range, then probably more people could get a hand on their games and piracy would be lower.
At first they said it was because of the distribution channel taking so much of the pie, now that Digital distribution has arrived they still try to charge the same amount on GAME and STEAM.
They treat customers as if they were stupid and obviously the market try to find ways to circumvent this.
If you compare games with other kind of entertainment you realise how expensive it is.
A movie ticket in theaters
A music CD on retail
A movie DVD
Live Concert
Football game
We can debate long about this, but I think that until prices get a severe cut off many people will be completely out of market to buy games.

Posted:4 years ago

#11

Perry Chen
Studying Finance

17 0 0.0
Why doesn't the industry find a way to create a revenue stream from the sale of used games? Instead of complaining? I see that EA's Ten Dollar initiative is a good step forward in balancing the needs between retailers, consumers, and publishers.

The volume of new titles has gradually increased year over year. The price of media is going down in every sector, so the market will dictate the true prices to these new video games. $60 is an artificial price, when $40 is closer to the true market price.

Posted:4 years ago

#12

Evan
Managing Editor

3 0 0.0
Who is 'Walsh'? Brett Sperry and Louis Castle founded Westwood Studios.

Posted:4 years ago

#13

Chris Nash
QA Engineer

47 23 0.5
Ultimately, the customers are the ones "to blame" for the rise in pre-owned sales, as it's they who provide the pre-owned stock in the first place! Here's a thought - if the games weren't so high priced at retail, perhaps consumers wouldn't feel driven to complete and trade in their new releases as soon as they can in order to claw back the most cash from the retailer.

Posted:4 years ago

#14

Jason Sartor
Copy editor/Videographer

104 33 0.3
I disagree with the cost of games being too expensive. Comparing a game to a movie cost isn't accurate if you factor in a movie ticket being $10 for an hour and half to two hours entertainment. A $60 game providing 20 hours of game play breaks down to $3 an hour. Also, throw in multiplayer with friends and the cost is relatively cheap cost per hour.
I think the biggest problem facing games is lack of replay value. I like RPGs, but I rarely finish most of them anymore, I just can't dedicate 100 hours to see the boss. However, I have played through Gears of War, GoW 2, Raiden IV, Pure and other games several times. I have friends who are not dedicated gamers, but love playing through SMB 3 on the Wii.
Simply put, how often are you unable to play a game because you don't have an hour to get to a save point or three hours to sit through a MGS cutscene, but would enjoy playing some levels of Mario or Gears because they are fun and don't require grinding, inventory tracking or remembering what place you are to run off in search of something to advance a story if you haven't played an RPG in a week?
In my opinion, the best way to prevent somebody from trading in a game is to give the player a reason to come back to the game and replay it. I have never seen a copy of Diablo II used anywhere. The game is great for replay and gamers have found a reason to hang on to copies and come back and replay the game over and over and over again.
As for me, I am currently playing Castlevania: SotN and SSHD on my PS3 with unopened copies of Prototype and Assassin's Creed II sitting on the shelf - maybe I'll get the time to play the four hours of openings and tutorials this weekend.

Edited 1 times. Last edit by Jason Sartor on 14th April 2010 7:42pm

Posted:4 years ago

#15
Jason

While I agree with you on the replay value of Diablo II, I think the lack of used copies for sale can be attributed to the fact that its a PC game. I've never seen a used PC game for sale in a brick and mortar in my experience because they run the risk of CD-Keys that are still being used or are banned.

Posted:4 years ago

#16

Haven Tso
Web-based Game Reviewer

255 8 0.0
The issue here is there are lots of crap games that disguise themselves as great purchases. I like the second hand market in a way that you have a choice of getting a game and if you really hate it you can resell it for store credits instead of keeping a piece of junk in your house. For games developers of course they want to make the most money out of customers even when they are releasing junk. But for customers they want to have that choice of making the most out of even crap games. And seriously, second hand book selling have been around for decades and I don't see any publishers or book retailers go out of business because of that.

Oh another thing is we only hear the side from publishers and developers not the retailers. I know that in books and publishing industry there are publishers who force retailers to at least take in a certain number of copies from them or they risk lower allocation of AAA titles in the future. Game publishers could be doing the same to game retailers. So the game retailers need to find a way to at least re-coup part of the cost from those shovelware.

