Saturday, March 7, 2009

A new frothy bubbling of the used-game stew

[cross-posted from Gamasutra blog]

I missed the DICE conference this year, but like much of the blogosphere I got a second-hand accounting of the more interesting talks at sites such as Gamasutra &

Among the talks getting some coverage was that of Paul Raines, Gamestop's CEO, in which he defended their controversial (within the industry anyway) practice of selling used games. Among those reacting to the talk was a good reaction from Dave Perry on VentureBeat.

This isn't a new debate, of course. (e.g. Here's a thread from back in 2005, when Epic's Mark Rein was on a tear about it). Two things seem to have changed about the debate this time around.

First, the industry seems to have decided that it's in bad taste (or just politics?) to argue against the consumer's right to re-sell their games. Thank goodness we're not the music industry :-). Perry and others are instead arguing against GameStop's practices of promoting the used title over new, while at the same time pulling all the usual retail practices of charging publishers at every turn to promote the very products they are steering consumers away from the new versions of.

The second thing that's changed in this debate, and is really the subject of this post, is that the field just got real crowded for Gamestop, as Best Buy, Toys R Us and *shudder* Amazon are all cannonballing into the used-game pool.

I think this is a good thing.

I share the same concerns that many do, in that I want as much money flowing back to developers & publishers as possible, and that means making the channel as efficient as possible.
If we assume that used game sales aren't going to go away (I don't beleive they should, and they very likely aren't) then it's a question of how we improve the situation for those creating the content.

One way of course, is to leave the retail business, and move to digital distribution, services businesses, etc. That's the subject of another post. For those intent on offering boxed product like today's, what do we do to improve the situation?

The answer, I beleive, is in competition.

Being essentially the only game in town for those looking to trade their games in for new (or used) ones has been part of what's made Gamestop the powerhouse that they are.
Adding competition to the situation will mean a few things:

  • Gamestop may lose market segment share to these other retailers. If that's the case, their negotiation position with the publishers won't be as one sided as it is today, and that may help do something about the promotion of new games. (e.g. maybe a window of time before used games are offered up?)
  • Consumers will get more for their used games. In fact this is already the case with Amazon. At the very least this means the perceived value of games vs other entertainment goes up, and this may translate into more gaming share-of-wallet.
  • Competition may mean that used games need to compete between retailers, not just with new, driving that price down. Versus today, where 1 week after release, a hit title often only has a 3-5% delta between new and used.

The net effect of the latter of the two points above is that if used titles sell for less and the retailer needs to pay the consumers more for them, they won't continue to be the high margin product that they are today - the very thing attracting all these retailers to the used game space!

At that point, retailers will need to compete, and not just on what they pay out to consumers for used titles, but compete for publisher business, allocation, etc. That may amount to a share of used game sales, windows of exclusivity for the new titles, better pricing... who knows.

At the end of the day, it will help if both consumers and suppliers have choice, which is just what competition brings to the table.


Anonymous said...

I agree about competition being the key. I've always argued that the problem isn't used game sales. The problem is that Gamestop is the only major player. As more players enter, we'll see profit margins get tighter as consumers have choice.


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