Used Game Trade is Good for Video Game Biz, Says Industry Watcher

April 9, 2008 -
While some game industry types and even the occasional game journalist criticize game trade-ins as harmful to the industry, a market researcher says it's actually a good thing.

As reported by Game Daily, Eric Villain of research firm OTX made his remarks at the MI6 conference in San Francisco this week. From Game Daily's account of Villain's talk:
We spoke to 2,000 gamers from March 14th to 17th. Is it good or is it bad? For now, it's actually a good thing. And actually fuels new game sales. Used games are only a fraction of the market. 

Gamestop has a phenomenal share of market – again, not a big surprise. We felt really good that a conservative estimate [of the used game market] is about 1.3 billion dollars in 2007.

Every game has different [trade-in] curve... Sellers are guys. The buyers are more evenly split, fifty-fifty... What's driving the retail market is people who are buying action-shooter games – RPGs as well... What we also expect is growth in the market for 2008. A lot more than a year ago. In the midst of an economic downturn, I expect more buyers.

According to Game Daily, OTX noted that used game sales create additional opportunites for in-game advertising, since multiple owners may use a single copy of a game. The practice also increases the value of some game brands.

Nearly two-thirds of gamers surveyed told OTX that they purchase both new and used games.

Comments

I buy the used games when I can't stomach supporting the publisher. Such as COD4 on PS3...

@ JOLeske

Considering what a pain in the ass it is to find a copy of Harvest Moon for any system new or even used if it wasn't for GameStop, hell most of my games ARE new, it's rare I buy a used copy. Hell I think of all games in my console collection let me see 1..2...3.... 3 of 15 games are used. Dead Rising, TimeShift and FEAR Files, are my 3 used copies.

Now Armored Core, and Profile Valkyrie are EXTREMLY a pain in the ass to find, hell for both I think my local Gamestop has a single copy of each, now from your arguement Gamestop should have walls busting full of them, which means at someone they tons where bought brand new, simply not the case. Also while I'm thinking about it where in the hell is a new copy of Armored Core Nexus?

I need to toss my 2 cents out (whatever that is worth these days ;) )

Used games do not hurt developers any. There I said it. There is no damage at all.

When someone buys a game new, the developer gains one customer. When that customer gets tired of the game, they trade it in and the developer loses a customer.

Another person buys that used copy, and the lost customer is replaced. The developer comes out even. There is no loss.

The only loss that a developer receives is when the lost cutomer is never replaced.

Perhaps that’s where we differ then. When I see a new copy of a game for $50 and the used copy of the game at $45 I don’t really think there is a significant amount of people that wouldn’t by at $45 but not at $50. They are just opting for the $5 less copy as a bonus not as a deciding factor.

@ E. Zachary Knight

“When someone buys a game new, the developer gains one customer. When that customer gets tired of the game, they trade it in and the developer loses a customer.

Another person buys that used copy, and the lost customer is replaced. The developer comes out even. There is no loss.”


Ugh. Sure, the developer gets paid when the first customer you mention buys the game new. However (and this is a big “but”), the original developer sees no money for that second purchase, i.e. the re-sale of the game by a reatiler as a used copy.

You end up with the game being sold at retail (NOT private sale, a completely different issue) multiple times, but the game’s creators only getting paid just once.

How does that benefit the developers? How can you justify that as being fair? This is not about greed, this is about getting paid.

All I suggest is that specialist retailers like GameStop in the USA or GAME or GameStation in the UK give a small percentage (like between 3% and 5%). of each resale transaction back to the original publisher, who will in turn have more money to fund the developer. This wouldn't affect private sale or stuff like eBay - just the bricks and mortar stores.

Maybe the same should be applied to music and movies if it isn’t already done so, I don’t know. Books don’t count because they’re so unbelievably cheap to create.

The point is, nobody is saying the used games would need to cost more, or that they should stop. Nobody is saying they are bad or evil. And nobody wants to charge the customer even more than is being done so already. All I’m suggesting is that the specialist retailers share a tiny fraction of their ridiculous resale profits with the creative types that put the stores in business in the first place. How is that wrong?