Edited 1 times. Last edit by Haven Tso on 14th April 2010 10:06pm

Posted:4 years ago

#17

Tony Johns

520 12 0.0
In Australia, we have had to pay at least $100 for a new game, $110 if you include the HD games like on the XBox360 and the PS3. And when the 3D glasses come in, games would then be costing up to $120 or even $150 just for a new copy.

Us Aussies have had to pay $100 for a new game as far back as the Playstation and N64 era, and back in the NES/MasterSystem and SNES/Megadrive days it was something like $80, and as far as I think it might have been around a whopping $60 for a new Atari 2600 game back in the 80's.

High cost of a new game is something Australians have had to live with, so of course I am happy to know that if I was low on money I could get a cheeper game for around $40 if it was already 1 or 2 years old and it was pre-owned.

If it was a new game that was recently pre-owned, then I would get it for at least $60

THAT is the best thing about pre-owned games, and you know what?

It brings in all those mums and dads into the store looking at the games that their kids might want to buy and they don't have any idea what is new and what is old, they just get something that is affordable for them

and when I have the right money, I don't mind paying $100 for a game as long as I know I can support the developer, but when I am short of money then I can't support everyone...so I instead buy second hand only for the games that I didn't get back a few years back because I didn't have enough money to get them when they were new.

Posted:4 years ago

#18

Tony Johns

520 12 0.0
And basicly, we all started off as kid gamers who had to rely on our parents so they could buy games for us,

the thing that really deprived me from my gaming childhood was that the games would cost so much money that my parents never got me an NES or SNES or Megadrive, and instead they got me an Atari 2600 Junior and the games I got were from a local second hand store that was around way before the used game market.

So I know from experience what it is like to be a kid, and not have enough money to buy games and my parents not wanting to buy me a console and games for christmas...it was heartbreaking and I had to rely on the games that my school friends got and cousin's games that he got because his family was luckier than mine was.

Missed out on some great games...but lucky I could get them all back thanks to the Wii's Virtual Console and the XBox Live Arcade and PlayStation network.

Posted:4 years ago

#19

Ray Kirkland
Audio designer / Composer

12 0 0.0
Ohh big shock companies look out for themselvs and choose profit over less profit. come back when the companies that make, publish and distribute games start thinking about their customers instead of their profit.



pre-owned games are a huge part of the games industry and have been for a long time now, I think its great that out of the millions and billions of games sold lots of people save lots of money and still get to play the latest games. since the games industry is one of the few that have failed to be harshly affected by the economic break down I fail to see the down side to pre-owned retail.

Posted:4 years ago

#20
Seriously Tony - just order games from the UK like everyone else.. when you can get a new release game delivered from the opposite side of the world three days after release for a third/half of the price then there's something seriously broken.

The games market isn't very big, and it gets smaller every year from people importing..
Thank god the publishers and the manufacturer's love their Region Lockouts huh..

I certainly won't be upgrading to a dsi, I only buy games on Steam that have the same retail price for Australians in USD as US citizens (That's right.. even though technically we are importing a game.. and should be paying what the US pays - since we pay in USD - publishers due to retail demand have determined that they want 'MORE'), and I order PAL version superbly cheaper games for all other consoles direct from the UK.

I will never buy pre-owened games as I think they are abused by the retail outlets.. JB Hifi (local retailer) when they first started selling games, were selling them at 69-79 AUD new console releases.. they start selling used games.. average retail price of a new release shoots back up to 99.. connection!?

Also never buy UNSEALED games from a store that sells pre-owned games.. They say they don't but you know they they sell pristine trade-ins as new. (Unfortunately it is standard practice in Australia to gut ALL copies of a game - thanks to the main department stores eternal fear of theft) - another benefit to importing games from the UK - You actually know that it's new!

Posted:4 years ago

#21

Stephane Belanger
National director of business development

6 0 0.0

Posted:4 years ago

#22

Shane Sweeney
Academic

355 267 0.8
I'm seeing a very knee jerk reaction going on. In most industries a booming second hand industry is a symptom of a pricing issue for first hand goods. For large goods like houses and cars this is acceptable because the shelf life of the product is so long, decades even.

