THQ Joins the Used Game Fight

[drovek]

And just like that, I love THQ more, and continue to look forward to their publishing of Saint's Row 3.

I... fail to see how this benefits the customer at all. I mean, the folks buying their games new won't be getting any carrots and anyone involved in the second hand business is basically getting pissed on.

You, as the developer, have seen only 60 dollars from that. You got paid once, but at least two (usually even more) people have enjoyed your game. That is certainly not fair for you.

Okay, let's go through the numbers and refute this notion that used games are bad for the industry.

A few quick metrics, first: Gamestop in recent filings (I think FY 08, but may have the year wrong; I'm certain it's within a back-of-envelope calculation) made a gross margin of about 27%. That is, For every dollar of revenue they take in through the till, they paid about $0.73 to whomever sold them the game. For a new game like Final Fantasy XIII, that's about 15%; for a used copy of the same game, they paid somewhere in the $25-30 range to sell at $54, and they bought back enough copies of Barbie Horse Adventures (that never sold) to reduce the total take from the used profits down a few points. If I were to show my work, the record would show that about half the chain's profits come from used games, but only one fourth of the chain's SALES come from used games. For every used game sold at the standard new game pricing point, THREE new games are sold at a figure 10% north of that mark.

All of this means that if used games went away, the new games market would, in a vacuum, gain no more than about 30-35% in sales. It simply CAN'T gain more from the market share of used games because, well, that pretty much reduces market share in used games to zero.

But there's more to it than that. When Gamestop or rivals give a gamer $25-30 in credit for their game, what does he do with that money? That's right, he BUYS MORE GAMES. And as we've seen, 75% of the time, those will be new games. Get rid of the used game market, and those sales are, at best, cut in half - because game churn lowered the cost of entry on new games to a used game plus $30, and not having the credit means that the gamer has to save up twice the cash to get his new game.

So now we're down to an upper bound of 15-18% gain in sales from the elimination of used product from the chain, and we haven't even touched on the most obvious problem from a developer's standpoint: the killing of the game store. Used sales keep game stores afloat. They provide half the revenue for a chain like Gamestop; get rid of it and they can keep the lights on or they can staff the store, but they can't do both. Before used games flooded the market, retailers enjoyed margins of 30% or more from distributors, but margins for retailers dropped as the pressure to hold the line on end pricing met higher costs from the studios. If gross margin drops to 15-18%, Gamestop will either diversify in a hurry or hemorrage.

Of course, XBox Live and PSN Store will help pick up the slack in game sales to a degree, but if Gamestop sees its margins cut in half and folds or even cuts back its videogaming profile in favor of a more meaty lineup of product, you're still going to see lessened visibility in thousands of locations translate into massive drops in sales. If Retailer A sells 5000 copies of a game and Retailer B sells 5000 copies of the same game, and Retailer B closes shop, Retailer A isn't going to sell 10000 copies of the game. They'll sell 8000 or fewer. I've opened stores; I've closed competitors. Smart.

So if you gain 15% of customers from killing used sales, but you hurt your distribution network to the degree that 20% fewer people purchase your product, what the hell have you accomplished?

You have put numbers to what was on my mind. That's awesome!

Thank you for your post.

 

[LeonLethality]

Well since I don't care about online (except for Monster Hunter, but I buy that on release anyway) it doesn't matter to me if all developers will be taking away from used copies is online play. If they make used copies unplayable offline then I will be pissed off though.

 

[Shamanic Rhythm]

I don't understand how you get to be a game publisher without learning some basic economics. Allow me to introduce you to some curves other than the Lara Croft kind:

http://en.wikipedia.org/wiki/Supply_curve

If demand is lower than supply, prices will naturally fall. The secondary market for games is only doing what it is supposed to. Maybe you guys should stop whining and insisting that you are in some way exempt from market forces, and take the hint and either a) improve the longevity of your product or b) lower the price.

