Analysts discuss impact of EA Sports Online Pass

It's dumb, the person who bought the game originally has paid for the person they are selling the game to, they've already had the money why should they get more?
It's not like the person selling the game on makes any difference or they lose a sale, it just counts as swapping ownership of the game over to someone else...

If you buy the game used you're not EA's customer.

"den-69 @ May 12th 2010 7:02PM

It's dumb, the person who bought the game originally has paid for the person they are selling the game to, they've already had the money why should they get more?
It's not like the person selling the game on makes any difference or they lose a sale, it just counts as swapping ownership of the game over to someone else..."

den-69, that's not how things work. First of all EA doesn't count on the re-sale value of a product. They make money of the first owner on an original purchase. Put simply, the more new games Best Buy, Amazon, Gamestop, of whatever store you want sales, the more units they will order from EA, thus the more money they will make. When a game is re-sold it is the owner or the intermediary (i.e. Gamestop) who makes money. The owner didn't pay for your part of the game. The owner is trying, instead, to recoup the money invested, or part of it. He can charge the same amount as a new game if he chooses to, but of course you wouldn't buy a used game at a new game's price, thus the lower cost. Resale doesn't help EA because that money stays with the owner or intermediary, yet the service provided by EA is now being used by somebody who didn't pay them for the service. Actually this is a good idea by EA. Besides, they can do whatever they want. If you don't like it just don't buy their product.

It's going to suck for that one guy who picks up the game 11 months later, pays his $10 bucks, and they promptly shut down the servers on him because they're not making much revenue on that title anymore.

Take EA's online offerings with a grain of salt.

@pat: The error in your argument is that you ignore this:

EA has already been paid for that copy of the game.

If the original owner continues to play the game for 12 months; or if he plays it for one month, sells it to a second person who plays it for five months, who then sells it to a third person who plays it for six months; the net result is the same: EA is paid once, and one person (at a time) is on the servers.

Exactly. The original purchaser has already paid EA for the online service, why does it matter if he plays it online or if somebody else does? EA has already been paid. They're just double-dipping now.

They are trying to recoup some of the losses incurred by being undercut with their own product.

If EA produced 1 copy of the game, made their profit off of it and was done, that would be great, but when you have a used copy that is perfectly the same in funtion to the new copy sitting right next to it , and priced only slightly lower, EA just lost the sale.

Used games have 0 depreciation, and GS has been taking advantage of this all along. now EA is introducing a depreciation value into the used game, which for people that won't care about the lost features will STILL BE A VALUE, but now other people will have to weigh if buying a used copy is worth the lost value.

IF EA is trying to make up for lost profits due to used sales they need to consider better pricing points. Really, do people forget about supply and demand? Sell their pretty much recycled sports games for say $40 and they will have MANY more buyers. This $10 is simply another way to make additional revenue and not really to pay for server access which has been already paid for by the initial buyer.

I'm with John.

Just so you don't have to find it yourself, here's Kevin Berg's comment:

"The problem I have is that used game sales aren't creating additional stress on their servers that havn't been compensated for. Lets say that EA sells 100 copies of Madden. Say, 10 of those are traded in at Gamestop for the purchase of a new game. Then those 10 copies are resold and played online. Thats still only 100 copies that EA recieved compensation to maintain their servers for. Those copies didn't multiply and create 10 additional copies that are creating addition stress/cost. They were compensated for 100 copies of server space, and that is all that is running.

Are they also forgetting about the additional revenue from DLC that they might not be getting if the used game purchaser won't be buying if they can't afford the cost of a new game to begin with?

EA is just crying that the used game purchaser didn't give them any money for the game they now enjoy. It's just like with used cars. Does Ford get any money from the sale of that used car? No, but what usually happens when a car is traded in? Another car is purchased. Sometimes new.

What could happen if EA devalues their own games? The people that depend on that value to purchase new games (which the publisher gets revenue from) may not be able to afford to buy that new game. In turn the publisher doesn't sell as many games and loses profits.

