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Sony Profits Conundrum
Alice, over at the Wonderland blog, has an interesting post wondering about the state of Sony's finances when put in contrast with their view on second-hand game sales, and new title prices. From the article: "Yet it turns out that discounting new releases also results in higher sales. MCV continues: 'BVG's The Chronicles of Narnia jumped ten places up the ChartTrack top 40 last week, thanks to a 16 per cent sales increase, following its slashing to £19.99 at most High Street retailers.' My question: what the hell are they complaining about? Why curtail the perfectly reasonable and legal second-hand market if they're making money hand-over-fist with the current situation?"
Because they could make a little MORE money if there was no second hand market!
My user ID is a palindrome!
"Why curtail the perfectly reasonable and legal second-hand market if they're making money hand-over-fist with the current situation?"
When have you *ever* heard a company say "Eh, thats fine. No thanks. I think we're plenty good..." on the subject of profits?
Han shot first.
It's a bit like the scene in Fight Club when the narrator explains how his company issues recalls. If the court settlements are less than the cost of a recall, they aren't going to fix those cars.
You don't need to be a bargain basement Colonel Sanders to know that someone at Sony apparently wants to keep a tight rein on distribution/selling of their games. They're a part of the same industry that insists on region coding for DVDs.
Discounting new releases means higher sales? No, really? /sarcasm
Gamers have asked for new releases to come down in price sooner, rather than waiting for the company to think 'well gee, sales and hype have hit rock bottom lets try discounting games now that everyone already bought second-hand copies and hope we make some more sales.'
Simply because a corporation seeks to maximize profits doesn't mean it shouldn't keep the customer's interest in mind. It's in Sony's interest to keep the secondary game market alive so that PS2 console owners remain happy and come back for the PS3. But yes, this also obviously hurts the primary game market. There's an obvious tradeoff here, which makes a console maker's decision whether or not to support or squash a secondary game market an interesting decision. Simply calling it "greed" marginalizes the whole conversation because it's obvious and insufficient at the same time.
o Your PS3 dies (they do) and when you bring your new one home none of your games play on it.
o End of the game and PS3 rental market (unless you can keep each game with each PS3. This will not help PS3 penetration at all.
o Although you keep you PS3 locked up when you're not playing it, you little brother grabs you new game and takes it to a friend's house to play before you get a chance to play it yourself.
o Overall glitches that plague any new technological protection measure may only impact a few percent of the players, but that's still many thousands of now angry gamers.
With Doctrine of First Sale allowing you to do what you want with it otherwise, Sony better just learn to live with used games that they are not going to be able to collect even more money from.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Yet it turns out that discounting new releases also results in higher sales.
This is about as duh as it gets. It's basic economics. At a given price, based on demand, you'll sell a given quantity. Lower the price, and generally you sell more. Raise the price, and you generally sell less. Of course it depends on factors like whether people can live without it (gas price increases for example).
The question is whether they make more money selling more copies at a lower price than they would selling less copies at a higher price. By the logic suggested here, they'd be making piles of money if they gave the game away because they'd sell more.
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The fact of the matter is that used games are HELPFUL to the gaming economy.
For one, used games help those who are addicted to having the newest games. How? Habitual new gamers will go out, buy a new game, play it, and sell it back to the store, used. They'll then use the (smallish) amount of money they get back towards the purchase of a newer one. So, in effect, used game sales are subsidizing the sales of new games.
Another way used games help is by expanding brand awareness. If I go into a store and see Series Game 3 on sale for $6, I might buy it on a whim. If it's particularly compelling, it might lead me to purchase Series Game 5 at full retail price. Sony hasn't lost any money in this series of transactions, and has effectively marketed its game to me.
So...once again, Sony needs to chill out!
It's not what you know, or even who you know- It's how many people recognize your damn
I've just realized: Sony is right! Second-hand markets is a horrible, horrible idea. I mean, if other people aside from the original purchaser are able to make use out of an item after the original purchaser no longer wants it, then it will drastically hurt sales.
And not just in gaming! No, my friends, Sony is thinking too small. We need to extend this War Against Reuse (WAR).
Let's bring on folks like Certa (Serta?), Ikea, and Nike. Lots of people sell their used mattresses, furniture, and shoes at garage sales- think of the profit loss! This needs to stop. In fact, let's take a page out of the RIAA Playbook and create laws banning garage sales altogether. It's too hard to visit every garage sale, and pick out those items which were not originally created by those owning the so-called "garage", and there's a much higher percentage of second-hand goods being sold at these things, so closing them for good will solve most of the problem.
But, before that, there are more evil companies out there- yes, I'm talking about Goodwill and Salvation Army. These companies, posing as places to sell moderate-condition items at a low low price and hiring those who might not otherwise get a job, are stealing hundereds of thousands, if not millions, of dollars from legitamite, multi-billion dollar companies. These large profit companies have people to feed, too! Will no one think of their children?