 

[MeowZhuxi]

Though i am against restricting people from multiplayer, i actually thought the cerberus network for Mass Effect 2 was really cool. It gave those people who bought new some cool extras and has continued giving little pieces of free DLC. In that case i felt like EA was rewarding people for buying new, not punishing them for buying used.

 

[Gryphonsflight]

I agree with many people in this thread. People will not buy crappy games for 60 dollars are release. For three years, I could not justify buying Two Human. It was too expensive and had too low of a rating and value to be worth 60 dollars to me. However, a few months back I bought it for 20. For 20 dollars, it was a great game to have, but in no world would I have paid 60.

Their quality suffers because they create nothing new that's worth wile. So they lose money, so they attack companies they claim have been cutting the bottom line for years. A store brand that isn't a pawn shop, Blockbuster, or such. They attack a giant of used games. Granted they are the largest but that's no excuse to suddenly turn on a company that sells 90% of your product the first time anyways.

I know this is restating the obvious, but these cuts are only meant to attack gamestop resales in my opinion.

 

[Nouw]

Overreaction much? Its basically 65 bucks! Get over it!

As long as this doesn't come to Relic I'm happy. Hell we're stuck with Games For Windows Live so we've suffered enough.

 

[SimuLord]

The challenge for game producers is to maximize revenue, and the secondary market is the single biggest obstacle to doing so. They gotta do what they gotta do, and that means removing the value proposition for the secondary-market buyer.

Doesn't affect me since I'm a PC gamer and Steam aficionado. So I have no dog in the fight other than wanting the industry to do well so people don't get laid off or otherwise suffer economic hardship due to used-game sales, profit for which goes straight upstream to Gamestop's CEO.

 

[manaman]

To poke fun at you for your earlier comments, I should say that I don't go to the library, and I fucking hate Harry Potter. But that would be inappropriate.

In all seriousness, I fail to see how this is that big of a deal. I don't know why everyone feels so self-entitled that they believe everything has to be a good fucking deal for them. Other people need to make livings, and I have no issue in contributing to this. You are looking at the "What ifs" of the scenario. The idea that this will develop into some sort of global conspiracy to destroy our consumerist rights.

I look at it as the devs trying to make five bucks off of the damned game that they made in the first place.

There are certainly much worse scams in the history of the world, and indeed, much worse goings on in the games industry in general.

It's not a conspiracy, you are throwing that word out there as a hook to make it sound loony to think of that as the eventual outcome. It's not the start of anything, you are looking at the middle.

I digress, but yeah you said how you feel, I said how I feel so that's it I guess.

As a last thought, hell yes that would have been inappropriate and basically flaming me to say what you did, how you where going to. The edit button doesn't change what gets sent to me when you first hit the post button. The only reason you would frame what you said that way would be to be rude.

 

[Cermax 360]

people always talk about buying used games like its a bad thing. what about older games that are no longer sold in stores new. most games only have a new shelf life of a few month to a year depending on the game.Then the only way to get it is used. So what then u are still stuck paying the company to play online for a game they wouldnt make money on anyway. for example people always say that when you buy a used game that is $55 used insted of $60 new that is dumb and i have to agree. I only buy used games that are no longer available new. So say i buy UFC 2010 after 2011 comes out i would still have to pay for multy player even though they nolonger sell it new and would make no money off of it anyway. Im not verygood at explaining my self so i hope u all get what i meen.

 

[Don't Poke My Bobcat]

Well for one thing videogames and cars are both commodities so the comparison is completely valid on that level alone.

In the same way that comparing an apple and a fish platter solely on the level of them being food would be correct, but missing the overall defining difference.

A car you actually purchase and obtain ownership, a game you purchase and obtain the license. Much like a franchisee will purchase a license and can act only within the constraints the licenser issues. For example, Subway outlets.

Secondly a car need only be used for a day to actually be used. There are used cars that haven't even had time to appreciably wear, just like there are used games with some scratches or missing boxes. So who are you trying to lecture about economics again?

