Used games: a marginal business

if games prices went down to oh... about $35-40, there'd be far less piracy, far less used game sales, and far more new, legitimate game sales. now THAT works for all stakeholders

We as consumers of the new millenia, have really high standards of what we expect for our 'hard-earned dollar' these days. And here it shows. What if ALL of our employment was based on a retail model? We'd feel pretty cheap and stupid and probably act as such. But I digress. My question is this, how can we expect high quality merchandise at such low prices (and lower) if we keep looking at, 'how much it cost to make' as opposed to, 'on top of how much it cost to make, how much would I be willing to pay for this merchandise?'. I think the retail world is taking a big hit on todays products and it will come back to haunt us if it hasn't already (foreign sweatshops, etc). What you think?

It is true that retailers like blockbuster,eb games, gamestop and gamecraczy don't make any money on new products. That's why they try so hard to make you bring used systens,games,accessories or movies for credit or trade in value. But what sucks, is we as the consumers buy a new game for 50$ play it,then go trade/sell it to the retailer and the games value actually drops in value to about 30$ or even 25$That's why people get mad when they try to trade or sell a game, system ect. to a retailer and they don't get near what they paid for the product.It's just like the automotive business,buy a 25,000$ car, and right when you drive it off the lot it depretiates in value to about 18,000$.That is why best buy was pushing so hard to sell accessories for the 360 launch.They wern't making any money on the systems. I agree with what matt said in his comments.

"My question is this, how can we expect high quality merchandise at such low prices (and lower) if we keep looking at, 'how much it cost to make' as opposed to, 'on top of how much it cost to make, how much would I be willing to pay for this merchandise?'"



Well, let me turn that around a little and expand upon it.



A game publisher spends $20 million making a crappy game based on a license from a movie for which they grossly overpaid. They then claim they "have to" sell it for $50 to make back their investment, and when said crap game doesn't sell, they blame sales of used games for undercutting their "retail" pricing scheme.



Still with me? Ok, now that argument might hold water if games like Katamari Damacy didn't exist. This is a game that cost probably $200,000 to make and market, sold for $19.99 and was still profitable enough at that price point to warrant a sequel.



What's wrong with this picture? Is it that used game sales are forcing developers into bankruptcy, or is it that *creative* bankruptcy is finally forcing Darwinism onto bloated game developers?



There's no doubt used game sales have cut into new game sales. But I would put to you the following two hypotheses:



a) Gamers wouldn't sell their games back to stores if they liked them well enough to keep them,



and



b) Gamers would be willing to pay $50 for games if they felt they were getting $50 worth of value out of them. Which in many cases, they know they wouldn't be. I mean we're not living in a vacuum; we've all got access to the internet and magazines, we know what games are good and what games aren't.



Put those two things together and it seems to me the used market is only a problem because so many games have gotten so stale and stagnant. I mean people sell used products of every type; you don't see car manufacturers complaining that used car sales are killing new car sales. You don't see that argument either from computer manufacturers. Or furniture makers. Or movie studios.



In fact, the only other industry I can think of that complains about this is the music industry. Which should be no surprise to anyone, if you compare the music and video game industries and see the things they have in common.



If so many people are selling your games back to stores after buying them, then it strikes me that the problem is one of content. Improve your content, and people will both be willing to pay more and they will be less willing to part with it later.



And as games like KD show, it doesn't take huge production budgets to put out good games anyway. There's just no need for the $50 price point any longer. And $60 is, frankly, ridiculous. I don't care if the graphics are HD; the last PC game I bought cost me $20 and it'll output at 1920x1080 just fine (and that's "p" too; not your wussy little "i"). If I'm being asked to subsidize your office bloat, poor licensing decisions and oversized marketing budget, then sorry, you've just got to learn to prioritize.



I hope the game industry is listening.

I own somewhere in the area of 25 Gamecube games, I probably purchased 4 of them brand new($50) maybe 2 or 3 bargain type games($20) and the rest were all bought on e-bay. I love games but as an adult can't justify spending the 50 bucks a pop.

