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Used Game Sales – A Change Upon Us

With the announcement of the Xbox One came a wave of uncertainty and unease over the used game market.  Many have taken to battle cries of unfairness and openly stated disdain at the thought of used games becoming monetized by the publishers. It is a complicated issue that is hotly debated and is emotionally charged for many.  Ultimately, things always change and with the Xbox One we are seeing once again the industry stress testing such a change.

As we look at the landscape of used games, we can quickly see they are non-existent on Steam which given Steams popularity with PC gamers makes them virtually non-existent for pc gaming.   Additionally we can take out any downloadable games from any ecosystem, as they are not transferable in almost all cases.  So, the reality is we are talking about one segment of gaming (albeit a big portion), and that is the retail console/handheld market.

There is an argument to be made that selling back your used games to stores such as Amazon or Gamestop promotes new game sales.  In fact Gamestop in talking to Gamasutra in 2012 told them that in 2011, 17% of their trade in credits went toward “new sales” and that the retailer sold 25 to 30 percent of the new games in the US.  In simple terms the money they give back gets turned around and used for new games.  But as you look at that figure they leave out some other interesting tid bits.  How much of the 83 % of trade in credits go toward more used games?  What I can tell you is that in 2013 it is estimated that 2.0 Billion is the revenue figure being generated by Gamestop for their Used games being resold and none of that revenue is being shared with the devs/publishers with the exception of the 17 percent of trade-in’s buying new games (which by the way Gamestop still gets a cut of).  You can also make a case that revenue generated by used games is pure profit given all packaging costs, distribution fees, etc… were already accounted for the first time it was sold.  In 2012 the industry all together did approx $62 Billion in revenue and its expected to see 39% of its revenue in the year 2017 to be from digital sales.  So looking at the big picture certainly something that is roughly equivalent to 3% of all sales seems like it wouldn’t be that big of a deal.  But remember revenue numbers don’t actually equate to profit in most cases.  Gamestops Used game sales number are more or less profit which as we all know is the best kind of revenue to get.

Profit at the end of the day is the number one thing any company will seek.  If you are not profitable you are not actually making money and that leads us layoffs, cutbacks and closures.  In 2012 we lost 20 game studios to closures and in 2013 we have seen The closures of both a major publisher and developers already in the early part of the year.  THQ being the most notable of the lot had to close its doors shutting down numerous developer studios whom many had put forward games that were critically acclaimed successes but failed at retail level.  One has to wonder that if THQ had been able to recoup some of the money from used game sales that their story might be different.  Heavy Rain is another prime example of a game that has quantitative numbers reflecting the impact of used games.  Per Quantic Dream cofounder and European Games Developer Federation chairman Guillaume de Fondaumiere, his game lost between €5 million ($6.8 million) and €10 million ($13.6 million) worth of royalties because of secondhand gaming.  He further backed the claim up by citing the game had sold 2 million copies, but the developer’s trophy stats showed 3 million people had played it.

This brings me to the consumer side of this argument.  This is where things get sticky.  As gamers we want the freedom to resell our games, to rent games and even borrow a game from a friend.  The vast majority of gamers feel strongly about these fundamental practices.  So any kind of system that tampers with used game sales is going to trigger alarm bells and make most nervous and angry.  If however, systems are put in place that will allow for most of our used gaming practices to continue in one fashion or another, or create alternative methods that in the end also reward the developers/publishers with funds to keep them going,  how can we not be ok with this given what we have seen in our industry of late?

Bottom line, our industry is changing.  Some of these changes are going to feel very anti-consumer on its surface.  Shared used game revenue is one such change that while upfront may feel intrusive and oppressive to many but I feel strongly this change ultimately has to happen for our industry to get healthier.  

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1.http://www.gamasutra.com/view/news/174825/Used_games_dont_hurt_new_game_sales_they_help_according_to_GameStop.php
2. http://venturebeat.com/2009/02/20/dice-summit-gamestop-executive-argues-used-games-drive-new-game-sales/
3. http://www.forbes.com/sites/johngaudiosi/2012/07/18/new-reports-forecasts-global-video-game-industry-will-reach-82-billion-by-2017/
4. http://www.ign.com/articles/2012/12/11/20-studios-we-lost-in-2012
5. http://games.yahoo.com/blogs/plugged-in/tumultuous-game-industry-rocked-wave-studio-closures-235700238.html
6. http://www.gamespot.com/news/heavy-rain-dev-says-used-sales-cost-studio-millions-6333786
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About Murphys Law

As one of the hosts of The Overseas Connection podcast, I try to bring a weekly take of news and humor to our audience whom are wanting to know whats going on in the video game world.

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