Everything is used from the second it leaves the stockist, and I'd like to see you buy a car that's only a day old. The best you can get is an ex-demonstration car and those will be worse off than a three year old model.

What I was referring to, and would assume in the context of the conversation you would have understood, is the bells and whistles manufacturer's offer new car purchasers such as alloy rims and £1000 cashback. Items clearly not on offer should I buy the car second hand later on, much in the same way buying second hand games removes my right to whatever perks used as an incentive at the time.

In this instance, online play - a perk that we've taken for granted since its inception. You may retort with Xbox Live costing money - but the developers do not see this, nor do they see money paid to your ISP.

So you, is who I'm lecturing about economics. Being a smartass only works if you know what you're talking about.

Other commodities don't have functionality removed from them requiring an extra ten dollars if you don't buy them new. They lose things because of what the people who owned them did. Not something the manufacturer planned in advance of any sale.

As you're comparing a product with product I would be inclined to agree with you on this point alone. However, as mentioned above, a game is the sale of a license and is vastly different to a sale of a product.

I appreciate that music and film also fall under the license sale parameter, but these have such a low resale value for consumer and retailer alike that it isn't really an advantage for either to bother. Plus you've had DLC music for a long time, as well DLC film for a small period.

In the real world when the creator sells their product, their power over that particular copy of the item ends. They aren't working for someone else to get paid, they have already performed their task, it is over and done with.

You are not buying a product, you are buying the distribution system to supply you the license to use.

I expect you're one of these individuals that cries should the developer not offer post release patches for game rebalancing and the like as well aren't you?

Unless you show some actual understanding (I'm not trying to be insulting but I see no other way to put it) I'm not going to reply to anything you care to add. I have no problem discussing with people but no desire to do so with individuals without core knowledge of the subject. And I see this conversation going in circles, so to avoid I'm declaring myself out.

 

[joystickjunki3]

Same, stupid corporates.

It's just misguided of them. Corporates have one job typically: think about the money, I can't fault them for that, but I think things need to change in a different way.

agreed! they lost me after they destoryed the dawn of war series anyways...

Haha, yeah, I agree.

what does a normal customer lose on it? it's just a serial key.. unless you buy second hand (which inever do anyway)

What if you lose your Live account and have get a new one? What if you had to do that for 5, or even 10, of these games? That's an extra $25-50 you will need to reinvest just play online, which Xbox owners already do by default.

Just because they are watching their own butts? This is a classic KneeJerk reaction. Think about this...If you buy it used for $50, and then pay another $5 for the online code, you still get it cheaper than if you were to buy it new. So, as long as you pay less than $55 for the game used, which anyone remotely intelligent will, and then buy the Online Pass; you still get a good deal.

Seriously, they are just trying to generate revenue, is that so wrong? No money equals no games, plain and simple. You want the cool games, then throw the publishers a frikkin bone here, ok?

True, and as I said above, I can't fault the companies for needing revenue, but I can fault them for protocols which have the ability to needlessly cost consumers more money. (See just above your quote.)

I'll join you in the camp then good Sir.

In my opinion they haven't actually made a defining titles that I have played.

Yeah, I see where you're coming from. THQ is a somewhat generic publisher in my mind, what with all the licensed cartoon and movie games. But they do have some gems.

 

[shadow skill]

Well for one thing videogames and cars are both commodities so the comparison is completely valid on that level alone.

In the same way that comparing an apple and a fish platter solely on the level of them being food would be correct, but missing the overall defining difference.

A car you actually purchase and obtain ownership, a game you purchase and obtain the license. Much like a franchisee will purchase a license and can act only within the constraints the licenser issues. For example, Subway outlets.

Secondly a car need only be used for a day to actually be used. There are used cars that haven't even had time to appreciably wear, just like there are used games with some scratches or missing boxes. So who are you trying to lecture about economics again?

Everything is used from the second it leaves the stockist, and I'd like to see you buy a car that's only a day old. The best you can get is an ex-demonstration car and those will be worse off than a three year old model.