I just wish that EA would come out and be honest instead of trying to tell us this isn't an attack on used game sales, cause that is what it is. Used game sales don't cost them money in server maintenance. It costs them money in lost revenue from new game sales. I can understand, even respect that EA is trying to make money. Just call a spade a spade!

Also what about those who purchase the game new but have multiple XBOX Live or PSN accounts? Will they too have to pay $10 for each of those additional accounts to access online content?

Bottom line, for my money, if EA is going to start charging me above my XBOX Live subscription to access their online content, the service had better be far superior to what they currently offer. If not, 2k sports and other publishers who don't charge extra will begin to look much more appealing."

"The problem I have is that used game sales aren't creating additional stress on their servers that havn't been compensated for. Lets say that EA sells 100 copies of Madden. Say, 10 of those are traded in at Gamestop for the purchase of a new game. Then those 10 copies are resold and played online. Thats still only 100 copies that EA recieved compensation to maintain their servers for. Those copies didn't multiply and create 10 additional copies that are creating addition stress/cost. They were compensated for 100 copies of server space, and that is all that is running."

Actually he didn't nail it. This is just a very simplistic way of analyzing how things work. Let's say that out of the 100 copies 10 were re- sold. Let's also say that EA had calculated that the average server use per owner would be 10hrs per week. Let's now say that the used owners are using the service for 50hrs a week instead. This is extra stress and cost associated with units that EA didn't get money from. There is extra maintenance, energy, servicing, etc, associated with the extra use and the number or hours that the server is up and running.

Another aspect is the life of the game. Let's say that EA has calculated to keep the server running for 2 years, but due to high use it keep it running for an extra year. Now, let's imagine that from those 100 units sold 80 are now used owners that are using the service 50hrs a week, thus effectively making it look like there is a high demand. In essence EA is keeping a service at a loss for users who didn't pay for it. The moment that the original owners sold the unit is the moment that the servers should have been shut off.

The number of units sold doesn't reflect accurately the stress and cost of the service, thus it is a bad argument to justify the position against EA's plan.

@PT, but that works in reverse too. A used game could be played online much less often than when it was in the hands of the original owner.

Also, let's not forget that if the servers are such a big problem, then there are other ways around it. Xbox Live is one good example, letting PC gamers host their own servers is another.

Great job posting that quote, it is exactly what ran through my head. Honesty is the best policy and this is definitely a move to just make some money off of used game sales. Not that some of won't go towards servers...

It will be interesting to see the numbers (of online pass sales) after this first round of EA Sports games is released. I know I couldn't see myself paying for one.

Personally, it seems to me that Berg is focusing too much on the online side of games.

EA's logic makes more sense if you consider each used game sale as a lost new game sale. EA is depending on the price elasticity of games being inelastic enough that the revenue gained from the used game buyers who start buying new games or the revenue gained from the $10 fee covers some of the lost revenue from used game sales. The online component is special because EA likely predicts this cost as an average hours of online played per person at this point, having been in the business for so long. Assuming that these copies are sold back only when this average time online is spent (on a case by case basis this would be untrue but if you took all the resellers, it would probably be true), EA is losing the money since the online costs aren't covered with used games sales.

Why does EA run their own servers? This would be fixed by using the Xbox Live system.

"Also what about those who purchase the game new but have multiple XBOX Live or PSN accounts? Will they too have to pay $10 for each of those additional accounts to access online content?"

Only if they have multiple consoles and no memory card. The original account AND the original console both get entitled to the online pass.

Also, EA shuts down servers when there is barely anyone playing anyway. People say it is after one year, but that really isn't true. So if "new" gamers are all done with the game and the only population left is the "used" crowd, then EA is paying to run those servers for longer with no money coming back in to support their maintenance. They have to wait for the "used" crowd to get bored too so that usage drops low enough.

Often not reported: You get a 7 day free trial of these servers without the code. In other words, rentals and such won't be effected unless you're a habitual renter of the same game.

