Preowned - It's Killing The Industry!!!

[dumpster]

My apologies to those who have read this before. I am totally aware that I am repeating myself!

10 (chain store, computer games) managers from the north west of England, sitting around a plasma screen watching a marketing guy from one of the other software companies (that means, not EA), demonstrating “Die Hard Vendetta”, about two months before its release. It’s a nice little first person shooter, and we are happy enough to watch the guy enthusing about it. After all, it’s better than yesterday where we sat and watched someone play a very much unfinished “Haven” for a whole hour, watching him pointlessly enthuse about how great this game was, when we could all see it was a load of crap.

As you can tell by the names of the games, this all happened some time ago. And yet, the star games of the conference were “Red Dead Revolver” which still isn’t out, and… erm… very little else actually. In fact, we were starting to believe the guy telling us how wonderful Die Hard was going to be – it looked like it could be excellent when it was finished. Then he lost us all with just one sentence. “To be honest”, he said “We believe it’s even better than Goldeneye”

The taunting and jeering took a while to die down. I doubt he used that line with any subsequent groups that day. The night before, the chairman of the company had made a speech in which, he politely requested us to be positive about the products we saw. Apparently, many developers and publishers were having a very tough time, which amazed me because our store was showing excellent growth. And it was only afterwards, back in the hotel bedroom, that I realised how upsetting our laughter at Die Hard would have been to the publisher. They have banked so much on this game, and there we are, making money selling the games, but the developers are dropping like flies, and worrying desperately about the future. And I thought “Why?”

About a year later, I left the industry. I am happy to admit that the offer of something better had come along, but a big factor my reasons for leaving was seeing the way that the high street games industry doesn’t seem willing to give anything back to the industry it requires to stay profitable, and are totally unaware of the big crash they could well face in the future.

For the small number of you that don’t know this, when you read a book from the library, or rent a movie at Blockbuster, the authors of the work are rewarded in some way. A small residual is paid to the author when the book is put in the libraries, and the rental copies of films are priced in a way that takes into account the number of people who will see that 1 copy.

The high street presence of games really comes down to 2 specialists, and indie stores. And all these stores have preowned games. The store makes a much higher margin on a preowned game; in some stores I have seen preowned games for only a fiver less than the new game. So when you trade in your game for about £15 and it is sold for £30 to £35, that’s far more money than the store would make selling new games. And this is the problem.

The industry itself makes no money whatsoever on a preowned game. But the friendly store staff are instructed to always offer preowned over new if possible. So if I go into a store to buy GTA, with £40 in my pocket, if the store offers me a preowned one, then I save maybe a tenner (maximum), but the developers, distributors, and basically, the entire industry (except the store) have lost out.

Preowned is self defeating anyway- I am sure that, if there were no preowned sales at all, the sales of new games would be that much higher, so therefore they could be cheaper, negating the need for preowned in the first place.

An example would be Rage. Rage probably deserved everything they got with that awful “Twin Caliber” and then spending all their money on Beckham. When they were on the verge of bankruptcy, no-one would have blamed them for rushing out every single unfinished product they had, just to get some money through the tills. But they didn’t – They continued to work hard and developed the best boxing game ever made, Rocky. And Rocky really was excellent. Didn’t sell very well for the first couple of weeks, and the few copies that did sell started to come in to be traded. The first one I traded in, the customer told me what a fantastic game it was. I played it, and agreed. And over the next few weeks, word spread about how good it was, and the game started to sell. Trouble was, at this time, it was on the preowned shelves for a tenner less. After I had seen the same copy of Rocky traded in a second time, I put an ultra violet mark on the manual, using one of those security pens we used on money. I tracked this copy of Rocky this way. We traded it and resold it 7 times. I am sure that, when people finally realised what a good game rocky was, if they had no choice but to buy it new, then Rage would still be with us. They would have sold lots and lots more copies.

And this is a real issue. Notice how developers are disappearing at an alarming rate. This months Edge says that within 3 years there could only be three developers worldwide. And if you think that is bollocks, go into Game and have a look how much of their promotional displays are sponsored by EA. It seems that EA is the only company that makes a decent profit off this industry.