But for media consumables with a finite shelf life its a clear sign from consumers that launch prices are to high. You can hardly blame a company for creating an appealing industry. Nor can you blame consumers for trying to save money.

One of the biggest hard core gamers I know, spends most of his days gaming on a reasonably wide range of games, but his DVD collection dwarfs his games collection and annually he would spend far more on films and yet barely watches them.

DVD's are at an impulse price point and bothering with second hand titles isnt worth it to the majority of consumers.

Clearly there is a mistmatch with the current model with consumers. Take Valves video game portal. An experience that lasts roughly 3-5 hours and is sold seperately in brick and mortor stores for the the price of a DVD. While I wont blindly claim that's the future of the industry, it certainly is a pricing/content point that does have a huge appeal to at least a large number of consumers that has asically gone untapped.

More questions and less finger pointing needs to go on.

Posted:4 years ago

#23

Matthew Butt

12 1 0.1
Aitor Roda : You might pay more for a game but arguably you can say its much more value in terms of more sensory entertainment. An average game takes a number of hours of play to master and also its not just watching, listening or thinking, its all 3 and more. I don't mind paying that amount for a good game. A simple way to fix it is sell the games online with a serial number, once you have finished you trade it in for x value back to the company. The next owner can buy it at the normal price. No 'second hand' cases, dvd's or other space wasters. A game could sell for 50, trade in for 20 and never need a 'second hand' price.

Posted:4 years ago

#24

Grant Smythe
Editor in Chief / Owner OXCGN.com

10 0 0.0
Cameron, I think Tony is simply pointing out the normal reail chain and costs.

Sure, we can and do often get games from the UK or even the US if they are region free, and if they can be sent, as there are some limits as to what can and can not be sent from the US.

Having been around gaming for some significant time, I can honestly say that games have not increased a great deal in over 2 decades. Even as early as the Atari,NES etc games were on par with what they are now, and in fact, due to our dollars purchasing ability back then, that price was extraodinarliy high, but it has remained somewhat constant over those 2 decades.

Is it the right price? Could it go down?

When you read some of the industry news about the sheer cost of wages for staff, let alone actual physical equipment, promotional costs, marketing and PR firms brought in to move a game, the Graphics companies brought in to do localisation and special art for local boxing etc. you start to see where the $US20mil plus for games goes on AAA titles.

Even AA titles these days can consume similar amounts. Publishers have a small window of opportunity to gain maximum return for their released product, which as we know is around 2 weeks at the most. With the main focus being the initial 24-72 hrs on release, then tapering off in the end of the fist week, then further down in the second week.

Unlike movies/film which get several slices of the publics attention. First with their major box office release, then their DVD store release, then DVD/rental release.

Games do not have that luxury unfortunately. They have but one shot at securing a good return, and then relying on continual sales to help support that investment.

SO initially, offering such incentives as Collector and Limited editions to secure pre-orders has helped secure day-one sale and ensure mass purchases. Which is a great marketing idea, and also benefits the end user by supplying them a choice of retail product. Be that a standard edition, or a limited edition with bonus product, whatever it may be.

The retail chains then grab the recent releases, some within days of being sold and being returned as either "disliked and exchanged or finished and moving on to the Next Big Thing. The retailer pays less than a 1/3 of what the purchaser has paid for the game initially, which they then sell for almost the same RRP for a new item. The publisher only gets returns from the initial sale, not the re-sale or re-sale of the re-sale which often happens time over time with the same game dics changing hands several times over.

So shoppers have learnt to exploit that system, buying one game, playing it frantically over night or in 2 days, to then return it saying it doesn't suit them, and they want to exchange it for something else - please. Which they can do up to 3 times, unlike before when many did it upwards of 4-7 times, until the retails put limits on the number of returns for one purchase naturally.

We have a totally different purchaser these days than we did even 5-6 years ago. The purchaser of today, the new and semi-new gamer do not 'keep' things. They move product and retain very little product. So the exchange rate for games has skyrocketed. Whereas before, even in PS2 and Xbox era, many games prized themselves in having a huge collection of games. Now it's almost a sin to have more than 10 games on your shelf, as they have already played it, so why keep it.

