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Publishers Want a Slice of Used Game Market
grigory writes "GameStop's business model depends on a healthy flow of used games: incredibly '[GameStop] enjoys a 48 percent profit margin on used games.' Game publishers do not see a cut of the secondary sale because it falls under the first sale doctrine. Now, some
publishers and manufacturers want a piece of the pie. 'One marketing executive, who did not want to be identified for fear of angering GameStop and other retailers, said the used game sale market is still depriving publishers of money because it gives consumers an all-too-easy alternative to buying a new game.' Interesting picture of companies fighting for your business, and (surprise!) complaining about being left out of the money stream."
Someone should tell them that, since Steam appeared there is no used games market.
Hell, come to think of it, now Steam's here, very soon there won't be such things as publishers!
Sucks to be them! Maybe someone should tell them?
If a bookstore can sell used books without giving any money to the publisher, I fail to see why a game store can't sell used games. For that matter, are we going to insist that everytime a geekstore resells pokemon, magic cards, miniature collectibles or other similar items that they need to pay the publisher a fee? Or the same thing for baseball cards. And if the stores need to, why not the individuals? (Maybe I shouldn't be too loud about this but I'm sure the Post Office would love to get money from stamp collectors buying and selling their stamps. Or the Treasure Department and coins...)
If your idea sounds ridiculous when the product is replaced by a functionally identical product, the idea is probably ridiculous.
If they are actually successful in doing anything about this, what next? Car manufacturers complaining because they don't get a "cut" of used car sales, because used car dealers are providing an "easy alternative" to buying new?
Either that, or game publishers will be the next on the bailout list...
had done this also? Would they have managed to get their way, one is forced to wonder? Would GM be thriving if they had a cut of every used car sale? Who the F--- do these publishers think they are anyway?! If this happens will I have to pay Dell every time my business sells a refurbished Dell PC? Hell, the pawnbrokers alone will never allow such a thing to go through.
These are somewhat rhetorical questions and the slippery slope fallacy applies a bit. Still, the principle is sound as a reason why the publishers shouldn't get a cut of used game sales, in my opinion.
You know the thing about UDP jokes? I don't care if you get it or not.
This is just like with a car, or some other item, where the original manufacturer gets a kickback every time it is resold because -- hey, wait, they don't get anything from it because that's a stupid idea! The original manufacturer has already sold it and given up any future interest in it for a fair price! Why the hell would the maker of a bad video game get more money every time EB manages to fob it off again on an unsuspecting customer?
it's the original sale, that's their slice.
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Stay tuned for some shock and awe coming right up after this messages!
Even better analogy: You sell your apartment, then when the buyer sells you claim half the profit.
If a bookstore can sell used books without giving any money to the publisher, I fail to see why a game store can't sell used games.
That's because you're rational, and understand the first sale doctrine.
Remember - these companies that are all in the selling entertainment business hold up the Holy Grail of money streams as their ideal. The RIAA. Make an item once, and every single time it changes hands, media - whatever - make a buck on it.
It's insane, but there's also a metric ton of cash involved, so of course the more unscrupulous types are going to gravitate towards that. Notice how the source who said the gaming companies "want in" on that revenue stream to which they are not entitled, refused to come forward and name himself/herself.
Any shakedown racket in its infancy would behave the same.
Instead people say "Hey, I want to buy a CHEAP game, and don't care if it is not the newest thing out there."
So if you are a game company wanting to get into the 'cheap, not recently released game' market, it is easy. Simply cut your prices for the stuff you brought out last year by 30% and for two years by 50%.
You are not going to be cutting into your 'new releases' money, and you will be giving the people what they want.
excitingthingstodo.blogspot.com
If they want a piece of the used game market, they can open their own stores and compete against GameStop just like everyone else.
In the rest of the world, the only time the original Vendor/Distributor/Manufacturer/Whoever gets a cut of a second sale is when they're adding some value, by doing a factory refurbishment, or inspection, so why should the game publishers be any different?
They can "refurbish" the game: Reset any DRM installation restrictions, clear out the multi-player accounts, check the disk for scratches, and replace any missing bits of paper in the box.
Then they can have a cut.
Until then, welcome to second hand sales.
In the context of a game "publisher" usually means "Guys with the cash." Basically the publisher is the company that ponies up the money to have the game made. That is why you'll see even companies like Epic have publishers. It isn't as though Epic needs someone else's name to sell their game. It is that they don't want to incur all the financial risk. So you get a publisher to pay for it, often a much bigger company.