Used games are, indeed, good for the business. I've played some used games before and have been pleasantly surprised enough to pay full retail for other games in the series.

Also, some people who buy used games just can't afford new games anyway, but the great part is that they're not always stuck in that situation, so used game buyers today end up being new game buyers tomorrow. This seems like it would be especially true for high school and college students.

I only ever bought one game used - Black & White. Didnt regret it.

[...] wrote an interesting post today onHere’s a quick excerptWhile some game industry types and even the occasional game journalist criticize game trade-ins as harmful to the industry, a market researcher says it’s actually a good thing. As reported by Game Daily, Eric Villain of research firm OTX made his remarks at the MI6 conference in San Francisco this week. From Game Daily’s account of Villain’s talk: We spoke to 2,000 gamers from March 14th to 17th. Is it good or is it bad? For now, it’s actually a good thing. And actually fuels new game sales. Used games are only a fraction of the market.  Gamestop has a phenomenal share of market – again, not a big surprise. We felt really good that a conservative estimate [of the used game market] is about 1.3 billion dollars in 2007. Every game has different [trade-in] curve… Sellers are guys. The buyers are more evenly split, fifty-fifty… What’s driving the retail market is people who are buying […] [...]

The used game trade helps battle piracy by giving those who can't afford full-priced games a reasonable outlet. I'd bet those that buy a used game are less likely to copy and distribute for the mere reason that it is theirs. It's very beneficial to those who "missed" a game. It prevents the need for continuous publishing of a game which costs the industry some cash.

Then there is the obvious truth that video games are raking in the dough even with this used-game selling in the mainstrem.

I do not buy used games very often because the difference in price between new and used at Gamestop is usually so small that I'd rather get it new, but I do like having the option. If it had not been for used games I likely never would have discovered the Shin Megami Tensei series, which is now my favourite RPG series.

the only problem with buying used from independant stores is that their used prices are usually out of whack with the price of the game new, often resulting in games that are $20 new in chain stores still being $30+ in the smaller stores.

Also, isn't used games the source of much of Gamestop's profit? I've had my issues with them in the past, but i like there being an alternative to the big box chains when it comes to buying games, even if that alternative is still a big corporate chain.

@Void Munashii:

Yes, used games are indeed a great source of Gamestop profit. That's because they undervalue the trade-in... but as long as people are willing to part with their old games for what's often a pittance, then Gamestop will continue to thrive.

I think that Ragnaar is right. You trade in a stack of games and can earn about 20 bucks towards a new game. Most single games only earn you five bucks of in store credit. The shop can charge around 20 dollars per used. They earn a 15 dollar profit per game traded in and then you need to use that in store credit on something. ON most games up to 15 dollars off don't cut into the profit margin at least from what I see at the big retail chain I work at. They earn it both ways. But I do have to say there are series I would have gotten into if not for cheaper used game prices and a few recommendations for various sources.

I have a serious problem with some of gamestop's trade in practices. They buy back practically new games for 10-15 dollars then sell them at 55 dollars. The only time I buy used is for older titles that get serious discounts. I bought Viewtiful Joe not long ago for just 5 bucks. A game I missed on when it first released.

Personally I don't find a problem with used games, I think they are good for the industry, because it allows people to offload games they don't want, and often someone will be looking for a game someone else is trading in. When I worked for Gamestop last Xmas, I had a lot of guys trade in games I don't see just anywhere (Ikaruga!) It's also neat to be able to find a game that they have stopped making new (MvC2). I bought Super Swing Golf 1 and 2 used because the quality is the same as new, and I can get two discounts on used games, employee and card. =)

Fuck this - if retailers paid even 5% of the retail value of a used gam,e towards the original publisher, UK developers wouldn't be petitioning ofr tex breaks. Nobody is suggesting that retailers stop selling used games, but some tribute should be paid towards the original creators.

@Monkeythumbs:

I'm sure UK game developers would still be petitioning for tax breaks. The problem is that that particular copy has already been sold. The developers already got their money for that particular copy. What people do with it afterward is their own business.

