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Is Preowned games hurting the industry?


Oh Danny Boy
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It's an interesting theory, tiedtiger. But I work at a games developer, and from my perspective it's a bit irrelevant.

I work in game development and publishing too.

Let's say my company have just released a game that cost £20 million to make. We'd like to make a sequel to that game (if for no other reason than if our publisher greenlights it, we continue to get paid during the year and a half or so it'll take to make the sequel), but to do that, we need the publisher to fund it. The publisher will look at sales figures to see how profitable the game is, and if it's not profitable enough, they won't shell out for another game.

They don't care whether people who buy a pre-owned copy of our game might like it enough to buy a new version of the sequel, for two main reasons. Firstly, they make no money from pre-owned sales, so this person who buys the pre-owned game is spending money that they won't see, and won't be able to use to fund the sequel. And secondly, it's impossible to measure how many pre-owned copies will translate into new copies of the sequel. It's money they can't count on.

Creating a fan of the game who'd never play it if they have to pay full price is nice from our perspective (after all, we've worked very hard on the game and we want everyone in the world to play and enjoy it. We don't see much of the money from sales anyway, and we've already been paid for developing that game). But for the publisher, it's meaningless. They're far more business-focused. At the end of the day, it all comes down to money. And not money that they MIGHT receive for sequels, because if they don't make enough money on the first game, they won't fund sequels.

You can argue that new games should be cheaper, and that that would cut down on pre-owned copies, which would mean more profits for the publishers to funnel back into developing the sequel to my game. And that's true if the game is guaranteed to sell enough copies at that lower price in the very few months it's in stores to make the money back, but that's another massive gamble that the publishers aren't going to be happy about taking.

Personally, I hate pre-owned not because the publisher doesn't get any money from it, but because Game and the like are charging a preposterous amount for pre-owned games.

Totally wrong.

Every publisher worth its salt is not looking for that one-successful-game strategy. That's often how developers think because they're used to slogging multiple years on a single project (and so it seems all consuming) but what publishers are actually looking for is *franchises*. Franchises are where the profit is at, not one-hit wonders.

So, although it may seem staggering in scale, that $20m that they're ploughing into a game is with the intent of a multi-year dividend. The possibility of a sequel is not an after-thought, it is the whole point. It takes so long to develop an engine, tools, pipeline, art style, game mechanics, content and levels that any publisher would be utterly insane not to be thinking in terms of getting multiple titles from a game rather than just one. Without that sort of long term perspective there'd be little point.

The mechanism that drives the appetite for the sequel is that more people played the first game than actually bought it. Word of mouth is playground lending, bit-torrent, renting, second hand sales and loans. If the game is actually worth it, those sources act to distribute the game far and wide and lay the seeds for the second game's sales. However that word spreads, the fact that it spreads is gold.

Of course the response from some in the industry has been to think that it's all about first-sale. It's not. That's like people who work in the books business who think selling more hardcover copies is where the true value is at: It's a good short term tactic but a stupid long-term strategy. The industry has way more success generally with its second title in a successful franchise than its first.

Of course the first needs to acquit itself enough to make the case to carry on and fund the sequel but the sequel is where the gold is at. That's why we see FIFA 11, Call of Duty 8, Rock Band 12 and Halo 21 and Super Mario MultiMultiMultiVerse. The whole games business exists to turn on fans, in whatever capacity, and convert them into consumers either now or down the road. Turning off the pipes that grant fans access to games would be like banning paperbacks and insisting that people can only buy legitimate hardbacks from approved stores. It might feel right but it would kill franchises in their tracks and lose the industry far more sales than they would make.

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I can guarantee you 100% that I'm not 'totally wrong' because I'm repeating exactly what I've been told by the publisher, and that literally is "We'd like to do a sequel, if the first game sells well enough." I've talked with people from our publisher and they've told me that they hate pre-owned for exactly the reasons I've said.

They aren't interested in whether someone might buy the sequel at this point. They're only interested in making enough money from the first game to fund the sequel. Once they're making enough money they'll greenlight our sequel, but until then we've got to find another game to make as it's not guaranteed by any means. Your point about wanting franchises is, of course correct, but if Halo 1 had tanked for whatever reason, Halo 2 wouldn't have been funded. And my publisher is threatened by pre-owned because their profit margins are thin enough as it is.

Obviously they want a franchise, but until the first game justifies it, it's not going to happen.

Your publisher may have a different approach to a new IP they've spent a ton of money on, but mine couldn't afford to finance a sequel to a flop.