I think this is being blown way out of proportion.There will always bee people buying games the day they come out and people waiting till the price drops or they can get a copy used .It's really what priority games are to people.I don't buy many new games myself unless it's a must have title i've been waiting for.Also i would like to point out that i have a Boxed copy of Atari 2600 Pac Man and the price sticker is $59.99 and i remember a friend paying $80.00 for Eye of The Beholder for the PC back in the 80's.

"*creative* bankruptcy is finally forcing Darwinism onto bloated game developers?"



you, my friend, are a freaking genious. that's the exact words I would say if I had any talent with words at all :)

As I see it, not a lot of games are worth keeping. People tend to pick up 2 types of games... the ones that have long-term playability (sports titles, Animal Crossing, MMO's, etc.) and games that are short-term (Metal Gear Solid, Tony Hawk, most Movie adaptations, etc.). The problem is that people buy short-term games, then re-sell them (repeat cycle) as a way of renting them (cheaper than $5/day at rental places). Because of this... it's true, the game developers are losing money... BUT... they can't very well make all long-term games or people wouldn't have time to play so many different games at the same time.



Solution for developers... spend more money on long-term games and games with pay-for downloadable content... and develop lower-budget platformers & short-term titles.

To #1.

Except now the publishers would have to sell even more copies to even break even. You may sell more copies on the lower price, but its unlikely to make an unprofitable game at $50 profitable at $20-25. You need to get real and realize almost all games are never going to be that low. Katamari Damacy is the exception, not the rule. It also came from a large publisher that could afford it if it failed. Some of the smaller companies may not be able to afford it if even one of their games were a bust.

Here's the thing. Used game sales hurt creativity and overall quality. Now stick with me.



What game is more likely to be sold back to the store as a used game? One that takes 10 hours or one that takes 40 hours? One that has no multiplayer mode or one that has a multiplayer mode?



The answer is the game that takes 40 hours and the one that has a multiplayer mode. How does this hurt quality? Because publishers know this and often require developers to make their games longer and to create more games in genres that have proven multiplayer capabilities.



So next time you're spending two hours on a boring fetch quest or shaking your head at the sheer number of first-person shooters, remember that used game sales are partly to blame.



The argument that 'If a game was good enough, you wouldn't want to trade it in' just doesn't hold water. Some games you want to play over and over again like Super Smash Bros and some games give you a great, perhaps even emotional experience like Ico but lack that 'just one more round' element. One isn't better than the other. It's just nice to have diversity.



So that's why I don't like used game sales.

i was standing in line at eb waiting to trade in GTA: SA, and the guy behind me wanted to buy it. EB would have given me anywhere from 20-25, and it was selling for 45, so i turned around and asked if he wanted to sell for 35, and we both won, i think you guys had an article about gamer to gamer selling and i think something like craigslist is needed to really make this widestream

The solution is even simpler. If the studios were to try and get an agreement for rental revenue from these companies everyone would prosper. Games that take longer or have greater replay value ( Madden, Hockey , MMO's)get bought. Games with shorter appeal. God of War, Shadow of the Colossus get rented. Will this work.

Probably not. Each side has it's interest in making the last dollar. Expect the Studios to go the STEAM way. They get every last dollar, and have you hooked up for easy expansion packs. That's where all of your money is going to go.

I work for a somewhat small scale used game retailer. We pay between $45 and $48 for each new game we sell. Tack on the shipping of the new product to the stores, then overhead of employees and electricity and you've got negative profit on new product. New product is just a lure. You come in looking for Halo 7 or Street Fighter Alpha EX Plus Beta 5 and then you see our NES case filled with Metroids and Contras. Chances are you'll only spend your $50 on that new game that day, but one day you'll get an itching for a classic game after humming the Contra theme for a week. You'll be back and plunking 20-30 bucks on a 20 year old game that you probably paid 50 bucks for 20 years ago once before. Not only that, we give in most cases, up to 75% of our retail value for trade ins. So, that $35 contra was brought in for like 25 bucks, giving us a $10 profit.