What I was referring to, and would assume in the context of the conversation you would have understood, is the bells and whistles manufacturer's offer new car purchasers such as alloy rims and £1000 cashback. Items clearly not on offer should I buy the car second hand later on, much in the same way buying second hand games removes my right to whatever perks used as an incentive at the time.

In this instance, online play - a perk that we've taken for granted since its inception. You may retort with Xbox Live costing money - but the developers do not see this, nor do they see money paid to your ISP.

So you, is who I'm lecturing about economics. Being a smartass only works if you know what you're talking about.

Other commodities don't have functionality removed from them requiring an extra ten dollars if you don't buy them new. They lose things because of what the people who owned them did. Not something the manufacturer planned in advance of any sale.

As you're comparing a product with product I would be inclined to agree with you on this point alone. However, as mentioned above, a game is the sale of a license and is vastly different to a sale of a product.

I appreciate that music and film also fall under the license sale parameter, but these have such a low resale value for consumer and retailer alike that it isn't really an advantage for either to bother. Plus you've had DLC music for a long time, as well DLC film for a small period.

In the real world when the creator sells their product, their power over that particular copy of the item ends. They aren't working for someone else to get paid, they have already performed their task, it is over and done with.

You are not buying a product, you are buying the distribution system to supply you the license to use.

I expect you're one of these individuals that cries should the developer not offer post release patches for game rebalancing and the like as well aren't you?

Unless you show some actual understanding (I'm not trying to be insulting but I see no other way to put it) I'm not going to reply to anything you care to add. I have no problem discussing with people but no desire to do so with individuals without core knowledge of the subject. And I see this conversation going in circles, so to avoid I'm declaring myself out.

Actually a game is not a sale of a license, not according to US law anyway. No software is if it is sold with the the expectation that the buyer has perpetual ownership of the copies that they purchase. See:http://en.wikipedia.org/wiki/Vernor_v._Autodesk,_Inc. for an example. The EULA is simply put invalid when it tries to tell you that you have only been granted a license to use the game. You are clearly not renting the item as there is no recurring fee. So how can one logically accept the idea that you have only been granted a license to use the item when there is no time in which the manufacturer will come to repossess your or my games? You are in point of fact and law buying a product. You know you should make sure you actually know what you are talking about before you try and call someone else a smart-ass.

 

[ravensshade]

what does a normal customer lose on it? it's just a serial key.. unless you buy second hand (which inever do anyway)

What if you lose your Live account and have get a new one? What if you had to do that for 5, or even 10, of these games? That's an extra $25-50 you will need to reinvest just play online, which Xbox owners already do by default.

then you'd be in the same situation as losing serial keys for your games? true it'd suck for having to do it for an entire account worth of games but that's a kind of big what if isn't it? what if microsoft went out of business? (yes i know that one is just to ridiculous)

 

[AnarchistAbe]

What if you lose your Live account and have get a new one? What if you had to do that for 5, or even 10, of these games? That's an extra $25-50 you will need to reinvest just play online, which Xbox owners already do by default.

Never thought of this point. OK, I concede, this was poorly implemented. I figured it would be a user registration like Mass Effect 2's Cerberus Network, where you have an EA account that you link to your game. If it links to a live account, then there is an inherent flaw.

 

[M3_RK]

...Make your game so that you want to play it again and again and again and again - and never get around to selling it on....

Go ahead and program that, and I will buy your game. Go ahead...we're waiting....

No matter how fun your game is, people will sell it. Some people are into the Play and forget philosophy. They dont want a "relationship" with a game, they just want a one-night sex-fueled extravaganza with their games. Metaphors aside, people will sell games no matter how good you make them.

i buy games i want to keep games i will play again i rent games that ill only play for a week
i personaly never sell games anymore because to me a collection thats huge is alot better than a small collection of recent game an its definataly more valuable

but when i did i never sold games that were either one very replayable or it was in my book a 5 out of 5 or 4 out of 5 game
also im sure you may have noticed that you see way less of great games being sold used and alot of bullshit games

My concern with the prevailing trend in the industry towards "Interactive Cinema", is that however immersive and appealing these 'games' may be in the short-term they simply do not represent solid value for money. Especially when you can whip through Alan Wake in a weekend. What is to stop you trading it in once you have experienced all it has to offer? Worse still, what is to stop you from just Renting it?