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I can guarantee you 100% that I'm not 'totally wrong' because I'm repeating exactly what I've been told by the publisher, and that literally is "We'd like to do a sequel, if the first game sells well enough." I've talked with people from our publisher and they've told me that they hate pre-owned for exactly the reasons I've said.

They aren't interested in whether someone might buy the sequel at this point. They're only interested in making enough money from the first game to fund the sequel. Once they're making enough money they'll greenlight our sequel, but until then we've got to find another game to make as it's not guaranteed by any means. Your point about wanting franchises is, of course correct, but if Halo 1 had tanked for whatever reason, Halo 2 wouldn't have been funded. And my publisher is threatened by pre-owned because their profit margins are thin enough as it is.

Obviously they want a franchise, but until the first game justifies it, it's not going to happen.

Your publisher may have a different approach to a new IP they've spent a ton of money on, but mine couldn't afford to finance a sequel to a flop.

Of course you've been told that. They don't want you doing a half-hearted job if you're thinking "there's no future in this" at the back of your minds. The individual external producer assigned to your project also wants you to do a bang up job on it because it's of great value to him or her personally inside the business to have this project be as awesome as it can be. If it sucks, they'll be fired.

It's also unusual in a publisher for an external producer to stick around on more than one release of a game because they take so long to make and people move around in the industry. So again, enlightened self interest on the producer side is all about the current release.

What I'm talking about is at the level above that: the executive level that plans the strategy for the company as a whole. Those are the finance guys and gals that the external producer has to convince (on a pretty regular basis too) that this game not only has legs, it has multi-year legs. They get very nervous at the idea that a game is being developed only with one release in mind because that means the whole company is setting itself up for a "If you build it they will come" failure.

Nobody expects to sell 10m units of a game on its first time out in other words because that almost never happens. It's much more common for those kinds of successes to come with some brand loyalty and pedigree attached from earlier roots.

The fact is that many games never actually move on into the realms of being a franchise because they suck or don't sell enough to convince anyone that a second one would do any better. But in every competent publisher I know of, the prize is the franchise, not your one project.

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.

Your publisher may have a different approach to a new IP they've spent a ton of money on, but mine couldn't afford to finance a sequel to a flop.

I can sympathise with smaller publishers, but the ones who make the most noise over preowned are amongst the largest. Some of them are happy to knock 40% off the price of the game after 6 weeks, thereby devaluing the game themselves but they won't accept people voting with their wallets. The only thing publishers are interested in is as much money as possible, but like tv studios, they are too arrogant to realise they are part of the problem themselves.

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All valid points, but then how come HMV don't accept music CDs, DVDs and Blu Rays as trade-ins? Why don't they have second-hand alternatives to all the products they sell?

Answer: the videogame publishing industry isn't big and united enough to effectively bully them into not doing it.

Books, CDs and DVDs are worthless secondhand (unless you are lucky enough to own some rare ones). Go look on ebay or at your local car boot for them, secondhand CDs for 50p to £1, DVDs never more than £1 unless they've only been out a couple of weeks. Newish HB books for 50p... No shop would manage doing that. Even the CD traders I've seen at car boots can't sell their wares for more than £2 a pop, just about enough for a one man band to turn a profit on a market stall, not the sort of business HMV will be looking to expand into.

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I for one do not think that pre-owned games hurt the industry. In fact, the opposite.

Pre-owned games increase the exposure of games massively beyond their expensive price tag, which in turn creates more fans for the game franchise and which subsequently will generate more full-price purchases for the sequel down the road.

Pre-owned is also the one true source of games reviews. While many a journalist or reviewer may wax lyrical about the value of a game and its place in the pantheon, they represent a select (and indeed self-selecting) community in many ways. But if you want to know whether the audience REALLY treasures a game then keep an eye for just how quickly it makes it to the second hand bins, how quickly it drops in price etc. All games get there eventually of course but genuinely good games hold their value longer.

Pre-owned, in short, is the metric by which to measure the difference between a Halo and a Bayonetta, and it has the added effect of creating more fans for games who might never have played a game if they'd had to pay £40 for it. In the long term that's a good thing.

What you're describing is a carefully cultivated, artificially created market that massively benefits retailers to the exclusion of everyone else in the chain. Of course retailers want to trap their customers in a cycle of flogging them cheap, non-degrading stock to put credit towards buying new games at a higher price than they could get them online or in supermarkets. Assuming that the market has organically fallen into this pattern is a tadhg naive.

You have zero data to prove that this cycle of exploitation 'creates fans'. Knocking the price of first-hand games down to under 20 quid a few weeks after launch just as easily 'creates fans'.

With zero data, you could just as easily argue that a game reaching a big audience of preowned users will have any sequel meet the same fate now that customers have been conditioned to expect the same experience second hand.