The thought of "digital delivery" in the future is a cool one, but will ultimately hurt retailers like us. That's why we needed to expand our horizons. We do game tournaments, game system repairs (Atari to XBOX), and are starting to launch "game lounges" where you can play any in-stock game on a big screen TV in the comfort of a couch. We (used game retailers as an industry) will innovate and ultimately turn a profit one way or another if in fact digital delivery is the way we start getting our media in the future.



I'd also say that the number one reason we get games traded in isn't because of content, but because the gamer beat the game and felt no need to play it through a second time. Now, granted, classic games can and will be playable multiple times, but games are getting longer these days and the casual gamer has a shorter attention span. They want to beat the game and move on to the next big thing.



As it's already been mentioned, someone will always buy a game on launch day. The used game market isn't hurting the new game market. There are plenty of games I never would have purchased if I hadn't have found them dirt cheap at one of our stores. Let's say I bought Katamari Damacy used. Liked it, then bought the sequel brand new. That's how it works. It's like downloading a few tracks off the internet and then buying the CD. Though, you have to do something that supposedly hurts the creator, you end up giving them money they wouldn't have received otherwise. Besides, if we offer cash to a customer, most of them buy something in the same store within the week. Could very well be new product.



Not only that, our company is who gives the money to the publishers. If someone trades in a bunch of crappy or dated sports games and uses that credit for a brand new title, that emans we have to purchase another copy. The publisher still gets their sales and we get a repeat customer. No one's hurt.

"EB and GameStop make basically no money from new product."



Yeah, right.



Every other highstreet store makes a shed load on new titles, so he's either lying or EB is run by monkeys.

Newer used games shouldn't make any money from places like EB and gamestop. When I see a brand new used game there for $45 and the new game for $50 I buy the new game. Cause I know some poor sucker bought the new game hated it returned it they gave him $19 for something he just bought for $50 and are selling it for $5 less then new. It may be "keeping them afloat" but it isn't really fair to the consumer. it should be structured differently so stores selling games are making money off of new games so used game buyers can catch a break.

"games are getting longer these days and the casual gamer has a shorter attention span"



Except for the rare exceptions (DQ VIII), games are getting *SHORTER* not longer. Eight to ten hour games are now the rule, not the exception they used to be. They're longer than the NES days, but shorter than a few years ago.



And at 8-10 hours or possibly even less, I am not going to blow $50 on a game. I can get a better deal getting a few movies than buying the game.

My advice, never be surprised by a game. Read reviews, buy from developers you trust, etc. Don't take chances on games, it's too expensive. Typically, I have a shelf full of games that I will never sell and a few games that I bought used anyway.



It is my hope that digital delivery (LIVE arcade, woohoo!) and a return to simpler game designs will lower price points.



I think part of the problem is the structure of the industry to begin with (most industries actually). Every year you have to make profit to keep shareholders happy. Not only that, you have to make *more* profit than you did last year. That doesn't really make sense to me, seems greedy.



I'm too tired to think of anything else to say, and someone else will say it better anyway.

The reason retailers make next to nothing on new products is because big supermarkets like Tesco in the UK can afford to sell games at at least £10 below RRP. To stay competetive specialist retailers have to match these prices therefore cutting pretty deep into their profit. Everyone knows you get more for your stuff selling it privately than selling it instore.



Used games are a good thing, it helps people on a budget like families or it allows you to catch up on those old classic you missed. If stores didn't sell used games I wouldn't have Ico, and I payed a hell of a lot less for that at a store than I would on eBay.

New games have as high of a mark up as DVD's about 15-20% believe me if there was no money to be made in selling games then big retailers or any retailer for that matter would not be selling them.

Just a word of advice to 360 owners. Be sure to inspect any used 360 games you buy, as I have noticed on several occasions "scoured" games being turned in [the 360 overheating issue].I am not at all passing judgement on participants, as I think these damaged discs have "passed under the radar" and the glitch can very easily be missed [I had to really look at one myself].I brought it to employees attn. and they had initially missed it as well.Now MS or whoever can like it or lump it, but it just erks my ass to see any well meaning gamer [hard earned $$'s]getting un necessarily ripped off.Fortunately, I don't think this problem will show up with any great frequency but is still something to be aware of.