I know this is a terrible analogy, but it's almost like going to a garage sale or a flea market and seeing these games there. Do you think they give anything to the original creators? And what if the person that bought it decides to turn around and sell it because he's bored with it? I guarantee he's not going to be sending a check for that game to the developers.

Used games do create revenue in the long term, especially with popular game endeavors. If the game is that good, then having new people introduced to the series is a bonus to the developer because I can guarantee you that more people will buy the next installment for retail.

The problem with used game sales is that they cannibalize new game sales when sold side by side. However, selling used games certainly does provide a valuable service to consumers, especially when consumers seek out titles that are no longer on shelfs of the big box stores. Many developers have argued that an appropriate solution would be to negotiate a black out period in which used games would not be sold until a fixed amount of time after a title's release.

I appreciate the trade in second hand games, it allows me to get rid of my old games and to afford new games when I want them.

"I appreciate the trade in second hand games, it allows me to get rid of my old games and to afford new games when I want them."

I do this only for games I don't play and know I never will again, but I appreciate the service for the same reason. Plus, while I prefer to buy games new whenever possible (I'm just picky like that), for older games it's really nice to be able to go to Gamestop or wherever and see a game on their shelves that isn't being made anymore.

@Monkeythumbs
Well said.

Re-selling on games doesn't benefit the original developers at all, and this ultimately leads to a negative effect on the industry. Sure, the developers made money on the initial buy-in from first purchase, but after that, each additional re-sale is another person who didn't buy an original copy. As cheesy as it is to say this, you could look at each re-sale as lost income for a developer/publisher. If developers/publishers aren't getting any income from a sold title, then it leaves less money for the development of new games. Less money to go around means more conservative "safe bet" choices on the part of publishers and as a result fewer new IP titles and more of the same sequels are made. I'm certainly not saying that re-sales are killing the industry, not by a long shot, but it does have a chilling effect. If there was an amount (even a very small amount) of income that went back to the original publishers/developers on re-sales, then it would likely lead to a healthier industry as a whole.

Japan all ready tried to illegalize selling used games. It was a utter failure. used game sales will never stop so the industry had better get used to it and make it part of their calculations for the bottom lines.

I don't oppose used game sales as long as developers and publishers get their share, which is not the case. Proof is the comment by sheppy.

"I buy the used games when I can’t stomach supporting the publisher. Such as COD4 on PS3…"

People like you sicken me, even going out the way to abuse this system.

My two cents as a developer.

I'm really suprised to see anything along these lines. Retail in general is hurting the industry by pressuring against digital distribution. People going for the mighty $5 discount on new release used games takes money right out of the pocket of developers and right into the hands of EB.

As far as trading in games, I use game trading sites like Switchplanet, Goozex (and I was recently reccomended Playswitch) where I get fair value for my used games. I'd much rather trade a game to another person than a store.

I think I've spent more than 300 bucks in the last 2 months at GameStop.

@Artifex

Tell me, do you think Car manufacturers should get a little something something when you either sell or trade in your car, or when you buy a used car? I don't.

Remember the game developers get their money from the games bought by retailers for resale. They got their money. When someone trades a game in for credit they use the credit for a new game and someone else buys their old game. It's not like the retailers a pirating these games and selling them.

If a game is hot and they don't have enough to satisfy demand with the 3 used copies they are getting from thier customers, they will order more.

@ragnarr

Any place that deals in used items pays a low amount of money when people sell them stuff. The used book shop that I frequent only pays 10% of cover price for books... mind you, they usually sell for 50% cover price instead of 90% like Gamestop usually does. i personally don't sell my games back because I like having a large collection, and I don't feel I'm, getting enough to make it worth my while by selling.


@ monkeythumbs

I'm torn regarding the idea of paying the game maker a second time for the game. I can see your point, but then again the used book shop is not giving a cut to the publishers and the used music shop is not giving money to the record companies, so why would it be any different for used video games?