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The more I think about this subject the more confusing it is, when really the solution appears very simple i.e. reduce the price of brand new games thus increasing sales from the start and decreasing the profit margins from second hand sales. Charging premium prices fromthe start never works and the retailers often get shot in the foot whne big-big releases are undercut by supermarkets.

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The more I think about this subject the more confusing it is, when really the solution appears very simple i.e. reduce the price of brand new games thus increasing sales from the start and decreasing the profit margins from second hand sales. Charging premium prices fromthe start never works and the retailers often get shot in the foot whne big-big releases are undercut by supermarkets.

And so how will the smaller publishers fund this ever so exciting business model in the first instance? And as regards lower prices in general for those big releases, why would the larger publishers charge less to retailers when their larger franchises pull in nine figure revenues on an annual basis and it's the supermarkets that take the hit for the most part, not them? And where will the hardware manufacturers make their money if they're not charging a reasonable amount for games to be pressed for their systems?

Your simple solution isn't a solution at all, it's just an unworkable ideal.

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The more I think about this subject the more confusing it is, when really the solution appears very simple i.e. reduce the price of brand new games thus increasing sales from the start and decreasing the profit margins from second hand sales. Charging premium prices fromthe start never works and the retailers often get shot in the foot whne big-big releases are undercut by supermarkets.

Problem with that is the high prices of the games are factored into the development costs. Also if a game comes out too cheap customers think there is something wrong with it.

Look at XBLA games, early on all nice and cheap. Now everything seems to be 1200 points. Ask yourself, why is that?

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More people should follow the Mass Effect 2 example where they have a single use code in the box which entitles buyer of a new copy to download worthwhile DLC for free, whereas second hand buyers need to shell out points to get the same content.

Then maybe developers could stop being such mercenary cunts with the pricing - yes I am looking at you Capcom and your fucking SSFIV costumes - splitting the cast into 7 groups and then asking for 320msp for each pack? COLD BLOODED.

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Problem with that is the high prices of the games are factored into the development costs. Also if a game comes out too cheap customers think there is something wrong with it.

I think point B might hold more weight than point A.

It's been a little while since I worked in the games industry, but when I did, it was the retailer that made the most profit from game sales. Up to 50% of the sale price is what I was told 10 years or so ago. The other 50% or so was split between the cost of manufactire and distribution (distributors also took a fair chunk) and then profits for the publisher, hardware manufacturer and the developer.

Point B is an interesting one. The second to last publisher I worked for was owned by a guy who made his fortune (and I do mean fortune, he was a multi-millionaire) because of this principle. he noticed that people whouldn't take shareware disks if they were being given away free, but would pay for them - the assumption being that nothing free is worth having. So he dupolicated thousands of shareware disks, stuck them in boxes and sold them from his bedroom, via adverts in PC and Amiga mags. He then went legit and started a budget label, which was pretty much the same thing.

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As somebody who rarely buys online (too old to get the habit) and as somebody who frequents game shops a lot and buys a couple of games a week from them I've noticed a real shift in the last 6 months.

Basically, Game (and more particularly Gamestation) have moved from having the main focus of the shop on new stock to having it on preowned. New stock is an inconvieniance, particularly once a game is a month old. I'm surprised that they are able to get away with it to such an extent. If I worked for Ubisoft and walked into my local GS I'd be mighty pissed off that there was virtually no new games for sale.

The real question is - how are they getting away with it? I'm not talking about selling pre-owned, but making pre-owned the main thrust of what is sold in the shop. I have nothing against pre-owned, I've bought many a pre-owned game and the industry has itself to blame (high prices, no availability once a game is 6 months old) but things are REALLY getting out of hand.

I wonder where things will be in another 2 years. Years ago I thought Game would split their shops between new and pre-owned, but that doesn't seem to have happened.

And it still remains true that the only item readily available second hand on the high street is videogames. The industry needs to stop wailing like young children and grow the fuck up and deal with why the situation exists and work out a solution.

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Look at XBLA games, early on all nice and cheap. Now everything seems to be 1200 points. Ask yourself, why is that?

Look at iOS games, early on all £5.99, now everything that actually sells is 59p. Ask yourself, why is that?

Coincidentally, the rise of most XBLA to 1200 points corresponds exactly with when I stopped buying them. The only XBLA game I've bought this year was 400 points.

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More people should follow the Mass Effect 2 example where they have a single use code in the box which entitles buyer of a new copy to download worthwhile DLC for free, whereas second hand buyers need to shell out points to get the same content.

Then maybe developers could stop being such mercenary cunts with the pricing - yes I am looking at you Capcom and your fucking SSFIV costumes - splitting the cast into 7 groups and then asking for 320msp for each pack? COLD BLOODED.