We need to pick up this WAR and fight those diabolical enough to sell us used goods as a fraction of the new price. This is just horrible. I'm so glad I had this epiph-
Oh, wait, that was just gas and hot air.
Continue about your day.
If Sony really wanted to do away the the second-hand market, they should simply offer trade-ins for games - turn in a used game and get a new game at a discount that is greater than the game traders pay for used. Then they could simply destroy all the used games, or resell them themselves at a profit... again, this is exactly what car dealers do.
I've abandoned my search for truth; now I'm just looking for some useful delusions.
So yeah... They could afford to give it away at an almost free price as long as it above $1. If a new game was sold at $1, I'd bet everyone who owned a PS3 would buy one.
Not really. Distribution cost of a game is negligible in the grand scheme. It's the cost of developing the game, marketing the game, etc, that are expensive. Now you might think, well at $1 they don't need marketing, but then that only works for that one game, otherwise all the games start competing with eachother at the $1 mark, and you now need a marketing budget again.
A good developer is going to cost between $100-150K per year, give or take. So how many developers does the game require? How many graphics people, etc? Suddenly you're getting into quite a bit of money. How long does it take to develop the game. A year? Two? Five? Multiple that times the salaries and you see how this goes.
Now, keep in mind that for every game they release that sells well there are a few others they make that don't. So in order to remain profitable they have to charge more for games to make up for the duds they lose money on.
So a couple years of development with a group of developers plus marketing costs, packaging, and distribution it costs quite a bit to make just one game. If that one game fails, then you have to make up that cost on other games. If you've noticed, the cost of games has been pretty consistent over time. There's been a steady increase as inflation is incurred and game complexity increases, but overall what I pay for Half Life 2 is on par with what I once paid for pac man (and arguably cheaper).
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So lets take this for a little walk.... Steam (and online verifications full stop) allow for ownership verification at point of play. The sell for this is often against our old friend piracy. These can kill a games second-hand value as you cannot always transfer the registration. This is a control mechanism that has potential to step beyond piracy prevention. So in order to allow the first purchaser to perceive greater value by not making the game worthless second-hand, the publishers set up a scheme where you can sell your registration back as part of any trade-in. This gets them a second sale as you have to trade-in and not just sell. The traded-in game/registration can then be recycled and re-sold through 'approved' retail outlets. To be approved as an outlet, you have to give a cut of second-hand sales back to the publisher to cover their 'administrative' costs in recycling the registration. Any dragging of heels in recycling popular titles would of course have nothing to do with protecting the sales of games that are still available at full price. Everyone is happy, player gets to trade in his game. Game shops and publishers get to stimulate new sales through trade in. Oh, not quite everyone. That extra cost is only getting passed one way... I don't get the idea that if I buy something I can't just easily sell it when I have finished with it. This is why I don't think online verifications are good, without even considering what we do in 10 years time when a game might not be worth maintaining an online verification service for. I'm not saying this is in their plan right now. I don't wear a tinfoil hat, the positions taken by business change too much for me to believe in a grand plan. I just realise that as with most business decisions, once someone realises you can attach a £/$/ to it, then it's a no brainer.
Your optimism strikes me like junkmail addressed to the dead.
BTW, any Brits care to tell us if a "Commercial Director" actually serves any legitimate business purpose ?
Anyway, it's entirely likely that neither Sony nor the publishers really care ( or more importantly, could do anything about ) the used game market. The publishers were just trying to deflect attention from the fact that other, very telling, important factors just might account for their declining revenues ( like crappy management and lack of compelling, original games, perhaps? ). It's a bit like the music industry pointing a finger at file-sharing and saying "that's where our profits are going!", except that the game publishers have even less of a reasonable argument here, as nobody is breaking copyright laws.
The arguments make no sense. Why, just because I might spend $10-15 on a used game, would someone infer that if that game wasn't there, I'd be buying a new $50 game instead ? No, I'd just be cursing my decision to buy a console with only very expensive games, and that would ( negatively ) impact my decision to buy another, or at the very least be bummed that I can't find that old game. Equally, nobody thinks of used games as being "as high quality" as new games- they're often scratched, and with very few unfortunate exceptions, even sequals are at least incrementally better in some ways than the earlier games.
To boot, what would they do about it ? Unfortunately TFA doesn't provide a link back to the "(MCV 9/12)" about publishers trying to do something about the used game market, but the used game market is like any used item market. It's not going away, and that's a good thing, or where would I buy that copy of Star Wars Starfighter ( or any other out-of-print game ) ?
Stupid asshat corporate whine. Not worth the words I just wrote, unless to hear someone ( like me ) smack these idiots around in public.