It sounds a lot like video game companies are asking for special rules for them over other forms of media. If you want me to buy your game new then release a product that I feel is worth $50-60 (Oblivion, GTAIV, Persona 3, etc), release at a lower price (Katamari Damacy, etc), or I have little choice but to demon-shop and wait for a sale, or a good used price. My disposable income is limited, so I have to choose carefully in my purchases.

Used games are great for the consumer, but bad for the developer. Do you think that the developer gets a share of used games sales? Rentals?

Steam FTW. We love it and it loves us all back. :)

@Bill

Thank you for putting into words something I wanted to express.

The logic behind having to compensate the developers for used games that is being thrown around on here is a little faulty. As you said Bill, they've already gotten there money. It's simply resale by the retailer. If anyone were to lose money on this I would think it would be the retail chain? Funny how that's simply not the case as it turns out they're NOT losing money on it and are actually turning a massive profit.

Another thing the opponents of used games seem to forget is that it's really hard to pick up certain games new. A game that immediately comes to mind is Valkyrie Profile: Lenneth. A port of a game game that is near impossible to find as it is (unless you look on eBay but that would mean it's also a USED copy) that, itself, is incredibly hard to find. Were it not for a GameStop carrying a used copy of the game I doubt I would've ever found the game at all. The pros FAR outweigh any cons of used game distribution.

I also feel the garage sale analogy was a perfect way of describing how ludicrous it would be to compensate an industry for something they've already profitted from. If someone sells something in a garage sale do you think it would be fair to legally bind them to compensating the manufacturer of whatever they've sold from the garage sale? I don't think so. Why? BECAUSE THE PERSON ALREADY PURCHASED THE STUFF BEING SOLD! The manufacturer has already profitted from it.

Let me end this by saying that the advantage to buying something new is just that: it's NEW. Perfect condition, all accessories included, guaranteed to work, etc., etc. There are still MANY pros to buying a game new.

@Monkeythumbs, Artifex, neoSpider

So basically you argue that the first sale doctrine shouldn't apply to video games?

Used game sales are only great for the retailers and the consumers. They do next to nothing for the developer. The idea that somehow an extra set of eyeballs for in-game advertising compensates for loss of a new game sale is laughable.

@ Vinzent

Used games are not great for the consumer. At least not from the EB/Gamestop conglomerate. eBay, or any game trading site, will give you true value, instead of 30%.

Full Digital Distribution would solve my big problem, which is the need to purchase older games and not being able to find them new. Hell, even the Atlus titles released this year are hard to find.

@ Monkeythumbs

Like so many others have mentioned, It really doesnt hold any water. Granted that yes it may hurt the developers a bit, but It could also help them with future installments. If you want to apply that logic to everything then ebay is evil, and so are garage sales and antique shops and rental places... When an indivisual resells a vehicle, movie, toy or hell even an art piece, do the original creators ever see anything as far as profits for thier resold merchandise? No, and besides unless the game is a freakin masterpiece (Like Xenosaga or Star Ocean 2 for the PS1, which still sell for nearly $50 might I add) the value of the game will only decrease and drop drasticly in price, with used games you at least get to spread the word and publicity of a game franchise/developer.

And true, Game Stop does rape its prices on used games, both in trade in value and resell, but thats just one company, there are other ways of selling Used Games. so the whole consept of "used games" being unfair or evil cuz of one store chain is unfair. Just my 2 cents.

Used games sales are alright for the consumer. I don’t buy into the argument that used games gets more people to buy games. Getting $3 off buying used could be nice but it won’t be the deciding factor on whether or not they guy the game. if you went out to buy the game from $52 you probably would have went out to buy the game at $55.

Used games sales are ok for publishers but very bad for developers. I think there is a point that a lot of people are missing. Developers don’t get money for every sale. The publisher gives the developer a loan so they can make a game then after the game is released the only party that gets any of the profits from the game are the publishers. The publishers take all the profit until the initial loan is repaid with interest, then the developers get a cut. For the developers to make any profit on making the game there must be a considerable number of sales. So with the current system new games go out to the retailer, the retailer sells these copies and buys them back to sell the all over again. So after the initial sales are done the publisher made their money back with interest and the developers cut may have started (though very possibly hasn’t). Now however, when people go to the retail markets to buy the game they buy the used copy for the $3 discount, so the retailers are making a huge profit but the publishers and developers are out of the cut.

