Bargains Are for Cheaters

[Galbraith]

Pardon me if this has been said before, I didn't read the whole thread.

I absolutely love this article. Shamus has hit on an excellent idea; in fact, the idea is so excellent that it forms an important pillar of current economic theory. For any given product (say MW2) there will be some (hopefully non-zero) number of consumers who are interested in it. Each consumer will determine the value of the experience they expect from MW2 (this is impacted by demos, videos, word of mouth etc.), and they will then purchase it when it hits the price they have set for themselves or lower.

By keeping games at 50-60 dollars forever the publishers are choosing to ignore this fact in favour of the fantasy that everyone will eventually get tired of waiting and buy their game. This fantasy is ridiculous because it's relatively easy to find a computer game similar to the one that's 50-60 bucks for much less. MW2 too rich for your blood? Maybe the 15 dollar Blacklight: Tango Down is more tempting (disclaimer: Blacklight might suck, I won't be buying it until it hits about 5-8 bucks on Impulse or Steam). This is the genius behind digital distribution: Steam or Impulse (or whatever you use) can sell a game for 5 bucks one day and 30 the next without people crying foul. It nails those parts of the demand curve that are satisfied by the 5 dollar price without exhausting the supply of people who value the game at 30.

Game publishers are going to have to grok this principle eventually, or they will lose sales to apathy as well as piracy.

P.S. I don't actually think the business majors at game publishers don't get this, I suspect it is instead the product of the industry changing too fast for the business model to catch up. Torchlight and Plants Vs. Zombies have proven that intelligent pricing can turn "bargain bin" games into an excellent source of profit for the developers (I bought both at full price and I will probably buy any forthcoming sequels at a comparable price without delay).

 

[matrix3509]

Has anyone else noticed that by Shamus' argument, its actually more moral to pirate a game than it is to buy it used? That way nobody loses a dime and nobody gains a dime. Perfect balance.

 

[Krakyn]

I do think that people bashing used game sales is just as ridiculous (probably a bit less) than people bashing libraries. If you see all my other posts in this thread, used games sales do no harm to the developers because of price thresholds on used game consumers. They're not going to buy a $60 game under most circumstances, whether they want it or not. They're going to pirate it, borrow it from a friend, go in on it with somebody else, get it on craigslist, or something. But they're not going to pay $60 for it.

Libraries are places to store the knowledge and history of our world. Games are part of that knowledge and history, and if the library wants to buy a game and rent it out, that's their prerogative. You have to deal with some things though like a reservation waiting list, people not returning them on time, etc. If you go rent the game from the library, the developer got paid for that product, and it's just as if somebody passed it around to their friends afterward or sold it to Gamestop used. If you get your games from the library, you're a smart consumer.

So your argument is special pleading?

You believe I am special pleading? Why? Ask me to clarify on any of points, and I would be happy to. Maybe it's that I said people who buy used games can't afford to buy new? I would cite the extremely sharp decline in new game sales after the first 1 or 2 weeks a title is released. The people who can afford to buy new do indeed buy new shortly after release. Nobody who really wants a game and can afford to buy it sits there for 4 months after release debating, then suddenly walks into Gamestop and buys the thing new.

 

[Krakyn]

If I don't buy a new game off of a Gamestop shelf, the developer loses nothing. Gamestop already paid the developer/publisher for the game in order to put it on the shelves. Half of the argument is invalid from the get-go.

nope. most of the games are actually on consignment, meaning gamestop doesn't pay the developers until the games are sold. Furthermore, some developers actually have to PAY gamestop to allow their games to appear on their shelves.

You know, I'm not exactly sure about this point. I have a friend who's a manager of a Gamestop, and I'm going to ask them about it. I figured they ran like any other stock/sell business.

 

[snowman6251]

its somewhat ironic that thq is whining about this when they have some of the most agressive pricing Ive seen, meaning they seem more then willing to cut down the price of a new game or to put stuff up on steam sale or give consumers more shit for free then really almost anyone else

THQ gave me Red Faction for free because I bought Darksiders.

That was pretty cool.

 

[Cynical skeptic]

Has anyone else noticed that by Shamus' argument, its actually more moral to pirate a game than it is to buy it used? That way nobody loses a dime and nobody gains a dime. Perfect balance.

People have been harping on that for a while. This debate has been running ever since gamestop start posting record profits and expansion, while the actual video game industry was laying off hundreds of employees and shuttering multiple houses.

Personally, I got tired of bringing it up because the counter was always 'but piracy is ILLEGAL' as if law is some sort of absolute.

 

[Samurai Goomba]

Nice.

