Fixing The Used Video Game Problem

While I may be a little late to the party, I figured I would wander into the used game debate anyway. We have all heard the argument that used game sales are hurting the video game industry. Couple this with the persistent rumors that next-gen consoles may block out used content and we, as consumers, feel unfairly targeted. The bad guy in all of this isn’t necessarily who think. It certainly isn’t the consumer, but it also isn’t the video game developers or the publishers worried about their bottom line. Nor is it the hardware manufactures weighing their options on whether to block used content. We shouldn’t fool ourselves; with rising development costs, creating video games is expensive. Sure, publishers want to increase their profits, and while this does contribute to their hostility toward the used video game market, it mostly reflects a need for revenue capital required to produce new games. Unfortunately, used game sales cut into expected profits, and money that would otherwise be reinvested into the video game development cycle is lost.

This “problem” has been growing for years, and is the reason we sometimes see a lack of creativity in newer games. Because there is potential for reduced return on some of the more innovative, quirky, strange, or, let’s say, exotic IPs, publishers are less likely to take a chance on an unknown, opting instead to go ahead with what they know sells.

The risk of innovation versus popularity is also why multiplayer components are now tacked onto games. Mass Effect and Assassin’s Creed started out as strictly single player games, but saw a multiplayer component in later iterations. While we all crave multiplayer, I think that BioWare (or EA) and Ubisoft specifically decided to add this whole new facet to their IPs as a response to the issue of used games. The added value of multiplayer can keep a game in players’ hands longer than without. Less used games on the shelf, in turn, means that prospective customers are more likely to buy the game new and, consequently, publishers see more of a return. It is then worthwhile for developers to invest in multiplayer.

However, multiplayer development costs money, so a game’s budget now must factor for such a cost on top of the originally planned singled player component. Since there likely won’t be an overall budget increase to cover these new development costs, the money has to come from somewhere else. So in compensation, single player games are becoming progressively shorter. It’s a perfect storm of rising development costs, sales lost to used games, and the attempt to offset those losses through added- value components. The point to this lengthy preamble is simple: The brilliant minds behinds all of the great games we have come to love need money to continue to create those games, and used games present a real threat.

If we want to blame anyone, we should point our fingers at the larger video game retailers like GameStop. Used game sales have become a lucrative business where they can “buy” our games for next to nothing (it may even be for profit, depending on what we buy with the in-store credit), only to sell them again for more profit. We the consumers like this system because we get deals for used games and we get credit toward new games from trading in our old ones; developers and publishers hate it because it cuts into their expected profits.

According to GameStop’s own financial figures for 2011, used games accounted for 27% of all of GameStop’s sales; that equals roughly 2.6 billion dollars. When we compare that value with GameStop’s 2010 numbers, we see that used games sales have actually increased by one percent, or 150 million dollars. Now keep in mind that these numbers account for sales and not revenue, nevertheless it is easy to see that used video games are a lucrative market. If we turn our attention to actual revenue, we see that almost half (47%), or 1.2 billion dollars, of GameStop’s gross profit comes from the used games we trade in. This is a significant amount of cash–revenue that could potentially be reclaimed by developers and reinvested into new games if used content were blocked. Furthermore, when we consider that other retail giants like Walmart and Best Buy are also getting into used video games, it is easy to see that publishers and hardware manufacturers have a legitimate complaint—the only problem is they are targeted the wrong people: us.

You know it’s funny. Trading video games has been with us for as long time, or at least as long as I can remember. Before trade-ins became popular, I’m willing to bet that we all would trade games with our friends. We had a game they wanted and they had a game we wanted so we would simply swap. That mentality and nostalgia is somewhat captured today by GameStop, but what used to be one for one is now three for one.

As mentioned, when development costs increase and used game sales cut into expected profit, future developments suffer. Besides “safer” releases or tacked-on multiplayer game modes, there are a few ways things can go. One of them is the subject of speculation and rumor that sparked this article: used content could, if the issue is not properly addressed, potentially be locked out. Of course this option isn’t palatable to us, the consumers, who drive the industry through purchasing video games. If you piss off the consumers, we will push back, and in this Web 2.0 world pushing back has never been easier. The backlash alone should be enough to deter gaming corporations from locking out used content; still, we are having this conversation.

Another potential way the industry could combat used games is to increase the price for retail releases. What now costs us sixty bucks may go up ten or twenty dollars to offset the lost revenue, but this may actually exacerbate the problem. Such a solution could potentially increase the gap in price between used and new, making the used game option even more alluring. Alternatively, the price of used games could rise proportionately to the increased cost of new games, putting us right back where we started.

The problem isn’t that the used video game market exists (it would exist with or without retailers get into the business), but that the retailers/brokers (primarily GameStop) reap the financial benefits. If publishers or developers were to somehow receive a slice of the giant pie that represents revenue for used video games (a sliver of that 1.2 billion dollars), then I am fairly certain that they would see the used game market as legitimate instead of as cancerous—something they could support instead of decry. They may realize that the sale of used video games is quite beneficial, as it enables more people get their hands on more games.

While I believe this to be a simple solution, the likelihood of it happening is really an unknown. Of course retailers like GameStop are going to be less inclined to dip into their own profits, but ultimately they are in a partnership with those who create the video games we love to play, and partnerships can end. Given the success of Steam, it seems that a completely digital distributive model is viable, and publishers may opt for this route, thus sending GameStop the way of Blockbuster. Consoles are not yet delivering games in a strictly digital fashion, but more and more we are seeing full releases on Xbox Live Arcade and the PSN. Should GameStop persist in its current practices, the end of physical copies of games will come sooner rather than later. And there is an added beauty to digital games from the perspective of developers and publishers: they can’t be traded in.

You probably noticed that earlier in this article I put problem as “problem.” My reason for quotation marks is to show that used games are only a problem if we let them be one. At this moment we are. I look at Sony and Microsoft and I can’t help but think that if the rumors of blocking used games are true, then they are taking the easy way out. But retailers aren’t helping: GameStop and others have exploited the willingness of gamers to participate in trades, and have made major profits that they could easily share with the people ultimately responsible for restocking their shelves with new, exciting games. Both the speculation that sparked this article and the status quo are equally damaging and ought not persist.