On this level, I compare preowned to piracy. It seems to be ok to steal (play the game without paying anyone involved in its creation or distribution), provided that you do give money to someone, somewhere (the shop). For every 100 people that went into a shop and bought Rocky, played it and loved it, maybe 20-30 bought it new. That’s 20 games sold on rages accounts sheet, and 100 sold on the shops. Surely Rage wouldn’t care if someone who bought it preowned just pirated it instead?

I won’t type any more. Sorry if I’m boring everyone. And just for the record, I do have my theories of what the entire games industry needs to do to get things sorted out, but I will leave that for another time. I would really appreciate your comments though.

Cheers

[theredstar]

I think you raise some really interesting points, but surely other businesses have 2nd hand markets as well?

I can buy 2nd hand DVDs (at Game no less) - but I accept that number sold 2nd hand is a really small % of total sales. Perhaps books are a better example - 2nd hand book stores are really common, and there's been a thriving 2nd hand trade in books since the 19th century (wild guess).

Why aren't book publishers falling at the same rate as software devs? Why don't we see Terry Pratchett bemoaning his lost income.

BTW This isn't meant to be facetious - I'm genuinely interested.

[rllmuk]

I think you raise some really interesting points, but surely other businesses have 2nd hand markets as well?

I can buy 2nd hand DVDs (at Game no less) - but I accept that number sold 2nd hand is a really small % of total sales. Perhaps books are a better example - 2nd hand book stores are really common, and there's been a thriving 2nd hand trade in books since the 19th century (wild guess).

Why aren't book publishers falling at the same rate as software devs? Why don't we see Terry Pratchett bemoaning his lost income.

BTW This isn't meant to be facetious - I'm genuinely interested.

I don't think the book argument holds as the values aren't as high. besdies, if I was going to buy a book, i'd get it from waterstones new - not a 2nd hand shop. but then i won't buy preowned games either...

[DJ Sack]

I agree with a lot of what you say and ive always thought this, the person who owns the rights to the games never gets paid for preowned copies, same way as if i pirated it they would still not get paid, GAME/Ebay/who ever would get money from me but the company that created it would not.

Japan used to have a zero tolerance policy on second hand goods but thats gone over the years. Pre owned is nice for the customer but it is very bad for business. Of course you could say the same thing about films, but they get their money back with tv rights, merchandise and video games etc.

[Venice Cull]

Stuart wrote a column for indie on this very subject.

http://ds.dial.pipex.com/thumbs.aloft/wos/...ndie/mots14.htm

It’s only when you bring the subject up that you realise quite how odd the situation with second-hand games is. You don’t, after all, walk into Dixons and see a load of second-hand TVs for sale beside the shiny new Sonys. You don’t find half the floorspace in Gap taken up by second-hand clothes. And you don’t go to HMV and expect to be able to buy a load of traded-in albums and DVDs. Yet in pretty much every dedicated game shop in Britain, whether indies or the biggest chains, you’ll find between 20% and 50% of the sales space devoted to used games.

The point is, a second hand market will become a significant force where the product in question is expensive.

[Pob]

That was a fascinating post. To be honest, although I'd always suspected this to be the case, I'd never really thought it through before.

I tend not to pirate games because I want to support the industry. But by buying second hand games, I'm not supporting the industry at all, am I? (Not that I buy many second hand games these days).

[SaintM]

Perhaps it is up to the industry to work to make owning a new copy more appealing than owning a pre-owned.

Animal Crossing did this in a way with the speacial 'presents' for being the first to use the included memory card, and Nintendo also do something like this with their Stars scheme (not the best example maybe!).

There is always going to be a second hand market, so publishers/developers need to accept that and work out how they can exploit peoples in-built urge for shiny things rather than blame consumers wanting to buy essentially the same thing for 25% less.

[theredstar]

I don't think the book argument holds as the values aren't as high. besdies, if I was going to buy a book, i'd get it from waterstones new - not a 2nd hand shop. but then i won't buy preowned games either...

But obviously loads of people do buy 2nd hand books. And 2nd hand CDs etc

I agree the pricing is the key factor, but surely this just supports the argument that gaming has priced itself into a corner?