Publishers need to stop funding Developers who are really just frustrated film directors. I would accept worse graphics for better gameplay.

which is the point they should make better games if they want ppl to keep them like god of war i beat the ggame an the challenges in a day same with uncharted 2 but you wont see me selling them because they have great replay value shit if you own either one of those games put on some costumes an tell me the game wasnt still fun the second time thru as donut drake and if it wasnt you should have the right to sell that hoe for 60$ or 5 an the person who bought it not have to pay another five make better games or give the game a shit load to do once u beat it i dont need multiplayer to replay a game just a good reason liek alt endings or atleast costumes an shit

i do like that games are getting so good that my girl ask me to play the part i just let her play through cause she wants to just sit back an enjoy kratos bein fuckin raw
but i do agree completely about the graphics vs gameplay im sick of game that look great but dont play great like heavenly sword then u got left 4 dead an its amazing even though graphicly it really wasnt shit

 

[M3_RK]

Well for one thing videogames and cars are both commodities so the comparison is completely valid on that level alone.

In the same way that comparing an apple and a fish platter solely on the level of them being food would be correct, but missing the overall defining difference.

A car you actually purchase and obtain ownership, a game you purchase and obtain the license. Much like a franchisee will purchase a license and can act only within the constraints the licenser issues. For example, Subway outlets.

Secondly a car need only be used for a day to actually be used. There are used cars that haven't even had time to appreciably wear, just like there are used games with some scratches or missing boxes. So who are you trying to lecture about economics again?

Everything is used from the second it leaves the stockist, and I'd like to see you buy a car that's only a day old. The best you can get is an ex-demonstration car and those will be worse off than a three year old model.

What I was referring to, and would assume in the context of the conversation you would have understood, is the bells and whistles manufacturer's offer new car purchasers such as alloy rims and £1000 cashback. Items clearly not on offer should I buy the car second hand later on, much in the same way buying second hand games removes my right to whatever perks used as an incentive at the time.

In this instance, online play - a perk that we've taken for granted since its inception. You may retort with Xbox Live costing money - but the developers do not see this, nor do they see money paid to your ISP.

So you, is who I'm lecturing about economics. Being a smartass only works if you know what you're talking about.

Other commodities don't have functionality removed from them requiring an extra ten dollars if you don't buy them new. They lose things because of what the people who owned them did. Not something the manufacturer planned in advance of any sale.

As you're comparing a product with product I would be inclined to agree with you on this point alone. However, as mentioned above, a game is the sale of a license and is vastly different to a sale of a product.

I appreciate that music and film also fall under the license sale parameter, but these have such a low resale value for consumer and retailer alike that it isn't really an advantage for either to bother. Plus you've had DLC music for a long time, as well DLC film for a small period.

In the real world when the creator sells their product, their power over that particular copy of the item ends. They aren't working for someone else to get paid, they have already performed their task, it is over and done with.

You are not buying a product, you are buying the distribution system to supply you the license to use.

I expect you're one of these individuals that cries should the developer not offer post release patches for game rebalancing and the like as well aren't you?

Unless you show some actual understanding (I'm not trying to be insulting but I see no other way to put it) I'm not going to reply to anything you care to add. I have no problem discussing with people but no desire to do so with individuals without core knowledge of the subject. And I see this conversation going in circles, so to avoid I'm declaring myself out.

