On The Topic Of Used Games
Here at eGamer, we like to tackle the really edgy and difficult topics, regardless of the aspect of gaming to which that topic pertains. Over the course of the past few weeks it’s been something of a marathon of mammoth tasks but we’ve always felt ourselves up to it and we’re not done just yet. This time we’re going to be focusing on another current hot topic in the gaming industry, and that’s used games. I’ll admit, I’m a little over the topic myself, but since I have what some have called an extensive knowledge of used games, I’ve been asked to pen a feature which delves into the topic and explains its various aspects.
To that extent, let’s call this an educational tool on the topic of used games. We are all gathered here today to witness the marriage of concepts that have been thrown around, as well as criticisms which negate those concepts, at least for the current gaming market. With this in mind, we’re going to be talking about things from the perspectives of the consumer, the developer, the publisher and the retailer. Pretty much every stakeholder in these transactions, then. As a result it’s going to get long, it’s going to get detailed, but on the bright side, it’s going to get extensive and cover pretty much every current side of the argument so that nobody gets left out and nobody is misrepresented. Hopefully.
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So. Used games. What are they like?
The obvious and primary benefit of the used games market is that it significantly broadens the exposure of games, where there are a few types of people who are suddenly able to purchase games, namely: People who cannot afford games at the full price; Gamers who are not willing to commit to a full-price purchase, perhaps because of the risk of a game being bad or not worth it; Non-gamers (parents, partners, whomever else) who are looking for cheap games for their gaming family members or friends; Gamers who are specifically taking advantage of the used games market to snag more per month than they otherwise would if they bought brand new.
Suddenly all of these people can buy games because the used games market exists. In its current guise, you could even form a sort of play-pool of gaming friends where it’s taken in turns to purchase games, which are then shared between this circle, rotating games when necessary so that everybody gets a chance, everybody contributes, and nobody is left out. This leads to incredible savings and the ability for even students and those without much in the way of income, to enjoy gaming. I for one have managed to get by in the past few years with only a few retail purchases, with the rest of my games either traded, bought used or borrowed from friends. As a result, I’ve saved thousands of South African Rand. Money that I otherwise do not have, which would have severely hindered my gaming and limited the amount of games I could play.
In this way, used games allow for a far larger audience reach than conventional, first-sale retail does. Allowing the sale of used games, thus, allows games to reach a far larger audience, especially for those games where most gamers are definitely not going to pre-order or buy the game at launch, for the full price. I won’t name any of the games in question but I’m sure that just by reading this, you’ve already got a game in mind which you’ve thought of buying once it went on sale, and subsequently did for cheaper than the initial asking price. Used games allow for this, and to that extent, used games have the potential for reaching a much, much larger install base, something developers have yet to really take full advantage of.
That brings us quite nicely to the next order of reference, which is that regardless of how many people it reaches, used games do inevitably hurt the developer. Now your immediate argument here is, “Well they’ve sold the game once, right? So why must a second consumer pay for the game when it’s already been paid for?” From the perspective of the original purchaser, you are right on the money, if you’ll excuse my pun. However things are very weird and shaky when it comes to the digital world. Whereas you could sell a car second-hand without incurring any extra fees, that car is not in same condition it was when you bought it, owing to wear and tear. Likewise for a book, if you so opt to sell a book. (I know people who would judge you for that.)
The thing is, with digital there is no wear and tear apart from negligible physical disc damage and most of the time, the original item is resold virtually intact. This means that although the selling party has transferred their rights of ownership to the buying party, the selling party’s use of the game is in no way related to the buying party’s use of that game. In other words, a duplication is created, not a full transfer. Now some developers have argued that this increases the cost of server maintenance as more users are on their multiplayer servers than games sold. That’s bullshit, and you should treat it as such. Even with the added server overheard from storing user statistics, it’s still a negligible amount and there are no magical new users being created on the server when one stops playing, having sold their copy of a game, and another starts. However unlike film, where most of the revenue is earned from cinema showings and not DVD, which would be the digital equivalent, the gaming industry relies on game sales as its primary source of income.
What this then means is that if, say, three million games are sold brand new and one million more gamers are playing that game, it’s effectively one million lost sales because of the used games market. It’s effectively one million people who are playing that game with no further money going to the developer. You might argue, once again, that the developer got paid initially for the game and so the money that goes to the seller of that game, which is the price the second purchaser is paying for it, is theirs by right of ownership. Fair enough, but what about lending games to friends, or trading games? Look at it from the side of the developer, for a moment. The game that you built from the ground up and poured your heart, soul, blood, sweat and tears into, just broke three million in sales. You’re ecstatic. However according to metrics, a recorded four million unique users have played your game. That extra million, do you think it’s just a goodwill on the side of the developer? That they should just take the hit and accept that they were already paid for a copy of the game which was then resold? Imagine if you’re them and seeing such a thing happening? You might call it developer greed, but another might call it the reason studios such as Radical Entertainment, Big Huge Games, 38 Studios and the entire THQ publishing house were shut down.
