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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."
and gets it!
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...
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.
I hadn't purchased anything from Gamestop until recently. My employer moved offices recently and now we are across the street from a Gamestop. I went over to purchase LIttle Big Planet and they assumed I wanted the used copy. There was only $5 difference between the used and the new and I figured I'd rather get the new. I knew something was up when the guy behind the counter kept telling me I could save a few dollars if I got the used one. Was I really sure I wanted the new one? Are you really sure? I figured they must be doing very will with their used games. Most of the store is full of used games.
What does Gamestop pay for used games? They must have some soft of dynamic system that keeps track of demand and quantity on hand before they quote a price. Is it worthwhile to sell games to Gamestop? They wanted to sell me on a membership card that would give me 15% when I sold a game to them.
The few games that I have bought used were from Gamefly. The nice thing about Gamefly is they at least give you a *new* case (not a beat up and gross one), cover art, and the booklet. I supposed I'm picky though, I don't buy a game unless I know I really want to keep a copy for a long time.
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?
The game companies get their cut at the time of first sale. The selling cost of the game already includes in the price the value to the customer of the ability to resell the product. The assumption the game companies are making is that if they lock this out, they can sell more product at the current prices, but instead what will happen is that they will be have to drop their prices some amount to account for the fact that it is less valuable to the purchasers.
This is a fairly standard element of elementary economics; for instance, see this chapter of Price Theory, where virtually this exact problem is problem number 12 in chapter two of the book.
Which just goes to show that for all the supposed value of an MBA, people in business still routinely fail to apply even the simplest economics to their own worlds.
"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.
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.
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.
The height of American corporate practice - we won't do anything to keep our customers but will spend millions creating artificial mechanisms to distort the market and end any competition for them.
The good news is they're succeeding wildly - for instance I've neither pirated nor bought big corporate music in years because I can't stand either option. Instead I just buy direct from bands for half the price in a market *not* distorted by Sony and BMG, and by odd coincidence the artist gets to keep all of it.
It turns out market arbitrage is not a constitutionally protected right.
Pug
An Invisible Entity of Vast Power whose existence must be taken on faith alone: Liberal Media
An identical situation - where the original producer gets a cut of every subsequent sale - has been happening across Europe in one particular very high value market for nearly a decade now. It's called droit de suite, and it's granted on art sold at auctions to make sure that impecunious artists get a cut of the multimillion resale values of their art. http://en.wikipedia.org/wiki/Resale_right It's a pretty contentious issue, especially for us mercantile Brits.
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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