Used Games and Next Gen Consoles

Posted by: 2/19/2013

gamestop.0_cinema_640.0 The rise of video games in the mid 1980′s brought about many changes to the industry. After going through what is known as the video game crash of 1983, Nintendo revitalized the video game market in North America by introducing the Nintendo Entertainment System. While the Atari 2600 and other consoles before the NES brought video games to the living room, the NES was what helped drive this idea that video games should be played at home instead of an arcade. With the popularity of consoles higher than ever, it helped bring on a new market in the video game industry: buying used video games.

Used game sales have been a very lucrative market for some businesses – the most notable being GameStop of course. While it is hard to find solid stats of the number of used games sold, in September of 2012, half of the total sales of video games included used game sales, game rentals and ‘digital format sales,’ according to the NPD. It would be fair to say that used games account for 30-50% of all video game sales in a given year. GameStop, which is a company that relies heavily on used games to turn a profit, had a total revenue of $9.5 billion in 2011. That is a large amount of revenue for a company that’s most profitable area is selling used games.

While the used games market has been very profitable for some companies, the same can not be said for others, especially game developers. For this reason, rumors have been spreading around the Internet suggesting that the next Xbox and PlayStation will have technology to block used games from being played on the consoles. This may be the last generation of consoles that would allow used games. If the rumors end up being true, who will be affected most by this decision? Some are saying gamers, and others are saying the console manufacturers and publishers. In the end, it isn’t as big of a deal as most people are making it out to be.

There is no question that the used game market hurts publishers and developers. When a consumer purchases a brand new game, the store you purchased the game from keeps a couple of bucks, while a majority of that money goes to the publisher. Fast forward a few months, and when that consumer is sick of the game, they’ll head to a GameStop to sell the game to the store for $20. GameStop will then take that used copy, put it on the shelf next to the new copy, and sell it for $5 cheaper than if customer is buying it new. Now when another costumer enters the store, sees the cheaper copy of the same game, they don’t hesitate to grab the cheaper game. But what they don’t understand is that all $55 GameStop is charging for the used copy goes to GameStop. All of it. Not part, or a majority. All of the money. The developers see zero of that used game transaction. Repeat this process a few more times with one copy of the game, and you’ll see why game developers are not a fan of the used game market.

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But one thing the industry needs to address is why so many consumers are purchasing used games. It isn’t the consumer trying to take a stand against Activision, or EA. A majority of gamers are not trying to send a message when they purchase used games. The lower price tag of the used game is what drives customers to purchase a used copy instead of a new copy. Gaming is an expensive hobby, and consumers are trying to save a few bucks wherever possible.

Overreactions by some folks to the consoles blocking used games is an understatement. Some people have said that if they can’t buy used games, they won’t buy a new Xbox. Others have said this will bring in a new video game crash. A majority of people believe that the end of used games means the end of cheap games. All of these statements are filled with hyperbole, especially the idea that not having a used game market will mean the end of lower priced games. There is an easy way to bust this idea, and that is to look at Steam and PC gaming.

There is not a used game market for video games on PC. A lot of this has to do with serial numbers PC gamers have to enter when purchasing a hard copy of the game, but the main reason it is non-existent is the rise of Steam. One of the biggest advantages that Steam has over consoles is the insanely cheap games that can be purchased from the online distributor. The reason for these cheap games is that there is no used game market on PC. When a game is not selling well, publishers and developers know that if they drop the price of a game, they’ll see an increase in the amount of games purchased. Since there is no used game market, publishers don’t have to worry about trying to recoup lost revenue to used games.

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The next gen consoles don’t have to switch to digital distribution only. It is clear that the infrastructure in America is not ready to support a digital only system of delivering goods. But eliminating the used game market would help bring down the cost of a physical copy of a game.

Is the gaming industry willing to upset that relationship with GameStop? While many in the industry dislike GameStop for the sole reason that a large majority of their profits come from used game sales, publishers and GameStop have been getting along well recently. This is evident by the sheer number of pre-order bonuses that GameStop offers with every single AAA release.

Blocking used games would definitely hurt part of the video game market, but it won’t bring about the next video game crash like some folks suggest. If it does turn out that the next gen consoles block used games, let’s wait and see how they implement this system before we run to the pitchforks. If blocking used games upsets you that much, remember there is always the Wii U.

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  • Massacred

    OK, but car companies don’t block the sale of used cars, and I’m sure that detracts from their business. Clothing companies don’t stop thrift shops from selling their clothing do they? Movie studios, don’t make selling used DvD’s and Blue- Rays Illegal do they? What is it with game companies?

  • Ziggy

    If a used car sales man sells a car, is he not infact making a profit without the company? If a student sells pre-purchased Candy at a school, is he not making a profit with out the company getting anything?

    How can game companies think that they are above this.

  • Flamered

    So you’re telling me in modern times, I can buy a CD off iTunes, burn a copy and give it to my friend. I can lend my friend a Blue-Ray and it will work on his player. And I can go sell a used BMW without Bavarian Motor Works trying to sneak in an extra profit, but when it comes to games this is an unacceptable practice? No, their profit is already accounted for after selling the in the first place. (they don’t call it USED for no reason)