You’ll hear the term “loss leader” thrown about, which basically means that something is initially sold at a loss in order to promote sales for related items at a profit. Consoles are our loss leaders. They are sold at a loss to us (this is verifiable fact, you may look it up if you’d like) and then console manufacturers will charge licensing fees to publishers for their platforms. This is why a PC game is usually a little cheaper than a console game — that extra R200 or so goes to Sony or Microsoft, not to the publisher. The developer, of course, has already been paid for their part in things. The problem, however, is that when you operate in a “loss leader” market, then a lot of emphasis is placed on that profit-relevant sale. First-hand retail, basically. And because of this, a lot of marketing and incentive typically goes into buying brand new. This is why you’ll see all those hype trailers and pre-order exclusives, which leads us nicely to…
Retailers such as GameStop and locally, BT Games, rely a lot on the sale of used games for their profits. A lot. In fact, compared to the marginal profits of full retail, when they sell games used, it’s almost entirely profit. If you think of it like this, the profits taken from first-hand game sales will go into buying those games back from consumers who don’t really get much in the first place — which you will know if you’ve tried selling back to a retailer — and then the same game sold used is effectively maximum profit. What this translates into is selling the same thing twice, but incurring more than double the profits. Thus, it’s quite the lucrative practice if you’re a gaming retailer.
As such, we have it from some reputable sources that many retailers actually encourage the sale of used games over their brand new counterparts. Bonuses are offered to gamers who trade in their games early, and those games are then sold for maybe 5-10% off the brand new purchase price. When you walk into the store and ask for a game, you are shown the game in its brand new version and then marketed the game in its used form.
When Microsoft changed their initial DRM policies last week, nobody was a bigger winner than retailers, and nobody lost more than developers. Sure, consumers won too because now those less financially able gamers could once again partake in their favourite pastime, and people like me could once again form and take advantage of play-pools. But with the abolishing of used games restrictions, retailers effectively saw dollar bills. Remember, this is their chief source of profit and now it’s right back in their control. And since they are so fond of encouraging used game sales and then downplaying the profit margins when asked about it, developers start to feel the burden as their game sales figures drop and publishers create unnecessary pressure to increase these. Thus developers are forced to think up new strategies, unpopular strategies such as day-one DLC and microtransactions, in their attempt to curb the losses incurred by publishers from the sale of used games.
Dealing With An Industry That Depends On Used Games
The simple truth of the matter is that right now, the gaming world is not ready to go full-digital and used games are an important, almost vital aspect of the growth of the gaming industry. Furthermore, the gaming industry, like all industries, is a business. And business models can, and do, fail. As such, just because a new business model is introduced, it does not make it immediately a success, nor indeed a failure. Time and practical application will tell whether it is either of those, although sometimes a handy helping of educated thought process goes a long way to figuring it out. I now direct everyone’s attention to the following video on used games, by TotalBiscuit. If you’ve not already seen it, then feel free to watch it (Azhar also asks that you kindly watch a reaction video by SickBoy, from GamingAnarchist) and join up with the rest of us afterwards:
Last year a European law was passed that allowed users ownership rights for their digitally purchased content. This means that should a consumer wish, they may sell off or trade the rights to their legally purchased digital content. Valve’s digital distribution platform Steam, is currently in contravention of that clause however it has not been enforced on the publisher just yet, perhaps owing to the law not accounting for enforcement of itself, but no doubt there are currently steps being taken to adhere to this law.
Whether or not Microsoft planned something similar is anybody’s guess, now. They could well have been planning all sorts of sales, promotions, specials and so on, but as much as that is a huge “what if”, so too was the “what if” scenario of Microsoft’s servers going down, likewise the “what if” scenario of Valve’s Steam servers going down. Although on the flip side, so too the “what if” scenario of Microsoft removing their restrictive DRM, something that early last week, I got called a “12 year old” “fanboy” who writes “clickbait bullshit” for views, for saying. So really, we can’t say it was a sure thing, but we cannot say that it wasn’t, either. Unfortunately, all of it falls away in the face of extremely negative feedback and pretty much the entire gaming industry opposing it, which is fair, I guess, since consoles are typically designed for convenience and ease of use, not PC-level complication. And that’s not a hit at PC gamers, I promise.
A Collection Of Personal Thoughts
Perhaps we could have had a much more elegant solution, where retailers are simply taken out of the equation entirely, and all trading and reselling of games is handled with, say, Microsoft as the middle man? This could be a viable means of doing things, where Microsoft take a cut of the deal but since they would, say, offer less and pay more than a retailer would, they’d easily get gamers to partake. Let’s say for example, I wanted to trade a game with Dean. The game’s full purchase price is R500 but Microsoft offers me R300 for the game, which they are charging Dean R400 to purchase used. He pays Microsoft R400, they pay me R300, then either they handle the pickup and delivery or we do, and then Dean files a “Sale Complete” or “Sale Not Complete” for which I am legally liable by all the laws of my country (South Africa, in this case) if I do not follow through correctly, with the sale. Dean and I may then append sales ratings to each other, based on the conditions of the game’s packaging, discs and so on. Or if it’s an entirely digital sale, none of that is even required, merely a swapping of licenses or ownership rights and job done. This is a simple and easy way in which Microsoft could have handled things. It could use entirely virtual money (which they’re going to be using, soon, anyway) and that extra R100 from the transaction could be shared between them and the publisher. Thus, everybody wins except for the retailer who has been filling their pockets off questionable practices, over and above the already-mentioned pushing of used games sales.