I have to say, Mr. Young, you have become one of my favorite parts of The Escapist. That was an excellent deconstruction of the problem, and I know I personally am very much in the group of gamers that can't afford to pay $50 or more per game. On the other hand, I have MANY times spent $20 or $30 on a new game to support a dev I love.

Bring prices down and more devs would get me to buy new, I can promise that.

 

[Cliff_m85]

If I created a game, and had control over marketing, I'd manipulate the public with simple and cheap gimmicks.


Ofcourse the release cost would be $50. That's obvious. But how can I convince gamers to buy into getting the game from the get-go? Easy. An Achievement. Go online with my game within one week of it's release and get 100 gamerscore. Go online within a month and get 50 gamerscore. Within a year? 10 gamerscore. The sooner you buy it, the more of a score you unlock. Then in three months after release I drop the cost by $20. In a year I drop it by $30.

 

[LadyMint]

There's only a few franchises that I put a pre-order on and eagerly await a fresh copy for a few reasons. First, I'm not made of money. Most of the time I miss the big thrilling wave of a video game's release because I either have to save up, or wait until it goes on sale. The trade-in business has made it possible for me to get more, and I'm very grateful that it exists. I'm definitely one of those cheap gamers who's going to try and stretch what little money (or trade-in credit) I can get.

Secondly, demos are not as readily available as I'd like them to be, and I don't like paying full price just to find out something's not what I wanted after all. Especially with PC games (which are mostly what I play), I'd end up well in the hole if I just kept buying fresh without trying first. I have a $60 paper weight sitting on my shelf now from a lesson I learned a few years ago. And if a friend hadn't let me borrow Spore, I'd have wasted around $50 finding out the game was lousy (to me. I'm sure someone liked it). But I won't always have a friend on hand who has bought a game I'm interested in.

That's prettymuch my feeling on it. Also that Gamestop is not the only company out there who does trade-ins/sells used games. Before I even knew what Gamestop was, I used to get used games from Mom n Pop game stores near me. There's a huge one near me now that makes all its money on used games, cds and dvds. I appreciate them, because they help me clear off my shelves and get some gaming done that I missed out on the first go-round. I can't speak for anyone else but myself, but if game companies want me to consider buying their games full price, they need to make demos more readily available witha clearer example of the gameplay I'm supposed to find enjoyable.

 

[DTWolfwood]

Well written Shamus. Agree 100%!

I've never bought into their retarded Guilt Trips. Regardless of the validity of their bitching and moaning. Sorry I'm a consumer and saving money is my prerogative. So if Gamestop is offering me savings (30%+, not 5 or 10%) I'm gonna buy their products not yours.

Oh yeah, keep on punishing your paying customers. See how that will help your bottom line in the long run. Good luck with that

 

[Saskwach]

My problem with this whole issue is that developers are being put front and centre as the losers. Anyone who has taken the trouble to read this far into a post on the gaming industry knows just who gets most of the money out of a game sale (publishers and game stores), and who gets the least (developers). This person also knows who gets the shaft more often than not in business deal, contracts and the like. The recent past has shown us that: IW/Activision is a classic case.

So bearing in mind the fact that very little of my money is going towards the alleged martyr of this capitalist crucifixion, and the majority is going to the purported Romans of this affair (game stores and publishers) why should I care enough to pay $X extra? Let's not forget that by buying something from a game store - used or not - a similarly small fraction is going to the poor guy or girl behind the counter too. Why don't they deserve their wages? Why is this hypothetical homeless developer less worthy of my money than the salesperson at my local EB? And if the choice is between "buying this cheap used game" and "not buying this expensive new copy", the first option helps someone, and the second helps no one (except me, perhaps).

This isn't about starving artists. This is about the power balance between game stores and game publishers. I don't care much who wins, but I know that if the publishers win then I lose.

 

[matrix3509]

Has anyone else noticed that by Shamus' argument, its actually more moral to pirate a game than it is to buy it used? That way nobody loses a dime and nobody gains a dime. Perfect balance.

People have been harping on that for a while. This debate has been running ever since gamestop start posting record profits and expansion, while the actual video game industry was laying off hundreds of employees and shuttering multiple houses.

Personally, I got tired of bringing it up because the counter was always 'but piracy is ILLEGAL' as if law is some sort of absolute.

I know people have been ganging up on piracy for a while now, its just that this article (and particularly what that THQ guy and the guys from Penny Arcade said) makes piracy look like absolute child's play when you compare it to the arguments they make against used games.

Personally, this whole crusade against used game sales just reeks of idiocy. Developers get pissed when people don't want to get raped up the ass by the prices of games (especially in Europe or the PAL regions), and they can't figure out that maybe nobody wants to play their shitty games for ridiculous prices.