Actually a game is not a sale of a license, not according to US law anyway. No software is if it is sold with the the expectation that the buyer has perpetual ownership of the copies that they purchase. See:http://en.wikipedia.org/wiki/Vernor_v._Autodesk,_Inc. for an example. The EULA is simply put invalid when it tries to tell you that you have only been granted a license to use the game. You are clearly not renting the item as there is no recurring fee. So how can one logically accept the idea that you have only been granted a license to use the item when there is no time in which the manufacturer will come to repossess your or my games? You are in point of fact and law buying a product. You know you should make sure you actually know what you are talking about before you try and call someone else a smart-ass.

word

 

[Don't Poke My Bobcat]

Actually a game is not a sale of a license, not according to US law anyway. No software is if it is sold with the the expectation that the buyer has perpetual ownership of the copies that they purchase. See:http://en.wikipedia.org/wiki/Vernor_v._Autodesk,_Inc. for an example. The EULA is simply put invalid when it tries to tell you that you have only been granted a license to use the game. You are clearly not renting the item as there is no recurring fee. So how can one logically accept the idea that you have only been granted a license to use the item when there is no time in which the manufacturer will come to repossess your or my games? You are in point of fact and law buying a product. You know you should make sure you actually know what you are talking about before you try and call someone else a smart-ass.

Allow me to supply you with an excerpt of Sony's User Agreement and Software License (as in, a company that deals in game software and is actually applicable).

"THIS USER AGREEMENT AND SOFTWARE LICENSE (THE "AGREEMENT") IS A LEGAL AGREEMENT BETWEEN YOU AND SONY ONLINE ENTERTAINMENT LLC"

Further:

"Downloaded versions of this Game software, any other Game-related content downloaded through the PSN, and any data associated with your PSN account are non-transferable."

And the best part (most relevant emboldened for clarity):

"We may terminate this Agreement (including your software license) immediately and without notice if: (i) you breach or violate any provision of this Agreement; (ii) you or anyone you permit to use the Game infringe any intellectual property rights; (iii) if we are unable to verify or authenticate any information you provide to us; and/or (iv) upon game play, chat or any player activity whatsoever which we, in our sole discretion, determine is inappropriate and/or in violation of the spirit of the Game. If we terminate this Agreement under any such circumstances, you must destroy all copies of the Game and all Custom Content (and all parts thereof), you will lose access to the Game and you will not be entitled to any refund for the purchase price of the Game or any expansions, add-ons, products or services related to the Game that you may have purchased"

To make it clear: you DO NOT have indefinite ownership of anything you purchase - it can be recinded at any time should the lincenser deem it necessary.

It's very nice to bring in outside examples, but find me an example of one in the gaming industry (and one actual pertaining to the subject i.e: Autodesk were attempting to bar the sale of unopened versions so bears very little weight here) and we'll have a sensible discussion.

 

[PuppetMaster]

This is extortion, plain and simple

Isn't the point of having xbox and ps3 accounts to keep everyone's data organised and personal? I wish I could compare it to the days when buying a used game means you may have someone else's profile to delete, or when Blizzard says I can't make a WoW account unless I buy my own copy, even though I installed it months ago with my friend's disk. This seems like punishing everyone who has willpower to wait for prices to go down $10-$20.

 

[Flying Dagger]

The solution is so simple that it is annoying how dumb people are?
Not making money because people are buying used games?
Add a charge per used sale that gamestop have to pay to the dev/pubs for every used game sale.
Charge gamestop $5 per used game sale, they still make $15 per title sold, and then you have the problem solved.

Am I seriously the only one to think of this?

Also, the game companies are committing a sin of ignorance here.
The fact you can return a game is a major input factor in many people's decision to buy new games. If you destroy the used game industry, less people will buy new, not more. People will just wait for the price to go down.

 

[Flying Dagger]

So if you gain 15% of customers from killing used sales, but you hurt your distribution network to the degree that 20% fewer people purchase your product, what the hell have you accomplished?

Your economics fails by virtue of you making these numbers up.
A decrease in used sales does not cause half of all games shops to shut down.
Just as one games shop shutting down will not booster another's sales by 60%.
As someone who has studied economics, your ridiculous arguments are causing me physical pain.