Monday, March 2, 2009

Interviews with K: How Buying Used Games Can Hurt Developers

Since K has a lot more expertise on the video game industry, I'm going to do a series of interviews to capture his thoughts. First up: there is a certain national specialty video game chain that is the place where <cough> Game lovers <cough cough> Stop to pick up the latest releases. ^_~ Let's call them, ah, GGS (generic game store).

A: So tell us, K. Why the bone to pick with GGS?
K: Well, I don't hate GGS in its entirety. I appreciate that they're a specialty store that gets games on release days and even go to them to put down pre-release deposits. I just have a problem with their used game policy.

A: And what's wrong used game policies?
K: Their particular policy ensures that GGS makes money hand over fist, but it keeps developers from seeing high sales for a lot of their games.

A: How does the whole scheme work then?
K: All their marketing practices are centered around used games (tons of promotions on the web, email, and in-store). Tactics they've been known to use:
  • Selling used games ~$5 cheaper than the unopened games (tons of profit)
  • Asking customers at the register if they would like to buy a "discount" (aka used) version instead
  • Putting used games on the main display shelves instead of new games
  • Allowing customers to swap used game purchases within 7 days if they don't like them (but not for new games)
Therefore, fewer copies of new games are sold, and obviously the developers never see a penny of the used game sales. The problem is that this is not just a facet of their business, but a major focus. They're biting the hand that feeds them in a massive way.

A: Like a parasite that kills its host, huh?
K: Well, if you're a video game company, what's your incentive to make new games? You've got an x% chance of making an A list title, tons of overhead to pay for marketing and TV ads, and now no one's paying for your game because customers just get the used versions and then bring them back for others to buy. It's a glorified rental system, with the GGS leech profiting from it all.

A: What's been the gaming industry's response?
K: The gaming industry and most professional orgs (like ESA) have all attempted to get GGS to stop exploiting used game sales. Since GGS is the only one making tons of money from used games, they see no reason to stop even though it's harming developers and publishers. Selling used games would be reasonable in small numbers, but their practices border on exploitative. And they've made it flat out clear that they don't care if it hurts the market that supports them.

A: How come what they're doing isn't illegal?
K: Nothing they're doing is illegal, per se. The problem is that GGS is taking such an excessively large slice of the pie. Unfortunately, there doesn't seem to be any particular reason to stop until they've driven a bunch of small developers out of business. They value profit over long term sustainability in the video game industry.

Bottom line: buy new games rather than used! And please buy games, period, rather than pirating them. We'll have another post on that subject later. ^_~

Part 2: Response to "How Buying Used Games Can Hurt Developers"

1 comment:

Xbox Maven said...

Interesting perspective. I buy used games from GS, I mean, GGS, whenever they do their buy two used, get one free deal. By waiting for that weekend, and using my GGS discount card, I manage to get games at a pretty good deal. I also manage to pick up some pretty sweet “forgotten games” from dead or obsolete systems.

My question is, looking back at my library of used GGS freebie weekend purchases, I see that most of the games I get are ones I wouldn't have purchased without some sort of major deal associated with them. For example, I was interested in playing Prince of Persia, but if it weren't for the sale, I'd have most likely never purchased it. Now I have it and I play it, but only because I got it at the discount. Would game developers rather you not buy a game, as opposed to buying it used? True, while they do not see direct profits from the resale of the game, and that income goes directly to GSS, I would think as a game developing company, they'd root for the success of stores like GSS even with a program that doesn’t deal direct income to game developers, and equate the loss of whatever they make in profits as the cost of advertising. Especially since with DLC available on systems like Xbox, you could have bought the game used and bypassed the income from that, but there’s no resale of DLC… So gamers may be using a used game, but they’re still generating income by getting the DLC. And that kind of program does get butts into the store, and people in stores are more likely to buy product, and they set themselves up to be directly advertised to regarding these very specific products. And a form of direct advertising that specifically targets exactly who you want in the most direct way possible… And double bonus, with their pre-buy reserve system, your audience can be targeted AND locked into a sale, all in the same trip. Do game developers feel that is an equal trade-off to the loss of income from the resale of games? Are there ways that game developers have considered using this automatically generated foot-traffic to their advantage?

I’m also curious… Obviously GSS, being a specialty store, caters only to the gamer... Meaning, you walk in there, your interest is games. That can be very limiting to the store, and leave it in a world of hurt should people not be as interested in video games as they are now, or more people cut it out of their budgets as an unnecessary luxury. I know they’re a powerhouse now, but (at least around here) we had gamer-specialty stores go out of business by the bucket load in the late 90s-early 2000’s. Now, I do know that at least one of those companies was acquired by GGS, but I still think that goes to highlight how volatile that market can be. The success of GGS depends entirely on the success and popularity of the games and systems in the market at the time, so slumps for the developers also equal huge slumps for places like GGS. If specialty stores like GGS go, that means people would have to buy games from non-specific merchants, like Wal*Mart, Target, Toys ‘r’ Us, etc etc. I can’t imagine that game developers would want that, seeing as they don’t stock nearly as much as GGS, and the relative shelf-life of a game for sale there is only as long as it’s popular. Like right now, if I want to buy any games from a fall release (save for Call of Duty: WaW of course), you can’t find them anywhere but GGS… Wal*Mart’s shelves are stocked with the latest releases, and that’s it. There’s no direct market advertising, no place to go to look up the release status or latest news of upcoming games, and all of the service you get is from people who probably only have very basic information about the game… All and all, companies do make more direct money from the sale of the game (even though the game is inevitably cheaper than what GGS sells the same game for), but so many opportunities for advertising, even word-of-mouth, are bypassed. I am curious to know, do game developers as a whole feel that the loss of income from resale programs affect them more, or do they feel that the loss of specialty outlets is a bigger concern/impact on their sale of games? I know at least for me, personally, when I had to rely on non-specialty stores to sell games, I bought very little. When GGS opened nearby, the buy two, get one used program got me in the door, and now I buy all of my games, even new ones, only from GGS. All of my preorders also are through GGS, and through my hobby and my job, I send people there all the time.

Also, how do game developers deal with the “EBay factor?” The people who buy the game new, use it, and then sell it online? Are the losses from that larger than that of the losses of the GGS trade-in program? Do they feel that is better, worse, or about the same in terms of financial impact on the success of the market?

Like I said, I’m genuinely curious and excited to hear what an insider has to say on the situation… These kind of discussions are always so hard to find and have, because inevitably somebody comes to pieces, then the discussion falls into a “What do you know, noob” web slang tantrum, everybody accuses everybody else of being an 8-year-old, and you’re no better off in terms of knowledge than before. I know that opinions on GGS fall under either “love it!” or “hate it!” so finding somebody to have a rational discussion with is always a friggin miracle!