50 bucks for a game is to much and 60 is ridiculous period! Thats what they have to realize, and whats next 100 bucks because it has better graphics? Thats why I know this whole blue ray thing is going to fail!



Sorry Sony

'New games have as high of a mark up as DVD's about 15-20% believe me if there was no money to be made in selling games then big retailers or any retailer for that matter would not be selling them.' Yeah at their RRP. But because no-one is willing to pay RRP anymore lower prices = less profit. If you make £15 profit on a £40 game, then thats only £5 if you have to drop the price to £30 as retailers often do.



19 - I already pay the equivliant of $70 for a game at full price, you guys have it much cheaper over there ;)

Geoff, if you are still reading, please visit my website and post in my comments. I have recently come into a modest sum of money and am interested in starting a "niche" boutique of games like you are describing. It would be incredibly helpful to get your advice.



Thanks. Sorry for wasting the space all, great debate!



www.2gamers1game.blogspot.com

a few thoughts.



jeff: you are very right in the content bankruptcy thought. the entire industry is struggling with that right now. that's one of the major reasons cliffyb has been fighting for so long to get gears of war made. new ip is risky at the scale of a 'triple a' game. that forces the publishers to only alot a small amount of their budgets to new ip. and the vast majority of those fail.



-- digital delivery will fix this.



also, their tactics ARE very much like the riaa. only that they aren't teamed up in an association. they don't have a front man like the riaa yet, but, expect one to come on as soon as the publishers start fearing the revolution. once they are no longer needed, they will fight tooth and nail to keep their antiquated business model.



-- digital delivery will destroy publishers.



finally, yep. the game industry is listening. developers are fighting their hearts out for us, but publishers *cough* ea *cough* are the ones putting the bag over our head and punching us in the face.



geoff: retail outlets are smart to get out of the "retail" business. it's not just game retailers, tho. it's music, movies, books -- all kinds of specialty stores. when was the last time you walked into a borders or barnes and noble and didn't see a cafe? or a lounge? movie theaters are figuring this out too. their ticket prices are dropping and they are just starting to figure out that it's because they can't just charge to see a movie anymore -- blockbuster and home theaters have destroyed that. they need to manufacture an experience. it's needs to be a social hangout, not just a checkout stand.



the same thing goes for game shops. a game shop needs to be the subculture hang out. you need to be able to go in there, have some cappucino and talk about kirby or samus. there is currently no money in new releases (thanks to publishers) and soon, there won't be much money in old releases either. it'll be for collector's only.



-- digital delivery will completely change specialty shops.



if the publishers weren't taking so very much of the money, you wouldn't even be hearing about the issue of used games. sure, developers don't see any money from a used game sale, but, if the games were $20 at retail or $10 for a digitally delivered copy, they (developers, not publishers) wouldn't care. nobody would care enough to trade it in. the content of the game would be worth the money you paid for it. $20 is that magic price point.



in order to do this, tho, we need to get rid of the big publishers.



speaking from an industry point of view: self publishing is a developer's wet dream. self publishing means cutting out the middleman publisher and all of their up front money. that's going to be replaced by individual "investors" who will likely get to put their name on the boxes as "producers."



as games enter more and more mainstream - it's actually happening now -- you will actually hear more and more names. regular people will start knowing who will wright is. just like people know who steven spielberg is. the less people hear about ea and the more people know warren spector the better.



it'll move more into a movie model. people will buy games based on who developed them. not who publishes them. c'mon, who really says "universal pictures really puts out some great stuff!" (maybe you can justify miramax with that, but, they are small and independent -- totally different)



digital distribution is the silver bullet for all of this.



take geometry wars on xbox live, for example. that game gets so much press about being a great game. i'll admit, it's fantastic. i love it. do i $50 love it? no. do i $20 love it? probably not. but, for $5 it absolutely can't be beat. no one even thinks twice about dropping $5 on a great game. it hurts my head to even think about how well it's going to sell once the xbox 360 actually gets manufactured at a decent rate.