On the flipside, I know at least I use the online portion of GameFly'd games much less than ones I buy. Or, in a more straight forward manner of speaking, I generally buy the games I intend to play online for a long time, whereas I GameFly games that I want to breeze through quickly (keeping a game too long defeats the purpose of renting).

Hopefully Gamefly will introduce a deal by which they provide you, if you wish, with an extra code for an extra low monthly fee, just like Netflix does for Blu Ray discs rental. Everyone happy.

But you're not paying extra if you buy it new.

Some reason people keep overlooking this. If you buy the game new, there is ZERO change for you. Only if you purchase used copies.

In which case, if you're supporting GameStop's used raping of the industry, there's a very special circle of hell reserved for you. It's right alongside the child molesters.

And people who speak at the movie theatre?

@Mike: You are only paying EXTRA if GameStop DON'T drop the price of the used game. You'll just be paying $10 to EA instead of GS.

Actually if you look at GameStop's financials and their associated press releases, the majority of customers who trade games turn around and purchase new (as in not used) product with the trade credit.

It's a logical assumption, that a customer willing to trade would also likely be looking to purchase used games, but it usually doesn't happen that way.

The problem with this defense is that no one has tried doing anything different. This assumes that everyone has a set budget for gaming (which probably is true) but also that people who buy used would only buy used.

If there is a national aggregate game expenditure budget of $25 billion, and $5 billion is spent on used games, and $5 billion comes from new games, if the used market disappeared (or contracted), it's not unreasonable to assume that while current game traders would spend less on new games in the future (with less rolling cash from the trading cycle), some current used gamers would move into the new game purchasing sector (probably buying older new games). The tipping point is when money gained from new sales exceeds money lost to the middlemen, meaning that overall revenue to gaming companies increases.

Not the most clear argument, but basically we can't fortell the action of this market because we have no precedents and there are too many variables.

I hate Gamestop as much or more than anyone else, but still, the first sale doctrine and the protections it affords consumers is of more value to me than Gamestop's demise. The law should be that you have the right to resell an item you've purchased, and that no one can selectively disable parts of that item so that the value of a resale is diminished. Maybe it's an improper analogy, but this is quite like someone selling me a bacon cheese and egg sandwich, and then taking back the bacon and the cheese when I want to sell that sandwich instead of eating it. Sure, I could sell the remaining egg sandwich, but it's value isn't nearly that of the original Bacon Cheese and Egg sandwich. No company should have the right to undermine the value of something I've already purchased from them.

Now I'm hungry.

I honestly don't see how it could diminish trade-in values any further. They're practically nothing as it is.

If usage is high, the servers will still be there. They only shut them down when usage is really low. So if used customers somehow value the online more now that they give $10 to EA instead of GS and keep playing, then it could be extending the life of the service for everyone.

Excellent point!

Yea but what if one used copy of a game is bought and traded... lets say... 5 times. That's 5 possible sales EA has lost on that game because people are just buying the used copy.

And while there are not anymore copies out there, it's reasonable to assume that each of the 5 people got their "money's worth" out of the online experience before passing it on, while EA did not receive any compensation from 4 of them. If the first person was still using the online, he would not have traded it in.

Sorry, I should've been more specific about what I was commenting on. I was specifically referring to Michael Pachter's remark that EA currently "does not get paid" by those that purchase used games, and therefore charging extra for access to features advertised as part of the original game makes sense.

My point is that they do get paid for the copy of the game that is purchased. If they feel that they cannot maintain their servers and render the online service for the original cost of the game, then they should raise the price or make it an additional purchase for all players, not simply those who buy the game used. Again, each used purchase is a game that was at one time new; that copy can only be in use by one person at any given time, so EA was compensated fairly for the included features at the time of the original purchase.