You might want to know what these other questionable practices are, I imagine? Well think of it like this: Publishers currently rely on retail as a means for pushing game sales. This is a good reason why the move to digital is being pushed so hard. Relying on retail effectively empowers retailers. A publisher cannot go against a retailer because of the risk of that retailer refusing to stock that publisher’s games. Now imagine a scenario in which, say, GameStop asks a publisher to include certain exclusive pre-order incentives for buying from GameStop. The publisher could refuse, in which case the retailer refuses to stock the game, or they accept and then the retailer has a means to attract customers into the store, to purchase said game. Then, as mentioned above, the retailer will push the customer to buy the used variant of the game instead, for maximum profit. Do you understand now, why I feel that the biggest winners in the used games market are retailers?
Perhaps I paint them out to be worse than they actually are, because after all, publishers are also to blame, right? Of course they are. I will not deny that for a second. Some of the most questionable publisher practices can be traced right back to used games, in fact. Okay, not all, I mean the always-online requirements for some games are base-level methods of control, but let’s look at some other factors for a moment. I’m going to skip on Origin and uPlay (with their constant pricing of games now worth a fraction of the digital price) for now because they form a larger part of a similarly detailed article on DRM, so, another time. But how about the already-mentioned day-one DLC and micro-transactions? Wait first, let’s address online passes, shall we? I hate them. I cannot stand them. They are an abhorrent means to countering the sale of used games and mean that in a household consisting of more than one gamer, only one person may partake in the game’s online experience. It’s excluding and it’s unfair on gamers, and it removes the optionality that should be there, which is present with the aforementioned other practices, which I’ll get to shortly. Suffice to say, I was one of the happiest people on Earth when Electronic Arts announced their removal of online passes. Doubly so, now that I know there are no similar restrictions enforced by manufacturers on consoles themselves.
Now, to those other practices. If a game sells five million copies brand new, and roughly two million are resold, that effectively means a market of seven million gamers. Whereas a developer could look at those extra two million as lost sales, a smarter, more intuitive developer might look at that as a potential two million more people to sell to. This is why the future of gaming might well involve a lot more in the way of downloadable content of various kinds, freely offered downloadable content for brand new buyers, and micro-transactions. None of these are things that I have a problem with because, as mentioned above, they have optionality, which is an important part of being a consumer. If you don’t want them, you may simply opt out. Nothing is forced on you, although the developer has every right to entice you by say, withholding certain advantages only allowed to you by purchasing downloadable content. Just as long as it doesn’t afford you an unfair advantage in multiplayer, it’s okay in my books.
Alternatively, you might argue that development and marketing budgets are far too inflated and maybe they ought to look at cutting costs on their side, if developers hope to maximise their profits. This too, is a valid argument. After all, given some of the development costs for popular, cross-platform titles… I mean some games go into the hundreds of millions of dollars from conception to release. That is a ridiculous figure and entirely unnecessary, especially when it means that in order the break even, the game also has to break sales records. That’s no way to run a business, let alone an entire gaming industry. So that is definitely something that developers will now be forced to look into, if they hope to cope with the prospect of used games in the next generation of gaming.
Possibly The Best Solution Yet
Of course, there is one thing that developers can do that will entirely eradicate the sale of used games: Make games that we won’t want to sell. To paraphrase one of Marko’s recent articles, when you go to a retailer and see a whole bunch of copies of the same game for sale in their used games section but certain other new titles entirely missing, that can only mean that they’re either in such demand that they don’t stay on the shelves for long, or, quite likely, nobody actually resells those games. That sounds like as good an idea as I’ve heard, on the topic of dealing with used games. Simply make better games that consumers will be hard-pressed to part with, and you won’t suffer as much from used games syndrome. I know that personally, there are games I would never have bought brand new, because I knew they were not worth it and would be far cheaper just a few months after release. On the other hand, there are games that I bought as soon as they were out, because I knew that they would be worth every cent, and I have since kept hold of those games, and have no intentions of selling them.
And that’s about as comprehensive a look as I can offer. We’ve talked about things from the side of the consumer, the developer, the publisher and the retailer. Now’s your chance to share your thoughts in the comments. Until such time as we live in a world with full digital distribution, consumer trust in corporate entities, or just a neat and handy way to remove retailers from the equation while allowing developers to get a cut of used games, which would eliminate the need to eradicate the practice, I do hope that we talk about things and get them clearly understood so that when Microsoft or Sony or whomever else drops some crazy used games policies in the future, we won’t be so instantly enraged and offended by it. And maybe together we can save the business that is the gaming industry, before it’s too late.