Gears of War was published by Microsoft, for example. So suppose they spent $20 million on making it. Not an unreasonable amount for a game that quality, maybe they even spent more. Now let's suppose it had bombed for whatever reason. Had Epic incurred that cost, it would be real hard. They are a private company that employs about 75 people. Private means they can't just sell stock to raise money. A $20 million loss would equal over a quarter million dollar loss per employee.
Now MS is a massive public company. They've got the cash sitting around that $20 million is peanuts. What's more they can sell stock if they need to raise money. Thus the risk is something they can afford to take.
More over, many dev studios aren't sitting on much cash at all. So they need money during the development time of the game. After all you have to pay the programmers and artists and such while the game is being written, not after it sells. So even if they were willing to assume the risk, they just can't since they just don't have the money it would take.
You do see some companies that self publish. Stardock has done this. Galactic Civilizations II was written by them and published by them. Means they self financed the game. All the risk and all the rewards are theirs alone. They've now gotten in to publishing other games as well.
So publishers probably aren't going away. Many development studios will want someone to pay for their game, and that is what a publisher does. The publisher won't actually distribute the game, they'll just fund it, and then sign agreements with services like Steam and Impulse to get the game to consumers.
Also, as big as Steam is, you are kidding yourself if you think it is more than a fraction of the market. There are plenty of publishers that don't release games on Steam, and even those that do are often not exclusive. EA sells many of their games on Steam now which gives Steam a huge boost in titles since EA is massive, however EA also sells their games in stores. The store copies don't use Steamworks or anything, they are totally independent of Steam.
Ask a manager or employee of a gamestore what their markup is on new games - what they actually make as profit. If they're not complete assholes, they'll tell you - a games store makes only a couple of bucks off of the new stuff, if that - the publisher keeps the remainder. Pay 65$ for a new game, the publisher gets at least $60 of that.
Pay $20 for a used game, the games store gets around 15-19$ of that, depending on the condition of and demand for the game. The markup may seem a bit ridiculous, but independent games stores would be out of business if it wasn't for the used market - the margins on new games are so thin that they'd have to move an enormous volume of product to make up for the difference they see in returns on used games.
I'm all for the used market, even though I buy most of my games new - it keeps the stores in business, even with dozens (hundreds?) of copies of crap and not-as-popular-as-they-thought-they-would-be (Nintendogs, anyone?) games sitting on the shelves.
I've been a gamer for over a decade now. The fact of the matter is the market is diluted with crap, and even a lot of the "hits" are a lot less fun/shorter than the games from last decade. I mean, sure, Gears of War is fun for a time, but how does it even compare to Deus Ex or Jedi Knight? I mean, you can even see how video games have progressed in the sequels of some titles. For example, compare Deus Ex 1 & 2, or Thief 2 & 3. Mario Party 2 and Mario Party 8.
Then there's the sheer amount of crap, even from "trusted" and "quality" companies. Like Soulcalibur Legends. My friend is a big fighter game fan and bought that game. Usually Soulcalibur is a "quality" title, but that game was so shitty! It seemed like a demo it was so short and lacking features.
You raised the prices of games by $10 and eroded their value. People aren't paying for new games because the price of a "new game" isn't worth it to them anymore. And it shows. It used to be that a New game would cost $50 and GS would be selling it used for $35. That means there's a lot of people buying the new game and few buying the used game (high supply of used games, low demand.) Now, the games costs $60 new and $55 used. Which means the exact opposite (low supply of used games, high demand.)
If I was a game publisher and I wanted to kill the market for used video games, I'd lower my prices to $30 and probably sell more than twice as many copies, making it up in volume. I mean, if you want the new Gears of War, you'll try and save $5 off of it because it already costs so much. But the difference between $25 and $30? Not many people care. In addition, when I get sick of GoW and return it, I'm getting $30 bucks back. That's like a tank of gas. What would you get back for a $30 game, $15 bucks? That's not enough motivation.
I completely agree with you but their argument is simple: people are buying games new, installing it on their computer, installing any cracks necessary to make it play without the CD, then selling the game second hand (and then the cycle continues).
They can't stop the NOCD cracks. They've tried. They can't run the game from CD, the performance is lousy. So all they can do is whine and lobby.
How we know is more important than what we know.
Clearly the reason there's a huge profit margin in used games is that new games are priced way too high.
I was thinking along the same lines. If they don't like the used games market, then either make games that are too much fun to part with (I almost giggled typing that one) or adjust prices according to how old the game is, and price used games off the market. You want brand new game X? Pay 59.99 for it. You want 6 month old game X? Pay 35.99 for it. 12 month old ...you get the idea. Use the Wal-Mart philosophy and undercut as you go, if a used copy is 18.99 and the new game is $20, I'll pay the little more for the brand new, even if the used copy looks spotless. But if the used copy is 35.99 and the brand new copy is 59.99, the game makers themselves would save the 25 bux without hesitation.