Except it hasn't been like that. There has been some DLC for free and the rest has been pay only. And so for us first time buyers we'll be getting a worse deal than those getting the collection pack that will inevitably come out discounted in a year or two.

I still think lower prices = higher sales but I'm sick of going over that again and again.

Maybe the movie companies were wrong and they should have kept movie prices at $99 like they did in the early days of video.

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Except it hasn't been like that. There has been some DLC for free and the rest has been pay only. And so for us first time buyers we'll be getting a worse deal than those getting the collection pack that will inevitably come out discounted in a year or two.

I still think lower prices = higher sales but I'm sick of going over that again and again.

Maybe the movie companies were wrong and they should have kept movie prices at $99 like they did in the early days of video.

It's like that now though. If you wait a year or two and buy the GOTY version, with all the DLC, it's probably cheaper than buying the game pre-owned when it first comes out, even if you had to pay for the DLC at the time. If I wanted the GOTY version of Fallout 3, for example, I can get it for £22.99. If I'd bought the game pre-owned and had to pay for the DLC bundled with the GOTY edition, I'd have spent lots more.

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Game say preowned unaffected by online passes and such

Publishers' efforts to stem sales of used games by introducing online passes have so far been ineffective, according to leading UK retailer GAME.

GAME CEO Ian Shepherd told MCV, “Certainly, publishers are using content to extend the life of games to extend the reasons to keep them. That’s a good thing, as it’s good for us and we’ll sell more of the games,”

“No, we’ve not seen the changes in the commercial nature of how some games have launched make any impact on the trade-in category,” he added. “It’s still a strong part of our business.”

EA, Sony and THQ have all recently introduced extra charges for users who have bought a used copy of one of their games and want to access online content.

In June, EA Sports boss Peter Moore explained, "One thing I have to do, and it's my job, and my development team's job, and my marketing team's job, is make you not want to trade the game in."

If GAME is to be believed, he'll need to try a little harder.

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I still think lower prices = higher sales but I'm sick of going over that again and again.

Surely lower prices = even lower pre-owned prices?

Unless you mean prices as low as DVDs and books which makes re-selling barely worth the effort. Surely games developers/publishers couldn't take such a massive reduction?

As Poet said, this is bringing back memories. In particular, one spectacularly massive and aggressive thread full of Stuart Campbell and that doomed campaign springs to mind.

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Surely lower prices = even lower pre-owned prices?

Unless you mean prices as low as DVDs and books which makes re-selling barely worth the effort. Surely games developers/publishers couldn't take such a massive reduction?

As Poet said, this is bringing back memories. In particular, one spectacularly massive and aggressive thread full of Stuart Campbell and that doomed campaign springs to mind.

Too true too true.

Stuart was so full of wrong.

Imagine if he was right. You might see distribution channels online (let's call it 'hot water gas') that might stem piracy on the PC by creating a new market for cheap indy games and a long tail for the PC market allowing publishers to sell their games at a low price years after they were released. Mwahahahahaha.

Or maybe Nintendo would create some sort of download service where I could buy the N64 version of Paper Mario for $20AU. It will never happen which is why I'd probably need to resort to second hand dealers charging triple what it cost at retail.

And finally, and this is going into lal la land here, imagine a mobile platform where indy's and big publishers sell decent games of less than Mastertronic used to? Madness! No one would ever make money!

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Often does, if Steam is to be believed.

I don't really pay much attention to Steam, since I don't really play many PC games, so you may have to expand on that a touch...

Also, can we conpare digital distribution to physical media? It cuts out a large chuck of the expense of getting a game to a customer (disk, packaging, distribution plus the usual retail costs), making it much easier to discount. And it's almost unfairly easy to get the game onto your machine...

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All I can say is that Steam completely changed my PC habits from scrounging second hand tables at games stores or looking around HOTU for old games to paying a few bucks to have games piped straight to me.

I'd be doing the same on the PSP if their store was even half as easy to use as Steam.

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Game say preowned unaffected by online passes and such

Well what is he supposed to say?

Most of GAME's customers are probably too clueless to realise that anything has changed. If most games start using single-use codes, cost-conscious kids will stop bothering with preowned.

Gamestop are shitting bricks over it, cooking up elaborate schemes to try to get people to buy DLC in-store along with their purchases.

As Poet said, this is bringing back memories. In particular, one spectacularly massive and aggressive thread full of Stuart Campbell and that doomed campaign springs to mind.

Say what you like about Campbell, but game prices have collapsed in the last six years (for whatever reasons) and the industry is making more money than ever.

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