If games were less expensive, would that make the 2nd hand market less damaging?

Only if the market increased in size, to something equivalent to books/CDs/DVDs.

Isn't this Fairplay again?

[Sir DangerM]

So, when GAME (or wherever) put traded in games back on the shelf as new, "the industry" still gets nothing from them?

[Venice Cull]

Perhaps it is up to the industry to work to make owning a new copy more appealing than owning a pre-owned.

Pricing would be a good start.

I can't suggest this is the case for everyone here, but in my experience the way a lot of people seem to afford to purchase a new game is to trade in one of their old games each time and create a 'pre-owned' copy in the store in the process.

[theredstar]

Pricing would be a good start.

I can't suggest this is the case for everyone here, but in my experience the way a lot of people seem to afford to purchase a new game is to trade in one of their old games each time and create a 'pre-owned' copy in the store in the process.

That's true. The fact that gaming is so expensive forces loads of consumers to trade in old games to finance new purchases.

It's simply not necessary for less expensive items.

[Sir DangerM]

That's true. The fact that gaming is so expensive forces loads of consumers to trade in old games to finance new purchases.

It's simply not necessary for less expensive items.

When I trade in old games for new, it isnt usualy anything to do with money. I just see games sitting on my shelf that I'm never going to play again (as I've completed them to their limit), and so I had may aswell get some use out of them.

If games contained more features to keep me playing them (and I dont mean just nail on a multiplayer mode), then I'd never trade anything in.

[DJ Sack]

Maybe a limit on pre owned, such as sky only get the tv rights to a film 6 months after dvd release? Maybe you could have the title cannot be preowned untill 6 months after initial release? That way everyone is happy.

[squirtle]

I'm very guilty of trading in old for new stuff and buying 2nd hand copies. But, I feel this is entirely justified when I don't believe that most games are actually worth £30-£40 in the first place. That price is out of impulse range and when I only have about £300 disposable income for food, beer, living, games, cd's and dvds I have to weigh up what's best for me at the end of the day. If games fell in price to £25 then I would buy more new. Simple as.

[ChrisN]

Not sure I see the problem. The car industry hasn't collapsed yet.

[Venice Cull]

Maybe you could have the title cannot be preowned untill 6 months after initial release? That way everyone is happy.

Everyone? I'd rather pay less for games, thankyou very much!

Not sure I see the problem. The car industry hasn't collapsed yet.

Are car manufacturers going under at the rate that game studios are? (genuine question).

[theredstar]

Are there any legal ways to restrict 2nd hand sales?

Or would you need a change in legislation?

[JPickford (retired mod)]

A legal way would be to bring games down to the same price as a DVD.

[Hawkeye]

Not sure I see the problem. The car industry hasn't collapsed yet.

Not a good comparison as the car industry makes more money from selling spares and performing repairs on older vechiles than it does from new car sales.

In a warped kind of way the car industry would be in more trouble if we all drove brand new cars.

[theredstar]

A legal way would be to bring games down to the same price as a DVD.

I agree. But it aint gonna happen is it?

Pillage being an honourable exception of course

[DJ Sack]

Venice, how would you propose we do this then? If we was to drop game prices to 20 pounds and still kept second hand, then surely you'd still be in the same situation now? Personally i cant see any way where this works out for both party's fairly.

besides you can get cheap games, i bought MGS:TTS for 25 pounds on import, i can expect to see a 2nd hand copy of the uk version within 3 weeks in game for 34.97.

[ChrisN]

Are car manufacturers going under at the rate that game studios are? (genuine question).

No, because the car industry has gone through the 'small manufacturer' stage and emerged on the other side with a few giants and a handful of extremely specialised little companies.

Which is exactly what the games industry needs to do in order to survive too. The likes of us forumites hankering after our Rezs and Icos are the equivalent of the Brabus Merc and Spectre buying car owners. These "hardcore" games don't keep big game companies in business. They should move over to making the "Nissan Micra" games like FIFA and its ilk.

The point is that very few small games companies are actually any good at what they do (Rockstar, ID, Bungie..). In order to survive you need either an awesomely brilliant product, or massive economies of scale, the likes of which are only available to Microsoft and EA.

