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100 Million Used Games Traded Each Year In the US
We occasionally discuss the complaints from video game publishers and developers about how used game sales are hurting them, and how they've been testing out countermeasures disguised as features to compensate. Now, industry analyst Michael Patcher has released a report which attempts to quantify that damage. Patcher estimates that used game sales and trades number around 100 million each year in the US. However, despite the immense number of transactions, he doesn't think the used game market is as detrimental to sales of new games as the publishers think. "The vast majority of used games are not traded in until the original new game purchaser has finished playing, typically well beyond the window for a full retail priced new game sale. Thus, while there may be some limited substitution of used game purchases when GameStop employees 'push' used merchandise upon consumers lined up to buy new games, the vast majority of used game purchases occur more than two months after a new game is released. ... To the extent that there is a substitution effect, we estimate that fewer than 5% of new game sales are impacted."
I would suppose that book publishers would love to prevent the reuse of their products too. The number of books passed on to others is most likely much much higher.
as price drops demand picks up; and purchasers at $20 will not buy at the $50 retail price. Thank you for restating how supply and demand curves work.
The real question is:
Is there a price point between the price of used games and new games that would generate greater profits for game manufacturers than the current pricing model?If there is, then used sales do cut into new ones in the sense that purchaser will wait until the game price drops to a price they are willing to pay if the used game reaches that price prior to publishers lowering the price of new ones. If the used market captures those sales then it is cutting into new game sales since used games are replacing new game sales.
Publishers would probably like to price so as to capture as much of the "I must have it on release day" sales as at high a price as possible; then drop prices enough so the incremental demand from the price drop generates higher profits than fewer sales at higher prices. While falling prices would drive down the value of used games and their attractiveness to stores; publishers run the risk of training buyers to wait a few weeks for the first price drop and losing release day sales and profits. Given how rapidly used games start to appear after release shows their is a large demand at lower prices (duh); how to tap into that without hurting earlier sales is a difficult question to answer. It's a tough call; especially given the money it takes to develop a game.
In the end, however, I think their is more to the story than just $20 used game sales don't hurt the $60 new game sales./P.
I'm a consultant - I convert gibberish into cash-flow.
When you justify buying a new game at $60, knowing that you can resell it and maybe get half your money back makes it a little bit easier. Without that ability, the value of the game goes way down. Imagine if you were buying a new car, and knew there was no way to resell it ... Would that impact the price you were willing to pay?
1) The person who bought the game new gets some money back when he sells it used, thus giving him more money to go buy another new game.
2) People are more likely to buy a new game if they know they can sell it used when they get tired of it. If they know they will be stuck with it, they will be less likely to buy. In the aggregate, lower new prices would be necessary if there were no resales. (This might end up happening if all the draconian DRM makes the "purchase" into a true rental because the game can't be transferred and might fail to "activate" in the future. Such games would be worth less.)
Penny - plain text accounting
You don't have to imagine. Plenty of people lease cars, knowing they can't re-sell them - technically, they don't really even 'own' the car, all for a reduced price. Other people like me would never lease a car, though. We prefer to own the thing outright.
Disclaimer: I'm a game developer working on MMOs, so used games aren't exactly a threat to our business at the moment, since you're buying an on-line account which you really can't sell - the client software is sort of incidental. However, even when I was working on single-player games, I still felt the same way. Which is:
To hell with publishers who feel they don't have to earn their customers' money just like every other business on the planet. The game development industry is big and booming, but it's also incredibly cut-throat and highly competitive, often with very slim margins and high risk. Tough nuts - we finally made it (as an industry) to the big time, and now they're complaining that their margins aren't as big as they'd like it to be.
Guess what - if there's a thriving used game market which sells used copies of your game for just a few bucks less than the retail price, maybe it's an indicator that your prices are a bit on the steep side, especially many months after its initial release. How about you drop your prices to remain competitive? Or release additional content to encourage new sales, perhaps?
I can't stand it when people whine about the reality of the marketplace like that. It reminds me of another entertainment industry that's become universally loathed because of their refusal to adapt to new marketplace realities, and instead use the force of law to bully and intimidate their customers. I hope to God my industry doesn't go in that direction. At least we seem to be seeing a backing off of those insane and intrusive DRM schemes (which most developers I know don't like either).
Irony: Agile development has too much intertia to be abandoned now.
Used games do not hurt or harm the game industry. Why? Because the consumer has a first-sale right to sell the game and the game industry has no right to financially gain from that secondary (or tertiary, etc) sale.
So when some third party profits, and you have no rights to the profits, it necessary follows that you were not harmed.
Under the game industry's logic, because my fellow employees are being paid by my employer, I'm somehow losing out on that money, because for some bizarre reason, that money should be going to me.
Or under the same asinine logic, McDonald's deserves a cut from the local Burger King's profits because it's making money that, for some bizarre reason, McDonald's thinks it deserves, even thought it has absolutely no right whatsoever to those profits.
Of course someone is going to complain about my analogies. That the game industry produced the game so therefore it has a right over the game. In my first example I didn't do my coworkers' duties, so therefore I have no right to their pay. And McDonalds didn't serve the customers who went to Burger King so therefore they have no right to those profits.
But you're missing the point. It is completely irrelevant that a particular gaming company originally produced the game. The main issue is that once it sells a copy, It no longer has any resale rights to that copy. I'll say it again, it has no right to any resale money in the same way that I have no right to my coworkers pay or that McDonalds has no right to Burger King's profits. None. Nada. Zip.
The gaming industry certainly wants profits it is not entitled to. But that is not harm. That's jealously and blind greed.
If someone says he and his monkey have nothing to hide, they almost certainly do.