Part of me hopes that every single one of the big publishing companies go bankrupt, that way maybe the small (and better) indie companies will get the chance to rise up and take their place. I see that as the only way videogames as a whole will ever progress and developers stop treating paying customers like pissants.

 

[boojum99]

Like movies and music (and unlike books and cars) a used game is indistinguishable from a new one. (Provided you don't damage the disc, obviously.)

I've seen the argument that games are different than books this way, but I don't really buy it. I read a lot of used books, and my reading experience is pretty much indistinguishable from that of a non-used book. The words are the same, the story is the same. Yes, if the book gets damaged enough that I can no longer read all the words, then the experience is ruined, but if the game disc gets damaged enough that you can no longer play the game, then the experience is just as ruined.

(I think the people making the argument against game reuse want very much for games to be not the same as books, because our society has already grandfathered in book reuse with libraries. But if libraries were invented today, I'm sure book publishers would be up in arms.)

 

[Helmutye]

The problem I see with the publisher's side of the argument is that they are not actually losing any money to second hand sales--they are simply not making as much as they would if every single person bought a new copy. The thing is, not every single person is going to pay $60 for a game. They just aren't. It is very similar to the idea of piracy--game publishers think that if they could just make a game pirate proof then all the pirates would pay the full price for the game. That is simply not the case. Real pirates will either steal the game or go without it.

Shamus's suggestion is brilliant--if publishers really wanted to harness the people who are unwilling to pay the full price, they would gradually lower their prices just like movie makers do. They would find a way to accommodate their customers. But they are completely uninterested in serving their customers--instead, they seem to have this weird sense of entitlement, that their customers owe them and should change to accommodate them. The rules are the way they are, and the company can find a way to function within them. Trying to change them to give themselves an unfair advantage is corporate thuggery at its worst.

And if they really want to eliminate used game sales, they can release products that do so--Project $10 is a perfectly legitimate move for EA to make. But they have no right to complain when their customers get upset and stop buying their products because of it. They are making a crappier product--by the law of the marketplace it should not sell as well!

 

[NobleBear]

Garage sale. $0.25.

Shamus, you win. So much. I would hug you if you were here. You totally hit the nail on the head with this one. I should also point out that if you want to discourage used games, you better have a damn good recycling program. What am I supposed to do with that disc when I'm done with it? Throw it in a landfill?

Garage sale. $0.25.

 

[(LK)]

...

And if Gamestop was only making $8 from a used game, instead of $30, they'd stop. There's not enough profit in the former to make it worth their while.

Ah, but publishers couldn't drop their costs lower than what it took to make the game plus a little for profit. Thus, GameStop could always stay *just* below what they set it at. You have to remember that GameStop has almost zero overhead, except the stores and employees, of course.

That's actually quite a lot of overhead. Leases are expensive, labor costs are expensive, warehousing and logistics is expensive. Retail is orders of magnitude more expensive than production when you're talking about entertainment media.

A developer might have a thousand employees working for a couple years to make a game, then the publisher might spend a few million on marketing.

A retailer has tens of thousands of employees and thousands of leases to pay for their stores, they spend the same kinds of money on marketing, and they maintain this overhead day-in, day-out, until the company no longer exists.

Dealing in used goods is every bit as expensive as dealing in new goods. Those goods are not any cheaper to warehouse, the employees who sell them are not paid lower wages, it does not require less fuel to ship them between locations. From an overhead perspective there is no difference between used and new. They are the same goods and require the same infrastructure.

You're identifying the exact wrong factor in what is cheaper about used games sales. Overhead is absolutely identical. It's the capital, the initial purchase price, that is different.

Therefore, if the margins shrink, the retailer is assuming more and more risk in keeping these used goods and paying the overhead to maintain an inventory of them. The only reason this system works so well for them is because the profit margin is so astronomical. It's a sure bet they'll make money.

If the spread on capital investment versus sales income decreases, this practice assumes more and more risk, and corporations are very quick to cut practices that are seen as a risk. Suddenly, the company is spending more money to buy used copies, when they already own new inventory that they're unsure will sell, suddenly they're betting against their own sales. That does become untenable.

 

[Atmos Duality]

I am of the opinion that used game sales in places like Game-stop are BAD for the consumer. I'm not saying used games per say. But look at it this way, I went to trade in Modern Warfare 2 back in Jan in Gamestop. They offered my ?10 for a game less than 3 months old, and they were selling it for about ?35-45. So I stuck it on Gumtree and got ?40 for it. I do this regularly now, and I have always gotten "near" retail price.

Gamestop aren't just ripping devs and publishers off, they're ripping you off too.