Sure, it might not be what we want from games, but we're a tiny minority, and frankly, we don't really count. The sooner games studios realise that the sooner they'll stop failing so much.

[Hawkeye]

Venice, how would you propose we do this then? If we was to drop game prices to 20 pounds and still kept second hand, then surely you'd still be in the same situation now?

I'm sure there would still be a second hand market, but it would be vastly reduced.

The amount of savings to be made from buying second hand would be lower, thus giving the consumer less incentive to buy pre-owned.

[ChrisN]

Not a good comparison as the car industry makes more money from selling spares and performing repairs on older vechiles than it does from new car sales.

Exactly. They've realised that theres more profit in spares and repairs than there is in new cars.

Just as game studios need to realise that likewise in the games industry theres not much cash in new games, and they need to find other ways to make money. Like 'spare' mission packs.

[Salsa Party Animal]

I think games need to be sold for 20 quid instead of 40 quids, so everyone can buy the games, reduce unwanted stock.

Perhaps all indy and chain store should come up with a deal with publishers and start selling games for 20 quid for brand new games and 10 quid for budget games and stop selling 2nd hand games in first 6 months. Then only way we can buy them 2nd hand is to use ebay.

I probably got about 60 news games and 25 second games in my collection or there about.

It got to be better for the industry if they have 50% of 1000 pound by selling 50 games than 50% of 700 pound by selling 20 games and 30 games in second hand. So that way there is 150 pounds less for publisher and developers.

[theredstar]

Is there any evidence to show that the 2nd hand market is smaller for cheaper games?

Is Pillage less likely to be traded than FFX-2? If so why?

Just being Devil's Advocate.

[Hawkeye]

Exactly. They've realised that theres more profit in spares and repairs than there is in new cars.

Just as game studios need to realise that likewise in the games industry theres not much cash in new games, and they need to find other ways to make money. Like 'spare' mission packs.

I think your insane to use the motor trade as comparison myself.

The reason that the motor trade works in such a manner is due to the fact a car is normally the most expensive item you will buy apart from your home. Due to this people wish to get the most from the vechile in tems of life span, so I'm not convinced that comparing a £40 product with one that is £10,000-ish is a good call.

Also the spares and repairs industry more often than not cut's out the "big players", as franchise dealerships get a very small percentage of the volume when a car is no longer in it's warranty period (normally three years from new).

The spares sales go directly to the maunfactuers (Bosch, Unipart, Pagid, Lucas etc), and third party retailers. Remember almost all car spares are out sourced not made by your Fords etc, they just assemble them.

To do "mission packs" in the way the motor trade does would involve the Developer cutting out the Publisher, and I'm not convinced how feasible that would be.

[DJ Sack]

Thinking about the car anaology, maybe with online gaming, games companies will produce new games and then earn money back with downloads, ala xbox live.

[Venice Cull]

I agree. But it aint gonna happen is it?

Pillage being an honourable exception of course

Venice, how would you propose we do this then? If we was to drop game prices to 20 pounds and still kept second hand, then surely you'd still be in the same situation now? Personally i cant see any way where this works out for both party's fairly.

What Hawkeye said. I rarely purchase 'second hand' CD's or Books or films (in fact, where I live there is nowhere to purchase second hand stuff like that, because it's such a limited market).

The difference in price between making a second hand CD profitable for the store, and the street price of a new one is so small that I may as well get a brand new one.

To undercut the highstreet significantly enough to make purchasing a second hand CD attractive to the punter, the store would have to give me pittance for my CD in the first place - I may as well keep hold of it.

[Hawkeye]

Thinking about the car anaology, maybe with online gaming, games companies will produce new games and then earn money back with downloads, ala xbox live.

Once again not really a valid plan I would guess as most car spares are sold for repair, or in other words to keep the vehicle on the road. I know for a fact people don't enjoy spending money on repairs it's a necessary evil.

A better comparison in that way would be to compare downloads to upgrades made to vehicles, which is a far smaller market and would be comparable to the "hardcore gamer" market that Onion originally dismissed.