A big problem with this is that people have started using retail outlets with trade in as extended rental systems. They go in buy a game (probably used) play it for a week trade it in and buy another copy (probably used) and since there are so many people doing this the retailer never has to buy new games after the initial week. I have seen stores buy only the number of preorders they have listed because they know they can rely on the pre order buyers to sell it right back within a week. The consumers become their new distributors. Have you ever tried to buy a sleeper hit (a game the initially sold poorly but after word of mouth got popular) it is very difficult because the few that were sold during the first week haven’t been sold back at the normal rate so the retailers don’t have stock.

@Bob

The used car analogy doesn’t work because cars have a degrading value based on usage. As soon as the car goes off the lot it goes down in value to both the buyer and the retailers because the mileage is going up. Also cars have an average lifespan much much longer then games so the buyer won’t buy a car, use it for a week and then sell it back so the number of times that a car retailers can sell the same copy of the car are much much lower.

There is a huge difference between a consumer selling to another consumer and the retailer buying from the consumer, then pushing the used copy over the new copy. There is nothing wrong with the first sale doctrine between consumers, the problem is with the retailers that push and rely on used games so much. When people go in to buy a game new, they are pushed to buy the used version at a minor discount instead. It is quite literally a large origination doing everything they can to cut the publishers/developers out of the loop.


@Jeff
“Another thing the opponents of used games seem to forget is that it’s really hard to pick up certain games new. A game that immediately comes to mind is Valkyrie Profile: Lenneth. A port of a game game that is near impossible to find as it is (unless you look on eBay but that would mean it’s also a USED copy) that, itself, is incredibly hard to find. Were it not for a GameStop carrying a used copy of the game I doubt I would’ve ever found the game at all. The pros FAR outweigh any cons of used game distribution.”

The reason you couldn’t find the copy of Valkyrie Profile: Lenneth is because of used games. The retailers were relying on the used copies for it’s source and are only willing to buy from the publisher again as a last option (even then only if there is a huge demand for it)

So, the game biz is getting on "I tis be losing income y0!" (Tongue in Cheek people) Ok let's bring everyone in whose losing money on venture like this... well thats everyone, why should I have to pay a HIGHER or SAME cost for something used, hell thats why my first car was used.

The product was made, sold then sold again. Party A sold it to Party B, becoming Party B's property. Party B sells to Party B.. why should party C pay party A for Party B's property? Thats the same arguement here, now I understand the arguement of "we be losin incomes y0!" But if you want income for the used product make every company get that and we'll see how long it takes for someone to go "This fucking sucks!"

Besides it's a pain in the ass to find some rarer games, like Armored Core.

@JOLeske

I'll give you the benefit of the doubt that it was because of used games that made it hard to find. But then this begs the question: whose responsibility is it to create demand for the product?

If the retailer certainly won't create this demand then it falls on the publisher. In that case then I would agree that used games made it hard for me to find a copy because it was a failure on the publisher's part to create the demand for it that would motive the retailer to order more copies to meet demand.

If the publisher certainly won't create this demand then it, of course, falls on the retailer. I fully expect the retailer to only create demand for games that they're sure would sell. Did the retailers expect Valkyre Profile: Lenneth to sell? Don't know but my guess would be that they didn't expect it to do well at all. Was it in high demand? Don't know that either.

What I do know was that it was hard to find and whether that was because the publisher failed at creating demand or whether it was the retailer failing to see its profitability I can't say. But right now I'm sailing off on a tangent and I really don't know what point I wanted to get across in this post so I'll just leave it as is because I've already spent 10 minutes typing this and I'd rather not delete this (thus wasting 10 minutes of my life typing for nothing).

@JOLeske

You know, I don't seem to recall Wal-mart or Best Buy having massive used games sections like Gamestop does.

whose responsibility is it to create demand for the product?