The era of instant gratification has lead this system into play. So while the price of games has remained basically the same, the way of purchasing has changed dramatically, and there's a huge disparity between the time a game stays available of solid price points when you compare them to say even 5 yrs ago.

1st-gen xbox games started at $AU89.95, the second tier was $AU99.95, an t hen the limited editions started or for special games etc, the price point was $AU109.95. 5yrs on, and the games are now $AU99.95, $AU109.95 and finally $AU119.95 (RRP) A rise of $AU10 over 5 years, and a price point that has remain constant for that time.

A good shopper, notthe gamer who wants the game yesterday at any cost justto say they pwned the game and beat it in 5 hrs etc, can often get the games new for far less than the normal RRP as mentioned above by doing some simple shopping around.

But again, we're faced with a different generational thing, where many gamers these days prefer to travel less, get their games faster, and use them quicker and then get rid of them faster. SO spending time looking for the best price for some is simply a waste of time, because they will be using the game as a Return/Trading in anyhow, and it matters little to them initially.

So as Cameron said, we can go the import route, which many good shoppers do, or simply shop around and find the best deals, which many stores will supply, as they are not held by the RRP, as after all, it is only the Recommended Retail Price, not a fixed price-point.

But the newer or two lower generations of gamers do little of that, and they have come into a gamer era seeing prices at their current rate, and assuming that they are high priced, as they can see some games going for much less at other retailers. Where as before, 5-10 yrs ago, discounting of games was not high on a retailers list of must-dos. He wanted to get the most he could from the stock he had on the shelves, be that day one, or 2 months down the track.

So basically, prices have remained much the same, and in fact, gamers these days have it a great deal easier than earlier gamers, where there was no trade-in, no return if you didn't enjoy/like it, or buy games via bargain discounts by major chains etc. You paid the full RRP or waited for a month or so for retailers to start selling surplus stock off as they get knock-backs from the publisher in allowing them to sell off stock to move "units' not gain maximum revenue.

God, Atari was known for it's tactics of getting retailers to sell units for as little as $AU1 simply to move "units-sold" to show stockholders the number of units sold, not the actual revenue raised from those sales. Falsely bumping up market shares.

There does need to be some level of return for the publisher who can then funnel that back to the developer and staff that worked on a game, often at the expense of family, relationships, poor health and burnout.

The one-slice-of-retail-slaes that currently exists, combined with HUGE development costs just does not give the right return for the amount of personal investment in the medium - these days. I'm not sure what the system needs to be, or how it should or could be implemented, but something does need to change.

Especially when you see major AAA companies showing an overall loss most quarters within the industry, even from the likes of EA, Activision, Take-Two, etc etc. ALl of whom have been showing losses over the last several years. Sure, they do make profits at times, but the overall theme is a loss. But they can absorb it for a period. But not forever.

EA has dropped back its rollout for 2010 from 2009's 50+ titles to just 40, citing rising costs, poor overall sales and thus smaller returns.

The older model simply does not work in todays economic climate and in todays customer purchasing patterns. It worked many years ago, but things have changed, but the method for returns for dev and publishers has not changed that much over that time.

WHat to do? How to do it? Who knows . . but something needs to be done,or we will see more and more smaller studios closing, or becoming part of the major "partnerships" that are now being undertaken by major publishing house.

There is no quick or easy fix like rising or lowering costs, as one offsets the other, so there needs to be a longer term for returns for the publisher in some way.

Well, that's my thoughts on the matter, and I've been around gaming for 'some' time now, as I turn 57 next month, so you can say I've seen the gaming industry rise over 'several' decades, not just two.

Posted:4 years ago

#25

Jim Webb
Executive Editor/Community Director

2,246 2,228 1.0
I trade my car in when buying a new one. I never hear the automotive industry complain about it.

If you want to stifle second hand sales stop bitching at retail, stop bitching at consumers, start changing the business model. THAT is the what you have a problem with, your own business model and instead of dealing with it, you take it out on everything else.

Start a buy back voucher system. Consumer reports their product registration code, publisher deactivates that registration key and emails the consumer a discount voucher for other products by the publisher. Consumer can now download a new title for cheaper than a new retail title and all funds remain with the publisher. Reactivate the old key for $10 bucks like EA is doing.

Incentivize consumers, don't penalize them.

Posted:4 years ago

#26

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