That's true for ALL retail.
To quote my recent economics class "The first thing I did when I worked at Sears was mark up the price of new inventory by 200%-400% of what we just payed for it, depending on what it was."
But that's normal for retailers; purchases direct from the manufacturer should be much cheaper on average, but retailer chains exist because they are an efficient means of distribution. They just happen to take a rather significant cut of the sale (after markup) in the process.

Don't believe me? Check out the Fortune 500, notice who is near (or at) the top. Wal-Mart, a retailer. They sell dirt-cheap goods (mostly from China since Sam Walton died) at grossly hiked up prices, but to us it looks like an amazing bargain.

As for the Used Game Market...
I once saw Gamestop try to offer 2 dollars to my friend for his copy of Pokemon Ruby. He nearly took it, until I pointed out that they were selling it USED for 30 bucks anyway.
He gave it to me, and pawned off the rest of his unwanted games to other sources.

So make no mistake; Gamestop can get away with these deals because they are the ONLY real business in town now. My own local game market used to be quite varied 10 years ago. Now, it's only Best Buy, several Gamestops, and the usual mega-retailers (Wal-Mart, Target, etc).

 

[chronobreak]

Point has probably been made already, but hell, forget about MW2, CoD 4 is still around 30 bucks at the Gamestops near me. This is a three year old game, it's ridiculous.

At least I can look to Telltale Games to not get ripped off, I feel they have a very healthy business model and they really respect their fans.

 

[Owyn_Merrilin]

"Shelf Life" for any other product is a near-linear process.
Start high, slowly decline; the irony here is that prior to 2005, GAMES USED TO DO THIS (in my market this was especially true).

I could purchase Warcraft 3 in 2002 for 50 bucks. In 2003, it was 40. In 2005 it was 20, and I just bought a BRAND NEW COPY last year for 12.
I can name the same process for unused (new) copies of older titles up until that point. What happened?
Well, for starters, the number publishers declined rapidly in number as the Big Boys in each region (Squaresoft for Japan, EA and Vivendi in the US, Ubisoft in Europe) ate up their weakened competition.

Now, Publishers indisputably control the industry; they commission the games, they OWN the developers, they own the names, copyrights you name it. Sometimes, they even dictate production against a developer's will (due to contract obligations).

In fact, there is only one part of the industry the publisher does not completely control or own; Distribution.
Gamestop has, over the course of the last decade, systematically eliminated its competition through strong business practices, luck, and possibly some underhanded tactics (why yes, I have watched over half a dozen local game retailers mysteriously turn into Gamestops in the last 10 years).
They can stand toe to toe with any other major video game retailer...but more importantly, the big Publishers.

This is an age-old problem that has already been dealt with in every other industry; every manufacturer of every conceivable product ideally would want to cut out the middle-man.

This man -- as well as Shamus -- is exactly right. If anyone cares to go through my post history, I say pretty much this any time the argument comes up. It used to be that games started out at a high price, and then steadily dropped, until bottoming out at $10 for a jewel case release of a PC game, or $20 for a Greatest Hits or equivalent release for a console game. If one were to go to Walmart today, he would find that it is still possible to get PC games for $10 new, but they are almost all casual games and/or shovel ware. I've seen two games in the past year that were both $10 and "core" releases, and maybe three or four in the past five years.

One other thing that I haven't seen mentioned, is that the used game business was once much less parasitic. Before Gamestop bought out EB games, there was a good deal of competition -- both from other used game companies, and from marked down new games. Prices were low; I remember paying an average of $2-$8 for a used game right up until the buyout occurred. If a used game broke $20, it was because somebody traded it in within a couple of months of release.

In conclusion, this new mode is unsustainable. I can't speak for everyone, but I know the industry has received less money from me in the past several years. When the prices were lower, I got three or four new games a year, plus a pile of used ones. The only game I've bought new and not on a ridiculous sale in the last year was Assassin's Creed, and that only because it was one of the rare $10 PC games I mentioned earlier. Keep in mind that I had a job for a good chunk of this year, whereas I was a child working off of a fairly strict allowance during the time period when games actually dropped in price. With the extra income I'm getting as a young adult, I should be buying so much more; instead, I'm buying practically nothing, subsisting off of older used games, thrift shop finds, and the occasional steam sale. If the game companies expect high school or college aged customers to actually buy their products new, rather than buying used or pirating, they need to actually try to compete on the costs. They did it once before; I know they can do it again.

 

[Sebenko]

How exactly do you plan on getting StarCraft 2 used? Each product has an unique key you have to register before you can even start playing, that is invalid after that and you'd have to sell your account (and all your Blizzard games you activated with it) with it. Also you have to input some things like "Real Name" that might be later needed for payment information or if an account is hacked to recover it that cannot be changed after first account creation...

It's called "not buying the game". I used ScII as an example because of how expensive it is. I don't even like Starcraft.