The costumer. Demand in economics defined as is havening the willingness to buy and the ability to buy. So Used games technical increase demand of a product. Because it means the more people can actually have the ability to buy a product. Will publishers can effect demand they do not it create. That is our jobs. If demand is increase then price over all will fall, not raise. Also used games is another way company can compete (price competition) Making better for consumers. (if the economics to scale is not to steep for the industry, which give the number of ferms produceing games that this is the case) This is basic economics.

Buying a used game means that you're not directly supporting the developer and publisher. If you particularly care about a game, if you want to make sure the creators have an incentive to make more along similar lines, making sure you buy a brand-new copy is the best way to do this. (For instance, if it's a niche or experimental title, and you like it, buying a new copy will be helpful in rewarding the creators for taking a risk.)

That said, there isn't (and shouldn't) be anything illegal about buying used games. Book publishers have done fine even with their products available (for free, even!) in libraries for centuries.

Author Neil Gaiman argues on his web journal that libraries are healthy for the book industry, and this might have parallels to the used-game issue as well: http://journal.neilgaiman.com/2008/03/more-on-free-and-suchlike.html

And actually stores make more money off used games then they do new. The mark up for new games if like is less then a dollar. While the mark up for a used games is alot more. The same argument was give for used cars. And we all know that it is being done. It helps a market it doesn't hurt it.

[...] Ah Used Games- go into your local Game, GameStop or local computer game store and next to the New pristine condition releases you find the Used section of game or bargain bin games where people have traded in their games. Apparently Trade in, used games etc are pretty big buisness in the Game Industry: Eric Villain of research firm OTX made his remarks at the MI6 conference in San Francisco this week. From Game Daily

@Gray17

They don’t. Wal-Mart does however only carry 5% of the games made (the 5% there their researchers deem fit for sale). Best buy was seriously considering used sales for a while and I haven’t heard much from that since, that is usually where I do buy my games from because they seem to be the most helpful to developers.

I don’t really see your point however.

@Ebonheart

It is very hard for me to understand what you are saying (not a perspective problem, I just can’t make sense out of your words)

@ JiLosbo

The nature of the product doesn't change weather or not the original creator of the product should get a piece of resale.

As for degraded value based on usage, the last time I scratched my car the fucker didn't turn into a brick unlike several games I've owned, I'm looking at you Soul Calibur. Just saying. An Items value is based on what someone is willing to pay for it.

@ JoLeske

Sorry went on a random tangent. It's not the used games that are making games hard to find, it's the companies and not used game retailers that make them hard to find.

@JOLeske

My point being that several (if not most) of the large retail outlets that carry games, don't carry used copies of games. Also that places like Wal-mart account for large portions of overall game sales. Yet you seem to be arguing that those places are running on the exact same policy as Gamestop. Which doesn't really add up when compared to reality.

@Gray17

Wal mart doesnt need to sell used games becuase they dont see only one product. To compete with wal mart and best buy game stop need to have some thats mark up is bigger then $1 to 50 cents. Hence used games. But that is 2 ferms and not the whole market. It is better for the market if used games are sold. Basic economics. It effect demand and there for lowers prices over all and that means that marginal revenue and marginal costs will drop. Mean that you publisher will make more per game in the long run. Increase in demand (like the sell of used games) are usually good for business.

@Ebonheart

Well the point I was trying to make was that the retailer’s reliance on used games is part of (if not the majority) the problem. GameStop and the like purposely under buy, when buying new games. If they are expecting to sell 50 copies they will buy 30 because they expect to get 20 of the 30 back though trade in. So if you are expecting to find a game without preordering you better hope enough people who did preorder didn’t like it.

@Gray17

Well that was a miscommunication than. We are talking about used games sales so when I refer to retailers I meant retailers that carry used games.

@Brent hay
It is not a global increase of demand though. If there is resale of the games the demand from the consumer to the retailer may go up because of the used sale discount, but the retailer to the publisher will go down because they don’t need to purchase as many new copies when consumers are purchasing used copies instead.
 
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