Thursday, January 4, 2007

Clarity in the Used-Games-Sales debate?

A recent post on the Freakonomics blog, regarding the debate behind the hypothesized positive/negative impact of used book sales on sales of new books, may help shed some light on the used games sales debate.

The arguments in both industries are similar:

Anti-used: If customers can re-sell their media, they end up paying less for it, and it cannibalized new media sales, as the second and subsequent buyers didn't have to buy new. Furthermore, the channel makes all the used-media money, with copyright holder getting none of it.

Pro-used: If customers can re-sell their media, they use the proceeds to pour back into the market and thus buy more. This makes up for the cannibalization, and in turn, artists also benefit from wider distribution and exposure.

The problem with BOTH arguments is that it has been SO hard to definitively prove either case in an open market.

ANyhow the blog post links to this paper by some folks at NYU and Carnegie Mellon, which is the best analysis I've seen of it to date. At least it seems so. I confess I haven't even tried to grok all the math.

Anyhow, their conclusion supports the 'pro' side of the argument, concluding that cannibalization is insignificant, and that used book sales may actually help grow the new book market, since a used book is more likely to retain value to the customer.

Would be interesting for someone to apply the same model(s) to the used games space and prove the same thing.

2 comments:

Anonymous said...

How about the argument that someone buying a used book/game might be pulled into the franchise and they buy new? For example, someone buys a used "DaVinci Code" book, likes it, then goes out and buys other Dan Brown books new? Although I don't buy used games, I have bought an older title as a "Greatest Hits" (eg. Sly Cooper), liked it, and then when 2 came out, bought it new at full price. It seems to be that in those cases, one used book/game could generate 2-3 times the revenue for the authors. Of course the other side is that the person may also just buy the rest as used too...

john said...

Kim,

I buy used and new.

Used is harder - you have to wait, you have to search for titles (especially popular ones), and in general you are paying a good proportion of the retail price for the used title if it IS popular. I think this is a serious barrier to rampant cannibalization... but keeps market forces in play to keep prices down.

Just like Jim, I have been pulled into (music and book) franchises by the availability of used cd/books... the same holds true for games. Oddworld is one of those that brought me back for more.

Since there is a market for my old games, I often cull those that I tried and did not like (or have completed), get some money in return, and typically re-plunk that money down on titles - both used and new. If I had to keep everything I bought forever, I would much more stingy in my spending habits.