As far as "lost sales", that goes down a slippery slope. It's the same thing with piracy: a pirated copy (or in this case, a used purchase) does not necessarily equate to a lost sale of a new copy. Granted, a customer purchasing a used copy is probably much more likely to actually be a lost new sale, but at the same time, used purchasers do so for a reason. Whether it be to try the game out (try returning an opened, new copy of a video game *anywhere* in the US), because it is cheaper (it may be a $5 sticker price difference on a just-released used game at GameStop, but if you have their card, it's $10 cheaper. That's a lot of money these days. Not to mention the myriad other places to purchase used games where the price differential is even more significant), or because they're trading games with their friends (that's not even a used sale, would the tradee ever have bought the game? Probably not).

The bottom line is you cannot equate 1 used sale to 1 lost new sale. There's probably a percentage there that are, but it's not something that can easily be determined, if at all.

Who's to say that somebody got "their money's worth" out of the online multiplayer? So, should the guy who plays his new copy for one year solid pay $10 every 3 months because in the same time period, another copy was bought and sold four times? BS. Just because somebody got "their money's worth" out of a product, even assuming that were accurate in 100% of trade-ins, does not mean that EA should be compensated again for online play with the same copy of the game.

Another related scenario: One person buys a game. After three months, he's not really playing it anymore so he passes it to his friend. His friend passes it to a third friend, and on to a fourth friend. The fourth friend passes it back to the original purchaser. Should the original purchaser now have to buy another online pass for the game, since he obviously "got his money's worth" when he gave it away the firs time? Or is this only applicable when the game is bought and sold? Where is the line drawn?

(And before you say that, in the last scenario, the original purchaser would still have his online pass from his original purchase, I would not put it past EA to use some sort of identifier from the disc itself to automatically expire his online pass once he's given the game away.)

I understand your argument, but I guess what I'm arguing is that I understand EA's logic, even though it might not be my favorite. Hell, I'd love for all my games and consoles (and all other entertainment) to be free for the rest of my life, but I also understand that Sony/MS/etc would also like to run a profitable business.

What if you assume that the average player will play 30 hours online, and build that into your accounting model? Now Player 1 plays 30 hours, gets tired of the game, and sells it. Player 2 then buys the used copy, and also spends 30 hours online before getting tired of it and selling it. While they are not online at the same time, both players have used your bandwidth and cost you money, whereas someone who only bought new used their 30 hours and probably now has the game just sitting on a shelf.

Aristokrat, so any user that uses more than 30 hours of play time... What? Has to pay again? Simply because EA didn't bother to calculate actual usage, and instead wants to have to insane scheme to make more money?

The answer is no: They don't have to pay again. And someone buying the disc used shouldn't have to pay again, either. That money's already been paid. If they don't want to support the servers, they should charge everyone.

But they won't, because it'll piss their customers off. Well guess what this is doing?

I just look it like an account. When you buy the game new you get a lifetime account of free online play. However, that online account is not transferable. So, if they sell that game the new buyer has to pay for their own lifetime account. I'm not saying it's ideal but I think this is a necessary move from EA considering all the money they are losing on used game sales. So, if you want to use their servers you have to pay a nominal fee. Everything on the game still works as it is but to take that experience on their servers you have to pay up.

This is just a very simplistic way of analyzing how things work. Let's say that out of 100 copies 10 were re- sold. Let's also say that EA had calculated that the average server use per owner would be 10hrs per week. Let's now say that the used owners are using the service for 50hrs a week instead. This is extra stress and cost associated with units that EA didn't get money from. There is extra maintenance, energy, servicing, etc, associated with the extra use and the number or hours that the server is up and running.

Another aspect is the life of the game. Let's say that EA has calculated to keep the server running for 2 years, but due to high use it keep it running for an extra year. Now, let's imagine that from those 100 units sold 80 are now used owners that are using the service 50hrs a week, thus effectively making it look like there is a high demand. In essence EA is keeping a service at a loss for users who didn't pay for it. The moment that the original owners sold the unit is the moment that the servers should have been shut off.

The number of units sold doesn't reflect accurately the stress and cost of the service, thus it is a bad argument to justify the position against EA's plan.

The point is, you may not be introducing more users but that doesn't mean you are not introducing more use for the service.