So, copying software is theft, "just like stealing an apple, or stealing a car. There is no difference; you're stealing a product". And yet, when it comes to reselling those products, different rules apply? Once I've bought my apple, or car, or furbie, I can sell it to whoever I want for whatever price I want. Why would software be different if you want it to be treated as a tangible object?
Sony and Panasonic aren't complaining about used TV sales, Toyota isn't complaining about used car sales, and Dell isn't complaining about people reselling their computers. In what world is someone reselling the game considered taking away money from the publishers? Lets set aside the fact that some people will pay full price for a game because they know that they can resell it later and recoup some of the cost...
Its not like people are going out to buy used games. They want cheap games. If they kept publishing their old games, and dropped the prices as the games got older, I'm sure they could take a huge chunk out of used game sales. Its not like I'm falling all over myself to save $5 off of a new game at GameStop. Seriously, every time I buy a recently released game, they offer me a used copy for $5 less. Oh boy, sign me up!
It looks like that, instead of thinking about the problem and adjusting their business strategy, they've chosen to whine like petulant children about something that every other industry in the world (well, at least those based on real physical objects) doesn't have a problem with. Or maybe my brain just isn't sophisticated enough to understand their business genius. Either way, their little rant makes me feel like I'm taking crazy pills.
How about they actually make games that have replay value and don't suck so that nobody will want to trade them in?
"the used sale market is still depriving of money because it gives consumers an all-too-easy alternative to buying a new "
This is the precise concept that motivates the First Sale Doctrine. You only get paid for selling something yourself. Why should you get paid when someone sells something that used to be yours? When you sell your used car, do you have to give a kickback to the person you bought it from? It makes no sense at all given the set of commerce rules that we have come to accept over the centuries.
Really there is no end of the negative consequences that result if you decide that First Sale is not a valid concept. You have to question the entire meaning of the word "sale" if you do this.
In the age of the internet, games are uniquely poised to capitalize on aftermarket sales (and sales due to piracy) in a way that no medium in history has been able to, and it can all be done just by modifying the design of the product. Here's some examples that work extremely well:
-DLC. Look at Burnout Paradise. Two years later, it's still getting meaty, significant upgrades on a regular basis. The game has had ELEVEN content updates, 5 of which were paid / premium add-ons. The publisher gets paid for each of those! Bethesda knows how to nail this too, despite some early mishaps with horse armor. Rockstar's figuring it out too. The right DLC will make you a ton of cash, even from the pirates.
-Recurring subscriptions: Some MMO's give away their clients, and make their money on premium DLC and monthly subscription fees. Apogee understood this years ago, with the original Wolfenstein shareware. Download it and get 1/6 of the game, which was a meaty, satisfying experience on its own. But pay up and you can get the other 5/6ths!
-High replay value: Rock Band & Left 4 Dead's co-operative multiplayer emphasis give them huge replay. I almost never see a reasonably priced copy of Rock Band sitting on the used shelf (trust me, I've looked, I want to import the songs into Rock Band 2). Rock Band follows the DLC model, too! The longer you convince someone to hold onto your game, the lower the aftermarket churn, and the higher you can keep your MSRP before you're undercut by the used market. Just ask the creators of Mass Effect, or Super Mario Galaxy (I dare you, get all 242 stars).
-In-game advertsiing. The people who buy games used are necessarily doing so after the big retail splash of the original launch. These new eyeballs can view ads impressions just as well as the original pair, though, and the value of that digital billboard is only as high as the number of people who can look at it at any given time.
Efforts to thwart the aftermarket's existence entirely, through one-time activation keys and emphasizing downloadable games, are just going to piss the customer off. The days of making a 4-hour singleplayer game with no replay value beyond deathmatch/ctf and expecting to have high sell-through are over; The high-budget $60 Terminator: Salvation game is only 4 hours long, it's going to be littering the shelves of used stores. The only way to stop the used market from undercutting the new market is to make the new experience so compelling, people don't want to part with their new game for a long, long time.
Even Jesus hates listening to Creed.
they could announce they were cutting the price of games by 1/2 unless gamestop revenue shares. If they did that then the price of used games would drop by half too and game stop would lose half its revenue!
The price drop would actually not mean fully half revenue loss for the publishers because they would sell more games.
Some drink at the fountain of knowledge. Others just gargle.