$5 for a game! for a great game! why? because there are no marketing costs. there are no publishers to pay. there are no boxes or packaging or discs to manufacture. there's no label art or box art. no manuals. no retail channels to bribe. no shelf space to fight over. it's just the game and a minimal amount of bandwidth. with no overhead and the blessings of the long tail, it's going to make money hand over fist for bizarre compared to how much money went into the game.



once digital distribution is widespread and developers can self publish, they can get their own pet projects greenlighted. we'll see risky, funky, fun ip. the cream will rise to the top and we'll have tons of great games.



---



now, on a personal note regarding buying used games, i don't buy them. in fact, when i bought perfect dark zero, the eb games guy tried like hell to sell me a used copy. not only was it only something like a $3 discount, but eb games makes the money off of it and not rare. (well. microsoft, i guess) it was the same when i bought knights of the republic. i want bioware to make money off of me and not eb games. there will always be some big chain to buy games from. there may not always be a bioware.



m3mnoch.

Not even 40% of xbox owners are online so your theory is crap.not even half of the USA can get broadband connections which is needed to download games or play a decent game online.So we need to learn to walk before we start running.

i can only assume you're talking about my "theory."



in fact, only 10% of xbox owners are online. however, over the next 5 years, that will rise dramatically. to the 50% microsoft wants? maybe not. but it could happen.



but, since when does digital distribution only refer to the xbox?



1) broadband penetration is over 60% in the usa. much, much higher in countries like south korea or japan. (remember, it's a worldwide market, not just the u.s.) and, of those broadband-enabled and non-broadband-enabled households, what do you think the gamer percentages are relative to each? i would bet that more people with broadband play games than those without.



2) you should ask valve what their profit margins are on steam. and, if they would rather deliver a game via steam or traditional retail channels.



3) and finally, you, sir, are perfectly allowed to think it's crap, but that has nothing -- absolutely nothing -- to do with the fact that digital distribution of video games WILL happen.



we are already walking. jogging, in fact. now, it's a sprint to market leader.



m3mnoch.

I think people will want to own an actual game with a box and instructions before they download one.Broadband is way too expensive for most casual gamers or gamers parents .Until Broadband connections are the same price as regular phone/modem connections then the idea of downloading high end games is not going to happen.I think Half Life 2 download debacle was an eye opener for a lot of people.The other problem is system failure that the games are downloaded on .How can you expect people to re buy a game because a hard drive went down on the system they had it on ,Also if you were allowed to download it and burn a copy then it's wide open to piracy.

I read yesterday in Play magazine an interview with the producer (I think anyways) of Gears of War about game pricing. I don't remember the exact words but he mentions that games have to come to that magical $20 price tag. Some movie's budget are as high as 100 million dollars and with $7 movie tickets and $20 DVD's can still make a profit (he mentions nothing about rental though). While some games take about 20 million sell for $50 and lose. He goes on about how gamers probably have had bad experiences (I know I have) with paying $50 for a real shitty game (not in those exact words). Now it takes alot of thought for gamers to part with there $50 for a game.

I have to agree with the guy. Maybe $20 is too low but who knows, maybe $30?

The guy sounds like a real cool guy, you guys should read the interview. He mentions some of his fav games are God of War, SOTC, Ico, RE4, and Halo 2. It's funny how most of those games are for the PS2 and he's one of MS big players.

that's probably cliffyb. i'll have to check into the interview. thanks for the heads up, gemini.



oh, and zap. what are you talking about man? can you not read? broadband penetration is over 60% in the us. gamers have broadband.



system failure? it'd have to be both the end user's system and the server. worst case scenario you have to download the game again. they already have you marked down with credit for the game at the server level.



and, what's the difference in piracy between cd's and downloaded games? digital content is digital content no matter how it's delivered.



[deleted rudeness towards superzapper here. i've been too much of a bully lately. must be the stress. sorry about that. i'll try harder.]



m3mnoch.

I got Half-life 2 as a freebie from ATI for having purchased a video card (either a 9600 or a 9800). At the time I got it, though, HL2 had not been released, so I got comp'd HL1 etc. I've since gone through a complete system rebuild, and reinstalled windows alone another 2 times. Not once have I had an issue with getting the games again. I have steam installed on 2 machines, and can flip back and forth between the 2 as to which is authorized. Steam is - IMHO - "DRM" done right...