I’ve heard the argument a hundred times over: GameStop is destroying the industry! They push used games, which are only five dollars cheaper, onto customers! They’re stealing from developers and publishers!
That the retailer sells used games priced closely to new ones rubs many in the industry the wrong way. They feel that those sales are eating into their profit margins. Who wouldn’t want to save five dollars (plus 10 percent for customers with Edge cards) on a barely played copy? (Although, GameStop claims that only four percent of used sales are of titles released less than 60 days prior, which is generally accepted as the period when most revenue is earned.)
Going further, some will argue that developers and publishers deserve money from second-hand sales, which completely blows my mind. Presumably — since we’re talking about a second-hand sale — the first buyer already paid both aforementioned parties for the copy.
Deep down, I can understand the allure of such an argument, which is one that gives the well-being of those involved in the game’s production and distribution top priority. The reasoning also feels intuitive — if developers and publishers aren’t paid, they won’t be able to keep making games, right?
But I’m not a developer or a publisher. I’m a consumer, and what may be good for those who make games may not also be good for me. Who’s looking out for our interests?
The “fight” against the second-hand market
Electronic Arts believes that used sales represent a “critical situation.” I’m convinced that if publishers (at the very least) had their way, we’d never have the opportunity to own another game. Every purchase would be access to a license — nothing more. Embedded within the assault on the second-hand market is the issue of ownership.
In a way, GameStop represents that lingering tradition of ownership. We can resell our purchased games because the first-sale doctrine transfers ownership from seller to purchaser. Copyright holders only have the right to profit from the first sale, not any subsequent sales of that particular copy. This is why I groan when someone argues that developers and publishers deserve a piece of the second-hand pie.
Unfortunately, developers have taken numerous steps to devalue a used copy. Several new titles were released last year with one-time-use codes for small, in-game content, such as Dawn of War 2 and Dragon Age: Origins. We don’t necessarily own this content, either, since we are unable to transfer said content to a new buyer.
The most recent example of such comes from Bioware, whose Cerberus Network for Mass Effect 2 standardizes the approach. A bundled, one-time-use code provides access to the network’s free content. Players who buy used will have the option to spend an additional $15 in order to receive the extra content.
But don’t think that developers would stop there. A little more than a year ago, Epic Games president Michael Capps fantasized about charging those who rent or buy used a fee in order to finish the game at all.
Developers seem intent on removing value from used copies by whittling away the amount of content we own, and thus, can sell to a third party. At the extreme, these actions could result in the exclusive licensing of games and the used option going the way of the dodo.
This goes way beyond saving yourself a few bucks here and there. Many people appear blind to the potential industry-wide negative effects.
The effect on sales
Second-hand goods lower the industry’s barrier to entry, which is much higher than other entertainment options for kids. The initial cost of a console is high, and said console usually doesn’t ship with a game anymore. Add that — plus a second controller so you can play with your friends — and newcomers are looking at something between $350 and $450.
That’s significant. And I know for a fact that my Dad was only able to afford all the titles my siblings and I played growing up by trading in older ones we’d already finished.
One of the best ways to grow the player base is to keep the barrier to entry as low as possible. The Wii brought gaming to the masses, but don’t believe that motion controls accomplished this feat alone. The system’s $250 launch price played a role as well.
A lower barrier to entry — and the ability to play more games than one’s available income would normally allow — brings more people into the pastime. If kids grow up with a large and diverse library at their fingertips, they’re much more likely to continue playing as they finish school, get jobs, and buy new games on their own.
Without a used option, I’m willing to bet that the younger players among us will be less likely to play as many games, and therefore, less likely to still be playing into their 20s and 30s.
But these second-hand goods also do one other thing — they make a retail operation which exclusively deals in video games profitable. According to the Wall Street Journal, 42 percent of GameStop’s gross profits come from used games and hardware. Because the profit margin in the second-hand market is so high — 48 percent — the business kept profits up despite the weakened economy. GameStop reported sales for this last holiday season nearly the same as the year before, as reduced revenues were offset by an increase in used game purchases.
This means that GameStop can continue opening new locations, hiring new employees, and, ultimately, moving more product. With more than 6,000 retail spaces in the U.S., you can probably find a GameStop in the smallest of towns and the most rural of areas. More stores mean greater access to games for even more people. This can only be a good thing for the industry.
My point is that not everyone lives in a city with a local, independently owned boutique shop that sells games. Much of the country is in the suburbs and the open country, where chain stores are the only option around.
The big box stores — like Best Buy or Target — are only going to carry the latest titles. What little they carry is only a small portion of their inventory anyway, and the profit margin on new games is incredibly tiny as well.
So, if you’re looking for something quirky or older, GameStop is usually the best place to go since they’re more likely to keep those titles in stock. GameStop has a business model to keep more games on shelves.
Intentionally chipping away GameStop’s primary source of revenue — as developers are keen on doing — could have disastrous side-effects over the long-term.
Second-hand goods don’t necessarily equate to lost sales
GameStop sells a lot of used games, and some might argue that those are lost sales of new titles. The assumption here, of course, is that were used games not an option, most (if not all) consumers would purchase new. I’m not convinced — no one has presented any evidence to suggest as much.
People buy used for the obvious reasons — it’s a hell of a lot cheaper for heavy consumers (since those $5 discounts plus 10 percent off add up quickly) and doing so allows them to buy more games, new included. If these consumers are priced out of the hobby through the loss of the used option, many of them would stop buying games altogether.
Even if we assume that some consumers would buy new all the time, I suspect that they wouldn’t take as many risks without the option of buying used, which means that they’d play fewer games and spend less money overall. I have a hard time imagining that this strategy would increase long-term profits for the industry.
For some odd reason, the Epic Games and Electronic Arts of the world believe themselves to be unique of almost any other industry that sells some type of good. Last I checked, libraries (which lend books for free) and used-book stores haven’t put print publishers out of work. Used-car dealerships haven’t stopped the production of new models or their sale. I never hear Random House or Toyota moaning about the second-hand market.
While developers and publishers will bitch and moan about used games, I hope that their pleas to receive money each time a single copy exchanges hands falls on deaf ears.