Bingo! You've figured out the blatant contradiction that supporters of strong IP are facing. On the one hand, they want it to be just like traditional property, and to act like it's a natural right, and can be stolen, etc. On the other hand, they want to turn around and license up the wazoo.
"Anyone who [rips a CD] is probably engaging in copyright infringement." - David O. Carson
All i'm hearing is "whaaa! I want more money" bullshit. I am tired of these companies who want everyone else to play by the rules (copyright) trying to circumvent the first sale doctrine. Guess what assholes, someone already paid the market price you set for the game and you got your compensation. If you think it's unfair, raise the prices and see if you get as many people purchasing your game. It is bad enough game companies sit on games that they have effectively abandoned, abuse people's PCs with malware designed to "stop piracy" and overall treat the customer with general contempt.
Gaming companies have already done a bang up job preventing PC gamers from selling/giving away their game to other interested parties and now they want to double tax paying customers because of their silly said business model. So go ahead and cripple the resale market. You may be able to kill it but there will always be the black market and those first sales you may have gotten will dry up as well.
The translation:
"Wah wah wah!"
Perhaps if you greedy bastards didn't sell games at the price you do more people would buy them. Instead, for a lot of people, they can't just casually pick up a game and take a chance like you would on, say, a $20 DVD. $70 is a LOT of money to gamble on something that stands a 50/50 chance of being garbage. And no retailer I've ever come across will give you your money back under any circumstances, so you take a big chance buying most new games.
Perhaps if the industry didn't put out so much absolute garbage we'd be more willing to take the chance. Unfortunately they aren't willing to not release unfinished games, crap games, and so much other effluence.
They're reaping what they have sown. And all they seem to do is cry about used games and how they're losing revenue.
Cry me a river.
I see a lot of comments here comparing the "First Sale" profits of video games to cars or TVs or other physical utilitarian devices.
The main difference, in my opinion, is that in the first year of owning a car or TV, only the first owner can get value from it. In the first year of life of a game disc, 12 people can get value from that one disc.
I don't think you'll see Bungie, Epic, or Infinity Ward complaining about this. They've figured it out... you sell people the game and give them a great multiplayer mode (or some other reason) to hang onto it, and they will. Used copies will be few and far between.
The people who are really suffering are those that make truly fantastic single player games. Prince of Persia comes to mind... it was great, I thoroughly enjoyed it. All 20 hours of it... and on my schedule, that's 5 days of having the game to do 100% of everything there is to do. So I rent it. I actually rent all games that have no multiplayer aspect. The only games I purchase are the ones I can see myself playing online still, 6 months down the line. You might say make the games longer, which is an option, but I personally don't WANT to invest more than 20 hours into any single player experience, and to be honest, when it is longer, like 100+ hours for a Final Fantasy game, you spend most of that time not having fun, just trying to level up to do everything.
This applies to DVDs and to a lesser extend music as well. One DVD can easily fully serve a group of 20 people in one week if they pass it around and watch it in groups.
I'll leave you with this... I think more than the disc, game companies, movie companies, etc are selling you the experience. The experience of playing through the game or the experience of watching the movie. And I believe they should be compensated for each experience they provide. I do think that $60 is a bit much for a video game, but I think it's to compensate for rentals and used game sales. Once everything goes digital, we will see a shift. Let's say that for every 1 copy of a new game that is bought, 2 people probably play that disc, on average, could be more or less, not sure. So $60 provides 2 play experiences. The publisher sees approx $30 per experience in this model, but assuming the first copy was $60 and the used copy was $55. That's $115 spent, and Gamestop probably paid the original owner about $25 for it, so they paid $35 for the experience. If the second owner sells it back very quickly for $25, then he would have paid only $30, bringing this in line with the above of $30 per experience. So $65 spent total for two plays, or $32.5 per experience. If the publishers had complete control over this, the players could have each spent less money for the same amount of, or more (because they get to keep the game), game.
However, it may be be a utopian thought to think the publishers would pass these savings onto us completely, I like to dream.
Bingo. And that they're not doing that is what convinces me they're not really interested in giving customers a good value proposition; they're just bitching that someone is preventing them from screwing customers as hard as they'd like to.
If they sold "classic" (anything that's not the new hotness) games in different packaging for the price of used, who would buy used? They could take the wind out of Gamestop's sales right there.
Lots of companies spend giant piles of money trying to figure out what customers want so that they can try to deliver it. In this case, it's blatantly obvious what customers want -- a slightly cheaper game -- and it's even obvious exactly what price they're willing to pay. Gamestop has done all the market research for them. If they want to make money, it's on the table for them to take. If they don't, they can let Gamestop take it.
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